I. Kasbati & Co Recommendations

Owing to be matters in para II and III, be very careful about your entity and yours assets while investing via Security Companies, etc  

II.   EXECUTIVE SUMMARY -

The case of -------------------Securities (Pvt) Ltd versus Commissioner (SMD) (Attachment 654.1), SECP, involves an appeal filed by ---- Securities (Pvt) Ltd (the Appellant) against an order issued by the Commissioner, Securities Market Division, SECP (the Respondent) on  13.12.17 

2.  The Appellant, a licensed securities broker and TREC holder of the Pakistan PSX, was subject to an onsite inspection by the SECP (the Commission). The inspection revealed several violations, including:

a) Misuse of trading terminals 

b) Non-segregation of clients' assets 

c) Operating unregistered offices/branches 

d) Unauthorized management running operations 

3.  Following an investigation, the Appellant was found to be non-compliant with u/s 74 of the Securities Act, 2015, Regulations 16 and 16(1) of the Securities Brokers (Licensing and Operations) Regulations, 2016, and clauses 4.18, 4.24, and 22 of the PSX Rule Book. As a result, the Respondent cancelled the Appellant's securities broker license and imposed a penalty of Rs. 5,000,000 (Rupees Five Million)

4.  The Appellant appealed the order, arguing that the inspection and investigation were initiated without adequate prior notice, violating principles of natural justice. They also claimed the order was based on conjecture, lacked credible evidence, and relied on statements obtained under duress The Appellant further alleged denial of a fair trial, confiscation of documents, and misclassification of a "house account" as a "client account" 

5.  The Respondent countered that the inspection was legally authorized, and any technical deviation did not invalidate the process. They stated that findings were supported by documentary evidence and corroborated confessional statements, refuting claims of coercion and total seizure of records. The Respondent also argued that the Appellant had ample opportunity to respond and that the penalty and license cancellation were authorized u/s 150(2) of the Securities Act, 2015, not constituting double punishment 

6.  The Bench ultimately dismissed the appeal, finding no reason to interfere with the Impugned Order. The Bench concluded that:

a)  The inspection's early commencement did not vitiate the proceedings, as the Appellant was informed and afforded adequate opportunity to respond 

b)  Employee statements were given under oath, supported by transactional records and bank statements, and claims of coercion were unproven 

c)  The Appellant failed to prove that the alleged unavailability of records prevented their response 

d)  Cash transactions above Rs 25,000 from a client-designated account violated Clause 4.24 of the PSX Rule Book, and the "house account" assertion lacked support 

e)  The Appellant admitted relocating its office without formal PSX approval, a regulatory requirement 

f)   The invocation of Article 13 of the Constitution (protection from double punishment) was misplaced, as Section 150(2) of the Securities Act, 2015, permits concurrent administrative sanctions 

g)  The cumulative violations were grave and systematic, warranting a robust regulatory response 

III.   DETAILS

A.  Case History

1 to 2 

B.  Brief Facts

1 to 2

C.  Adjudication Process and Penalties Imposed

1 to 2

D.  Learned Counsel Appellant Submissions

1 to 6

E.  Learned Counsel Respondent Submission

1 to  5

F.  Bench’s Deliberation Findings and Rationale

1 to 3

G.  Bench’s Conclusion on Violations and Sanctions

1 to 4 

H.  Final Decision

In view of the foregoing, the Bench finds no reason to interfere in the Impugned Order. The instant Appeal is hereby dismissed without any order as to costs.

IV.   FURTHER DETAILS & SERVICES 

Should you require any clarification or explanations in respect of the above or otherwise, please feel free to email Mr Amsal at amsal@kasbati.co with CC to info.kasbati@professional-excellence.com.

Best regards for Here & Hereafter

Asif S Kasbati (FCA, FCMA & LLB)

Managing Partner 

Kasbati & Co (1400+ Tax, Levies, Companies, Economy, Inflation, HR, Banking, Finance, etc

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