SUBJECT: PROHIBITORY ORDER UNDER SECTION 20 OF THE SECURITIES AND EXCHANGE ORDINANCE, 1969 I. WHEREAS, it was observed from the examination of trading data of Karachi Stock Exchange ("KSE") during the period starting from December 01, 2014 to December 22, 2014 ("the Period") that certain individual clients of Creative Capital Securities (Private) Limited ("The Brokerage House"), TREC Holder of KSE, have been actively placing orders in various scrips at KSE.
2. WHEREAS, review of the order level and trade level data indicates that quantum of trades executed by such clients were very few in proportion to the orders placed by them. This lead to a detailed review of the order level data of the clients.
3. WHEREAS, the detailed review of the order level data of the clients of the Brokerage House namely Muhammad Naveed, Rizwan, Zubair and Zeb Un Nisa bearing clients codes SMI, (Z05 & Z65), ZMO1 and 2804, respectively, later referred as the Clients, showed that they placed significant quantum of buy/ sell orders in various scrips during the Period and out of which a large proportion was deleted within 05 seconds after the placement of the same. The summary of the statistics is given as below: {{TABLE}} Name Client Code Terminal Order placed Order Canceled % Canceled Orders Canceled within 5 seconds Muhammad Naveed SMI Total 3276 1413 43% 327 MEM15301 2 2 MEM 15307 1 MEM15308 3273 1411 327 Rizwan Z05 Total 979 ' 432 44% 76 MEM15304 58 29 MEM15306 884 397 76 Z65 MEM15309 24 5 MEM15311 13 1 Zubair ZMOI MEM15303 591 266 45% 48 Zeb Un Nisa 2804 Total 1199 568 47% 224 THMI5301 20 6 THM I 5302 1179 562 224
4. WHEREAS, the Securities and Exchange Commission of Pakistan ("Commission") vide letter dated January 15, 2015 inquired the Brokerage House about the rationale of such orders and transactions in question. In response the Brokerage House informed the Commission that it has communicated the same to its clients and has noted down the observation of the Commission.
5. WHEREAS, the practice adopted by the Brokerage House is in conflict with the fair market practices, wherein the Clients have indulged in a practice of placing large sums of orders with no intention to purchase the same. Please note that such pattern persuades the interest of the general public for trading in these shares and create a false and misleading appearance of active trading in any security.
6. WHEREAS, the Brokerage House is responsible for each and every order placed or trade executed through its trading terminal. It is responsibility of the Brokerage House that it should monitor all the trading activities being executed through its terminal and should keep track and prevent any transaction being made in violation of any applicable rules and regulations.
7. WHEREAS, being an active participant, the Broker being in the business of the capital markets should be conscious of the responsibility it is carrying. It is pertinent to note that orders, which were placed by the Clients, of the Brokerage House were not placed with the intention of executing fair transaction in the capital markets and the same was overlooked by the Brokerage House.
8. IN VIEW THEREFORE, in exercise of the powers conferred under Section 20 of the Securities and Exchange Ordinance, 1969, ("Ordinance") the Brokerage House is directed to prohibit such trading practices through its terminals, as referred above, which are not in line with the prevalent regulatory framework and constitute or is calculated to constitute contravention of any provision of this Ordinance and rules and regulations made thereunder. The Brokerage House is further directed to comply with the rules and regulations failing which the Commission shall be constrained to initiate necessary legal proceedings against the Brokerage House.
9. This Prohibitory Order is issued without prejudice to any other action that the Commission may initiate in accordance with law on the matters subsequently investigated or otherwise brought to the knowledge of the Commission.