WHEREAS, Salim Sozer Securities (Pvt.) Limited (the "Brokerage House-I") is a Trading Right Entitlement Certificate Holder of the Karachi Stock Exchange Limited ("KSE") and registered as a broker with the Securities and Exchange Commission of Pakistan ("Commission") under the Brokers and Agents Registration Rules, 2001 ("Brokers Rules").
2. AND WHEREAS Mr. Salim M. Sozer is Chief Executive Officer/Director of the Brokerage House-I,
3. AND WHEREAS, Ela hi Cotton Mills Limited (the "Company") is a public company listed at Karachi Stock Exchange. The trading data of the Company during the period from June 01, 2015 to August 19, 2015 (the "Review Period") was analyzed and the following were observed: The share price of the Company increased by Rs 31.25 or 85% from Rs 36.75 as on June 11, 2015 to Rs 68.00 as on July 1, 2015.
Daily traded volume of the Company ranged from 500 to 1,500 shares.
No order for purchase or sale of shares of the Company was placed from July 02, 2015 to July 06, 2015.
No shares of the Company were traded during the period from July 7, 2015 to August 19, 2015.
However, during the same period, the price of the shares of the Company decreased by Rs 13.40 or 20% from the opening price of Rs 68.00 as on July 7, 2015 to Rs 54.60 as on August 19, 2015.
4. AND WHEREAS, the summary of change in price and volume of the shares traded of the Company during the Review Period is as under:- SECURITIES & EXCHANGE COMMISSION OF PAKISTAN NIC 1 Date Volume Value Closing price June 11, 2015 1,000 36,750 - 36.75 June 12, 2015 1,000 38,580 38.58 June 15, 2015 1,000 40,500 40.5 June 16, 2015 1,000 42,520 42.52 June 17, 2015 _ 1,000 44,640 44.64 June 18, 2015 1,000 46,850 46.85 June 19, 2015 1,000 49,150 49.15 June 22, 2015 1,000 51,600 51.6 June 23, 2015 1,000 54,180 54.18 June 24, 2015 1,000 56,880 56.88 June 25, 2015 500 29,860 59.72 June 26, 2015 1,500 I 92,700 62.70 June 29, 2015 500 32,915 65.83 June 30, 2015 1,500 i_ 100,850 67.85 July 1, 2015 1,000 68,000 68.00 July 7, 2015 - - 67.34 July 23, 2015 - - 65.68 August 4, 2015 - - 64.67 August 5, 2015 - - 63.73 August 11, 2015 - _ - 61.61 August 12, 2015 - - 59.55 August 13, 2015 - - 58.45 August 18, 2015 - - 57.47 August 19, 2015 - - 54.6 5. AND WHEREAS, Chief Executive Officer/Director of the Brokerage-1 was the major buyer and seller of the shares of the Company during the period from June 11, 2015 to July 01, 2015. Details of the buyers and sellers of the Company during the above mentioned period are as follows: Name Salim M.Sozer, Chief Executive Officer/Director of the Brokera Kashif Shahida Banoo Muhammad Noman Muhammad Zahoor Abdul Samad Saleem Grand Total Quantity Purchased 7,000 4,500 1,500 1,000 500 500 15,000 Sold 7,500 4,500 1,500 1,000 500 [5,000 6. AND WHEREAS, as per record of this office, trading pattern of the Chief Executive Officer/Director of the Brokerage-1 in the shares of the Company are as under: Trade date Trade time Quantity Buyer Seller Time Trade interval price 2015-06-11 1056040015 500 Kashif Salim M.Sozer 4 hrs 36.75 1455210016 500 Salim M.Sozer Kashif 36.75 _ 2015-06-12 1452010033 500 Kashif Salim M.Sozer 9 38.58 1501080018 500 Salim M.Sozer Kashif Minutes 38.58 2015-06-15 1449300013 500 Kashif Salim M.Sozer 35 40.5 1524500037 500 Salim M.Sozer Kashif Minutes 40.5 2015-06-16 1517130024 500 Kashif Salim M.Sozer 11 42.52 1528530071 500 Salim M.Sozer Kashif Minutes 42.52 2015-06-17 1456070017 500 Kashif Salim M.Sozer 9 44.64 1505530003 500 Salim M.Sozer Kashif Minutes 44.64 2015-06-18 1515210032 500 Kashif Salim M.Sozer 3 46.85 1518130054 500 Salim M.Sozer Kashif Minutes 46.85 2015-06-19 1213290003 500 Kashif Salim M.Sozer 1 Minute 49.15 1214300034 500 Salim M.Sozer J Kashif 49.15 2015-06-22 1343540016 500 Kashif Salim M.Sozer 40 51.6 1344030014 500 Abdul Samad Kashif Seconds 51.6 Saleem 2015-06-23 1350330019 500 Kashif Salim M.Sozer 1 Minute 54.18 1351110041 500 Salim M.Sozer Kashif 54.18 2015-06-24 1345070022 500 Shahida Banoo Salim M.Sozer 9 56.88 1354310015 500 Salim M.Sozer Shahida Banoo Minutes 56.88 2015-06- 25 1353040003 500 Muhammad Salim M.Sozer 59.72 Noman 2015-06-26 1052120029 500 Salim M.Sozer Muhammad 60 Noman 1203330013 500 Muhammad Salim M.Sozer 15 62.7 Zahoor Minutes 1218090072 500 Salim M.Sozer Muhammad 62.7 Zahoor 2015-06-29 1352310018 500 Muhammad Salim M.Sozer 65.83 Noman 2015-06-30 1129230030 500 Salim M.Sozer Muhammad 2 hrs . 30 66 Noman Minutes 1359270064 1000 Shahida Banoo Salim M.Sozer 67.85 2015-07-01 0955400003 1000 Salim M.Sozer Shahida Banoo 68 AND WHEREAS, the above-mentioned trading data revealed that During the period from June 11, 2015 to June 23, 2015, Chief Executive Officer/Director of the Brokerage-1 and Mr. Kashif were the only purchaser and seller in the shares of the Company. During the said period, all his transactions were matched by the transactions of Mr. Kashif and vice versa.
Though the trading in the shares of the Company did not result in change of beneficial ownership of the Chief Executive Officer/Director of the Brokerage-1, however, the trading resulted in increase in price of shares of the Company During the above period, the share price of the Company increased by Rs 17.43 or 47% from Rs 36.75 per shares as on June 11, 2015 to Rs 54.18 per share as on June 23, 2015.
From June 24, 2015 to July 01, 2015, Chief Executive Officer/Director of the Brokerage-1 continued trading in the shares of the Company with other counterparties i.e. Ms. Shahida Bano and Muhammad Noman.
The continued trading in the shares of the Company resulted in the further increase in the price of Company to Rs 68 per share as on July 01, 2015.
8. AND WHEREAS, analysis of the day were trading activity is as under: On June 11, 2015, Mr. Kashif bought 500 shares from Chief Executive Officer/Director of the Brokerage-1 at 10:56AM at the rate of Rs 36.75. After 4 hours, he bought these 500 shares from Mr. Kashif at the same rate.
From June 12, 2015 till June 23, 2015, the above mentioned pattern of transaction was observed and the price of the shares of the Company increased on a daily basis.
On June 24, 2015, the above mentioned pattern of transaction was observed between Chief Executive Officer/Director of the Brokerage-1 and Ms. Shahida Bano.
On June 25, 2015, Chief Executive Officer/Director of the Brokerage-1 sold the shares to Mr. Mohammad Noman at the rate of Rs 59.72, On June 26, 2015 Chief Executive Officer/Director of the Brokerage-1 purchased these shares from Mr. Noman at PKR 60 and sold the same number of shares to Mr. Muhammad Zahoor at PKR 62.70 after 1 hour. Similar pattern of transaction were observed on June 29, June 30 and July 1, 2015,
9. AND WHEREAS, during the period from July 07, 2015 to August 19, 2015, Chief Executive Officer/Director of the Brokerage-1 placed orders for sale of shares ranging from 5,000 shares to 15,000 shares of the Company at the rate ranging from Rs 64.6 to Rs 54.6/- but none of your sale orders materialized.
10. AND WHEREAS, Chief Executive Officer/Director of the Brokerage-1 and Mr. Kashif are holding trading account with Broker House-I and TS Securities Pvt. Ltd (Brokerage House-11) respectively. The Commission sought certain information/documents including account opening forms, which inter alia revealed the following: Email ID mentioned on Chief Executive Officer/Director of the Brokerage-I's account opening form and email ID mentioned on broker ledger of Mr. Kashif are same HYPERLINK http://i.e.samadsozerPgmail.Com i.e. samadsozerPgmail.Com which shows that all the details related to the transactions are being sent to the same email ID..
Account Opening Forms of both of them were witnessed by the same individuals. i.e. Mr. Abdul Wahid Shah and Mr. Yousaf, despite the fact both of them have trading accounts with two different brokerage houses.
Mr. Abdul Wahid Shah is an employee of the Brokerage House-I, From the above facts, it is apparent that both of them are interconnected AND WHEREAS, by entering into the aforesaid non bona fide transactions, prima facie, Chief Executive Officer/Director of the Brokerage-I indulged in creating artificial trading in the shares of the Company, which resulted in increase in the price of the shares of the Company in a short period of time. Further, after successfully artificially increasing the price of the shares of the Company, Chief Executive Officer/Director of the Brokerage-1 attempted to dispose of his shareholding in the Company at inflated price. However, he was not successful in selling his shareholding at the inflated price.
AND WHEREAS, Chief Executive Officer/Director of the Brokerage-1 was involved in creating the false/ misleading appearance of active trading in the shares of the Company.
AND WHEREAS, Rule 8(iv) and 12 read with Code of Conduct provided in the Third Schedule of the Brokers Rules provides that: integrity- A broker shall maintain high standards of integrity, promptitude and fairness in the conduct of all his business.
Exercise of due skill and care- A broker shall act with due skill, care and diligence in the conduct of all his business.
Manipulation- A broker shall not indulge in manipulative, fraudulent or deceptive transactions or schemes or spread rumors with a view to distorting market equilibrium or making personal gains.
Malpractices- A broker shall not create false market either singly or in concert with others or indulge in any act detrimental to the investors' interest or which leads to interference with the fair and smooth functioning of the market. A broker shall nor involve himself in excessive speculative business in the market beyond reasonable levels not commensurate with his financial soundness.
14 AND WHEREAS, being a registered broker with the Commission under the Brokers Rules, the Brokerage House-I was required to be conscious of its responsibilities, but the aforesaid transactions are tantamount to creating false market and/or artificial active trading, which is detrimental to fair and efficient market operations, prima facie in violation of the Broker Rules.
15. NOW THEREFORE, in exercise of the powers conferred under section 20 of the Securities and Exchange Ordinance, 1969, the Brokerage Housed is directed to prohibit from indulging in such practices in future through its terminals and/or its proprietary account, because the same are not in line with the prevalent regulatory framework and constitute or is calculated to constitute inter alio contravention of SE Ordinance and rules made thereunder including Broker Rules. The text of section 20 of the SE Ordinance is reproduced hereunder for ease of reference:- where the Commission is of opinion that any person is engaged or is about to be engaged in any act or practice which constitutes or is calculated to constitute a contravention of the provisions of this Ordinance or of any rules made thereunder, or that any person has neglected, or is not likely, to do an act the omission or failure to do which constitutes such contravention, it may, by order in writing, direct such person to abstain from doing the act or committing the practice which constitutes or is calculated to constitute such contravention, or to do the act, the omission or failure to do which constitutes such contravention.
Every person to whom a direction under sub-section (1) is given shall comply therewith in such manner, if any, and within such time, as may be specified therein.
16. The Brokerage Housed is further directed to ensure meticulous compliance of the rules and regulations, failing which the Commission shall be constrained to initiate necessary legal proceedings against the Broker.
17. This Prohibitory Order is issued without prejudice to any other action that the Commission may initiate in accordance with the law on the matters subsequently investigated or otherwise brought to the knowledge of the Commission.