With controversial Capital Gains Tax (CGT) and politico-security uncertainties being oft-referred persistent reasons for fast depleting trading volumes at Karachi Stock Exchange (KSE), unnecessarily long and complicated account opening procedures also appear to be a factor that keeps the investors away from the equity market. KSE management is currently at loggerhead with regulators from Securities and Exchange Commission of Pakistan (SECP) over what an elected director on former board termed it “additional details” sought by commission from investors in its Account Opening Form (AOF).
“SECP’s form requires investors to provide so much additional details that their interest to invest on the already volatile stock market fades away. It is discouraging,” said Abid Ali Habib, chairman Abid Ali Habib Securities and one of 10-member KSE Board of Directors. Habib stated this while talking to a group of journalists who were invited at KSE Friday afternoon to interact with a visiting Indian delegation of journalists, who had “stuck up” at their prior meeting place, MQM’s headquarters, Nine Zero.
Referring to the latest KSE board’s meeting with SECP officials, led by Musarrat Jabeen, director said SECP had come up with a new and lengthy AOF in which extensive details had been sought from the investors. “It’s a 20-page form requiring the applicant to read its thorough terms and agreements in at least two days,” director said.
Habib went on to say the new form needed investors to subscribe on at least 20 places. KSE director said in addition to their Computerised National Identity Cards, applicants were also required by AOF to give additional detail like their driving license (if any), details of their house whether rented or personal possession and salaries or income of applicant’s spouses and so on.
“Why an investor, wanting to invest, starting from a meager amount of Rs10,000, would bother to provide all these details,” director wondered. Habib said a friction of 180 million Pakistanis, numbering 2 to 2.5 lac, was currently maintaining accounts with Central Depositary Company (CDC) that also include those who had only filled form and never traded then. Practically, KSE director said, 50,000 account holders were trading once a year, while only 10,000 account holders were actively participating in the share trading. “If we ask for such long details the existing traders would too flee the market,” he warned. According to Habib, KSE side argued that risk-averse investors, who usually turn to stock market in search of higher margins under philosophy of “greed and fear”, should be provided with documentation work that is not that lengthy and complicated.
When asked for rationale, SECP officials were citing for new inclusions in AOF, KSE director said they were just following orders. “What can we do, we have orders from above,” Habib quoted SECP official Musarrat Jabeen as saying. He, however, said regulators had assured his side of more deliberations on the issue. “SECP has noted our reservations and assured that they would deliberate on the matter,” director said.
