Market manipulation: SECP drags 23 big brokerage entities to court

The Securities and Exchange Commission of Pakistan (SECP) finally filed a “criminal complaint” in a sessions’ court against a group of 23 entities including brokerage houses, investment companies and individuals relating to renowned business families.
The apex regulator, in its criminal complaint number 242, has alleged manipulation in listed shares of Azgard Nine Limited (ANL) at Karachi Stock Exchange (KSE).
The critics, however, have raised their eyebrows questioning as to what made the apex regulator take almost six “long” years in moving against irregularities which were committed in April 2007.
The institutions accused in the complaint include JS Global Capital Limited, Jahangir Siddiqui and Company Limited, Jahangir Siddiqui & Sons Limited, Jahangir Siddiqui Securities Services Limited, JS Investment Limited and Aziz Fida Hussain and Company Limited.
While the individuals nominated are Saad Saeed Farooqui, Mehboob Ali Kalyar, Muhammad Sadiq Patni, Syed Nizam Shah, Humayun Shaikh, Alia Sheraz Monoo, Amna Humayun Shaikh, Nasreen Shaikh, Ahmed Shaikh, Muhammad Riaz, Muhammad Ijaz, Irfan Aziz, Saba Irfan Aziz, Zehra Nazim Aziz, Mohammad Iqbal and Muhammad Mubashir Hameed Dagia.
“This honorable court may be pleased to take cognizance of the acts committed by the above named accused in terms of section 24 of the Securities and Exchange Ordinance, 1969 whereby the share price and volume of the ANL shares were artificially increased through criminal manipulation in terms of section 17,” the SECP submitted in court.
Referring to KSE’s trading data, the SECP complaint said during 73 trading sessions, taking place between April 2 and July 13, 2007, unusual hikes in trading volume and price of ANL shares were noticed on the KSE screen.
During the period in review, the SECP said, the price of ANL stakes increased by 132 percent peaking at Rs 52.5 per share on July 3, 2007 as against its average price of Rs 22.85.
This resulted in the SECP forming a two-member investigation team in November 2007 to probe into the trading of ANL shares under section 21 of the relevant ordinance.
While the inquiry was underway, the regulator went on to inform the court, the volume and share price of the ANL again marked an “astonishing” surge.
During 96 trading sessions, ranging from November 29, 2007 to April 22, 2008, the average trading volume peaked to 16.8 million shares (on Jan 18, 2008). In terms of price, the company’s shares boosted by 168 percent to close at Rs 96.4 on April 21 from Rs 36.6 of November 28, 2007, the commission said in the complaint.
“The abnormal increase in price and volume of the ANL share indicated manipulation on the KSE trading terminal,” the SECP said.
Citing trading data at the client/UIN level, the SECP said a “concentrated and concerted buying and selling” was observed among clients of two brokerage houses namely JS Global Capital and Aziz Fida Hussain & Company Limited.
“These prohibited and manipulative trading practices by the group members impacted both the volume as well as price of the ANL share” during the two subject periods, the SECP prayed.
Besides its officials, the regulator has named as witnesses on its behalf the managers of Faysal Bank, MCB, Saudi Pak Commercial Bank, PICIC Commercial Bank, JS bank, Bank Al-Habib and officials of the Central Depositary Company of Pakistan Limited, KSE and the National Clearing Company of Pakistan Limited.
These witnesses, per the petition, would produce in court relevant record and/or prove copies sent to the SECP.