SECP refers Bagasra Securities case to FIA Over Rs49m unpaid investor claims

Mettis Global reported that the Securities and Exchange Commission of Pakistan has approved referring the Bagasra Securities case to the Federal Investigation Agency for legal proceedings. The referral concerns claims that the brokerage dealt in clients' holdings without authorisation, and investors are still owed Rs48.93 million. Under Section 41B of the SECP Act, 1997, the FIA can now begin formal proceedings over alleged transfers and pledges of investor securities made without consent.

The matter dates back to March 2010, when the SECP opened an inquiry after complaints about unauthorised transactions in client holdings. That inquiry, completed in October 2013, concluded that shares were allegedly moved and pledged without investor consent to raise financing and cover margin obligations. The findings put the number of pledged shares at 176.204 million, covering the period from July 2007 to March 2010. After defaults, banks and the exchange enforced their rights and sold the pledged holdings.

The enquiry committee also noted that the brokerage's directors and liquidator did not supply required records, so it relied on information from CDC, PSX and banks. NCCPL had declared Bagasra Securities a defaulter, PSX sold the firm's membership card in 2009, and the company wound up voluntarily in January 2010. PSX has verified 333 investor claims worth Rs145.50 million, of which Rs96.57 million has been settled, with Rs75 million of that coming from the Investors Protection Fund.