ISLAMABAD -  Chairman of the Securities and Exchange Commission of Pakistan (SECP) Zafar Hijazi said on Tuesday that investor protection would remain the prime objective of the regulator and it would ensure complete compensation to small investors.

He was addressing a joint press conference along with PSX Chairman Muneer Kamal and Managing Director Nadeem Naqvi at the SECP Head Office on Tuesday.

The SECP chairman informed the media that nine brokers had been declared defaulters so far. Hundred percent payments have been made to claimants of four brokerage houses and 77 percent of payments have been made to other claimants, he said. He explained that a total of 3,453 complaints were received against these nine defaulting brokers out of which 2,453 (76.8 percent) complaints were settled. In this regard, Rs689million have been paid to claimants. He stated that 100 percent payments were made to small investors who invested up to Rs100,000. These payments have been made from the recoveries from defaulting brokers as well as from the investor protection fund.

The SECP chairman said that the prime responsibility of the regulator was to secure the small investor, bring transparency and ensure growth of the capital market. He pointed out that there were five brokers under strict observation of the SECP and warnings had already been issued to the brokers who overexposed their investments. The SECP conducts off-site and on-site inspections and in more sensitive cases the inspections are done by the Joint Inspection Team of CDC, NPCCL and PSX. As the market touched new heights, a fresh wave of investors entered the market and some brokers started deposit taking and offering fixed profits to investors illegally, he explained.

Hijazi said the SECP had started operations for market intelligence. This is to check and preempt brokers if they continue their wrongdoings despite warnings. He suggested to the PSX to adopt the market intelligence methodology to monitor brokers’ behaviour.

The SECP chairman said that SECP’s regulatory enforcement was a continuing process and even today he referred a case to NAB for investigation. To a question, he confirmed that the SECP had already forwarded the name of defaulting brokers to relevant department to place them on ECL. He said the SECP was closely coordinating with the law enforcement agencies and red warrants would be issued against absconding brokers if needed.

The capital market’s regulators also expressed their satisfaction with the stock market working, strength and fundamentals. Muneer Kamal said the capital market was strong, stable and on right track, therefore investors should not lose confidence due to wrongdoings of a few persons. Regulatory and oversight bodies are vigilant and proactively engaged with brokers who are vulnerable, he added. He said the SECP had adopted a methodology to conduct at least one audit of each broker in a year. There are about 303 brokers registered with PSX.

He said that Pakistan’s market was growing and well established and there was no need for panic. As opposed to the previous crashes in stock market, the market conditions are stable. He reiterated that no single group was strong enough to dictate the market’s direction. Keeping checks and balances and making queries is the right and responsibility of regulators, the SECP and PSX, he added. Therefore, the brokers should be appreciative of regulators’ proactive approach to safeguarding the market and investors.

Explaining the market fundamentals, Nadeem Naqvi said that total market capitalisation stood at $90 billion. The free float of shares is around 24 per cent, while one third of the shareholding is with foreign investors and one third of the market share is with local financial institutions, mutual funds etc.

Therefore, only 40% of the market is with retailers and because of market diversity, we believe that individual brokers cannot manipulate it, he said.

In response to a question, the SECP chairman appreciated Chairman of the Senate Committee for Finance and Revenue Senator Saleem Mandviwalla for taking interest in the ongoing issues of the capital market and termed it a good gesture of the legislative body. Hijazi said the SECP team would appear before the senate committee to explain the reality of the situation and SECP’s point of view. Hijazi was optimistic that Senator Mandviwallawould would appreciate regulators’ efforts for bringing transparency in the market.

Hijazi said that SECP’s current actions looked stringent and strict because the regulators never adopted such a proactive approach in the past. He expressed his determination that no relaxation would be given to brokers violating the law.