Small shareholders, who had taken most of the beating during last year's stock exchange crisis, continue to live on hopes that some day their problems would be alleviated. They have been caught up in a quagmire following uncertainties.
Since huge volume of shares of sub-account holders are blocked and cannot be sold in the falling market, causing disastrous financial losses, they have suggested to the Securities and Exchange Commission of Pakistan (SECP) and Central Depository Company of Pakistan (CDC) to improve the system, whereby sub-account holders would be secured.
According to the suffering shareholders, since the enforcement of CDC, the issuance of share certificates has been discontinued. The investors in joint stock companies have option either to open an investor account with CDC or to keep account with members of stock exchange. Small and medium investors prefer to keep account with members due to recurrent payments to CDC and hassle of issuing and delivering cheques after sales. Both types of accounts are regulated and documented by CDC.
Small shareholders say that it has been a regular practice by some members of stock exchange to obtain loans by pledging sub-account holder shares, as security. Due to recent market crisis and restricting index for 100 days, the members have taken full advantage and obtained loans on sub-account holders fully paid shares, to meet their losses and avoid default. This has resulted in blockade of clients' shares, having no exit for sale of their holdings. Stock exchange members are not giving any time frame to clients for release of their shares pledged illegally with banks without consent of the client.
Commercial banks have given huge loans against 'Binami' shares, knowing that these pledge shares are not owned by loanee. It is strange how banks could advance loans to Karachi Stock Exchange (KSE) members on security of shares whose actual owners are sub-account holders. The KSE members have committed breach of trust and pilferage of shares of their clients, they said.
Investors are in thousands who are caught up between the devil and the deep seas, as there is no exit for them. Many small shareholders are in dire need of money to sustain life. In case of default by member with the banks, the pledge shares would be off loaded in the market by the bank to recover their outstanding loans. This would add further misery to account holders.
The system devised by dispensing with issuance of share certificates to investors is defective, as there is no protection to the investors who maintain sub-accounts. Members are thriving all the time on surety of clients' shares.
CDC has entire records and can give exact volume of shares and names of members who have committed breach of trust. State Bank of Pakistan would do well in directing the banks to seek alternative security, to provide immediate relief to sub-account holders. SECP may also intervene and ask members to return shares pledged by them without clients' consent.
The Advisor to Prime Minister on Finance, Shaukat Tarin, has been active in reviving the stock market by arranging buying out CFS (Badla) shares by financiers at discounted rates, thus helping National Clearing Company, and inducting State Enterprise Fund of Rs 20 billion, besides amendment in company law to permit buying back of shares by owners of the companies.
These steps have benefited members. The Advisor has not taken any steps against members who have pilfered the shares worth millions of rupees from sub-account holders whose shares have been pledged as surety by members with banks. State Bank of Pakistan should also take up this serious matter with banks for advancing loans on 'Binami' shares.
Opting for litigation in the court of law would be a futile exercise as sub-account holders cannot afford to pay legal fees. Besides, it would be time-consuming as well. Once CDC gives the data with names of members and the volume of pledged shares by them, members would be exposed. Sub-account holders have neither given any consent nor any authority for pledging of shares.
The fraudulent actions of members constitute breach of Central Depositories Act - 1997, criminal breach of Pakistan Penal Code punishable by imprisonment, small shareholders said. (BR Report)
Since huge volume of shares of sub-account holders are blocked and cannot be sold in the falling market, causing disastrous financial losses, they have suggested to the Securities and Exchange Commission of Pakistan (SECP) and Central Depository Company of Pakistan (CDC) to improve the system, whereby sub-account holders would be secured.
According to the suffering shareholders, since the enforcement of CDC, the issuance of share certificates has been discontinued. The investors in joint stock companies have option either to open an investor account with CDC or to keep account with members of stock exchange. Small and medium investors prefer to keep account with members due to recurrent payments to CDC and hassle of issuing and delivering cheques after sales. Both types of accounts are regulated and documented by CDC.
Small shareholders say that it has been a regular practice by some members of stock exchange to obtain loans by pledging sub-account holder shares, as security. Due to recent market crisis and restricting index for 100 days, the members have taken full advantage and obtained loans on sub-account holders fully paid shares, to meet their losses and avoid default. This has resulted in blockade of clients' shares, having no exit for sale of their holdings. Stock exchange members are not giving any time frame to clients for release of their shares pledged illegally with banks without consent of the client.
Commercial banks have given huge loans against 'Binami' shares, knowing that these pledge shares are not owned by loanee. It is strange how banks could advance loans to Karachi Stock Exchange (KSE) members on security of shares whose actual owners are sub-account holders. The KSE members have committed breach of trust and pilferage of shares of their clients, they said.
Investors are in thousands who are caught up between the devil and the deep seas, as there is no exit for them. Many small shareholders are in dire need of money to sustain life. In case of default by member with the banks, the pledge shares would be off loaded in the market by the bank to recover their outstanding loans. This would add further misery to account holders.
The system devised by dispensing with issuance of share certificates to investors is defective, as there is no protection to the investors who maintain sub-accounts. Members are thriving all the time on surety of clients' shares.
CDC has entire records and can give exact volume of shares and names of members who have committed breach of trust. State Bank of Pakistan would do well in directing the banks to seek alternative security, to provide immediate relief to sub-account holders. SECP may also intervene and ask members to return shares pledged by them without clients' consent.
The Advisor to Prime Minister on Finance, Shaukat Tarin, has been active in reviving the stock market by arranging buying out CFS (Badla) shares by financiers at discounted rates, thus helping National Clearing Company, and inducting State Enterprise Fund of Rs 20 billion, besides amendment in company law to permit buying back of shares by owners of the companies.
These steps have benefited members. The Advisor has not taken any steps against members who have pilfered the shares worth millions of rupees from sub-account holders whose shares have been pledged as surety by members with banks. State Bank of Pakistan should also take up this serious matter with banks for advancing loans on 'Binami' shares.
Opting for litigation in the court of law would be a futile exercise as sub-account holders cannot afford to pay legal fees. Besides, it would be time-consuming as well. Once CDC gives the data with names of members and the volume of pledged shares by them, members would be exposed. Sub-account holders have neither given any consent nor any authority for pledging of shares.
The fraudulent actions of members constitute breach of Central Depositories Act - 1997, criminal breach of Pakistan Penal Code punishable by imprisonment, small shareholders said. (BR Report)
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