SECP received complaint regarding Mutual Funds’ manipulation at PSX

KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has been lodged with a complaint against Mutual Funds for what an appeared to be a case of manipulation at Pakistan Stock Exchange (PSX) during August 16, 2019 to January 17, 2020. Treasure Magazine has the copy of complaint filed with the Commission.

The complaint states that, “some Individuals booked hefty gains during this rally of 109 days and the role Mutual Funds during this rally was not only suspicious but contrary to safeguarding the interests of the Ordinary Unit Holders and Investors.”

The SECP has been requested to order an investigation under Section 139 of the 2015 Securities Act against a few Mutual Funds for market manipulation as they appear to have misled the trading activity during the aforementioned period.

In the complaint some data is submitted as an evidence for probable manipulation. The SECP is the main regulator of PSX, and hence regulates the mutual funds and individuals trading through PSX.

The complainant requested the Commission to look into the individual level data of Individuals and Mutual Funds and investigate following aspects:

–              Insider and conflict of interest rules,

–              Individuals positions and their communications with Mutual Funds,

–              Detailed analysis of top 10 gainers and losers in the Mutual Fund and Individual Category during the aforementioned period.

Many other complaints are receiving against Mutual Fund Industry for last few years, but the SECP is not taking concrete measures to address such complaints.

The filed copy of complaint further states that “a rally of 14,404 points in just 109 trading sessions, increased market capitalization by $12 billion lost for about $11 billion between jan 17 and  Feb 26, 2020 i.e. the day when Pakistan encountered the first case of Coronavirus (COVID-19.”

Given this age of automation and availability of UIN level data with NCCPL, it would be very easy for any investigative agency including the National Accountability Bureau (NAB), Federal Investigation Agency (FIA) and SECP to find out and refute the impression that certain individuals booked unlawful gains with the connivance of Mutual Funds else/otherwise take the manipulators to the task as enshrined by the law.

The complainant claimed, “the cumulative positions when calculated on the bases of date of August 16, 2020 depicted that Mutual Funds bought when Individuals were selling and were selling when Individuals were buying.”

He further claimed that this pattern of multiple-contra-styled buying and selling during the period of August 16, 2019 and January 17, 2020 emphasizes that Mutual Funds were buying at low and selling high, which becomes further disturbing when such patterns also suggest that Individuals by sheer luck or whatever, were either taking contra-position or were able to square up their earlier contra-positions at behest of the Mutual Funds.

An investigation into the trade-level-data of Mutual Funds and individual category UINs is a befitting need of the hour that apex regulator and Ministry of Finance should consider.

The complainant has also requested that the Commission to fulfill its legal obligation and conclude an investigation within stipulated time-peiord under the provisions of section 129 of securities act 2015.

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