Shares of company: brokerage house found involved in creating artificial trading

The Securities and Exchange Commission of Pakistan (SECP) has claimed to have detected a brokerage house indulging in creating artificial trading in the shares of a company, which resulted in an increase in the price of the shares of the company in a short period of time. According to an order issued by the SECP against a brokerage house of Karachi, Chief Executive Officer/Director of the Brokerage-I attempted to dispose of his shareholding in the Company at inflated price. However, he was not successful in selling his shareholding at the inflated price.
Details of the issue revealed that the Brokerage House-I is a Trading Right Entitlement Certificate Holder of the KSE and registered as a broker with the SECP under the Brokers and Agents Registration Rules, 2001 ("Brokers Rules"). The trading data of a public company listed at Karachi Stock Exchange was analysed during the period from June 01, 2015 to August 19, 2015. The share price of the company increased by Rs 31.25 or 85% from Rs 36.75 as on June 11, 2015 to Rs 68.00 as on July 1, 2015. Daily traded volume of the Company ranged from 500 to 1,500shares. No order for purchase or sale of shares of the Company was placed from July 02, 2015 to July 06, 2015.
Moreover, no shares of the Company were traded during the period from July 7, 2015 to August 19, 2015. However, during the same period, the price of the shares of the Company decreased by Rs 13.40 or 20% from the opening price of Rs 68.00 as on July 7, 2015 to Rs 54.60 as on August 19, 2015. The SECP said that the Chief Executive Officer/Director of the Brokerage-I was the major buyer and seller of the shares of the Company during the period from June 11, 2015 to July 01, 2015.
The trading data, according to the SECP order, revealed that by entering into the aforesaid non bona fide transactions, prima facie, Chief Executive Officer/Director of the Brokerage-I is indulging in creating artificial trading in the shares of the Company, which resulted in an increase in the price of the shares of the Company in a short period of time. Further, after successfully artificially increasing the price of the shares of the Company, Chief Executive Officer/Director of the Brokerage-I attempted to dispose of his shareholding in the Company at an inflated price; however, he failed in his endeavour to sell-off his shareholding at the inflated price.
Chief Executive Officer/Director of the Brokerage-I was allegedly involved in creating the false/ misleading appearance of active trading in the shares of the Company. The SECP said that being a registered broker with the Commission under the Brokers Rules, the Brokerage House-I was required to be conscious of its responsibilities, but the aforesaid transactions are tantamount to creating false market and/or artificial active trading, which is detrimental to fair and efficient market operations, prima facie in violation of the Broker Rules.
In exercise of the powers conferred under section 20 of the Securities and Exchange Ordinance, 1969, the Brokerage House-I is directed to prohibit from indulging in such practices in future through its terminals and/or its proprietary account, because the same are not in line with the prevalent regulatory framework. The Brokerage House-I is further directed to ensure meticulous compliance of the rules and regulations, failing which the Commission shall be constrained to initiate necessary legal proceedings against the Broker, SECP order added.