Investigation into Rs 250 million EOBI scam: PSX feels left out as FIA probes 12 more brokers

Federal Investigation Agency (FIA) has included at least 12 brokerage firms of Pakistan Stock Exchange (PSX) in its probe in the multimillion-rupee EOBI scam. However, frontline regulators of PSX are feeling left out in the years-old criminal proceedings the FIA is carrying out in collaboration with apex regulators at SECP. On January 4, the federal investigators had arrested three top officials of AKD Securities for inflicting over Rs 250 million loss on the exchequer by, allegedly, manoeuvring with the Employees Old Age Benefits Institution (EOBI).
The 12 brokers under investigation are 10 from Karachi and two from Lahore, said a well-placed source at PSX. "Brokers facing FIA probe are those who somehow have been related to the trading of Amtex shares by EOBI," the source said. The FIA probe seems to have rung alarm bells at PSX where the elected directors at the Exchange's board, who represent the brokerage fraternity, are unhappy with investigators for their "targeted" actions. "Undisclosed trading is done on the stock market where the broker has no knowledge of the traders," said an office-bearer of KSE Stockbroker Association (KSA), requesting anonymity. "Why don't you nab people at EOBI and Amtex," he asked, adding "The question is where do we draw the line?"
Meanwhile, PSX Board met here Monday to discuss the present situation of the stock market and uncertainty created by investigation of some brokers. "Due to the specialised nature of stock market, investigations related to the securities industry should be routed through the frontline regulator," a statement quoted the Board as saying. Also, it said, the Board decided to communicate with the Securities and Exchange Commission of Pakistan (SECP) to suggest procedural aspects of investigations of stock market participants.
These regulatory actions have a bearing on investor sentiments at PSX. Monday saw the benchmark KSE100 index falling for the 11th consecutive session to what analysts said nine-month low of 30,628, down 373 points or 1.2 percent. "Unconfirmed reports of few brokers getting letters from agencies hurt local market sentiments," said Topline analysts on January 14 when "panic selling" eroded 713 points of the index.
Perhaps keeping this factor in mind, Interior Minister Chawdhri Nisar Ali Khan Monday ordered the formation of a joint task force comprising FIA and SECP officials to deal with "sensitive issues" in capital market. "This joint task force would discuss all matters prior to initiation of any actions by FIA pertaining to the capital market," read an SECP statement. It held its first meeting on Tuesday (yesterday) at FIA's headquarter in federal capital, the body is tasked to set a co-ordination mechanism. "This endeavor would lead to greater investor protection and confidence in the country's capital market," Chairman SECP Zafar Hijazi was quoted as saying.