Former member participants' admission be terminated: SECP tells CDC

The Securities and Exchange Commission of Pakistan (SECP) has directed the Central Depository Company of Pakistan Limited (CDC) to terminate admission of ex-member participants with immediate effect. The apex regulator has also directed the CDC to suspend admission of unregistered member participants for a period of 60 days provided that such suspension shall be removed on production of broker registration certificate by such participants.
"In case of non-production of broker registration certificate by such participants within the period of suspension, the CDC will terminate admission of such unregistered member participants," it added. The SECP asked the CDC to ensure that all new member participants shall not have the facility of opening and maintaining sub-accounts under their umbrella without producing broker registration certificate from the SECP, until the implementation of standard follow-up procedures for dissemination of disciplinary actions against members/clearing members/participants, wherein the same aspect has been covered.
The SECP in its letter sent to the CDC, with a copy endorsed to Karachi Stock Exchange, has noted that certain anomalies in the data provided by the CDC relating to participants admitted in Central Depository System (CDS).
"It has been observed that some CDS participants at the time of admission were members of the stock exchange(s), however at present do not hold valid membership of any stock exchange," the SECP said, adding "Also, there are number of member participants who are not registered with the SECP as broker under Brokers and Agents Registration Rules, 2001".
The Security and Exchange Ordinance, 1969 defines a broker as "any person engaged in the business of effecting transactions in securities for the account of others. The CDC Regulations allows a member participant to open sub-account(s) under its umbrella for other investor(s) and the member participants who are not registered with the SECP as broker are not authorised to trade and hence shall not be allowed to open sub-accounts.
The SECP directed the CDC to make suitable amendments in its Regulations restricting opening of sub-account(s) under the umbrella of a unregistered member participant to address this issue. The SECP has said that the decision has been taken in the public interest, for the protection of investors as well as to enhance integrity and transparency of Pakistani capital markets.