ISLAMABAD: The Islamabad High Court (IHC) has rejected an appeal filed by the legal heirs of Siddiq Moti, upholding the Securities and Exchange Commission of Pakistan’s (SECP) ruling in a decades-old dispute over the unauthorised transfer of shares.
The appeal challenged decisions by SECP’s securities market division and its appellate bench regarding a complaint dating back to 2000. The IHC affirmed the SECP’s finding that Moti had transferred shares without proper authorisation from the account holder, Naeem Hussain. In its judgment issued on November 19, 2024, the court underscored the SECP’s authority as a regulatory body and emphasized the critical need to safeguard investor securities. The appeal, registered as SECP Appeal No. 06 of 2015, contested the SECP’s May 22, 2015, decision, which had upheld an earlier ruling from September 25, 2009.
The case originated from a complaint filed by Naeem Hussain on December 22, 2000. Hussain had alleged that Moti had unlawfully transferred shares from sub-accounts held in his name with the Central Depository Company (CDC).
Following a detailed investigation, the SECP concluded that Moti had failed to provide evidence to justify the transactions and had not obtained Hussain’s explicit authorisation. These actions were deemed violations of the Central Depositories Act, 1997. The SECP’s appellate bench had upheld this conclusion in 2015. The IHC, in its ruling, found no procedural or legal flaws in the SECP’s handling of the case. It clarified that general authorisation clauses in account-opening forms do not entitle brokers to transfer securities from clients’ sub-accounts without explicit and documented consent.
The court further said that decisions by specialised regulatory bodies like the SECP and its appellate bench cannot be overturned in a second appeal unless substantial legal errors are evident. The IHC also imposed a cost of Rs100,000, to be shared equally between the SECP and the complainant.
The SECP welcomed the verdict, describing it as a significant step toward protecting investors and promoting transparency in the capital markets. Over the years, the SECP has intensified its efforts to curb the misuse of client assets within the brokerage industry.
To address such risks, the SECP has introduced stricter regulations, including mandatory fortnightly reporting by brokers to the Pakistan Stock Exchange on client asset segregation and the automation of securities transfers directly between buyer and seller accounts, eliminating manual broker interventions.
This landmark ruling underscores the SECP’s commitment to ensuring transparency, accountability and the protection of investor interests in Pakistan’s capital markets.
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