H.G. MARKETS (PRIVATE) LIMITED vs COMMISSIONER-SMD, SECP Ss — 2024 CLD 1381 SECURITIES-AND-EXCHANGE-COMMISSION

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H.G. MARKETS (PRIVATE) LIMITED VS COMMISSIONER-SMD, SECP Ss.57, Cls. (a) to (f), 123(8) & 123(10)---Commodity Exchange and Futures Contracts Rules, 2005, R. 20 & Sched.---Provisions relating to standards of conduct, non-compliance of---Whether broker fulfilled its duties diligently towards its customers---Appellant (a futures broker of the Pakistan Mercantile Exchange /PMEX)was penalized by Securities and Exchange Commission of Pakistan ('the Commission')---Allegation levelled by the complainants was that they had given discretionary authority to the employees of the appellant to trade in their accounts and the employees of the appellant indulged in excessive trading with the sole objective of generating commissions, resultantly they lost all or a significant part of their investments---Contention of the appellant was that Cls. 1(a) and (b) of the Schedule to Commodity Exchange and Futures Contracts Rules, 2005 ('the Rules, 2005') were not attracted---Held, that said contention was misconstrued as both the said provisions were part of the code of conduct for brokers under the Rules, 2005 and the same were attracted in the present case where the subject matter involved determination of fairness, due skill and care employed by the appellant towards the complainants as they were customers of the appellant, in light of the underlying contracts i.e., the account opening forms, and not customers of PMEX, where trading was carried out and funds were kept to ensure investor protection---Regarding Cls. 2(d) of the Schedule to the Rules, 2005, though account opening forms, Dictionary Trading Authorities (DTAs) and other documents containing risk disclosures were obtained by the Appellant, however, to ascertain the investment objective and risk tolerance, which varied from person to person, no evidence had been placed on record by the appellant (especially when it was being acknowledged that it was a high-risk market) to show investment objectives of the complainants in support of its contention that no case of excessive trading was made out---Appellate bench modified the impugned order to the extent that the penalty imposed, upon the appellant vide impugned order was reduced to Rs. 3,500,000/---Appeal was disposed of accordingly.

H.G. MARKETS (PRIVATE) LIMITED vs COMMISSIONER-SMD, SECP Ss — 2024 CLD 1381 SECURITIES-AND-EXCHANGE-COMMISSION-OF-PAKISTAN

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