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---Validity---Nature of relationship between the complainants and the appellants, as per account opening forms, showed that out of all the complainants, five accorded Discretionary Trading Authority (DTA) to the appellant for trading in their accounts whereas two did not give DTA to the Appellant, however, they both did share their login IDs and passwords with the appellant---Pertinently, in general all the Complainants had alleged loss caused to them by the trading carried out by the traders/employees of the Appellant, however, there was no documentary evidence on record showing that the complainants categorically instructed the appellant regarding stoppage of trading revocation of DTA and/or change of login ID and password, or any other written instruction to the effect which could be deemed as a clear instruction from the complainants to the appellant---On the contrary, there was also nothing produced by the appellant in support of its defense which could suggest that why the appellant (through its traders/employees) kept trading and kept incurring losses without seeking express instructions from the complainants---In the present case, the appellant failed to organize and control internal affairs in a responsible manner or employ fairness, due skill and care towards its customers i.e. the Complainants---There could be no justification for obtaining the login IDs and passwords of the two clients/ complainant, in absence of DTAs as the appellant was required to comply with the relevant provisions of the standards of conduct as envisaged under S. 57 of the Futures Market Act, 2016 ('Act 2016') read with Sched. to the Commodity Exchange and Futures Contract Rules, 2005 ('Rules, 2005')---Moreover, obtaining of DTAs from the customers did not absolve a regulated person i.e. the appellant from fulfilling the statutory requirements and maintaining the conduct at all times, as prescribed under the law---On the other hand, the primary document determining the nature of relationship between the appellant and the Complainants i.e. account opening forms, included disclosures in Urdu language as well and the same had been signed by all complainants---The DTAs given by the Complainants, except two, had not been signed by the Complainants during the Show-Cause Notice proceedings and apart from their statements alleging losses, no other documentary proof regarding any instruction, for instance correspondence with the appellant, had been provided by the Complainants in support of their claims against the appellant---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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