SECP Conducted Inspections and Investigations of 105 Stock Brokers in 2020-21

The Securities and Exchange Commission of Pakistan (SECP) has conducted onsite inspections and investigations of 105 stock market brokers and issued warnings to 35 brokerage companies during 2020-21.

The SECP data issued on Saturday revealed that onsite supervision is the key tool to monitor the activities of brokers to ensure regulatory compliance. Inspections and investigations of the brokers are conducted regularly based on indicators of risk assessment criteria inclusive of financial strength, compliance level, and business performance. A significant number of inspections and investigations were conducted during the year leading to compliance directives or referrals for adjudication depending upon the nature of regulatory non-compliance.

The SECP report revealed that the offsite review of financial statements and other statutory returns is the primary tool for supervision of the corporate sector. Onsite inspections or investigations are conducted if necessitated by the offsite review, based on the recommendation of the registrar or a complaint by an eligible shareholder. Major non-compliances or irregularities observed during the offsite or onsite reviews are referred for adjudication while warning or compliance directives are issued for minor non-compliances by the respective supervision functions.

Moving ahead, in the forthcoming year, the Commission foresees thorough and well-synced enforcement supported by offsite supervision, onsite inspections, investigations, and adjudication functions. Priority areas continue to aim at transparent disclosure, informed decision-making, accountability, and protecting minority shareholders and the general public.

AML/CFT-related compliance shall remain a key focus. Further, focus areas include strengthening risk-based supervision including improving the risk matrix for identification of high-risk companies for prioritizing examination of such companies, taking appropriate measures against non-performing units, pursuing actions against non-filers, and strengthening vigilant inspection and investigation functions, SECP’s report added.