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Rs160b client securities held at KSL, SECP bars KSL trading at KSE & PMEX

Rs160b client securities held at KSL, SECP bars KSL trading at KSE & PMEX

ISLAMABAD: The Securities & Exchange Commission of Pakistan (SECP) has issued directives to halt the trading facilities of KASB Securities Limited (KSL) at the Karachi Stock Exchange Ltd (KSE) and Pakistan Mercantile Exchange Ltd (PMEX) with effect from the opening of market on November 18, 2014 till further orders

It is also worth noting that recently the SECP had levied penalty on the KSL vide its order of February 19, 2014 on account of failure to ensure appropriate segregation of client funds.

The six-month moratorium by the State Bank of Pakistan (SBP) and SECP directives have deteriorated the solvency and liquidity of KSL and also created systemic risk for the market. After the restrictions on the bank deposits with KBL, the net capital of KSL i.e. Rs267 million has declined considerably.

Moreover, KSE and PMEX are directed to ensure and continuously monitor that appropriate arrangements are made by KSL for timely payments, upon demand, to its clients, to whom money is payable by KSL. Central Depository Company has been directed to restrict all movement of securities from the participant umbrella of KSL and only allow portfolio transfers from the sub-accounts of the clients. It is pertinent to mention that quantum of client securities held in KSL custody is around Rs160 billion. The National Clearing Company has also been directed to facilitate all pending settlements of KSL in respect of trades executed till November 17, 2014 and net off the settlement obligations of KSL on November 18, 2014 with the settlement obligations of November 19, 2014.

It is pertinent to mention here that KSL is a majority owned subsidiary of KBL. KSL uses KBL as the settling bank for the purpose of settlement of transactions executed at KSE. Further, as on November 14, 2014, KSL had a deposit of more than Rs361 million with KBL primarily pertaining to its clients. In addition, KSE had deposits of more than Rs174 million at KBL which represented margins deposited by the KSL against trades executed at KSE.