For all investors investing in the capital market, it is extremely important that they know and understand their rights regarding investor protection and the rules & regulations thereof. At the outset, when a potential investor is to open a trading account with a securities broker, he/ she must ensure that the broker is a Trading Right Entitlement (TRE) Certificate Holder of Pakistan Stock Exchange and is licensed by the Securities & Exchange Commission of Pakistan (SECP). A customer can verify if a securities broker is a TRE Certificate holder by visiting the PSX website and verifying the registration details of the brokerage firm along with its registered office and branches.
Account Opening & Maintenance:
When opening an account, customers are advised to ensure that the Customer Relationship Form (CRF) or Sahulat Account Opening form containing the minimum Terms & Conditions (T&Cs) should be read, understood and signed by them. Infact, all relevant fields of the CRF must be properly filled out and irrelevant fields may be struck off. Moreover, the T&Cs, annexed to the CRF/ Sahulat Account Opening forms provided to account holders must be duly stamped, dated and signed by the Compliance Officer of the securities broker on each page.
Investors are advised to open accounts in their own name only and encouraged to operate their account themselves. Investors are encouraged to open CDC Investor Accounts for safer custody of their shares. In case they want to authorise someone else to transact on their behalf, then a relevant authorisation must be furnished in writing to the concerned securities broker whilst a copy of the authorisation may be maintained by the account holder. Account holders are further recommended to keep track of all alerts, emails, messages or documents sent to them in respect of their account by their securities broker, as well as CDC and NCCPL. Account holders must also sign and verify the correctness as well as completeness of their UIN Post Report and CDC Setup Report.
Orders & Confirmations:
In order to protect the assets of investors, there are certain guidelines and regulations outlined by PSX. Account holders holding an account with a brokerage firm must place orders in written form or through recorded lines when placing orders verbally. The brokerage firm, on its part, must provide Trade Confirmations to the customers after execution of each trade. Furthermore, they must provide quarterly statements of the trading account to their customers. Receipts of margin deposits or payments must be provided by the brokerage firms to their customers. Brokerage firms are also required to provide the mandatory tariff structure to their customers.
Investment Process Caveats:
Investors must not invest based on any promise of a fixed return or guaranteed returns by a securities broker. Investors must not authorise any broker to transact on their behalf or carry out trades without explicit permission or authority by the investor. Investors must not make investment decisions based on advice by unlicensed investment advisors or follow any investment advice by unauthorised/ unregistered persons on any unofficial or unregulated social media platform