When investing in the market subsequent to opening an account with a securities broker, investors must be cognizant of their rights regarding investment in the market. From account opening and maintenance, investment process and procedures, to different caveats regarding investment in the stock market, investors must be careful and ensure that their rights are protected. For example, investors must not invest based on any promise of a fixed return or guaranteed returns by a securities broker; furthermore, investors must not authorise any broker to transact on their behalf or carry out trades without explicit permission or authority by the investor.
Investor Complaints Process & Resolution:
In case of any complaints or trade related dispute, the customer may at first lodge a complaint with his/ her securities broker. If the matter is not resolved, the customer may lodge the complaint with the Regulatory Affairs Division (RAD) of PSX to get relief or compensation. The complaint may be lodged by submitting a prescribed Investors’ Complaint Form (available on PSX website) at investor.complaints@psx.com.pk or electronically at csir.psx.com.pk. Once an investor files a complaint, PSX takes up the matter with the concerned securities broker and initiates the process of the complaint resolution initially through mediation.
Arbitration:
If the matter still stands unresolved, despite mediation, then Arbitration is employed in accordance with procedures prescribed under Chapter 18 of PSX Regulations. Arbitration is a process of dispute resolution whereby a customer can settle their disagreement with the broker efficiently outside the Court. Any party to the dispute, whether investors alleging mismanagement of their funds or securities brokers for recovery of debit amounts, may file for Arbitration through an application to RAD supported by relevant documentary evidences. If the disputed amount is above Rs 500,000, then the Arbitration is carried out by a panel comprising of industry experts, CEOs of brokerage houses, and representatives of PSX senior management staff. The Arbitration panel provides equal opportunity of hearing to all parties involved in the dispute. In case the disputed amount is less than Rs 500,000, then the sole arbitrator who may be one industry expert hears and decides on the dispute. A decision is made after significantly reviewing the entire matter from all angles. If any party to the dispute is dissatisfied with the Arbitration result, they may file an appeal with the PSX Chief Regulatory Officer (CRO) within 15 working days of the decision. Subsequently, an Appellate panel comprising of five arbitrators including industry experts and PSX senior management staff will hear and decide on the Arbitration decision against which the appeal is being made within 45 days of the receipt of the appeal.
Default by a Securities Broker:
In case of default by a securities broker, a customer wanting to lodge a complaint against the said securities broker in respect of claiming funds, can do so by contacting the PSX Regulatory Affairs Division (RAD). The process involves formation of a Default Committee by PSX for handling such matters, inviting claims against defaulting securities brokers through PSX website and advertisements in newspapers, appointment of auditor for verification of claims, and disbursement of available funds to approved claimants.
The approved claims of defaulter securities brokers are settled by PSX through liquidation of assets of the securities broker and through the Base Minimum Capital (BMC) maintained with the Exchange in accordance with Chapter 19 of PSX Regulations. If the customers’ claims admitted by the Exchange against a defaulted securities broker are more than the amount available out of sale proceeds of assets of such securities broker and through the BMC for satisfying such claims, then remaining amount shall be paid from Centralised Customers Protection Compensation Fund (CCPF), established by the Exchange with the sole mandate to compensate customers of a defaulter securities broker, up to a maximum of Rs 500,000/- per claimant, in accordance with Chapter 24 of PSX Regulations.
While there are comprehensive measures in place to protect investors by PSX as a frontline regulator, the saying that “prevention is better than cure” or “better be safe than sorry” is the most apt in this situation. Being careful and investing responsibly is the best guarantee that an investor can have in terms of protecting his/ her investment and assets.