SECP Refers Bagasra Securities Case to FIA Over Rs49 Million Unpaid Investor Claims

The Securities and Exchange Commission of Pakistan (SECP) has approved referring the Bagasra Securities case to the Federal Investigation Agency (FIA) for legal proceedings over alleged unauthorized dealings in clients’ shares, with Rs48.93 million in investor claims still outstanding.

The referral, approved under Section 41B of the SECP Act, 1997, will enable the FIA to initiate formal proceedings concerning the alleged transfer and pledging of investors’ securities without their consent.

The case dates back to March 2010, when the SECP launched an enquiry following complaints about unauthorized transactions involving clients’ holdings.

The enquiry, completed in October 2013, found that shares had allegedly been transferred and pledged without investors’ consent to secure financing and meet exposure margin requirements. The resulting funds were used to benefit certain clients at the expense of others.

According to the enquiry findings, a total of 176.204 million shares, including client holdings, were pledged between July 2007 and March 2010. Following defaults, banks and the stock exchange exercised their pledge rights, leading to the sale of the pledged securities.

The enquiry committee also recorded that the brokerage’s directors and liquidator failed to provide the required records. Consequently, the committee relied on information obtained from the Central Depository Company (CDC), Pakistan Stock Exchange (PSX) and banks to complete its investigation.

The National Clearing Company of Pakistan Limited (NCCPL) declared Bagasra Securities a defaulter, while PSX sold the brokerage’s membership card in 2009 and initiated the settlement of investor claims. The company subsequently ceased operations after passing a voluntary winding-up resolution in January 2010.

PSX verified 333 investor claims amounting to Rs145.50 million. Of this amount, Rs96.57 million was settled, including Rs75 million paid through the Investors Protection Fund, leaving Rs48.93 million unpaid.

The SECP’s approval of the referral is aimed at pursuing legal action and supporting recovery efforts to address the outstanding claims of affected investors.

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