LESSONS FOR CAPITAL MARKET INVESTORS

Lesson 1:

Always deal with a licensed broker registered with SECP

Consequences of not observing

• Your investment with  unauthorized brokersis at risk and prone to fraud
• You may lose your hard earned money in the hands of unauthorized brokers
• PSX and SECP will not entertain your complaint, if you deal with unlicensed brokers

Guidelines to Follow

• You can verify  registration from the website of Pakistan Stock Exchange
• License verification can be made through  Jampunji SMS license verification service; for verification through SMS, send LV <incorporation ID> to 8181

Lesson 2:

Trade only through your own Accounts with Broker &CDC

Consequences of not observing

• Your investment is not secure if you trade through account in the name of someone else
• You are at risk as you are not the legal owner of your money
• You are prone to fraud if you are investing without having Broker and CDC accounts in your own name.
• Broker may use your money for churning in the market for his own benefit
• Only legitimate owner and accountholders can file claims in case of default of broker.
• SECP will not entertain your complaint in case you traded through 3^rd party accounts.

Guidelines to Follow

 

• Carefully completeyour account opening forms and obtain  copies for your record.
• Ensure that your contact details like address, email address and cell phone are correctly recorded in the account opening form

Lesson 3:

Never authorize a 3^rd party to operate your account

Consequences of not observing

• The authorization given to someone else to operate your account on your behalf can be misused
• Authorized person may cheat you for his personal gain
• Your money can be used for churning
• Your claim will not be entrained by broker or exchange in case of misuse of such authorization
• SECP will not entertain your complaint in case of any loss due to 3^rd party authorization

Lesson 4:

Always make payments to broker by crossed cheque and obtain receipts.

Consequences of not observing

• You may be cheated if you make payment through 3^rd party cheques
• Do not pay cashto broker; Payment by cash is illegal and SECP will not entertain your claim in case of default by  broker.
• Always obtain periodic statements of accounts from broker, and compare them with your records.

Lesson 5:

Always maintain a documentary record of your business transactions so as to protect your hard earned money.

Consequences of not observing;

• In absence of documentary evidence of your business transactions in the stock market, you may not be able to substantiate your claim or complaint against the broker

Guidelines to Follow

• Do not sign any document without fully understanding its terms and conditions.
• Carefully complete your account opening forms and obtain copies for your record.
• Never Forgo obtaining all documents of transactions in good faith.
• Give Orders either in writing or on recorded telephone line of the broker
• Always obtain periodic statements of accounts from broker and CDC, and compare them with your records.
• Obtain copy of schedule of applicable fee and charges from the broker for your record.
• You are at risk if you are not receiving “trade confirmation” within 24 hours from your broker of all trades executed in your account.

 

Lesson 6:

Never transact on ‘’Tips’’, Insider News, Rumors or Media report

Consequences of not observing;

• Investment on the basis of rumors, media report or tips may lead to loss of your hard earned money.

• Insider trading is a criminal offence and prosecution may lead to imprisonment for up to 3 years or to a fine which may extend to Rs. 200,000,000 or 3 times the amount of gain made or loss avoided, or loss suffered by another person, whichever amount is higher;

Guidelines to Follow

• Always check financial statements of a company prior to making investment in its script.
• Do not transact, based on media reports, rumors, tips, or promises of guaranteed or high return.
• Take your time to research the stock before you invest. Never trade on social media tips where the recommendation is claimed to be based on inside or confidential information.
• Exercise extreme caution regarding social media post/messages that solicit an investment or provide information about a particular share.

Lesson 7:

Always maintain custody and complete control over your securities.

Consequences of not observing

• In case of default of broker, your investment will not be safe 

Guidelines to Follow

• Open an account with CDC’sInvestor Account Services (IAS) and subscribe to CDC online services for authorizing all portfolio transfers from your account.
• Use CDC’s Direct Settlement Service and settle your trades through IAS Account.

Lesson 8:

The investors are cautioned to avoid making an investment decision on the basis of the research report issued by a person or entity not notified by the SECP.

Guidelines to Follow

• The list of Research Entities duly notified with SECP is available on SECP’s website.
• You may authenticate notified research entities with the Jamapunji SMS service by sending ;REV <Research Entities Notification Number> to 8181

Complaints

In case of any compliant, immediately lodge it with Pakistan Stock Exchange. You may lodge your online complaint with SECP through its website (www.secp.gov.pk)