2004 PLP 353 (CLD)

Date of hearing: 3rd April, 2003. Through this appeal Islamabad Stock Exchange (Guarantee) Limited (hereinafter, "ISE") has impugned the order dated 27‑1‑2003 passed by Mr. Shahid Ghaffar, learned Commissioner (Securities Market), whereby he imposed a penalty of Rs.25,000 each on ISE and Premier Capital Management (Private) Limited (hereinafter "Premier Capital") which is a corporate member of ISE, under section 22(1)(c) of the Securities and Exchange Ordinance, 1969 (the "Ordinance"), for violation of rules 5 and 7 of the Brokers and Agents Registration Rules, 2001 (the "Rules") and section 5‑A of the Ordinance.

2. Briefly stated the facts of the case are that Premier Capital was registered under rule 5 of the Rules to act as a broker till 31‑10‑2002: Premier Capital nevertheless failed to get the registration renewed on or before 31‑10‑2002 and despite the fact that vide letter dated 12‑8‑2002, ISE was put on notice by' this Commission to get the registration of Premier Capital and other brokers renewed before 31‑10‑2002, the application for renewal of registration of Premier Capital reached the Commission on 4‑11‑2002 and Premier Capital kept on trading as broker which was well within tire knowledge of ISE.

3. ISE has objected to the impugned order on the grounds that ISE had reminded Premier Capital for renewal of registration vide letter 16‑8‑2002, that ISE acted bona-fide, that Premier Capital kept on trading because its registration had neither been suspended nor ISE was empowered to suspend the registration. The counsel for ISE further contended that the request for renewal of registration of Premier Capital had not been refused once it was forwarded by ISE to the Commission, and that 'while passing the Impugned Order the learned' Commissioner, (Securities Market) did not interpret the relevant rules in accordance with the established principles of interpretation of statutes.

4. We have heard this case on 3‑4‑2003. We have perused the entire record with the help of learned counsel of ISE and officers of this Commission. We have also gone through the relevant provisions of the Ordinance and the Rules at length.

5. The counsel of ISE has repeated the grounds mentioned above in the course of his arguments and in addition requested the Commission to take a lenient view and forego the penalties imposed on ISE.

6. The Impugned Order rests on the premises that both ISE and Premier Capital have admitted their default end confessed that they have violated rules 5 and 7 of the Rules and section 5‑A of the Ordinance inasmuch as Premier Capital traded at ISE as broker beyond 31‑10‑2002 without registration as broker under the Rules with Commission and ISE failed to take cognizance of this violation in its capacity as a frontline regulator. As a matter of record ISE once suspended the trading and then removed the suspension on the same day and thus facilitated the Premier Capital Securities to undertake illegal trading. The said admission and confession has not been objected to in the present appeal. Keeping in view the above facts the alleged reminder of ISE dated 16‑8‑2002 to Premier Capital for renewal of registration is of no effect.

7. We now deal with the remaining objections of the appeal. ISE is supposed and required to protect the investors within the parameters defined by law and applicable rules. It cannot do so by perpetuating and facilitating the illegal trade of a member. ISE, has therefore, failed to perform its duties as frontline regulator And has not acted bona fide.

8. Under the Rules no broker can do the trading after the expiry date of certificate of registration .The arguments of ISE that the trading by Premier Capital after 31‑10‑2002 was justified because its registration had not been cancelled or suspended has, therefore, no force. The plea that request for registration had not been refused, is devoid of any force because there was no question of refusal during the period from 1‑11‑2002 to 4‑11‑2002 (when Premier Capital did the trading without registration because there was no such request pending with the Commission.

9. We have also considered the request made by the counsel of ISE regarding taking a lenient view in the matter and are of the view that the learned Commissioner (Securities Market) has already taken a lenient view in the matter, specially considering the fact that he could have proceeded against ISE under section 7 of the Ordinance.

10. In view of what has been discussed above, we find no exception to the Impugned Order and dismiss this appeal. S.A.K./19/SEC Appeal dismissed.