SECP fines PICIC for insider trading

KARACHI: The Pakistan Industrial Credit and Investment Corporation Ltd (PICIC) has been fined Rs500,000 by the Securities and Exchange Commission of Pakistan (SECP) for insider trading in two of its subsidiary mutual funds.

According to a SECP press statement on Tuesday, the PICIC has been fined for indulging in the trading of PICIC Investment Fund (PIF) and PICIC Growth Fund (PGF) in a manner that influenced the certificate prices of these funds to its advantage.

The trading activities in PIF and PGF (formerly ICP SEMF) on June 25, 2004, were observed to be unusual and abnormal. During the last three minutes of trading in PIF and PGF, not only abnormally high turnover was witnessed but abnormal price fluctuation was also observed.

Details of trading, which took place in the certificates of PIF and PGF on June 25, 2004, revealed that PICIC was the major buyer in the last three minutes of the trading session.

Furthermore, PICIC had avoided trading for most part of the trading time when certificates were available at favourable prices. The decision of PICIC to buy aggressively in the last minutes, thereby pushing the prices up, clearly showing that the purpose was not to buy certificates in normal course.

After successfully pushing the prices upward in PIF and PGF in a manipulative manner, PICIC sold 49,155,672 certificates of PIF and 12,600,000 certificates of PGF on June 28, 2004, at closing market price of June 25, 2004, to PICIC-Asset Management Company, making a substantial profit in the process.

The SECP said that it believes such attempts to generate artificial turnover and price movement tend to induce unsuspecting investors to trade-in such scrip.

This is detrimental to the interest of small investors as well as development of fair and transparent market.

It is, therefore, important for the protection of investors and to ensure a transparent functioning of the stock market that such acts of market participants are appropriately penalised.

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