SECP warns analysts, media against stock recommendations

ISLAMABAD — Research analysts and the media community have been warned by the Securities and Exchange Commission of Pakistan (SECP) of consequences if they continue to give advice to people to invest in any particular stocks as it could cause market to fall.

By A Correspondent

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Published: Sun 6 Apr 2008, 9:30 AM

Last updated: Sun 5 Apr 2015, 11:35 AM

Though a belated one, but the move is likely to check the problems often created by researchers and analysts through media by asking people to invest or pull out their money from certain stocks at certain points.

Some government advisers and researchers had issued a number of statements in the electronic media that tempted people to invest in stocks frantically thus creating a bubble that had led to the March 2005 stock market crash.

The SECP yesterday issued a set of guidelines through a circular, copies of which have been sent to the heads of Pakistan Electronic Media Regulatory Authority (PEMRA), all stock exchanges, Mutual Funds Association of Pakistan, and All Pakistan Newspapers Society.

The commission has warned that those individuals who violate these guidelines can be punishable under Section 24 of the Securities and Exchange Ordinance, 1969 which provides for imprisonment for a term which may extend to three years, or fine which may extend to Rs500,000 or both.

In the circular, the commission says Section 17 of the ordinance provide for protecting the interests of general public against malpractices in the capital market. No person shall for the purpose of inducing, dissuading, effecting, preventing or in any manner influencing or turning to his advantage, the sale or purchase of any security, directly or indirectly.

The section also forbids suggestions or statements which the person himself/herself does not believe to be true. This also includes concealment of facts or planned omissions in research or statements aimed at deceiving people.

The SECP says individuals must have reasonable and adequate basis, supported by appropriate research, while making any recommendations or expressing investment related views or opinions on media relating to the securities. However, this basis should not include commentaries on economic, political or market conditions; technical analysis concerning the demand and supply for sector, index or industry; based on trading volume price; and statistical summaries of companies's historical financial data.

If the individual is making use of a third-party research, he/she must make reasonable and diligent efforts o determine whether such research is sound. The circular says if individual must refrain from disseminating third-party information if he/she suspects it is biases or untrue.

The circular says the individual while expressing any recommendations, actions and other investment related views or opinions on media must disclose al conflicts of interest in a timely, clearly and prominent manner.

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