Investors’ confidence in the fairness of capitalmarkets is fundamental to the successofmarkets in capital foundation. To attract investment, investors need to be assured
that they would not be cheated off their money by the company in which they invest
or by intermediaries such as brokers, fund managers or other
participants such as investment advisors and analysts. Stock Exchanges,
as frontline regulator and SECP, as apex regulator of the capital
markets use a variety of means to get the investors protected from
market abuse. Investors are offered protection by including good
corporate governance
practices in corporate law, having an effective systemofhandling investors’ complaints,
creating awareness among investors of prudent way of dealing in securities and
demonstrating the capacity to detect and punish market abuse through market
surveillance.
12.1 Resolution of investors’ complaints.
You should always ensure that the stockbroker you choose is
licensed to trade by the Securities & Exchange Commission
of
record. As a shrewd investor, you should know your rights and
obligations and should be aware of the rules that govern yourthings go wrong. You can report abuse to the KSE or SECP, who are the
regulators to ensure the development of a fair, efficient, and transparent
securities market. Alongwithmonitoring and regulating the capitalmarket,
both the KSE and the SECP have the ultimate responsibility to protect the
investors through market supervision and ensuring that their laws and
regulations are complied with.
12.2 The Investors’ Education & Complaints Cell at KSE
Stock exchanges, being the frontline regulators, play a
proactive role. Securing the interest of small investors
and minority shareholders is of prime importance to the
Karachi Stock Exchange. In order to keep a vigilant eye
on investors’ issues and to provide a platform to the
general public for voicing their concerns, an Investors’
Education & Complaints Cell within Legal Division
of KSE has been set up. This Cell is responsible for ensuring that
grievances/complaints of the general public concerning investment and
trading of securities are heard and redressed, in a quick and efficient manner.
The Investors’ Education & Complaints Cell also conducts programs for
investors’ education and provides assistance for answering general questions
regarding the securities laws, rules and regulations and any counseling that
may be required in this regard.
12.3 Your complaint
Your complaint is important to the KSE as it may provide
useful information and insight into malpractices in the
market. It can also serve as an early warning signal to
preempt potential defaults. You are, therefore, encouraged
to lodge your complaint with the KSE as a frontline
regulator. Frivolous complaints, however, are not entertained.
The KSE receives complaints of a varied nature. Of these the most common
are those that are lodged against the brokers of the stock exchange. These
relate to:• unauthorized trading,
• unauthorized transfer of shares,
• non-supply of statements of account, and
• order execution problems.
Grievances can be lodged with the KSE in the form of a formal complaint
against a member or an agent of a broker of the stock exchange. The KSE
will endeavour to redress your complaint in a timely and judicious manner.
12.4 Lodging your complaint
Although you have recourse to approach the KSE for lodging your complaint,
it is strongly advised that your concern/problem should first
be taken up directly with themember concerned. It is prudent
to act promptly. If the Member fails to redress your grievance
then you may lodge a proper complaint supported by
documentary evidences to the Karachi Stock Exchange
addressing to the Managing Director. The time limit required to resolve a
dispute varies with the nature and complexity of each case and the availability
of documentary evidences.
12.5 How your complaint is dealt with
On receiving your complaint against a member of KSE,
it is forwarded to the Investors’ Education & Complaints
Cell at Legal Division of KSE for review and evaluation.
The matter is then taken up with the concerned member
who i s / ar e r e qu es t e d t o s end hi s / t he i r
comments/observations to the KSE, a copy of which will
also be sent to you. The matter is likely to be resolved at this stage. In case
reservations remain despite the exchange of correspondence,KSEmay initiate
an investigation in order to ascertain the true facts of the matter. This could
involve inviting both parties to a face-to-face meeting for resolving the
matter. Occasionally, a dispute concludes without any decision. This occurs
mostly in the event of lack of evidence. The KSE in such cases may decline
to attend the dispute or may dismiss a case and refer the parties to avail their
remedies through court of law.
12.6 Disputes to be referred for arbitration:
As per General Rules & Regulations of the Exchange, all
claims, complaints, differences and disputes arising of dealings
and transactions in respect of securities made subject to Rules
& Regulations of the Exchange and not amicably settled with
the concerned member may be referred for arbitration process.
12.6.1 Appointment of Arbitrator(s):
As per above-referred Regulations, all claims/disputes upto Rs. 0.5
million are referred for arbitration to the Managing Director of the
Exchange, who either himself enters upon the reference or appoints
a nominee for this purpose. The claims/disputes valuing more than
Rs. 0.5 million are referred to the Arbitration Committee of the
Exchange. In such cases, a panel of 3 arbitrators is constituted to
conduct arbitration proceedings, out of which 2 are appointed by
drawing lots from the Arbitration Committee, with one being a
member of the Exchange and other a non-member director. The
third arbitrator will be the Managing Director of the Exchange or
his appointed nominee. However, in the case of non-availability of
any member of the Committee to act as arbitrator, it may instead
appoint any person having expertise in legal or securities market
matters, preferably a former non-member director of the Exchange
to be an arbitrator of the said panel.
12.6.2 Application for Arbitration:
In every case where a claim, difference or dispute arises, the concerned
investor may submit to the Exchange an application for arbitration
along with following documents:
(i) Investors’ Claim Form as per Annexure “B” duly filled and
signed along with all supporting documents and annexures as
mentioned in the form.(ii) An undertaking as per Annexure “C” to abide by all theRules
& Regulations of the Exchange in force for the arbitration.
(iii) Fee as specified in the Regulations.
12.6.3 Arbitration Hearings:
The arbitrator(s) fix a date, time and place for
each hearing, notice of which is given to the
parties in 7 days advance.
12.6.4 Appearance:
The parties to the reference may attend the hearing in person or
through any person duly authorized by them in writing who must be
acquainted with the matter in dispute.
12.6.5 Award:
An award made by an arbitrator, or in case of panel
of three arbitrators by majority of them, shall be
final and binding upon the parties.
12.6.6 Appeal against the Award:
(a) A party to a dispute who is dis-satisfied with any award of the
Managing Director/his appointed nominee may appeal to the
Arbitration Committee against such award within 7 days of the
receipt of such award. The award of the ArbitrationCommittee
in an appeal shall be final and deemed binding on the parties to
the dispute.
(b) A party dis-satisfied with the award of the panel of arbitrators
may appeal against such award to the Board within 7days of the
receipt of such award. However, for the purpose of hearing the
appeal, the Board may constitute a Committee of the directors
every year comprising three of its members, two being nonmember
directors and one member director.
Any investor appealing to the Arbitration Committee / Board shall provide
the following:
(i) The grounds of objections to the award of the arbitrator(s)
(ii) Payment of required fee.
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