Introduction
The Pakistani stock market has witnessed multiple cases of regulatory violations by brokerage firms, with KASB Securities Limited (KASB) and KTrade Securities Limited (KTrade) (Ktrade Vs. KASB ) emerging as prominent examples. Both firms have faced serious allegations of unauthorized trading, manipulation of client accounts, excessive leverage, and systemic failures, leading to substantial financial losses for investors.
This research-based article examines the striking similarities between the violations committed by KASB and KTrade, highlighting how regulatory frameworks were breached and investors were exploited.
1. Unauthorized Trades & Fraudulent Activity
KASB’s Case
- Historically, KASB was involved in unauthorized trading, where clients’ accounts were manipulated without consent.
- The SECP and PSX penalized KASB for executing trades beyond client mandates.
KTrade’s Case
- PKR 750,000+ lost due to unauthorized trades executed without client approval.
- Clients reported trades being placed without their knowledge, leading to forced losses.
Regulatory Violations:
- SECP Act, 2015 (Section 24) – Fraudulent trading practices.
- PSX Rule 5.4.2 – Unauthorized order execution.
2. Unilateral Changes to Trader/Account Settings
KASB’s Case
- KASB was accused of changing account terms and risk exposure limits without informing clients.
KTrade’s Case
- PKR 451,500 lost after KTrade swapped a client’s assigned trader without consent.
- The new trader executed high-risk trades, leading to significant losses.
Regulatory Violations:
- SECP Code of Conduct (Clause 5.1.1) – Mandates client consent for material changes.
- PSX Regulations (Rule 5.2.1) – Requires fair treatment of clients.
3. Excessive Leverage & Risk Manipulation
KASB’s Case
- KASB was found illegally increasing exposure limits, forcing clients into high-risk positions.
KTrade’s Case
- Forced 10X leverage (vs. SECP’s 2X limit for retail clients), causing PKR 1.2M losses.
- Clients were pushed into margin calls due to manipulated risk settings.
Regulatory Violations:
- SECP Leverage Rules (Circular No. 11/2020) – Caps leverage at 2X for retail investors.
- NCCPL Exposure Limits (Rule 4.1) – Prohibits unauthorized risk exposure.
4. System Failures & Order Manipulation
KASB’s Case
- KASB used “stuck orders” to hide losses, delaying settlements.
KTrade’s Case
- PKR 850,000 lost due to deliberate “system glitches”, preventing clients from exiting positions.
- Orders were delayed or stuck, leading to forced liquidations.
Regulatory Violations:
- SECP Technical Standards (Circular No. 09/2017) – Mandates system reliability.
- CDC’s Trade Settlement Rules – Requires timely order processing.
5. Third-Party Interference & Trade Halts
KASB’s Case
- KASB allowed unauthorized personnel to control client accounts.
KTrade’s Case
- PKR 640,830 lost after a third party (Muzafar Iqbal🛈) instructed trader Babbar Hanif to halt trades.
- Clients were denied exit opportunities, leading to avoidable losses.
Regulatory Violations:
- SECP Brokerage Rules (Section 12(3)) – Prohibits unauthorized instructions.
- NCCPL’s Risk Management Framework – Bars unauthorized trade intervention.
6. Trading via WhatsApp (Non-Secure Channels)
KASB’s Case
- Informal trade instructions via WhatsApp/SMS were common, bypassing official records.
KTrade’s Case
- Traders executed orders via WhatsApp, violating secure trading protocols.
- No audit trail, making disputes unresolved.
Regulatory Violations:
- SECP Electronic Trading Guidelines (Clause 7.2) – Mandates secure, recorded platforms.
- PSX Rule 5.6.1 – Prohibits informal trade instructions.
Conclusion: A Pattern of Regulatory Abuse
Both KASB Securities Limited and KTrade Securities Limited have exhibited nearly identical violations, including:
Unauthorized trading (SECP Act, PSX Rules) Unilateral account changes (SECP Code of Conduct) Excessive leverage manipulation (SECP Circular 11/2020) System failures & order manipulation (SECP Technical Standards) Third-party interference (SECP Brokerage Rules) Informal trading via WhatsApp (PSX Rule 5.6.1)
These cases highlight systemic weaknesses in Pakistan’s brokerage oversight, where firms exploit loopholes to manipulate client funds. The SECP, PSX, and NCCPL must enforce stricter penalties to prevent such violations in the future.
Recommendations:
- Mandatory trade confirmations (SMS/Email for every transaction).
- Strict leverage enforcement (Automated caps on retail accounts).
- Ban on third-party account interference.
- Stronger penalties for WhatsApp-based trading.
Investors must remain vigilant and report violations to the SECP Complaint Portal (https://www.secp.gov.pk/) and PSX Investor Protection Fund.
Research Case #KSL-KT-2024-0037
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