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We all want our hard-earned funds to grow and increase. While this is possible by investing prudently in the right asset classes and vehicles of investment suitable to us in keeping with our risk/ return objectives and our risk tolerance levels, it is equally important to keep an eye out for our portfolio of investments in order to secure our investments.
There are several ways of securing your investment portfolio:
Selecting the right securities broker: This requires shortlisting a number of Securities Brokerage firms based on the following parameters and then choosing the one most suitable to your investment needs such as:
Ease of communication & understanding of your defined investment objectives. Availability of research material.
Availability of online trading facility.
Provision of trade confirmations.
Brokerage charges levied are in-line with your budget.
Filling of Customer Relationship Form (CRF) or Sahulat Form:
Your account can be opened by filing either CRF or Sahulat Form with the Securities Broker. CRF allows the investor to experience the full potential of stock market while Sahulat Form is ideal for those who are risk averse or want to undergo simplified process of account opening. CRF allows investors to trade in all markets such as Ready Market, Futures Market and Leveraged Products while Sahulat Form only allows trading in Ready Market and that too upto a limit of Rs800,000.
Opening an Investor Account: You must open an Investor Account with Central Depository Company (CDC) to secure the custody of the shares purchased whereby the account is totally under your control.
Evaluate your risk/ return objectives and risk-taking capacity: You must assess what are your risk/ return objectives; how much risk are you willing to take against what level of expected returns. You may also consider your risk-taking capacity in terms of how long can you afford to stay in the market in case of a downturn.
Documentation: You must ensure that all documents (and copies thereof) regarding your account and its transactions are available with you so you have a complete picture and record of your account, investment portfolio and its transactions.
Confirmations through SMS/Email/Courier: Make sure that you receive all trade confirmations from your Securities Broker as well as NCCPL via SMS, Email or courier.
Be thorough in your trading practices: Make sure that you communicate your order instructions to one person in the brokerage firm so as to avoid any miscommunication and confusion. Also, in case of any discrepancies, you must contact your Securities Broker immediately and not leave things to chance.
Avoid discretionary trading practices: Avoid discretionary trading practices whereby a Securities Broker is given the freedom to execute trades for you.
Online Trading through Broker App: The App or Software provided by your Securities Broker will enable you to invest on the Stock Exchange as per your own decisions. Make sure to obtain the access to this downloadable App or procure the software from your Securities Broker.
Possible Complaints as an Investor: While you may have taken all necessary measures to ensure your investment portfolio is safe & secure, you may face an issue in the course of making your investment which could necessitate a complaint registration process on your part.
These issues can be:
Commitment for high returns: You may be promised sky high returns against a particular investment when in fact there may be no such returns to be gained from that investment and you are pushed into incurring losses over that particular investment.
Portfolio Management offers from your Securities Broker or trader: Your Securities Broker or trader may make offers to manage your portfolio.
Securities brokers and traders are not permitted to manage a client’s investment account.
They cannot invest or trade on behalf of the client except with specific instructions from client for each trade.
Being sold a particular scrip without your express consent: You may be sold a scrip by a Securities Broker without taking your express consent for that purchase. This is a serious issue and lapse of proper SOPs exercised on part of the Securities Broker regarding proper trading.
Buy or Sell transaction without permission: Your Securities Broker trades on your behalf without your express permission.
Default: The Securities Broker whose services you are utilizing defaults.
Redressal of Your Complaints/ Grievances:
You can approach the Securities Broker as a first line of action to redress your grievance. If that doesn’t help, you can approach the Regulatory Affairs Department (RAD) of PSX as the frontline regulator for redressal of your grievance, particularly in case of default by the Securities Broker. This is possible through the following process:
You may register a complaint by submitting the prescribed Investors’ Complaint Form (available on PSX website) at [email protected] or electronically at csir.psx.com.pk
PSX takes up the matter with the concerned Brokerage House and tries to resolve the matter through mediation.
If the dispute is not settled even then, PSX resolves the matter through Arbitration in accordance with procedures prescribed under Chapter 18 of PSX Regulations.
In case of Default by a Brokerage House/ Securities Broker, PSX constitutes a Default Committee.
PSX invites claims by investors against the defaulting Securities Broker by placing an ad in newspapers and on PSX website.
PSX appoints auditor for verification of claims.
PSX Disburses available funds to approved claimants.
PSX settles the approved claims of a defaulter Securities Broker as follows:
The assets of Securities Brokers in custody of the Exchange are liquidated to settle approved claims of claimants. The assets comprise of:
(a) Office(s) within the Exchange premises, if any, in the control of the Exchange; (b) Base Minimum Capital maintained with the Exchange in accordance with the Chapter 19 of PSX Regulations;
(c) Securities available in the House Account and Investor Account of the defaulter Securities Broker; and
(d) Securities available in the Sub-Account in CDS for maintaining custody of securities belonging to the defaulted Securities Broker.
If the customers’ claims admitted by the Exchange against a defaulted Securities Broker are more than the amount available out of sale proceeds of assets of such Securities Broker for satisfying such claims, then remaining amount shall be paid from Centralised Customers Protection Compensation Fund (CCPF), established by the Exchange with the sole mandate to compensate customers of a defaulter Securities Broker, up to a maximum of Rs 500,000/- per claimant, in accordance with Chapter 24 of PSX Regulations.
You can also file your complaint through another mode – Prime Minister’s Performance Delivery Unit [PMDU]:
PMDU is a nationwide complaints and grievances redressal mechanism to provide citizens an opportunity to seamlessly communicate with all government entities to have their issues resolved with priority and to address complaints lodged by the citizens through Pakistan Citizen’s Portal – a Government-owned mobile application. PMDU dashboard has also been assigned to PSX, CDC and NCCPL. All complaints received by PSX on PMDU dashboard are being resolved on priority basis.
The above is a brief of why it is important to secure your investment portfolio and what to do in case you need redressal of your complaints. In any case, it pays to be vigilant and careful with your account, its transactions and its documentation. For further information and guidelines, you are welcome to visit the PSX website at https://www.psx.com.pk/psx/resources-and-tools/investors/know-your-rights-information-for-investors
Disclaimer: The contents of this article comprising of information pertaining to financial products, including but not limited to securities, derivatives products, listed companies or companies proposed to be listed on PSX and any content of third parties are strictly of a general nature and are provided for informative and educational purposes only. Such content/ information is not intended to provide trading or investment advice of any form or kind and shall not under any circumstances be construed as providing any recommendation, opinion or indication by PSX as to the merits of the said product, security or company and also not be interpreted as comprehensive and interpretive of all applicable regulatory provisions.
The article does not necessarily reflect the opinion of Business Recorder or its owners
The writer is Head of Marketing and Business Development, Pakistan Stock Exchange Ltd