PSX Plans to Revise Code of Conduct For Security Brokers and Their Employees

The management of the Pakistan Stock Exchange (PSX) has planned to revise the code of conduct for security brokers and their employees in the interest of promoting ethical and compliance standards within the capital market. It directed securities brokers to develop and implement a comprehensive code of conduct for their employees, following the amendments and additions of new regulations under its instructions. Each Securities Broker shall formulate a Code of Conduct that sets out the expected standards of behaviour and ethics for all employees; and define in the Code of Conduct, at a minimum, certain actions or activities as “major/material breaches”, including unauthorized trading and any other undue activities in customer accounts; receipt of funds from customers in the employee’s name; performing any securities market related activities from an unregistered office or location, whether in the name of the employee or the Securities Broker. The employees of security brokers would not breach confidentiality or misuse customers’ information, and any other prohibited activities as deemed appropriate by the Securities Broker. Employees including employees serving as directors of Securities Brokers desirous of trading for their own personal accounts or on behalf of their spouses and/ or dependent children must obtain prior written authorization for such activity from the Securities Broker or authorized officer of the Securities Broker on his trading account opening form, the code of conduct said. Employee must submit to the Securities Broker or authorized officer of the Securities Broker, a written undertaking of his understanding and willingness to strictly abide by all the relevant rules, regulations, codes and procedures as prescribed by the Exchange, Clearing Company, Depository Company and the Commission at all times while trading on his own account or on behalf of their spouses and/ or dependent children. Employees must ensure that investment advice given to clients by them (if legally authorized to do so), does not result in a conflict of interest with their individual trading activities. The employees should not indulge in buying or selling securities of a company for their own account or any account over which they exercise control if they possess non-public information or inside information of that company or information pertaining to any potential trade/deal which may affect the share price of that company. Further, they will not pass any such information to others. The employees should not buy or sell those securities for their own account when they are aware of clients’ proposed trades, trades by the Securities Broker, or forthcoming research reports regarding such securities. Securities Brokers shall monitor their employees’ trades regularly, and the Internal Audit Department will ensure compliance with these Regulations, and any violation shall be communicated to the Audit Committee/Chief Executive Officer and shall be submitted to the Exchange and/or the Commission as and when demanded. PSX directed that Security Brokers will take the disciplinary actions that may be taken against employees found guilty of misconduct. These may include, but are not limited to, Issuance of warning letters and restriction or suspension of employment, and termination of employment. PSX sought public comments on these additions and amendments to the code of conduct.