The violations came to the notice of the commission during the on-site inspection of the broker under Securities and Exchange Ordinance, 1969. The order passed by the SECP said that the Commission observed that the broker failed to provide complete information and documents to the inspection team. The order said that it was further observed that Net Capital Balance certificate submitted by the broker was overstated.
It has been highlighted in the order that the inspection team of SECP reported that discrepancies in the calculation of Net Capital Balance (NCA) of MRA Securities as on December, 31, 2011, which included overstatement of trade debtors by Rs 97.32 million by including MRA's proprietary debit accounts in the trade debts. The other discrepancies are overstatement of creditors by Rs 2.09 million, understatement of other liabilities by Rs 38.80 million, understatement of debtors by Rs 2.26 million, overstatement of cash balance by Rs 445,850 and overstatement of NCB by Rs 136.31 million.
The Commission had served a show cause notice to the broker and during the hearing authorised representative stated that data was not provided due to the poor law and order situation of the city. The company did not offer any comments on miscalculation of NCB. The broker's contention that provision of record was not practically possible due to law and order situation in Karachi had no merit as business of the company otherwise was in process during that period, sources said.
During the course of enquiry the SECP officials were informed that the brokerage could not provide the relevant records as demanded by the regulator because the law and order conditions in Karachi. The brokerage maintained that the relevant staff could not attend the offices as public transport was not available. However, the inquiry team in its report said that they noted the staff related to routine business could attend the office, whereas obtaining the soft copy of records did not require too much time or physical presence of the relevant staff. Apart from the fine, the broker was strongly advised to take immediate measures and put in place proper checks and procedures to eliminate the occurrence of such instances in future, SECP order added.