Law:

Section:

(a) Securities and Exchange Ordinance (XVII of 1969)-------S. 22---Brokers and Agents Registration Rules, 2001, Rr.8, 12, Third Schedule, Code of Conduct---Duty of Broker towards clients---Scope---Handling of conflict of interest---Method---Contravention of Code of Conduct in trade transactions---Company purchased 578,000 shares of its clients at the rate of Rs.920 in its proprietary account, and only after five days from purchase of said shares, sold the same at the rate of Rs.1000 to its associate company---Said transaction resulted in an appropriate profit of Rs.46 million to the company---Commission sought clarification from the company regarding said transactions which resulted in a significant gain to the company---Response of the company was found unsatisfactory---Company, though was a reputed institution and had large base of foreign clients, it was its obligation to work more professionally and prudently---Market intermediaries were required to treat their customers in a fair manner characterized by high standards of honesty and integrity---Primary duty of a broker/company was to act as an agent for parties who wished to buy or sell shares and not enter into transactions where conflict of interest would arise between the broker and its clients---Broker's responsibility was always to place the interest of the customer ahead of its interest---Broker's obligation and duty to the customer, must be paramount which was not only moral duty of broker, but law also put onus on the shareholders of the broker company to give preference to its clients when such situation would arise---Conflict of interest was a fundamental and pervasive issue in developed and emerging capital market, where transactions between the market participants were primarily assisted by market intermediaries---Market intermediaries in primary and secondary capital market had to balance their own interest and those of issuers and investors--- Situation creating a conflict of interest could occur between a broker and a client, and between different groups of clients---Former class of conflict would take place between the brokers' own economic interest and the interests of its clients---Best…

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