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A Centralized Customers Protection Compensation Fund (CCPF), formerly known as Investor Protection Fund (IPF), has been established and operated in accordance with the Customers Compensation Fund (Establishment and Operations) Rules, 2017 and Centralized Customer Protection Compensation Fund Regulations, 2017 promulgated by the Securities and Exchange Commission of Pakistan.

The sole mandate of CCPF is to compensate customers of a defaulter stock-broker up to a maximum of PKR 500,000 per claimant whose claim has been admitted by the Pakistan Stock Exchange (PSX).

The Claim invitation process initiates upon declaration of the stock-broker as defaulter by PSX. A customer wishing to file a claim against the defaulter stock-broker can do so by contacting the Regulatory Affairs Division (RAD) of PSX. The ensuing process is as follows:

  • The Default Committee is constituted by RAD comprising industry experts, senior management personnel of PSX and TREC Holders not exceeding one-third of total such committee members.
  • A notice of default of a stock-broker is issued by PSX on its website informing the public about the declaration of a stock-broker as a defaulter.
  • A public notice is issued on the same day on PSX website inviting the public to file claims against the defaulter stock-broker. Such notice is also published in at least two widely circulated newspapers of Pakistan in English & Urdu languages.
  • The Default Committee dispatches the Investor’s Complaint/Claim Form (available on PSX website) at the registered address of each customer of the Defaulter available with CDC and /or NCCPL.
  • To ensure in-depth verification of filed claims and to maintain transparency and independence, PSX engages an audit firm to verify the genuineness of claims of the aggrieved parties.
  • The approved claims are settled from the funds made available from the disposal of assets of the defaulted stock-broker under custody with PSX. The claims still remaining unsatisfied are then paid from CCPF upto a maximum limit of PKR 500, 000 in the manner provided in Chapter 24 of PSX Regulations.

Foreign persons and institutions as well as non-resident Pakistanis can invest in stocks listed on Pakistan Stock Exchange. They can benefit from potential growth oppurtunities offered by Pakistan’s Capital Market. For non-resident Pakistanis, investing in PSX is specially an attractive venture as it will enable them to benefit from the competitive returns from the Pakistani stock market while being stakeholders in their homeland’s economy. For foreign investors, the benefits are equally attractive and competitive as Pakistan’s stock market has consistently performed better than several regional exchanges and other emerging markets over a period of several years.

Foreign persons/ institutions/ non-resident Pakistanis can invest in PSX through Foreign Portfolio Investment (FPI) channel:

This scheme allows investors to invest into various instruments such as equities, government bonds, and TFCs. The foreign investor can either invest through a Standalone Special Convertible Rupee Account (SCRA), a Custodial Service Provider or a Global Custodian. In all these routes of investment, foreign investors are well advised to open a Custody Account/ IAS with the Central Depository Company (CDC) for safekeeping of equities after they have been bought.

Standalone Special Convertible Rupee Account (SCRA):

SCRA can be opened remotely with any scheduled bank in Pakistan. SCRA allows for remittance of funds to & from the account for purchase and sale of securities. However, a brokerage account will also have to be opened to enable the foreign investor to transact on Pakistan Stock Exchange. Below is a list of scheduled banks and brokerage firms that a foreign investor is required to contact to transact on PSX through this route.

Custodial Services Provider:

Custodial services provider is a bank which provides custodial services. This service consists of two accounts, Cash Account (Special Convertible Rupee Account-SCRA) and Securities Account. Both these accounts are linked and under the title of the Account Holder/ foreign investor. SCRA allows for remittance of funds to & from the account for purchase and sale of securities. The Securities Account is credited with securities purchased and debited with securities sold. This account is linked to a brokerage account which enables a foreign investor to transact on PSX. A foreign investor is required to contact a custodial service provider or a brokerage firm to transact on PSX through this route.

Global Custodian & International Broker Dealers:

These are specialized services offered by international banks & international brokerage firms in the country of residence of the foreign investor (if the service is available or offered there). Through these firms/ banks the account holder/ foreign investor can invest in PSX. This route of investment is comparatively expensive as it extends to Pakistan via custodial services that these firms have with local banks in Pakistan.

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The Stock Exchange is a place where shares of listed companies are bought and sold. Companies list themselves on the stock exchange to raise capital. Shares of companies are traded, after they are listed, through a process of Initial Public Offering (IPO) or Secondary Public Offering (SPO). The share purchase represents ownership of the shareholder in a company to the extent of amount contributed by the investor to the capital of that company.

Corporate Bonds (Term Finance Certificates - TFCs etc.) and Government Debt Securities - GDS (Treasury Bills etc.) are also listed and traded on the Stock Exchange. Bonds are listed by a company that wants to raise capital in return for fixed periodic payments as mark-up and the eventual return of principal to the investor. GDS are listed by the Government to raise capital whereby the securities give fixed periodic returns as profit with eventual return of principal to the investor.

A company floats its shares for the first time through an IPO in the share market. These shares can be purchased by filling and submitting the share subscription form along with the payment of subscription amount through cheque (or through any other instrument of payment recommended by the issuer company) at a branch of the designated bank(s). The shares are subscribed at a pre-designated price. In an SPO, shares are offered by a listed company by way of issuing new shares, called Right Shares, or through off-loading of more shares (held by directors and others) in the market. The share price is set on the stock exchange platform as the shares are bought and sold.

Pakistan Stock Exchange (PSX) has more than 500 listed companies distributed amongst more than 35 sectors. There are 11 Indices listed on PSX board. Part of the PSX ecosystem are the CDC (Central Depository Company) through which delivery of shares takes place, and NCCPL (National Clearing Company of Pakistan Limited) through which settlement of shares takes place.

Potential Investors are advised to contact a TREC (Trading Right Entitlement Certificate) holder/ licensed brokerage firm for their account opening and trading on the Stock Exchange.

Download Investor Awareness Guide

  • Primary market/ IPO – Dos: A (prospective) investor must read the Prospectus/ Abridged Prospectus issued against an IPO carefully and note the following:

    • Risk factors pertaining to the issue.
    • Financials of the issuer.
    • Object of the issue.
    • Outstanding litigations & defaults, if any.
    • Business overview.
    • Background of promoters.
    • Instructions before making application.

  • Primary market/ IPO – Don’ts:

    • Do not fall prey to market rumours.
    • Do not go by any implicit/ explicit promise made by anyone.
    • Do not invest simply based on the bullish trend of the market industry/ issuer company.
    • Do not bank on the price of the shares of the issuer company going up in the short run.
    • Do not invest just because others are doing it also.
    • Do not invest just because the issuer company has a good reputation. Study the details behind the issue.

  • Secondary Market– Dos:

    • Transact only through Stock Exchange.
    • Deal only through registered brokers/ TREC holders of PSX with valid license for brokerage issued by SECP.
    • Complete all account opening formalities properly
    • Read & properly understand the risk associated with investing in securities before investing.
    • Assess the risk-return profile of the investment as well as the liquidity & safety aspects before investing.
    • Invest based on sound reasoning, taking into account all publicly available information.

  • Secondary Market – Don’ts:

    • Given the benefits of trading on the Stock Exchange, it is advisable to avoid off-market transactions.
    • Don’t deal with unregistered intermediaries.
    • Don’t fall prey to promises of unrealistic returns.
    • Don’t invest on the basis of hearsay & rumours; verify before investment.
    • Don’t forget to take note of risks involved in the investment.
    • If new to share trading, it is strongly recommended that (prospective) investor obtain proper professional investment advice before investing in shares.

Following are some of the important considerations before investing in the stock market:

Stock Investment Guidelines:

  • DIVERSIFY YOUR INVESTMENT: The best way to minimise risk is to diversify your investments across various investment products. If equities are your sole investments, it makes sense to diversify between different sectors and companies. In this way, loss incurred on some investments can be absorbed or compensated by gains made in others.

  • UNDERSTAND YOUR RISK PROFILE: As an investor, you must choose between how much risk you can take as all investments carry a certain amount of risk. Consider an investment product not only according to your requirements and how much capital you can invest, but also according to your tolerance of risk. Depending on how ‘risk averse’ or ‘risk-prone’ an investor you are, you may choose an investment accordingly.

  • DO YOUR HOMEWORK BEFORE YOU INVEST: To invest well, you must gather and understand all relevant information regarding the investment you are going to make. This includes studying companies’ annual reports, accounts and other statements while keeping abreast of what is happening in the said sector or industry. Consult your investment adviser/ stockbroker to get the latest market information about shares you wish to buy or sell. Do not buy into rumours or be pressured by anyone’s grave but unfounded recommendations before making an investment decision.

  • THINK LONG TERM: Investment in shares does not necessarily result in instant yields. Do not invest any money which you may need immediately, since the price of shares can go up and down. Studies have shown that investments properly timed and based on strong fundamentals have been proved to be very profitable for investors in the longer term.

  • JUDGEMENT OF TIMING: The aim of investing in stocks and shares is to buy at low and sell at high. Knowing when, however, is the challenge. While it is not easy to time the market, investors should try their best to buy when the upswing has begun, and sell as the downswing starts.

  • AVOID HERD MENTALITY: The stock market is driven by two emotions: greed & fear. People are usually caught up in the boom hype and pay beyond the worth of shares. This is the greed that drives bull markets. Don’t allow greed to become your need. In bear markets, people get carried away with the ruling pessimism and are eager to sell their investments believing in the worst rumours. This is the fear that dominates bear markets.

  • BEWARE OF SCAMS: Beware of promises of quick profits or sky high returns. Investors must bear in mind that higher the gain on investments, higher is the risk involved. This is the fundamental risk/ reward trade-off.

  • KEEP AN EYE ON STOCKS’ PERFORMANCE: Investors must keep an eye on the performance of stocks. They can do so through newspapers, digital media, investment magazines, brokerage firms’ research articles or through other media. A company’s stock performance can take a boost or downturn based on some fundamental changes in the company such as a structural or financial reform. Similiarly, a company can face seasonal or circumstantial boom resulting in better stock performance.

  • TAXES & COMMISSIONS: As an investor, you must know the rates of taxes and commissions charged by the Federal Board of Revenue/ Brokerage firm as these affect your costs and hence your returns. There is no prescribed rate of commissions charged and it can vary from firm to firm. Investors must take into consideration the taxes that will be deducted from the trading transactions they will undertake. (For details on current taxes and charges levy, contact your brokerage firm).

Stock Investment Basic Concepts:

  • DIVIDEND & DIVIDEND YIELD: An investor may invest in stocks of a company for its Dividends.
    Dividend is the return paid to shareholders out of the profits of the company. Dividend can be cash dividend or bonus dividend/ shares. Dividends may be paid out by a company more than once a year.
    Cash dividend provides for a measure called Dividend Yield. Yield is the measure of cash flow that an investor gets on the amount invested in a security. Dividend Yield is a financial ratio that indicates how much cash dividend a company pays in terms of its share price. Dividend yield is calculated by dividing the cash value of the dividend by the share price. It is defined in percentage.

  • EARNING PER SHARE (EPS): This is a ratio calculated by dividing a company’s net profit after tax by the number of shares outstanding. It’s a measure of the strength of the company in terms of its earning capability for each share issued.

  • PRICE EARNING RATIO (P/E): This is a ratio calculated by dividing the current share price by its EPS. It’s a measure of valuation and indicates whether the price of a share is realistic and is in-line with its earning. If the share is over-priced, then the ratio will be high and if the share-price is low, the ratio will be low.

  • BOOK VALUE OR BREAK-UP VALUE: Book Value per share is calculated by dividing the total equity of a company by its number of shares outstanding. This ratio indicates the asset coverage that each equity share represents in the company.

  • CAPITAL GAIN: Capital gain is the selling of shares at a higher price than the purchase price. Multiple such trades can result in multiple capital gain accruing to the investor.

  • COMPOUNDING: Compounding is the process in which an asset’s earnings, from either capital gains or profit, are reinvested to generate additional earnings over time. This Investment will generate earnings from initial principal and accumulated earnings from preceding periods.

  • DIVIDEND REINVESTMENT: This is the process whereby cash dividends earned from a company are reinvested for stock investment.

Pakistan Stock Exchange has begun an initiative to develop awareness of public at large about the financial concepts, investment basics and financial planning. The objective is to ensure the general public is equipped with knowledge related to financial and retirement planning & basic concepts of investments, stock market investments and other investment related considerations.

Financial education enhances the consumers/investors understanding of financial products and concepts through information, instruction and/or objective advice. Simultaneously it develops the skills and confidence among investors/consumers to be able to gauge financial risks and opportunities so that they can make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being.

The Open Sessions aim to improve the learning curve and to create awareness about investment avenues. These sessions are meticulously planned by PSX team and are geared toward maximization of investment activity.

Want to become part of an investor awareness session?

VIS

PACRA

The Default and Arbitration Wing at Pakistan Stock Exchange Limited [“PSX”] (formerly: Karachi Stock Exchange Limited)

The Pakistan Stock Exchange Limited (formerly: Karachi Stock Exchange Limited), being the frontline regulator, plays a proactive role in ensuring that investors’ interest remains protected. Securing the interest of small investors is of prime importance to the Pakistan Stock Exchange Limited (formerly: Karachi Stock Exchange Limited).

In order to keep a vigilant eye on investors’ issues and to provide a platform to the general public for voicing their concerns, Default and Arbitration Wing within Regulatory Affairs Department of Pakistan Stock Exchange Limited (formerly: Karachi Stock Exchange Limited) has been set up.

The Default and Arbitration Wing is responsible for ensuring that grievances/ complaints of the general public concerning investment and trading of securities are heard and redressed, in a quick and efficient manner. This Wing is also responsible for proposing disciplinary actions against defaulting brokers.

Since 2008, this Wing has been working under the supervision of General Manager/ Chief Compliance Officer and has recommended disciplinary actions such as, suspension /expulsion/ forfeiture of membership/ TRE Certificate of 14 Brokerage Houses of Pakistan Stock Exchange Limited (formerly: Karachi Stock Exchange Limited) and settled claims valuing Rs.2.6 billion transparently.

This Wing liaises with Securities and Exchange Commission of Pakistan (SECP), National Accountability Bureau (NAB), Federal Investigation Agency (FIA), Prime Minister’s Inspection Commission (PMIC), Federal and Provincial Ombudsman Offices in the matter of complaints lodged against the Member/ TRE Certificate Holders of the Exchange.

List of Permanent Arbitrators Panel

Panel of Senior Management staff of the Exchange

This includes senior members of PSX Management. One senior member is nominated by CRO in consultation with the Managing Director-PSX for constituting sub-panel of arbitrators.

Panel of Industry Experts

The Panel of Industry Experts was last updated in August 2019 and currently reviewed in March, 2021.

Karachi Office Lahore Office Islamabad Office
Asif Mehmood Hadia Awan Rana Muhammad Shahid Saleem
Muhammad Samiullah Rizwan Bashir Zainab Effendi
Murtaza Abbas Mooman Wasif Majeed Muhammad Riaz
Qaisar Mufti Amir Mehmood Masoom Akhtar
Sayyid Mansoob Hassan Syed Shahab Qutub Muhammad Aslam Malik
Munawar Hussain Shaikh Imran Afzal Muhammad Naveed Akhtar
Vishal Shamsi Shafqat Saeed Paracha Waqar Ali Khan
M. Afnan Saiduzzaman Siddiqui Mian Tariq Hassan Khurram Rahat
M. Amin Qazi Shakeel Ahmed Awan Nazir Ahmed Shaheen
Yasir Masood Mohammad Almas
Irfan Amanullah Agha Zafar Abbas
Mohammad Iqbal Ghori
Waseem Majid Malik


Panel of TRE Certificate Holders

List of Brokers failing to comply with the Awards/Orders of Arbitrators

Status Report of Investors’ Complaint

List of Delinquent Clients

Lodging a Complaint

1. Through designated email ID i.e. investor.complaints@psx.com.pk

2. Online Claim Registration Form

How fo fill E-Claim Form

Claim Form

General Instructions for complaint registration

A guide for investors - Lodging complaints against PSX Members