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Pakistan prohibits insider trading
Published in The Saudi Gazette on 15 - 06 - 2008

The government has prohibited the insider trading through the new federal budget which said that any person found guilty of this would be imposed a fine of Rs10 million or three times the amount of gain or loss avoided by him or loss suffered by another person, whichever amount is higher.
Recently, a former Credit Suisse banker of Pakistan accused of leaking confidential information about several major deals, including the $45 billion buyout of TXU, as part of a $7.5 million insider trading scheme, was convicted by the US District Court in New York.
According to the finance bill, in addition to the fine, an insider found guilty may be directed by the Security Exchange Commission of Pakistan (SECP) to surrender to it, an amount equivalent to the gain made or loss avoided by him; or to pay any other person who has suffered a loss, an amount equivalent to the loss so suffered by such persons; and may, where such person is an executive officer, director, auditor, advisor or consultant of a listed company, be removed from such office by an order of the SECP and debarred from auditing any listed company for a period of upto three years; or may, where such person is registered as a brother or agent, liable to cancellation of registration.
Where an insider person discloses inside information to any other person, who is not required to possess such information for any reason, the insider person shall be liable to fine, to be imposed by the SECP , which may extend to Rs30 million.
The SECP may make regulations to regulate persons, who produce or disseminate research concerning listed securities or issuers of listed securities and persons, who produce or disseminate other information recommending or suggesting investment strategy, intended for distribution o channels or for the general public.
The finance bill said that insider trading shall include an insider person transacting any deal directly or indirectly, using inside information involving listed securities to which the inside information pertains, or using others to transact such deals; any other person to whom inside information has been passed or disclosed by an insider person transacting any deal, directly or indirectly, using inside information involving listed securities to which the inside information pertains, or using others to transact such deals; transaction by any other person, who knows, or ought to have known under normal and reasonable circumstances, that the information possessed and used for transaction any deal is inside information; an insider person suggesting or recommending to another person to engage in dealing in any listed securities to which the inside information possessed by the insider person pertains, without the inside information being disclosed to the person, who has dealt in such securities.
What will not be considered insider trading includes any transaction performed under an agreement that was concluded before the time of gaining access to inside information; or the disclosure of inside information by an insider person as required under law.
No contract will be void or unenforceable by reason only of an offence under this law.
According to the finance bill, inside information means information, which has not been made public, relating, directly or indirectly to listed securities or any or more issuers and which, if it were made public, would be likely to have an effect on the prices of those listed securities or on the price of related securities; in relation to derivatives on commodities. __


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