How the courts hold back financial justice

As Justice Ahmed Keerio announced the verdict inside a humid courtroom of the Sindh High Court last week, it marked an occasion that comes far too rarely: The Securities and Exchange Commission of Pakistan (SECP) had just won a case. 

Victories enjoyed by the Securities and Exchange Commission of Pakistan (SECP) are few and far between when it comes to the capital markets. When they do end up getting a win in their column, it is a cause of celebration, even if the decision comes decades after the SECP first gives an order. 

In Pakistan, the efficacy of the SECP is a major issue. The job of the SECP, for any reader that is unfamiliar, is to make sure that fairness and transparency is achieved in the capital markets like the stock exchange. You see capital markets work with certain sets of rules. Insider trading, bad faith deals, information exchange, and withholding material information are all white collar crimes that can unfairly disadvantage some investors. The idea is that the SECP keeps a check on such activities. 

Unfortunately, even though the role is well defined, the track record of the regulator has been patchy to say the least when it comes to getting convictions in the courts of the country. The way it works is that when something suspicious comes up, the SECP carries out the relevant investigations and then pursues these cases to the full extent. They contact the people involved and try to get to the bottom of the matter. If they find wrongdoing they can issue orders against individuals or organisations involved. 

While the procedures followed by the SECP have their own issue, a major obstacle in implementing these orders comes from the courts. If the SECP rules against someone, they can take the SECP to court for the decision. In most countries there are arbitration laws and procedures that make this process fast. In Pakistan, stay orders and judicial lag can drag them out for decades in some cases. On top of that, a lack of judges experienced in financial crimes can further delay an already painful process. But what went on in the recent case that the SECP has won? To understand the full story, we need to go back.