In a landmark ruling, the Sindh Special Court (Offences in Banks) has handed down Pakistan’s first-ever conviction for insider trading. Zakir Hussain Somji, the former Assistant Vice President (AVP) of Investments at a private bank, was found guilty of insider trading in violation of Section 128 of the Securities Act, 2015.
According to media reports, the case arose from an inspection by the Securities and Exchange Commission of Pakistan (SECP), which identified suspicious trading patterns using data from the Karachi Automated Trading System (KATS) spanning from January 2014 to February 2016. The investigation revealed that Somji misused his position at the private bank, which gave him access to internal investment decisions, to gain personal profits through illegal trades.
Somji was found to have purchased 11,795,100 shares of various companies, with 1,230,900 shares being bought from the private bank. He later sold 11,836,600 shares, including 4,915,200 shares, which were sold back to the private bank. This series of transactions led to an unlawful profit of Rs2.87 million.
Following a detailed investigation, SECP filed a formal criminal complaint under Section 128, which was punishable under Section 159 of the Securities Act.Â
After a full trial, which included testimonies from SECP prosecutors and defense arguments, the court ruled in favor of the prosecution, concluding that the evidence was strong and convincing.
The court highlighted that Somji’s trades matched those of the bank on 173 occasions, an indication that insider information was used. Despite Somji’s denial and defense claims, the court upheld the prosecution’s findings, concluding that these trades were illegal and amounted to front-running—where Somji bought shares ahead of the bank’s decisions or traded directly with it for illicit gains.
The court imposed a financial penalty of Rs8,599,938 on Somji, which is three times the amount of his unlawful profit. He was instructed to pay this fine within seven days, or face imprisonment until the amount is fully paid.Â
Although the court did not impose a custodial sentence, the ruling marks a significant step in the prosecution of insider trading cases in Pakistan.
Akif Saeed, Chairman of the SECP, praised the ruling, stating it would bolster investor confidence and encourage more stringent actions against market abuses and regulatory violations.
