Karachi: The Pakistan Stock Exchange Limited (PSX) has issued an investor alert emphasizing precautions and key considerations for individuals who choose to authorize others to execute trade orders on their behalf with securities brokers. This announcement, dated October 2023, aims to safeguard investors from potential risks associated with delegating trading responsibilities.
The PSX advises that authorized individuals should preferably be those known to the investor, possessing relevant qualifications and experience with adequate market understanding. The authorized person must align with the investor's objectives and risk tolerance. While family members are often preferred, unaffiliated third parties may also be appointed. However, investors are cautioned against selecting individuals through social media or those promising guaranteed returns with minimal risk. Importantly, the authorized person cannot represent the securities broker due to conflict of interest regulations.
According to information available from the Pakistan Stock Exchange (PSX), the authority to operate a trading account should be formally delegated through a signed agreement between both parties. This agreement, including the authorized person's name, CNIC, and contact details, must be shared with the securities broker. Any additional documents required by the broker's policies must also be provided.
Investors are reminded of their responsibility for any consequences arising from transactions executed by their authorized persons. There are inherent risks of misuse and misalignment of interests, making it crucial for investors to monitor account activities and quarterly statements provided by securities brokers. Discrepancies or concerns should be promptly addressed with the authorized person or broker, and if necessary, reported to relevant authorities for timely action.
Furthermore, investors are encouraged to understand their rights and obligations under securities market regulations to mitigate legal and financial risks. The designated market category, as outlined by PSX regulations, underscores the importance of this understanding.
Investors retain the right to revoke the authorization at any time. Upon revocation, the securities broker must be immediately informed in writing to restrict the authorized person's account access. The PSX reiterates that investors are responsible for their investments and should take necessary precautions to protect their interests. Trades executed by an authorized person will be considered legal unless the authority has been revoked and communicated to the broker prior to execution.