Cases of Insider Trading in Pakistan and Abroad

Cases of Insider Trading in Pakistan and Abroad
Bit of history and some handy examples from Pakistan, India, and the United States
where renowned stock market brokers and business tycoons were questioned,
convicted, sentenced, and fined by courts for capital market manipulations:
However, as research conducted by the "Jang Group and Geo Television Network"
shows, until the 21st Century and the European Union's market abuse laws, the United
States was the leading country in prohibiting insider trading made on the basis of
material non-public information.
In 1909, well before the Securities Exchange Act was passed, the United States Supreme
Court had ruled that a corporate director, who bought that company's stock when he
knew the stock's price was about to increase, had committed fraud by buying but not
disclosing his inside information.
Here follow the examples:
1. In November 2017, the Supreme Court reserved its judgment on petitions

seeking disqualification of Pakistan Tehreek-i-Insaf secretary general Jahangir
Tareen.
During one of the hearings, the court was informed that shares of United Sugar
Mills Ltd — an entity up for sale — were bought by Mr. Tareen’s employees
before the information was accessible to the public, which eventually led to the
PTI leader facing allegations of insider trading.
The employees later sold the shares, making Rs70.8 million in the process. But
Mr. Tareen had to pay a penalty of Rs70m later on when the Securities and
Exchange Commission of Pakistan (SECP) slapped a fine on him over allegations
of insider trading in 2005.
Mr. Tareen, as a director of JDW Sugar Mills, allegedly had specialized

information about the acquisition of USML, one of JDW’s subsidiaries.
2. In February 2007, the National Accountability Bureau, after a reference filed by

the Securities and Exchange Commission of Pakistan, has arrested a broker
Hassan Waheed, on charges of unauthorized trading, illegal deposits, non-
payment of cash and non-delivery of securities to investors.
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It is imperative to note that in March 2017, the SECP had issued 24 show-cause
notices to the brokers involved in insider trading in the Pakistan Stock Exchange.
SECP said abnormality was witnessed in the capital market during November last
year when the index had surged 9,000 points in a single day and 3,000 points on
the next day. The SECP started the study of the situation and investigation was
initiated to identify the abnormality in the capital market to avoid any possibility
of illegal trading.
The SECP chairman said investigation was carried out and 24 brokers were found
involved in illegal investment. The brokers had admitted their mistakes and
tendered their apologies
3. It was also in March 2017, according to Geo TV, that the SECP had filed a criminal
complaint against an employee of a leading bank on charges of insider trading
According to an SECP press release, Misbahuddin Rizvi was responsible for

placement of orders for equity investment.
Rizvi used to actively trade in shares and used insider information to earn millions
in collusion with his relatives, SECP said.
It goes without saying that SECP is investigating the possibility of irregularities or

manipulation by big brokerage houses in a bid to curb 'Insider Trading" and
illegal leveraging in the stock market, but since many cases are under judicial
consideration, it won't thus be appropriate to the name the brokerage houses
and their owners.
4. A Mumbai stock broker, Ketan Parekh, was convicted in 2008, for involvement in
the Indian stock market manipulation scam in late 1998-2001. In March 2014 he
was convicted by a special court in Mumbai for cheating and sentenced to two
years rigorous imprisonment.
He was debarred from trading in the Indian stock exchanges till 2017.
5. Another Indian capital market investor and broker, Harshad Mehta, was charged
with numerous financial crimes that took place in 1992.
He was arrested and banished from the stock market with investors holding him
responsible for causing a loss to various entities. Mehta and his brothers were
arrested in November 1992 for allegedly misappropriating more than 2.8 million
Page 2 of 4
shares (2.8 million) of about 90 companies. The total value of the shares was
placed at US$39 million.
In September 1999, Bombay High Court convicted and sentenced him to five
years rigorous imprisonment, besides slapping a fine.
Mehta again raised a furor in June 1993 when he made a public announcement
that he had paid Rupees 10 million to the then Congress president and Indian
Premier, Narasimha Rao.
Of the 27 criminal charges brought against him, he was only convicted of four,
before his death at age 47 in 2001. It was alleged that Mehta engaged in a
massive stock market manipulation schemes. He was tried for nine years.
Mehta was convicted by the Bombay High Court and the Supreme Court of India
for his part in a Bombay Stock Exchange financial scandal valued at Indian
Rupees 49.99 billion.
6. In May 2007, American prosecutors had charged a top Pakistani investment

banker, Aijaz Rahim, with earning more than $7.5 million in illegal profits from an
insider trading scheme that they said was run by a former Credit Suisse banker,
also a Pakistani.
Rahim was accused of profiting from confidential information about nine deals,
including the $45 billion buyout of TXU, the Texas energy giant. Credit Suisse was
an adviser on all nine deals.
Altogether, prosecutors said Rahim earned more than $7.5 million from the nine
transactions. More than $5.1 million of that stemmed from trading in TXU alone.
The "Reuters" news agency had added: "US federal prosecutors are seeking to
recover about $9.8 million from two bank accounts allegedly linked to Mr Rahim."
7. In 2013, an India-born former Goldman Sachs Director Rajat Gupta was convicted
in United States of insider trading.
According to "The Hindu," he was ordered to pay a hefty $13.9 million civil
penalty and was permanently barred from acting as an officer or director of a
public company for spilling boardroom secrets.
Page 3 of 4
8. In July 2017, according to CNBC, a renowned Las Vegas gambler William "Billy"
Walters was sentenced to five years in prison over his role in a $43 million
insider-trading scheme.
In April, Walters was convicted on all 10 counts he faced, including securities

fraud, conspiracy and wire fraud.
From 2008 to 2014, prosecutors argued that Walters made $32 million in profit
and avoided another $11 million in losses.
9. In February 2017, according to "Reuters" news agency, a former Wall Street

investment banker was sentenced to three years in prison on Friday after he was
convicted of engaging in insider trading by repeatedly tipping his father off to
unannounced healthcare mergers.
Sean Stewart, who worked at Perella Weinberg Partners and JPMorgan Chase &
Co, was sentenced by US District Judge Laura Swain in Manhattan, who called his
conduct "outrageous."
Judge Swain also sentenced Stewart to serve one year of home detention
following his release from prison, and she ordered him to pay a $7,500 fine.
Jurors had found Stewart guilty last August of securities fraud and other charges,
making him one of 85 people to be convicted in a wave of insider trading cases
by US Attorney Preet Bharara’s office since 2009.
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Cases of Insider Trading in Pakistan and Abroad

Here follow the examples:

1. In November 2017, the Supreme Court reserved its judgment on petitions

Mr. Tareen, as a director of JDW Sugar Mills, allegedly had specialized

2. In February 2007, the National Accountability Bureau, after a reference filed by

According to an SECP press release, Misbahuddin Rizvi was responsible for

It goes without saying that SECP is investigating the possibility of irregularities or

6. In May 2007, American prosecutors had charged a top Pakistani investment

In April, Walters was convicted on all 10 counts he faced, including securities

9. In February 2017, according to "Reuters" news agency, a former Wall Street

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