The Securities and Exchange Commission of Pakistan has proposed a three-year imprisonment for brokers for opening and maintaining fake accounts with the Central Depository Company, official sources told Business Recorder on Tuesday.
SECP has also proposed imposition of up to one million rupees penalty for various offenses:The caretaker Cabinet has been informed recently that in the draft Stock Exchanges, Corporatisation, Demutualisation and Integration, Ordinance 2007, several steps have been proposed to curb fraudulent transactions in the stock exchanges.
"Three-year imprisonment has been recommended for opening and maintaining a fake account with CDC besides imposition of up to one million rupees penalty on a stakeholder for different offences," the sources added. The sources said the regulator also came under severe criticism for misusing its discretionary powers.
The sources said Demutualisation will help in governance and decision-making as it separates management of a stock exchange from ownership of trading rights (brokers, agents and issuers).
It will also set out clear roles and responsibilities of owners, management and customers, besides increasing resources and providing greater market access to stock exchanges.
Stock exchanges will become more cost-efficient and profitable. Level of competition among them will also increase as international stock exchanges could make Pakistani exchanges as their strategic partners bringing more foreign investment in the country.
After Demutualisation, Pakistani companies could list themselves with international stock exchanges, the sources continued.
Presently, 200 seats were functional in Karachi Stock Exchange, 150 in LSE and 120 in ISE, the sources said, adding that after Demutualisation 40 percent share of the paid-up capital will be allowed to strategic investors and local financial institutions, 40 percent to brokers and less than 20 percent to general public.
The SECP management was of the view that with the Demutualisation, stranglehold of the existing brokers would be reduced and new entrants would be allowed to start their businesses with lesser money and more companies and foreign investors could come to the market, the sources maintained. The sources said the Cabinet had expressed concern over manipulation by the brokers and strategic investors.
The SECP, however, argued that it would develop a balance between brokers and other shareholders and for this purpose enough powers would be given to the regulator. According to the sources, Prime Minister Muhammedmian Soomro questioned misuse of discretionary powers by the SECP in the proposed Ordinance, the sources added.
Responding to this, the SECP representatives clarified that discretionary powers were essentially required for regulatory bodies. The draft ordinance, 2007 could have been approved by the Cabinet if Finance Minister Dr Salman Shah was present in the Cabinet meeting as most of the Cabinet members were ready to give approval in principle, but the Prime Minister did not agree to it, the sources continued.
A three-member ministerial committee headed by the Finance Minister will go through the draft ordinance 2007 and submit its recommendation to the Cabinet after Eid.
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