Corporate laws: SEPB discusses key policy changes

The Securities and Exchange Policy Board (SEPB) discussed key policy changes in corporate laws to encourage listing of companies and increase capital formation, assist Federal Board of Revenue (FBR) to ensure documentation of corporate sector, facilitate formation of startups, and reduce overall fee structure charged by the National Clearing Company of Pakistan Limited (NCCPL).

The Securities and Exchange Policy Board discussed these policy measures at the meeting of the Board held at Karachi at the SECP Southern Regional Office under the chairmanship of Professor Khalid Mirza.

Sources told Business Recorder here on Saturday that the SEPB discussed the proposed amendments to the listing rules of Pakistan Stock Exchange (PSX) relating to the Initial Public Offering (IPOs) with a view to promoting more listed companies and capital formation. It is expected that these proposals would be finalized in the next meeting of the Policy Board.

The SECP Policy Board has taken a proactive approach with regard to various responsibilities and functions entrusted to it under the SECP Act including importantly overseen the ordinarily discharge of the commission functionalities in order to meet the purposes of the Act, sources said.

In deference to the FBR's request, the Policy Board directed the Commission to issue a letter to all companies asking them to ensure that annual tax returns are filed in accordance with law.

Sources said that mainly it is not the responsibility of the SECP to collect taxes of FBR or enforce filing of income tax returns by the companies. Therefore, the SECP has done away with the condition of submission of compliance certificate by the companies. However, to facilitate the FBR, the SEPB has decided that the SECP will write letters to the companies to file income tax returns as per law.

The Policy Board was advised by the chairman SECP that a letter had been issued with regard to recall of officers deputed to a law enforcement agencies (LEA) and a response would hopefully be received before the next Board's meeting. The Commission was advised by the Board that they should do a fact-finding with respect to all officials of the Commission which have been implicated and come out with a considered view as to what occurred and if anything went wrong what it was.

The SECP submitted its annual report for the year ended 2018-19 for approval of the Policy Board. The Board decided that it will be looked at by the Board's Members and possibly cleared in the next meeting.

The Policy Board again expressed concern about the fact that secretary level officials of the government of Pakistan who are ex-officio members of the Board do not attend Board's meetings and instead send their nominees to do so. This dilutes the efficacy of the Board. The Board, once again, decided to issue a letter addressed to the Ministry of Finance (at the highest level) requesting that they urge the officials concerned to do their best to attend all Policy Board meetings.

The Policy Board finalized evaluation of the performance of the Commission and the Commissioners for the year ending June 30, 2019. The Commission proposal to amend the company law in order to facilitate "startups" was approved by the Policy Board. Pending enactment of this legislation, the Board approved amendments to 3rd Schedule to the Companies Act, 2017 prescribing an appropriate definition for the term "startups" providing, immediate through limited, facilitation for the formation of "startups".

The Policy Board discussed several matters pertaining to prima facie wrongful actions by various departments of the Commission and issued appropriate policy directives to the Commission in this connection.

The Policy Board noted with considerable concern that the fees charged by NCCPL appeared to be somewhat excessive and the Commission was asked to look into this matter with a view to issuance of appropriate directions to NCCPL for prescribing lower fee levels, as warranted.

The Policy Board decided that the Commission should carry out an exercise for amalgamation of the Securities Act, 2016 and the Futures Market Act, 2017 (since this segregation did not make sense) and place before the Regulations Committee of the Board: (i) a comparison of these laws with the erstwhile the Securities and Exchange Ordinance, 1969: and (ii) proposed amendments in the amalgamated draft legislations in order to propose a simplified, rationale and substantially less onerous law.

With respect to the proposed new Brokers Regime, the Policy Board directed the Commission to review the capital requirement proposed for each category of stockbrokers (since these were, prima facie, excessive) and also to consider the introduction of a brokers regime whereby brokers simply operated as stock market intermediaries but without being permitted to hold client assets, whether securities or shares - it was felt that this would substantially reduce any capital requirement for stock market intermediaries.

The Securities and Exchange Policy Board, in pursuance of Section 12 of the Act 1997, comprises ex-officio members of the Ministries of Finance, Commerce, and Law, SBP, SECP and persons of eminence from the private sector.