The Securities and Exchange Commission of Pakistan (SECP) and China Securities Regulatory Commission (CSRC) have signed a memorandum of understanding (MoU) to exchange information on investment companies, brokerage houses, take-overs/mergers of listed companies and discovery of insider dealings, market manipulation, other deceptive marketing practices and supervision as well as monitoring of stock exchanges.
The MoU has been inked in the backdrop of globally evolving integrated financial markets, necessitating regulatory agencies of capital markets to develop co-operative linkages to ensure information sharing for enforcement of securities laws and facilitate detection and combat cross-border violations.
Sources told Business Recorder here on Saturday that the MoU between the SECP and CSRC would enable the regulatory authorities of both sides to exchange information about the listed companies within the regulatory framework of respective countries. For example, if a partner firm of China has shareholding in Pakistan, the Chinese regulatory body can ask the SECP to provide information about the integrity of the Pakistani firm.
Similarly, if a case of insider trading takes place in Pakistan and its trail goes to China, the SECP can request the CSRC to provide necessary information about concerned company making investment in Chinese capital market. For instance, if a Pakistani brokerage house intends to open business in capital market of China, the CSRC will have the authority to seek information about the broker who intends to make investment in China.
Both corporate regulatory bodies can also exchange information about the listed companies making investment in other countries, within the framework of the MoU. The technical assistance of China to Pakistan's corporate regulatory body is an important area of the MoU which would facilitate the SECP officials in different areas of capital market, etc.
Sources said that the SECP has maintained corporate record of registered companies in electronic format. Under the exchange of information agreement between the SECP and the CSRC, the SECP can electronically provide the necessary information to its counterpart regulatory body. The online availability of the corporate database would ensure prompt transmission of information to China, whenever required.
They said that standard MoU has been signed between the SECP and the CSRC after vetting the Law and Justice Division to ensure exchange of information between the two jurisdictions.
Under the MoU, the authorities will provide mutual assistance and exchange of information in response to requests to enable the authorities to effectively perform their respective duties according to their laws and regulations. Under the foregoing general theme, the scope of this Memorandum will include assisting in discovery of and taking action against insider dealings, market manipulation and other fraudulent, deceptive and manipulative practices. The MoU also covers supervising the monitoring stock markets and cleaning and settlement activities and their compliance with the relevant laws and regulations; promoting and securing the fitness and progress of registered persons and promoting high standards of fair dealing and integrity in their conduct of business and the compliance by issues with any duties under the laws and regulations and any commitment to make full, accurate and timely disclosure of information relevant to investors; take-overs and mergers, related to public companies and any other matters decided upon in writing between the authorities from time to time.
Meanwhile, the SECP said on Saturday that the MoU would further enhance regulatory co-operation and information-sharing between the two regulatory agencies. The SECP has been promoting bilateral co-operation with counterpart regulatory authorities of the capital market at bilateral, regional and international levels. The SECP has already established co-operative arrangements, through MoUs, with the regulatory agencies of India, the Maldives, Australia, Bhutan, Lanka and Iran.
The MoU was signed in the presence of Prime Ministers Wen Jiabao and Yousaf Raza Gillani on Friday. Tahir Mahmood, SECP Commissioner, signed the MoU on behalf of the SECP while Liu Jian, Chinese Ambassador, inked it on behalf of the CSRC.
The MoU provides parameters of co-operation and consultation, seeking to enforce and ensure compliance with respective laws and regulations in both countries. The document reiterated the commitment of the securities regulators to work together in ensuring that securities and futures markets in Pakistan and China are fair, transparent, efficient and regulate to world class standards.
"The MoU is aimed at supporting the national economy and minimising the risk that is usually involved in financial market transactions," Tahir Mahmood said. Describing the MoU as a significant milestone in the development of the capital markets of Pakistan and China, he added that "increasingly expanding securities markets today require co-operation among the regulatory bodies of the capital markets at the international level for adequate protection of investor rights and the MoU is a step towards building a strong co-operative arrangement between the SECP and the CSRC", SECP added.
The MoU said: "This Memorandum of Understanding sets forth a statement of intent of the Authorities to establish a framework for mutual assistance and to facilitate the exchange of information between the Authorities to ensure compliance with their respective securities and futures laws or regulatory requirements. The purpose of this Memorandum of Understanding is for increased investor protection and further promotion of the integrity of markets by providing a framework for co-operation, increased mutual understanding and exchange of information, to the extent permitted by the respective laws, regulations anal practices of the Authorities.
"The Memorandum of Understanding serves as a basis for co-operation for the Authorities and does not create any binding legal commitments, nor does it modify or supersede any laws and regulations in force in or applying in Iran or Pakistan. The Memorandum of Understanding does not create any enforceable rights including rights enforceable by third parties, nor does in affect any arrangements made or to be with made under other Memorandum of Understanding.
"This Memorandum of Understanding does not affect any right of any Authority under laws and regulations to take measures otherwise than as provided herein to obtain information necessary to ensure compliance with, or to enforce, its laws and regulation. In particular, this Memorandum of Understanding does not affect the ability of either Authority to communicate with or obtain information or documents from any other person on a voluntary basis subject to any applicable laws, regulations and procedures of the Authorities.
"To the extent permitted by their respective laws, regulations and procedures, each Authority will use reasonable efforts to provide the other Authority with any information in its possession which gives rise to a suspicious of a breach or anticipated breach of the laws and regulations, or may assist in the administration and enforcement of the laws and regulations."
The MoU further said that the authorities recognise the need and desirability for providing mutual assistance and exchanging information to assist each other in ensuring compliance with laws or regulations of their respective countries. However, the Requested Authority may deny assistance requested under this Memorandum of Understanding on the ground that the provision of assistance will violate the national or public interest or the domestic law of the Requested Authority or the request is not made in accordance with the provisions of this Memorandum of Understanding.
"The authorities will within the framework of this Memorandum of Understanding, provide each other with the fullest assistance permissible to enable the proper administration of the laws and regulations of the Authorities.
"The assistance available under this Memorandum of Understanding may include but is not limited to providing access to information in the possession of the requested authority and obtaining documents and information from persons.
"The request for information will specify the information required (identity of persons, specific questions to be asked, list of documents sought etc); a general description of the matter and the purpose for which the information is sought (including details of the rule of law pertaining to the subject matter of the request); the link between the specified Laws and Regulations and the regulatory functions of the Requesting Authority. "The authorities will provide assistance on matters that are not offences in their own jurisdiction or contrary to public policy.
"The requested authority may impose conditions of the onward release of such information to third parties. These conditions include prohibiting the onward release of information to third parties. The Authorities will consult with each other regarding the reasons for refusal and the circumstances under which use of the information might otherwise be allowed.
"If the requested authority believes that a request does not accord with this Memorandum of Understanding, taking into account the provisions of this paragraph, it will inform the Requesting Authority of the reasons for its refusal within five days of the receipt of the request.
"Any document or other material provided in response to a request under this Memorandum of Understanding and any copies thereof are to be returned on request by the Requested authority."
The MoU said that any assistance or information will be provided by an Authority only for the purposes of assisting the other Authority in the performance of its regulatory functions. Any assistance or information provided under this Memorandum of Understanding will be used by the recipient only for the purpose of performing its regulatory functions; the purposes stated in the request for assistance or information, including ensuring the proper administration and enforcement of the laws or regulations of the Requesting Authority specified in the request; or conducting or assisting in civil proceedings brought by the authority or other law enforcement or regulatory bodies within the territory of the Requesting Authority in taking regulatory action or imposing regulatory requirements within the scope, MoU added.
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