The new Chairman of the Securities and Exchange Commission of Pakistan (SECP), Zafar Hijazi, has taken strict policy measures to discipline the market participants, introduced reforms to strengthen stock market regulations, reconstituted the SECP appellate benches to expedite hearing of cases, and in the process of restructuring the commission on the most dynamic lines.
Sources told Business Recorder here on Tuesday that the new chairman, having vast experience of SECP, has adopted a tight policy to discipline entities and market participants. A number of measures have been taken to strengthen market monitoring system and the enforcement regime. Several enforcement actions were put in place against the violators of regulatory rules and companies were asked to strictly follow the disclosure requirements.
Since resumption of new assignment, the new SECP Chairman has started taking initiatives, actions and decisions to discipline the market participants and for the development of corporate and capital sectors in Pakistan. The SECP actions might hurt the vested interests in the market, but the Chairman is determined to reinforce the regulatory framework and make it a valuable organisation for companies as well as investors, big and small, and turn it into a more creditable and stronger institution.
In this regard, SECP Chairman has recently informed the Senate Standing Committee on Finance about the resolve of the apex regulator to ensure fair and transparent market with protection of investors' interest. He said that there would be no compromise on the investors' interests and there would be zero tolerance for market misconduct and unfair trade practices. In order to effectively discharge its regulatory role the SECP has strengthened its enforcement functions by increasing the size of the market surveillance team and upgrading its infrastructure.
Senate Finance Committee appreciated the SECP's efforts and expressed its full support to the apex regulator in bringing about requisite changes in the regulatory framework. Sources said that the process of re-evaluating the market structure, regulatory policies and risk management issues has started to reform the entire structure. SECP has also accelerated the process of reforming relevant laws and regulations. The SECP authorities have asked the Corporate Law Review Commission to submit the new draft companies' law by March 31, 2015. The new law will provide breathing space to small companies by way of fewer regulations and an encouraging regime for raising and maintaining capital for large companies. The incorporation process has been streamlined by providing an updated process for the regulation of name availability to ensure accessibility to the corporate form.
The proposed regime will provide new avenues for raising capital by introducing the concepts of partly paid shares, treasury shares and redeemable shares, as well as a new regime of sweat equity shares to reward skilled employees. The new law also clarifies the distinction between private offer and public placement of securities, allowing the use of new varieties of prospectus that have fewer requirements than a formal prospectus.
The robust reform agenda initiated by him is aimed at ensuring investors' protection and capacity building of capital markets institutions. He, not only announced to adopt an international standard book building process for initial public offerings (IPOs) in stock markets, but also formulates the revised book building regulations and got them approved from the SECP's Policy Board.
The SECP has already started the process of re-evaluating the market structure, regulatory policy and risk management. In addition, SECP Chairman has formed a committee to develop a pilot project to set up 'capital market hubs' in small cities to attract savings for investment in the capital market. Headed by Muhammad Hanif Jakhura, CEO, Central Depository Company, the committee will include representatives of the stock exchanges and asset management companies.
Sources said that the division of responsibilities, powers and functions of shareholders and directors has been clarified and the duties and responsibilities of the board of directors has been introduced for the first time. Keeping in view the international good practice the new law introduces the requirement for each company to produce a human resource and remuneration policy and a stakeholder relationship policy.
Chairman Hijazi initiated restructuring of the organisation. He rationalised the perks of senior officers to ensure optimum utilisation of financial resources. Also, he tightened the delegation of financial powers of officers. For better utilisation of human resource, the Human Resources Department has started working on workload assessment of all employees. Chairman Hijazi reportedly said that the SECP would soon see a major reshuffle to minimise the influence of stock market brokers in the organisation. He also said that the Surveillance Department would be strengthened and more officers would be assigned to it.
Emphasis has been placed on minority shareholder protection by allowing representative suits and providing statutory mechanisms to prevent oppression and mismanagement. There is also a thorough restatement of the code of corporate governance in the law, whereby the new law will ensure that the SECP's regulatory arsenal is adequately equipped to deal with current and future challenges and that its powers and duties are clear, they said.
In accordance with the government's National Action Plan to eliminate terrorism and to halt financing sources of terrorist, the SECP also decided to revalidate the licenses of all not for profit organisations (NGOs) registered with the SECP under section 42, of Companies Ordinance 1984. The SECP introduced the procedure for revalidation of licenses and all Section 42 NGOs were asked to submit applications for renewal by January 31, 2015.
Moreover, a number of initiates were taken to improve the efficiency of the organisation and to extend maximum facilitation to the public and promoters. The SECP also extends its co-operation with other government departments such as FBR and NAB to help them achieve their targets. For example, in the first week of January 2015 it sent a list of 10,000 companies that failed to file their tax returns to know whether these companies were active or not. Consequently, the relevant information was provided to the FBR.
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