During the last few years, the Securities and Exchange Commission of Pakistan (SECP) has assumed an important role in regulating business houses and industry in the country. In keeping with its role, it proposed an improved procedure on 14th January, 2016, for scheduled banks to accept applications for subscription of securities either in electronic form through an e-IPO system or through a manual process. Under the draft rules, "Banker to an Issue" would mean a scheduled bank licensed under the new rules and no person shall act as or perform the functions of the Banker to an issue unless such person is licensed under these rules. The Banker to an Issue would maintain high standards of integrity and fairness in discharging its functions and dealings with its clients and other Bankers to an issue in the conduct of its business. It would also be required to comply with all the applicable directions and orders issued by the Commission and execute a written agreement with its clients prior to performing services as a Banker to an Issue containing at least the terms and conditions as specified in Schedule II. The Banker to an Issue shall have such internal control procedures and financial and operational capabilities which can be reasonably expected to protect its operations and interest of its clients. The Banker to an Issue would also ensure that the refund of subscription money to the investors is made in prompt and timely manner, all information provided to the Commission is true and accurate and that no applications for subscription of securities are accepted after closing of the subscription period.
Capital markets in Pakistan, like most of other countries, play a crucial role in mobilizing domestic resources and channelling them efficiently into productive uses, thus raising national productivity, enhancing exports, promoting employment, etc. These markets are usually regulated in a way so as to promote public confidence in their functioning, including disclosure requirements for investors' protection and guard against insider trading and market manipulation. However, while the SECP had been quite active in introducing structural and legal reforms aimed at strengthening risk management, increasing transparency and improving governance in the capital markets, it had practically done nothing to facilitate investors at the time of subscription of an Issue and improve the behaviour of bankers. In fact, one could witness long queues of investors and experience a highly indifferent or uncooperative attitude of bankers towards investors at the time of subscription. This has dampened the interest of investors to new subscriptions and retarded the flow of idle funds towards new investments. We are glad that SECP has taken a serious notice of this omission and acted accordingly to rectify the situation. For instance, general ignorance of the employees of "Banker to the Issue", non-availability of prescribed forms and late refunds of the subscribed amount in case of non-acceptability of applications were the general and genuine grievances of the applicants. In the draft rules, an effort seems to have been made by the SECP that such complaints are removed and clients/investors are treated fairly and with respect. We are certain that when these rules are finalised and really implemented on the ground, small investors would actually get what they deserve and desire. This would tilt the scale of preference towards new investment which would be helpful in generating more economic activity in the country.
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