National Assembly''s Finance on Committee has reportedly approved Securities and Exchange Commission of Pakistan (SECP) (Amendment) Act 2016, Tuesday despite boycott of the opposition of the house proceedings. A meeting of the National Assembly''s Standing Committee approved SECP Law and Credit Bureau Bill, 2016. On Monday, the members of the opposition parties refused to approve the SECP law before taking a briefing from officials of the Federal Board of Revenue on offshore accounts. Consequently, the meeting ended without taking up any agenda item. On Tuesday, the meeting adopted SECP law despite boycott of the opposition.
The SECP officials informed the meeting that there was need to strengthen financial and administrative independence of the SECP as well as to enhance its mandate without corresponding statutory powers. The key deficiencies of the SECP, according to presentation made to the committee include; (i) inadequacy of enforcement powers; (ii) ineffective powers to call for information and documents; (iii) lack of effective process of prosecution, lack of procedure for recovery of penalties; (iv) lack of provision to seek international cooperation and assistance from foreign regulatory authorities; lack of frame work for self regulatory organisations; (v) need for establishment of independent Audit Oversight Board; (vi) lack of injunctive powers; (vii) absence of provision for disclosure of information in public interest and inadequate investigative powers. The proposed SECP Amendment Bill 2016 was said to be aimed at addressing these deficiencies.
The meeting was further informed that a series of meetings since June 2011 with the approval of the draft SECP enforcement and regulation bill (new bill) led to the decision that instead of introducing the new bill, the amendments in the existing SECP Act 1997 should be incorporated. Thus SECP Amendment Bill 2016 was proposed to amend the SECP Act 1997 after review of the Finance Ministry and other stakeholders.
The brief of proposed amendments to SECP Act, 1997 is as follows:
THE COMMISSION (PART II): Amendment in Section 3 to ensure Administrative, Financial and Functional Independence of the Commission;
New section 6A is being added to provide provision of Acting Chairman, if the position of Chairman is vacant or he is unable to perform his functions, to avoid legal challenge to the authority and functioning of the SECP.
THE BOARD (PART III): (i) Amendment in Section 12 to increase the number of private members of the Policy Board from 4 to 6 and consequential increase in overall strength from 9 to 11 to give majority to the private members in the Policy Board of 11 members to meet principles of IOSCO and to ensure independence of the Commission;(ii) deletion of proviso to Section 12 to enable experts with experience over age of 65 years to be appointed on the Board.
Power and function (part vi): (i) amendment in Section 20 by inserting further clauses to widen the scope of powers and functions of the SECP, inter alia, as under; (ii) to encourage introduction and growth of Shariah Compliant Financial Products;[z] (iii) to minimise market abuse and financial crimes to protect investors [aa] (iv) establishing and regulating entities for protection of investors (SRO''s); [fa] (v) powers to make regulations for disclosure of information in public interest; [fc] (vi) identify and address factors resulting in systemic risk in capital market [x] (vi) to regulate and facilitate the healthy growth of the corporate sector (private and public) and to promote good corporate governance; [y]
PART (VIII) (Enforcement and Investi2ation; (i) insertion of section 28A & amendment in section 29 & 30 to enable Commission to carry out inspection of regulated persons and align powers of the investigator of the Commission with the new Securities Act, 2015;(ii) insertion of new section 31A has been proposed to enable the Commission to call for information from any person including financial institutions for the purposes of investigation of offences under the Administered legislation.
Powers of Review and Correction; (i) insertion and amendment in section 32 &33 to enable the Commission and the appellate bench to review and make correction in their order. Amendment in Section 34 is proposed to streamline the provision in accordance with the Securities Act, 2015 to enable quick disposal of appeals.
PART (IX-A): Power of intervention by the commission; a new part has been proposed to further strengthen the scope of enforcement powers of the Commission in relation to regulated persons. Furthermore, this will provide a unified and comprehensive structure for the effective regulation of all the sectors regulated by the Commission
PART (IX-B) Self Regulatory Organisations (SRO); as per the requirement of IOSCO new part comprising of sections on Self-Regulatory Organisation (SRO) is proposed to enable the Commission to register and regulate SRO for effective regulation of entities and market intermediaries.
PART (IX-C) Audit Oversight Board (AOB); the independent audit oversight Board will regulate the matters relating to accountings and auditing standards and quality of services of accounting provided by auditors in corporate sector. Amendment in section 38 (Procedure of prosecution to provide for a detailed procedure of prosecution and enable special public prosecutor institute or defend cases, appeals, petitions, applications and all other matters before any court;
New section 42B (Recovery of penalties has been proposed to enable the Commission to recover the penalties imposed by it under SECP Act as well as all administered legislation by the SECP. New section 42E (Seek cooperation and assistance of foreign regulatory authorities on reciprocal basis) (Cooperation and assistance to foreign regulatory authorities) has been proposed to enable the Commission to provide and seek international cooperation and assistance from any foreign regulatory authority, body, organisation, entity etc on reciprocal basis; New section 42F (Power of the Government to amend schedule); power to amend the schedules has been proposed to enable the federal government to amend the schedules to the SECP Act.
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