The Securities and Exchange Commission of Pakistan (SECP) has decided to develop a roadmap in coordination with commercial banks for enabling investors to apply for Initial Public Offerings (IPOs) online/electronically to facilitate investors by giving them benefits of automation and reduced turnaround time involved.
The Capital Market Development Plan (2016-18) issued by the SECP revealed new measures for protection of minority shareholder. To create an environment conducive for investment, it is imperative that appropriate safeguards are put in place to ensure interest of the minority shareholders in public listed companies. The present regulatory framework already encourages listed companies to ensure adequate minority representation on their boards and requires the presence of independent directors on their boards to ensure transparency and objectivity in the boards' decision-making process.
Apart from investor education and awareness measures, the SECP is contemplating on giving enhanced responsibility to the Pakistan Institute of Corporate Governance (PICG) for carrying out important responsibilities with regards to shareholder protection. It is envisaged that PICG will assume the role of minority shareholders' watchdog in line with global best practices and may be made responsible for spearheading shareholder activism, particularly among retail and minority shareholders - to preserve shareholder rights, minimize risks to shareholders and ultimately enhance value to the capital market. Other measures included building up credibility through active participation in AGMs and EGMs, where it may highlight concerns/issues relevant to retail/minority shareholders and taking initiatives for development of best practices for institutional shareholders.
Other initiatives included conducting yearly surveys of locally listed companies, such as the Directors' Remuneration Survey, Corporate Governance Survey and the Dividend Survey, and may provide proxy services for minority/retail investors.
It is also envisaged that PICG will establish an independent directors' forum to facilitate exchange of ideas, best practices and consultation amongst independent directors in the country to strengthen independence. Further, to enhance protection of rights of the minority shareholders, the SECP is working on a strategy to promote a culture of enhanced regulatory compliance by listed companies. The SECP strategy in this regard entails first giving due opportunity to companies to rectify regulatory defaults and in case of failure it provides procedures for taking necessary action against such companies including being wound-up/liquidated. In case of non-compliance with the directions, the company or its chief executive and directors shall be liable for action under the Securities Act which includes penalties of up to one hundred million in case of individual and up to two hundred million in case of a company.
Investor facilitation measures: The cornerstone of a fair, transparent and efficient capital market is investor protection and facilitation. As also stated in various sections above, a number of initiatives are in the pipeline, few of which are stated below:
A road map will be developed in coordination with commercial banks for enabling investors to apply for IPOs online/electronically to facilitate investors by giving them benefits of automation and reduced turnaround time involved. Given that e-dividend is an efficient and economical way of payment of cash dividend as it saves time and cost of both the companies and shareholders, it would be made mandatory for issuers to offer e-dividend facility to their shareholders. The SECP added that efforts will be made through relevant legislation to prohibit physical issuance of securities and require all issued capital to be in dematerialized form, to do away with the numerous problems attached with physical shares, for investor facilitation.
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