The Securities and Exchange Policy Board approved substantial reduction in National Clearing Company of Pakistan Limited (NCCPL) fees for investors and changes in the Companies (further issue of shares) Regulations, 2018 to facilitate capital formation, and advised Ministry of Commerce and SECP to convince the provincial revenue authorities to abolish sales tax from life, health and reinsurance services.
The Securities and Exchange Policy Board met here at the SECP headquarters under the chairmanship of Professor Khalid Mirza.
The Board's mandate vis-a-vis SECP was also deliberated upon and it was affirmed that the board will act in accordance with the provisions of the Act with the oversight role of the Board being emphasized as the cornerstone. The Board has pointed out various instances of regulatory action that needed rectification together with related policy directives.
When contacted, Khalid Mirza said that the policy board in this meeting clarified its mandate as prescribed in the law and in this connection, stressed the oversight role. The Board made it clear that the board aims to be proactive in a quasi-supervisory role and to ensure that the commission achieves the purposes for it was setup under the SECP Act.
This is very important for investors' confidence. The board's proactive role during the past years had a salutary effect on investors' confidence and has been a source of comfort for market participants.
Now, the SECP has started addressing the core issues of the market and in this respect the board is as much to be blamed as SECP. It is about time that the securities regulatory apparatus comprising policy board to take re-boosted steps to induct real competition and fair play in the market.
The Policy Board approved changes in the Companies (Further Issue of Shares) Regulations, 2018 to facilitate capital formation and provisions whereby the Commission could impose conditions on further issue of shares were substantially removed. Major amendments include omission of (i) the provision restricting more than one rights issue within a period of 12 months; (ii) underwriting requirements for rights issue; (iii) requirement for preparation and submission of financial projections to the Commission in case of rights issues; (iv) mechanism for pricing the further issues either at premium or at discount; and (v) information and documents currently required to be submitted along with applications for seeking approval of the Commission to issue further share capital without rights offer; preference shares and Employees Stock Option Schemes.
In its recommendations to the Board, which were approved, the Insurance committee strongly advised that the ministry of commerce and SECP convince the provincial revenue authorities to remove sales tax from life, health and reinsurance as it was proving a major impediment to the growth of insurance sector, acting as a barrier to new entrants and inducing foreign insurers to leave the Pakistan insurance market.
The committee recommended that Pakistan Reinsurance Company Limited to undertake valuation of adequacy of its retrocession capacity from an independent actuarial firm. The Committee had also recommended that the Commission review the concept of creating a reinsurance pool by local insurance companies to ensure that foreign exchange does not flow out of country under various 'fronting' practices.
Amendments to Section 186/187 empowering corporate boards to appoint CEOs in all cases were approved to be incorporated in the Companies Act, 2017 to be proposed to the Government. Also, amendments to sections 42 and 43 substantially removing the onerous requirements with respect to licensing and liquidation of section 42 companies were approved.
The Board also approved the Commission's plan for merging the Securities Act with the Futures Act together with the required rationalization / simplification. The Board also asked for a review of the LLP Act with the objective of eventual substantial rationalization/simplification of this statute.
The Policy Board also approved substantial reduction in NCCPL fees to facilitate investors and also advised the Commission to review the requirements for disclosure of financial statements on the website of trading only brokers. The Policy Board deliberated and approved the process for appointment of nominees on the Boards of PSX/CDC/NCCPL.
The Policy Board gave final directions to the Commission for reconstructing the SECP Annual Report, 2019 to include future outlook/plans for placing before the Government.
Concern was expressed by the Board regarding officials of SECP that remain attached to law enforcement agencies (LEAs). The Board reiterated that LEAs should respect SECP's position as covered by Section 41B of SECP Act, 1997 (the Act) and the Commission was urged to seek recovery of files impounded by one of the agencies.
Under Section 41B of SECP Act, 1997, notwithstanding anything contained in any other law, including National Accountability Ordinance, 1999 and Federal Investigation Agency Act, 1974 no action, inquiry, investigation or proceedings in respect of any regulated activity, regulated securities activity, transaction, process or permission granted under this Act or any administered legislation, shall be taken, initiated or conducted by any Federal or Provincial investigating agency, bureau, authority or institution by whatever name called without reference from the Commission.
No proceedings shall lie before any agency, bureau, authority or institution at the instance of any party to a matter which is or has been in issue before the Commission, in respect of a matter which is actually or has been or might or ought to have been a proper subject of complaint to the Commission under the administered legislation.
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