NA body asks SECP to consult on NBR with policy board, brokers

Finance Standing Committee of National Assembly on Thursday asked the Securities Exchange Commission of Pakistan (SECP) to consult on its new brokers' regime with its Policy Board, brokers and other stakeholders including public within two weeks and report to the committee. A meeting of the committee presided by Faiz Ullah after taking briefing from all the stakeholders on new brokers' regime underlined the need of ensuring transparency in the process.

The committee chairman stated that after listening to SECP Chairman, SECP Policy Board as well as brokers, the committee recommends that all the issues with regard to new regime must be solved in a transparent manner. He further stated that members of the committee also showed their concern over issuance of notification in haste by SECP regarding new regime after a notice was issued by the committee.

The committee also recommended that the SECP should submit the number inside trading cases brought into the notice and what action was taken as well as of the number of defaulters and action taken by the SECP against them. Earlier, the committee discussed new policy regime introduced by SECP, regarding stock brokers and broker Houses. The Commissioner SECP briefed the committee about the salient features of new policy and stated that the measures are taken for improvement of stock market.

He said that new regime would be based on categorization of brokers into three categories, ie, trading & clearing (T&C), trading & self-clearing (TSC) and trading only (TO) and added that first two categories are permitted to retain custody of client assets whereas third broker to only keep custody of its proprietary book, directors and sponsors and their close relatives, migration to an effective risk-based compliance culture and said new regime was also based on the regulatory framework implemented in 2016.

Chairman SECP informed the committee that proper consultation in this regard has already been made with number of stakeholders (stock brokers) for the last ten months.

He added that the objectives of the new regime are to increase number of brokers and bring about improvement of governance and internal controls as well as compliance with AML/CFT requirements and ease of doing business to enable the small investors to concentrate on their core competence, etc.

Chairman SECP Policy board Khalid Mirza stated that the scheme has been implemented in many countries including India and proved successful because it is very logically and simple. He said that Indian market and trading volume is very huge.

He added that the concept paper of the scheme was shared with the SECP policy Board but regulations were not shared with the policy board. He added that in his view point the scheme is required to be reviewed critically. President, Pakistan Stock Exchange, Broker House Karachi and other stakeholders expressed their concerns over the design of new regime. They were of the view that said SRO (new regime) would affect the small stock exchange brokers and it will further create monopoly of gigantic brokers.

Some members of the committee were of the view that subject regulations will provide protection to investors. After threadbare discussion, the committee recommended that SECP should review its policy in consultations with stakeholders and will submit its report to the committee in 15 days.

The committee decided to defer agenda pertaining to budgetary proposals of the Ministry of Finance, Revenue and Economic Affairs relating to Public Sector Development Program (PSDP) for financial year 2020-21 for taking up in the next meeting.

The meeting was attended by Makhdoom Syed Sami-ul-Hassan Gillani, Syed Naveed Qamar, Jamil Ahmed Khan, Mr. Faheem Khan, Dr. Ramesh Kumar Vankwani, Qaiser Ahmed Sheikh, Ali Pervaiz, Dr. Aisha Ghaus Pasha, Ms. Hina Rabbani Khar and Ms. Nafisa Shah, besides the senior officers from Ministry of Finance and SECP.