The Policy Board of Securities and Exchange Commission of Pakistan (SECP) has approved the draft of 'Stock Exchanges De-mutualisation and Corportisation' law. Sources told Business Recorder on Friday that the SECP policy board met on October 11 under the chairmanship of Advisor to Prime Minister on Finance Dr Salman Shah.
They said that the proposed law has been approved, which is likely to be implemented by December 31. There could be slight changes in the timeframe for promulgation of the law, but it would most probably be implemented by the end of the current year.
The draft of de-mutualisation law has duly been approved by Karachi Stock Exchange KSE), Lahore Stock exchange (LSE) and Islamabad Stock Exchange (ISE). The proposed law would convert the existing 'limited by guarantee' stock exchanges into de-mutualised companies, having shares capital.
Of 100 percent shareholding of the demutualised stock exchange companies, at least 40 percent would be given to some institutional strategic investors. The SECP is making efforts to attract foreign investment in this area.
Sources said that the draft law has been sent to the government for vetting before its promulgation through an ordinance. The new law is called 'Stock exchanges (corporatisation, Demutualisation and integration ordinance'. Sources said that the de-mutualisation process of all three stock exchanges would be completed by December 31, 2007.
It is important to mention that the SECP is looking for strategic partners to run the stock exchanges for broad-basing of shareholding structure after Demutualisation. The SECP had incorporated certain amendments in the Securities and Exchange Ordinance, 1969 through Finance Act 2006.
Accordingly, stock exchanges had to be demutualised by December 31, 2006. However, on the request of stock exchanges, the SECP extended the period till December 31, 2007. The amendments made in the Ordinance were seen as an interim measure till enactment of a separate law on Demutualisation, which was essential to provide necessary legal framework for the proposed process.
Therefore, a draft law, prepared by the Commission, was submitted to the government for approval and further processing. The government wanted to accelerate the process of corporatisation and Demutualisation of stock exchanges, and advised the Commission to pursue early promulgation of the proposed law.