The Securities and Exchange Commission of Pakistan (SECP) with the approval of the federal government has reviewed the existing Ballotters, Transfer Agents & Underwriters Rules, 2001 and drafted two separate sets of regulatory frameworks, viz. the draft Underwriter Rules, 2013, and the draft Balloters and Transfer Agent Rules, 2013. The revision of BTU rules is SECP's one of the major moves towards development of the capital market in Pakistan.
Both sets of draft rules have been published in the official gazette for seeking public opinion as required under sub-section (2) of Section 39 of the Securities and Exchange Commission of Pakistan Act, 1997. The draft rules are also available for public comments at the Discussion Forum on the SECP's website www.secp.gov.pk. The existing BTU rules were promulgated on June 27, 2001, under Section 32C read with Section 33 of the Securities and Exchange Ordinance, 1969, to regulate the businesses of the underwriters and ballotters and transfer agents. The existing BTU rules were made to regulating affairs of the underwriters and balloters and share registrars despite the fact that both these intermediaries perform totally different functions.
Furthermore, since the existing BTU rules have a very limited scope as they merely provide the eligibility criteria and there is no licensing/registration requirement for these intermediaries, therefore, disciplinary actions, in case of any misconduct, become difficult to initiate. The purpose of the review of the existing BTU rules is to fairly safeguard interest of the investors, building of the investor confidence, efficiency and market development. In various developed and emerging markets, regulatory framework for regulating affairs of the underwriter and the balloters and transfer agent also exists.
Underwriters play a vital role in the fund raising by the corporate through the initial public offering (IPOs) and subsequent right issues. On the one hand they ensure raising of the requisite funds by the corporates and on the other the price at which the issues are underwritten by them provide comfort to retail investors in making prudent investment decision.
The functions of balloters and transfer agents are also of important nature as they, on behalf of the issuers, are responsible for keeping and properly maintaining the share register and involved in the issuance and transfer of securities. They also help in distribution of cash dividend announced by the listed companies, and handling of the investors' complaints.
The key areas covered in these draft rules are the eligibility requirements, registration and renewal, duties, responsibilities and functions of the underwriters and the balloters and transfer agents; maintenance of the books of accounts and records; enforcement actions like restriction, suspension or cancellation of registration in case of any violation.
Under the draft underwriters rules, only scheduled banks, development finance institutions, housing finance companies, investment finance companies, leasing companies and corporate brokerage houses will be eligible to act as an underwriter whereas under the draft Ballotters and Transfer Agents Rules, any company with a minimum paid-up capital of Rs 5 million will be eligible to act as a balloter and transfer agent. The public comments received on both sets of draft rules will be considered by the SECP and then the final rules will be notified, repealing the existing BTU rules.-PR