In line with its efforts to strengthen the capital market, the Securities and Exchange Commission of Pakistan (SECP) has approved the Securities Exchanges (Licensing and Operations) Regulations, 2016. The regulations, which have been finalized after detailed stakeholder consultations, have been made available at the SECP's website.
Necessary checks have been specified in the regulations to ensure that the securities exchange operates in a manner consistent with investor protection principles and the IOSCO principles of securities' regulation and financial market infrastructures. The regulations provide for matters relating to licensing, financial resources, duties and obligations, audit and accounts, appointment and conduct of directors and management, and fit and proper criteria for directors, officers and shareholders of the securities exchange.
Improved governance requirements have also been specified, which include requiring the exchange to mandatorily appoint one-half independent directors on its board. In line with the best international practices, a securities' exchange will be required to constitute a regulatory affairs committee comprising of independent directors and ensure segregation of commercial and regulatory functions under a segregation plan. Also, the securities exchange will be required to undergo a mandatory annual audit of its operations, regulatory functions and IT systems, to ensure integrity and effectiveness of its systems and to promote transparency.
A securities' exchange will be required to ensure maintenance of necessary infrastructure, human resources, and policies and procedures to effectively and efficiently discharge its responsibilities. A securities' exchange will also be required to develop and submit to the SECP a comprehensive 3-year business development plan including financial projections, product and market development plans, plans for outreach and education of investors and market participants, and shall be required to inform about the progress of implementation of such plan on an annual basis.
It is expected that with the implementation of this comprehensive regulatory framework, the securities exchange in Pakistan will be better geared to provision of a fair and efficient trading platform, while ensuring maximum transparency, thus promoting investor confidence. The same will be crucial given that Pakistan has been reclassified this year by MSCI as an 'emerging market' and is expected to attract substantial foreign and domestic investment to the capital market.-PR