Although there were strong reservations from stock exchanges, a Senate panel on 3rd March’ 15 sharply cleared with consensus a new draft law for Securities and Exchange Commission of Pakistan (SECP) minutes after giving 15 days for consultations among the stakeholders.
The meeting of the standing committee on finance and revenue supervised over by MQM Senator Nasrin Jalil was informed that the modification to SECP Ordinance of 1969 was first introduced in the parliament about a decade ago but had been pending approval without any major reason.
The managing directors of Karachi, Lahore and Islamabad stock exchanges told the committee that they were the major stakeholders but had not been consulted over the law in 10 years.
The SECP representatives said the draft law had been put on its website in April 2007 and press releases were issued seeking comments from all stakeholders (including the general public) and this should have been enough for the three stock exchanges to come up with their input.
While Senator Jalil was unhappy with the stock exchanges leadership for not offering their recommendations, she was among the many members who agreed that the review process was not up to the mark.
She asked the chiefs of three stock exchanges to submit their amendments to the draft law within 15 days and suggested to finalise the SECP Act 2015. After seeking clearance from all the members of the committee, chairperson Jalil announced that the committee had “unanimously passed” the SECP Act 2015. Earlier, Lahore Stock Exchange MD Aftab Ahmad Chaudhry told the committee that the draft law was shared with stock exchanges in 2005. “Since then, the stock exchanges had been demutualised. We are now seeking international investment by offering shareholdings of the stock exchanges but the proposed law seemed to be blocking such moves and cutting down their share value,” he said.
He said the exceptional closure of stock markets for three months after the 2008 market crash on the force majeure clauses of the law had led to shying away of investors from the market, disappearance of hundreds of dollars of investment and removal of Pakistan from the Morgan Stanley Capital International (MSCI) — an index of over 1600 world stocks.
Referring to the US market, he said even the 9/11 resulted in closure of market for 3-4 days and that too because of some technological problems because the emergency powers to close the market was enjoyed by the president. He suggested a similar arrangement in Pakistan. Chaudhry said the draft law seemed to exercising powers to set prices which is detrimental to the capital market. No executive authority should have the powers to set share prices, he said.
He stressed that the proposed law also did not suggest ways to monopolistic character of the Karachi Stock Exchange and was weak on investor protection which was a major cause behind just 225,000 investors in the capital market. Islamabad Stock Exchange MD Mian Ayyaz Afzal agreed to the opinion of his counterpart from Lahore and said his institution had submitted comments on the proposed law in 2006 and a lot of changes had taken place since then. The Karachi Stock Exchange MD Nadeem Naqvi also said the premier market had last shared its comments over the draft in 2006.
He said that when the national assembly’s committee took up the proposed law in 2011, KSE had requested the SECP in writing to share the revised draft but was informed that since the draft had been sent to the NA committee, it was property of the parliament. He said he had requested the late Fauzia Wahab, who led the NA committee to call them for the panel’s meeting but this could not happen. He said the Karachi stock market got the opportunity to appear before the parliamentary panel now but substantive comments could not be given because it was not given the draft of the law. The committee was informed the draft law was important to meet international standards as part of the reforms under the International Monetary Fund (IMF) programme.