Regulators all across the world are being handed more power to ensure efficient market functioning; Pakistan merrily seems to be going in the opposite direction.
They say good things don last long. The reputation of the capital market regulator, Securities and Exchange Commission of Pakistan (SECP), is far from squeaky clean. Still, it is regarded as one of the better regulators for its autonomous status and relatively well functioning operations.
Reportedly, a $400 million loan from the ADB is contingent upon the approval of the draft law. Many of the changes proposed to the SECP Act are questionable as they tend to reduce the independence of the regulator.
Details of the draft law have been guarded in secrecy by those familiar with the matter. However, one of SECPs former chairmen has alleged that the draft 2010 SECP Act effectively makes the regulator a department of the government of Pakistan.
The Policy Board of SECP, a body entrusted with providing guidance to the commission in its functions, has apparently been awarded executive powers. Decisions regarding the budget, employment and investment policy will have to be approved by the board, which is heavily dominated by government representatives.
Ahsan Mehanti, CEO of Shehzad Chamdia Securities is of the view that decision making will not be timely if they are made in quarters other than the SECP itself and that will have a negative impact on the stock market.
Capital markets regulators around the world are a collegial forum of chairman and commissioners who together manage the affairs of the organization.
Sources in SECP have expressed their disapproval of the proposed change that will make them subservient to the Chairman, who will become the Chief Executive of the organization. Rumour has it, that even minutes of the policy boards meetings are not being shared with the commissioners.
An independent tribunal was a condition the ADB has enforced on the SECP before its loan will be disbursed. In a surprising move, the tribunal has been done away with. Criminal proceedings against capital market offenders are to be taken up in regular courts.
Stable and progressive frameworks are essential for the sustainable development of capital markets in Pakistan. One hopes that sanity prevails and Pakistan is not pushed one step backwards in the fast moving world.
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