Draft rules unveiled: ICAP and PVA object to penalty regime for valuers

Pakistan Valuers Association and Institute of Chartered Accountants of Pakistan (ICAP) have objected to certain provisions of the draft Valuers Registration and Governance Regulations 2017, particularly penalty regime for valuers and suggested alternate provisions in the law. Pakistan Valuers Association and Institute of Chartered Accountants of Pakistan (ICAP) have submitted detailed comments on the draft Valuers Registration and Governance Regulations 2017 of the Securities and Exchange Commission of Pakistan (SECP).
According to the comments of ICAP received to the Securities and Exchange Commission of Pakistan (SECP), ICAP's primary concern relates to the restriction on registration of chartered accountants for valuer services under the draft Valuer Registration and Governance Regulations 2017. The Institute has previously raised this matter through its letter. "We are again raising our concerns as we firmly believe that mandatory requirement for formation of a company under the Companies Act for obtaining the registration as a valuer will act as a regulatory constraint for the chartered accountants firms."
The valuation of securities, financial assets/liabilities or intangible assets is one of the core services provided by the chartered accountant firms. Some of these valuations, especially relating to financial reporting matters, are also driven by the requirements of IFRS, making the Institute's member the most relevant and qualified professionals to carry out such valuations. However, the registration requirements of the draft valuers regulation will debar the Institute's practicing members from performing valuation services. The mandatory prerequisite to form a company will reduce the pool of experienced professionals who have been professionally and effectively providing such services for the last many decades and are amongst the most professionally qualified personnel to do so. The ICAP believes that the regulation should not be framed in a way which restricts the chartered accountant firms from performing valuer services. "Accordingly, we urge the Commission to reconsider the above provision, and amend the eligibility criteria in Regulation 4 of the draft valuer regulation so as to also include the QCR rated firms of chartered accountants," the ICAP said.
The ICAP was of the view that the Commission has defined five categories under which registration as valuer can be done. The Institute would like to recommend the examples of intangible assets given under this category should be expanded to include all intangible assets which qualify for recognition under IFRS.
The ICAP further said that the clause requires disclosure of fees and charges relating to valuation services on the valuers' website. "We are of the view that fee for valuation services will vary from assignment to assignment taking into consideration the complexity of the valuation, nature of target's business, industry, sector etc. In addition, fees for valuation services would also be market competitive and therefore trade sensitive in nature. Therefore, we believe clause 12(1) should be deleted."
In its comments, Pakistan Valuers Association said, "We, at the platform of Pakistan Valuers Association (PVA) have the core responsibility to resolve all matters of valuers judiciously for providing quality services in a good professional way as per international standards." In this context, PVA is providing interim registration to valuation companies. "The registration of PVA should be made compulsory for all companies who are seeking registration of SECP as registered valuer, and we humbly request to the Commission to incorporate this clause in the current SRO." For purpose of registration with the SECP as a Registered Valuer for a new company, the desired company must fulfill the criterion set out in the aforementioned clauses and also show strength of at least two persons having minimum 10 years experience in valuation.
Staffs of all valuation companies also need to be registered with the SECP. Any firing/hiring of persons shall be intimated to the Commission or the person will require the clearance certificate from the registered valuer company before joining another registered valuation company. In case of establishing a new company, the existing company must issue an NOC for the floating new entry in the valuation industry. At present the valuers have been enlisted with Pakistan Banks' Association (PBA) since 2001, and entirely comply with the criteria set out by PBA as per their guidelines including enlistment/renewal, and providing professional services to the banks/DFIs satisfactorily. Therefore, it is also suggested that the SECP provides registration as it is basis for first three years to all the valuers who are enlisted with PBA, so that the existing system may continue for the main stakeholders, ie, the banking sector.
Under draft Valuers Registration and Governance Regulations 2017, where a valuer contravenes or fails to comply with any provision of these regulations or is not in compliance with the conditions of registration or any directive issued or order passed by the Commission, the Commission may, after providing an opportunity of been heard, impose restriction on its activities as valuer or suspend its registration.
Pakistan Valuers Association objected that primarily, it is needed to be removed from the SRO. Or either, the suspension of Registration of Valuer for some period is sufficient punishment till clearance of the inconsistencies/discrepancies/fault, etc, by the valuer as per SRO clause 19-1, a & b, it added.
Pakistan Valuers Association has suggested SECP that although the chief executive will sign all the valuation reports and documents yet board of director of the company shall also be authorized as a senior professional who fits the criteria for signing of the valuation reports and related documents. This will minimize the time period of preparation of valuation reports and increase the responsibilities of the signing authority for more transparency.
Pakistan Valuers Association suggested that the penalty provided under Section 460 with section 479 of the Companies Act is not justifiable for Valuer globally. Reasonable/affordable penalty amount may be fixed and amendment in Act is required for Valuers, Or Level-1 may be considered instead of Level-2 as mentioned in Section 479.
Pakistan Valuers Association further commented that to pay the damages to the person who has suffered loss arising out of incorrect or misleading statement of particulars made in its report, is also unjustified for Valuer. This regulation can be misused by client who wants the valuation results which only best suites his requirement and if not, then he will claim for losses from the Valuer resulting in complications for the SECP as well as valuer both. But the suspension/cancellation of registration will be subject to completion of the following process: A panel of valuers nominated by Pakistan Valuers' Association (PVA) shall investigate merits of the complaint against the valuer before considering his suspension or cancellation of registration. The valuer should have the right to speak on the suspected allegation.
Pakistan Valuers Association With respect to clause (a) - also must have minimum 5 years valuation experience with respect to clause (b) - no objection. Hence, an associate engineer with minimum 8 years valuation experience may also be considered. Non-degree holder with minimum 15 years valuation experience may also be considered. Pakistan Valuers Association said that a clause is not suitable for all the present valuation companies. In section 6 pertaining to "Grant of Registration" with condition, anyone can be chief executive of the company, or, it is suggested that a BSc engineer in any discipline with 5 years valuation experience or minimum a bachelor degree holder may be considered for chief executive of the company.