ISLAMABAD: In order to ensure investors protection and capacity building of the capital market institutions, the newly appointed Chairman of the Securities and Exchange Commission of Pakistan (SECP), Zafar-ul-Haq Hijazi, has started implementing a robust reforms agenda for the capitalmarkets.
The Chairman reaffirmed the resolve of the SECP that there shall be no compromise on the investors' interests and will be zero tolerance for market misconduct and unfair trade practices.
The market monitoring system and the enforcement regime will be strengthened, he said in a statement here Tuesday.
The focus of the reforms agenda will be on strengthening the market monitoring and enforcement regime and introduction of structural reforms for market development and outreach, investor's protection and capacity building of the capital market institutions.
At the forefront of the reforms roadmap is strengthening of the SECP's enforcement regime.
The monitoring and surveillance capabilities of the apex regulator will be enhanced by strengthening the surveillance teams and infrastructure to ensure timely detection of market misconduct and unfair trade practices and appropriate enforcement action in a swift and equitable manner.
On the market development side, various initiatives will be taken such as further development and broadening of the e-IPO facility network through a centralized system.
To attract new listings, efforts will be made to simplify the existing manual procedures for listings, and to suitably amend the relevant rules and regulations.
Also, to bring the IPO process on a par with the developed markets, theSECP will revise the existing book building process to make it more efficient and transparent.
A web-based system of book building will be provided through the platform of the clearing company to ensure a more user-friendly, neutral and transparent model.
Considering that the small and medium enterprises carry an immense potential to create economic and social growth, a Small and Medium Enterprises (SME) Board will be introduced at the stock exchanges to facilitate listing of SMEs.
Specialized regulations will be introduced to rationalize the listing process for smaller companies while ensuring appropriate safeguards for capital market investors.
Sukuk is a viable and efficient alternative for fund raising. A regulatory framework is being prepared for the issue of Sukuk and Participation Term Certificate.
Also, efforts will be made to create liquidity in the existing commodities exchange through introduction of new products, and improving existing risk management regime and framework for default management at the PMEX.
The SECP would also take measures to increase the depth of the capital market and broaden the investor base.
Investor protection is the essence of the SECP's reforms agenda and is of top most priority.
Some key reforms in this regard are the introduction of Direct Settlement Service mechanism at the depository company whereby investor accountholders will obtain direct settlement facility through the CDC in addition to custody service, to prevent unauthorized use of clients' securities by broker participants.
In order to minimize the chances of misuse of investors' assets, a similar product titled National Custodial Services (NCS) will soon be launched at the clearing company.
The NCS will offer investors a facility of centralized clearing, settlement and custodial services without involvement of brokers.
Furthermore, an "Asset under Custody" regime will be introduced at the CDC to curtail unlimited custody of investors' assets with a broker, limiting the threat and uncertainty faced by investors in the event of default by the broker. A web-based investor's complaint system will be launched.
The SECP also understands the importance of key capital market infrastructure institutions and intermediaries and plans to strengthen their risk management capabilities.
In this context, a revised broker registration regime will be introduced to cater to the changing dynamics of the brokerage business.
The new regime will introduce a code of conduct for brokers. This code of conduct will enhance investors' protection and ensure proper management of risk.
Moreover, a code of corporate governance will also be introduced for brokerage houses to improve corporate governance framework for such entities.
Given the significance of the clearing company's role, efforts are in progress to give NCCPL the status of a Central Counter Party through appropriate changes to its regulations and the current default management process.
In addition, a Settlement Guarantee Fund of appropriate size in accordance with actuarial valuations will be raised to ensure a robust and efficient default management regime in accordance with the best international practices.
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