The Securities and Exchange Policy Board paid glowing tributes to its outgoing chairman and current finance secretary, Dr Waqar Masood Khan here on Tuesday. The SECP chairman, Zafar Hijazi and other members greatly appreciated his sustained support for the development of Pakistan's capital market and corporate sector.
Hijazi said that Dr Waqar has exceptional intellectual abilities and quickly gets to the bottom of complex matters. The SECP is tremendously grateful to him for having fully supported reform agenda. Members of the Policy Board also expressed their appreciation of Dr Waqar's contributions and his long association with the apex regulator.
During the meeting, the Systemic Risk Department of the SECP gave a detailed presentation to the Policy Board. It shared an analysis of market activity for 2016, highlighting that mutual funds have merged as the most significant buyers during the fourth quarter of 2016. To manage any possible redemption pressure on these funds, SECP has directed the asset management companies to maintain at least 5 percent cash and have borrowing arrangements equal to 15 percent of their net asset value. The growth in the mutual fund industry is a positive development for Pakistan's capital market and a sign of its evolution.
Members of the Policy Board were informed that in the past, two illegal practices played a negative role in the stock market, in-house badla financing and insufficient collection of margins by brokers from clients. During a market reversal, these two exacerbated price drops, increasing the risk for the clearing house. The SECP has done a thorough analysis of 24 large brokerage houses to curb such illegal practices and enforcement actions are being expedited.
The Systemic Risk Department apprised the policy board that the SECP has revamped the criteria to determine eligibility for listed shares pledged as collateral to the clearing-house. The revised criteria take into account both financial strength of the company and the liquidity of the shares of the company. The revised criteria underwent a public consultation and it is now being implemented on a 30-day notice. The improvement in the eligibility criteria strengthens the management of risk because in case of a default by a clearing member, the clearing house will be better able to sell the margin securities.
Dr Waqar Masood appreciated the SECP for closely monitoring the stock market situation and taking timely measures to protect investors.
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