Dr Tariq Hassan, Chairman, Securities and Exchange Commission of Pakistan (SECP) has assured the new board of Karachi Stock Exchange of continued support and consultative process for holistic regulation of financial sector.
Tariq met the newly elected directors of KSE. Arif Habib, new KSE chairman, welcomed him and assured him of full support for all reform measures introduced by the SECP, including demutualization of the stock exchanges.
Dr Hassan thanked the outgoing KSE chairman Ferozuddin Kassim and lauded the services being rendered by Managing Director Moin Fudda.
He assured the new KSE board that SECP would continue its consultative process of holistic regulation of the financial sector.
He stressed the need for enhancing the retail investor base in the market and said that SECP and the stock exchanges should work together for the development of the capital market and continuation of regulatory reforms.
In this regard, he agreed to reinstate the Co-ordination Committee of SECP and KSE, as suggested by the newly elected KSE Chairman, and indicated that meetings would be held at regular intervals - the first meeting to be held in Islamabad later this month.
The SECP Chairman also highlighted the need to improve credibility of capital market.
He said that steps need to be taken to further improve risk management at the stock exchanges, and urged the stock exchanges to be more proactive in their capacity as frontline regulators of the stock market.
He said that the board and management should play their due roles, the former in policy formulation and the latter in the day-to-day operations of the exchange.
He said that a committee comprising experts and representatives from stakeholders would soon be formed for demutualization of the bourses.
The SECP chairman said that while the role of SECP and stock exchanges is the same, the consultative process will continue.
He said that we are proud that the KSE is declared as the best performing market of the world.
He said that his philosophy of regulation of market is in its development. He urged upon the new board to play a vital role in developing the market as a frontline regulator.
He said that unless we have the retail investors, the performance of the market would have no value.
The purpose of all the reforms so far carried out or will be introduced in future will be to boost the investors' confidence.
He pointed out that credibility is a very important factor and we have to ensure to avoid any systemic risk in our operational areas.
Referring to role of the SECP, he said that we have a clear understanding of our relationship with the stock exchanges. However, he expressed his disappointment on some issues referred by the SECP.
There is a function for the stock exchanges as frontline regulator, but at times, the Self-Regulatory Organisation (SROs) fallen short due to whatsoever reasons and under the situation, we have to intervene directly.
He said that we are open for consultation on every issue and I hope that we will be able to maintain our relationship.
The SECP has a big agenda. While the objective is the same, there is only a matter of maintaining its speed.
Referring to the reforms so far introduced by the SECP, he said that there are three categories, namely; (1) operational reforms which includes risk mitigation measures, (2) structural reforms, which includes demutualisation and integration and code of corporate governance.
He said that it is time now to launch the concept of demutualisation, which will be through a transparent and consultative process. Similarly, we have applied the code of corporate governance and there is a need to apply the same to ourselves.
He also emphasised the need of defining the functions of the board and management at stock exchanges, which is an important part of corporate governance.
He said that while the function of the board is to lay down and supervise policy matters, the day-to-day operations should be handled by the management. Thus, there is a need of defining clearly the role of the board and management in order to avoid any conflict of interest.
While every stakeholder should have an opportunity to express their views, the KSE as the frontline regulator and SECP have to think for long-term market development which can be achieved through effective regulatory framework.
Certainly doing all this, the SECP will have no problem if we are providing a level-playing field, and transparent operations.
Referring to various specific proposals pertaining to inclusion of OGDC in the COT eligible list and holding period restriction on pre-IPO, he assured that he will look into these matters.
He also declared the reactivation of the SECP and stock exchanges co-ordination committee and said that the meeting of the committee would be held during the current month to discuss all matters.
Presenting the vote of thanks on behalf of the board, Managing Director Moin M. Fudda stated that we are all working for Pakistan and we will succeed. On behalf of the board, he assured whole-hearted support to the SECP enabling it to discharge its responsibilities and hoped for continued guidance of the SECP in all matters.
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