New Brokers Registration Regime: KSE members oppose SECP concept paper

RECORDER REPORT

KARACHI: The members of the Karachi Stock Exchange (KSE) unanimously rejected the SECP concept paper on 'New Brokers' Registration Regime,' saying the idea of brokers' minimum capital requirement to be enhanced to Rs 400 million is not acceptable.

The members held an informal meeting at the KSE premises here to discuss the concept paper. They also discussed the reasons of massive fall in trading volumes at the exchange. Over 100 members attended the meeting.

"The major concerns of majority of the members were drastic decline in the daily trading volumes at the exchange," a member told BR after meeting.

The members said imposition of Capital Gain Tax and its mode of collection was the major reason behind the massive decline in daily volumes. Due to the said reason there is lack of interest of retail investors whose share in daily trade was over 50 percent.

The members decided to discuss all the issues with the finance ministry bosses and the Federal Board of Revenue (FBR). "We have decided to discuss the issue with Finance Minister Dr Abdul Hafeez Shaikh and the FBR Chairman," another member said. He was of the view that without resolving the issue of CGT and its mode of collection, trading volumes are difficult to increase at the exchange.

Later, a statement was issued by the KSE members that says: "It was overwhelmingly observed that after the imposition of Capital Gain Tax (CGT), trading volumes at the exchange have fallen to 14-year low resulting in meagre collection of taxes by the government, and industry-wide unemployment.

The spectre of CGT and its applicable method of collection are driving away small investors which in turn, is stifling investment activities in the organised sector, that is crucial for economic stability of the country.

The members reiterated that they as well as all investors are taxpayers and wish to play their part and help the government raise revenue. They pointed out that the best way to collect CGT on shares trading is to collect this tax under presumptive tax regime. This will not only enhance revenues but also help improve the working of the tax department and overall confidence of investors.

The members also decided that they will invite the finance minister along with the FBR officials to discuss and resolve the CGT and its collection method in a practical and effective manner, as revival of capital market depends on resolution of this issue.  The members also discussed the concept paper and in light of extremely low trading volumes they felt it was not an appropriate time to implement this regime. They rejected the idea of brokers minimum capital requirement for full service brokers (ie trading members + clearing members) to be enhanced to Rs 400 million. They also did not accept the concept of creating a separate category for clearing members and trading members."