ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has proposed amendments in the SECP Act 1997 to establish 'independent capital market tribunals' to facilitate regulated stock market participants to appeal against the decisions of the SECP.
According to a brief of the Finance Division on the said amendment in SECP Act 1997, the amendment requires replacing section 33 and section 34 of the SECP Act with a new section 'capital market tribunal'.
Currently, the process of review exists in the SECP Act but it is structured in such a way that the SECP effectively is making a judgement on a decision made by itself despite the safeguard that no Commissioner who participated in the original decision may form part of the Appellate Bench of the Commissioners. This structure is fundamentally flawed, notwithstanding the integrity of the Commissioners, since it inherently creates the perception of bias and undermines market confidence in the impartiality of the Appellate body to overturn a decision of their peers. It also runs contrary to the general principle that there should be a clear distinction between the role of the investigator and prosecutor and the judge, it said.
To challenge a decision made by a regulatory body in the courts can be both time consuming and expensive and the judiciary may not be familiar with the way in which capital markets operate or the powers and regulatory objectives of the SECP and their role in investor protection as there is no dedicated Commercial Bench as yet in Pakistan.
Finance Division said that it is considered international best practice to create an appellate structure (usually a Tribunal or Panel) that is clearly defined by statute as sitting outside the regulatory authority. This tribunal is comprised of a panel of experts who have the appropriate graviats, expertise, independence and integrity to foster market confidence in their ability to adjudicate on decisions made by the regulatory authority with independence and impartiality.
The rationale behind the proposed amendment is to establish an independent Tribunal to facilitate regulated market participants to appeal against the decisions of the Commission.
As international best practices, it is not advisable for any regulatory authority to take the role of investigator, prosecutor, decision marker and then appellate decision maker.
Moreover, capital market related cases require special expertise and technical knowledge to deal with which can be ensured through establishment of special tribunals, Finance Division added.
Copyright Business Recorder, 2021