Securities and Exchange Commission of Pakistan (SECP) Chairman Zafar Hijazi has said that the wilful defaulting/non-performing listed companies would not be allowed to enjoy benefits of listing while ignoring the rights of investors. Zafar Hijazi Chairman Securities and Exchange Commission of Pakistan (SECP) has said that the commission is planning to tackle the issue of defaulting/non-performing listed companies while providing them with an opportunity to rectify their defaults.
Sharing future plans of the commission, Hijazi said, in SECP annual report (2014-15), the defaulting/non-performing listed companies involved in wilful default will be strictly dealt with in accordance with the law. They will not be allowed to enjoy the benefits of listing while ignoring the rights of investors. Similarly, process has been initiated for increasing free float of the listed companies as per the regulatory framework and during the current year all possible measures will be taken to complete this important reform initiative
He said that another important but neglected area is development of the debt market. A concerted effort will be made in collaboration with the State Bank of Pakistan and Ministry of Finance to remove all impediments and strengthen the relevant intermediaries like credit rating companies, debenture trustees, underwriters, etc. The process has been started with a comprehensive review of credit rating companies which will lead to revamping of existing intermediaries and bringing in international players with established brand names and global presence. The commission will make concerted efforts to ensure full compliance with the IOSCO principles in various areas which have been highlighted as partially compliant in the recent assessment of the Pakistani securities market conducted by IOSCO. Efforts will also be made for re-inclusion of Pakistan in the MSCI Emerging Markets (EM) Index, as the SECP meet the qualitative and quantitative criteria for the same.
SECP Chairman said that the efforts are being made for diversification of shareholding of the stock exchanges by bringing together financial institutions and strategic investors in line with the requirement of demutualization and integration law. This will provide an opportunity to remodel the landscape of our capital market and make it a regional hub for raising capital and attracting investors from around the globe. However, any decision on the matter would be taken in consultation with the stakeholders and after taking into consideration factors like market development, improved governance, investor protection, liquidity and best order execution for the investors.
In pursuance of the government's National Action Plan to end terrorism and to halt financing sources of terrorists, the SECP decided to revalidate the licenses of all non-profit organisations or NGOs registered with the SECP in order to ensure that no transgressions have taken place. Steps such as development of new modules under e-Services for licensing under section 42 of the Companies Ordinance, 1984, for non-profit associations, filing of accounts, obtaining certified true copies and inspection by third parties/consultants were to aimed at ensuring comprehensive documentation and monitoring of such organisations.
In order to facilitate availability of non-banking financial products at one place and expand outreach to smaller cities, a concept of Capital Market Hub has been introduced under which offices or representatives of stock brokers, mutual funds, banks, pension funds and insurance companies will be there in one place. First such hub will be opened very soon in the city of Abbottabad, followed by other smaller cities, Zafar Hijazi said.
Besides addressing various shortcomings of the 1969 ordinance, the new law incorporates IOSCO benchmarks and contains provisions for promoting public confidence in the market, including full disclosure at the time of the initial offering, continuous disclosure requirements and an inclusive compliance regime. It also contains provisions for curbing activities like market abuse and insider trading. Other significant legislative achievements include; Real Estate Investment Trust (REIT) Regulations, 2015, amendment to the Single Member Companies Rules, 2003, introduction of legal framework for unit-linked products and funds, amendment to the Insurance Rules, 2002 and Sukuk Regulations, 2015. Stakeholder consultation on the Research Analyst Regulations and Limited Liability Partnership (LLP) concept paper is also concluded.
SECP Chairman said that in order to bring the initial public offering (IPO) process on a par with the developed markets, revised regulations for book-building have been enforced to ensure a user-friendly and transparent model, which also provides investors with an opportunity to participate in the process electronically. Secondly, in order to attract new listings, the existing manual procedures for listings have been simplified. Regulatory amendments were approved to change exchanges' pre-open modalities to curb manipulation during pre-open session. Considering the immense potential of Small and Medium Enterprises (SME) in capital formation and social growth, the concept of SME Board has been introduced at the stock exchanges to facilitate listings. Moreover, with a view to encouraging development of Islamic capital market, the Shariah Advisory Board has also been reconstituted.
Zafar Hijazi said that efforts are underway to ensure full compliance with the Insurance Core Principles (ICPs) of International Association of Insurance Supervisors (IAIS) by the end of the next financial year. Code of Corporate Governance for Insurance Sector is being developed. In order to increase the insurers' capacity to underwrite and retain risks, thereby serving to retain foreign exchange in the country, the paid-up capital requirements for the insurance sector are to be increased to Rs 500 million and Rs 700 million for non-life and life insurers respectively. The SECP has also requested the Ministry of Finance to get implemented the legally compulsory group insurance by recommending amendments to labour laws to enhance the scope of the coverage.
Financial results of the Commission for the year 2014-15 show surplus of income over expenditure after tax Rs 203.78 million as against last year's surplus of Rs 154.08 million, registering an increase of Rs 49.70 million (32%). Total revenues (net of levies) for the financial year 2014-15 are Rs 2,483 million which are higher by Rs 469 million (23%) as compared to last year's revenue of Rs 2,014 million. Revenues of Company Law Division, Security Market Division, Specialised Companies Division and Insurance Division have increased during the year by 34%, 41%, 12% and 14% respectively, when compared to last year's revenues. Income from investment has decreased by Rs 8 million mainly due to decrease in discount rate by the State Bank of Pakistan.
Total operating expenses for the year under review are Rs 1,932 million showing an increase of Rs 114 million (6%) over the last year. The increase is mainly due to increase in cost of utilities, rent expenses, salary and other operating expenses. Capital expenditures for the year remained within the limits as per the approved budget for the year. An amount of Rs 11.60 million received as penalties by the Commission during the current year and Rs 63.424 million as surplus for the year 2013-14 has been transferred to the Federal Consolidated Fund.
The external auditors in their report have given the opinion that the financial statement of the SECP have been presented fairly in all material respects and its financial performance is according to approved accounting standards and the Code of Conduct.
Alongside capital market growth, the SECP as part of the National Financial Inclusion Strategy of Pakistan is also actively engaged in supporting the government agenda of financial inclusion, export growth and employment generation through growth of the SMEs sector. Major restructuring in the regulatory regime of the NBFCs and Modarabas is underway to ensure the growth of small and specialised financial institutions that principally focus on the SME sector. Additionally, work is ongoing for creating an enabling and empowering regulatory framework for the hitherto unregulated microfinance institutions. These two steps will lead to improvement in access to finance and employment generation.
The SECP will also revamp the regulatory regime for insurance brokers by bringing the reinsurance brokers within its regulatory ambit through appropriate amendments to the insurance laws. This will lead to retention of valuable foreign exchange in the country. Efforts are being made to build liquidity in the commodities exchange through introduction of new products, and improve existing risk management regime and framework for default management at Pakistan Mercantile Exchange (PMEX), SECP Chairman added.
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