Setting up of board to be mandatory for futures brokers

The Securities and Exchange Commission of Pakistan (SECP) will make it mandatory for all futures brokers to establish an effective board of directors (board), responsible for ensuring long-term success and for monitoring and evaluating the management's performance.
Under the draft Futures Brokers (Licensing and Operations) Regulations, 2018 issued by the SECP, all futures brokers shall ensure compliance with the following Corporate Governance Code. The listed futures brokers shall ensure compliance with this Code in addition to the Code of Corporate Governance (CCG), rules, regulations, codes or guidelines applicable on listed companies as prescribed in the regulations of the futures exchange by the Commission. In case where there is any inconsistency with the requirements of rules, regulations, codes or guidelines prescribed by the Commission for listed companies the provision of such rules, regulations, codes or guidelines shall prevail over this code.
A futures broker shall establish an effective board of directors (board), responsible for ensuring long-term success and for monitoring and evaluating the management's performance. The size and composition of the board should reflect the scale and complexity of the futures brokers' business.
b) The board is encouraged to have a balance of executive and non-executive directors, with the requisite skills, competence, knowledge and experience.
Under the responsibilities, powers and functions of board of directors, the SECP said that the board should set the strategic objectives and ensure that necessary financial and human resources are in place for meeting those objectives. The board shall further ensure that significant policies have been formulated on the following issues, among others: Governance, risk management and compliance issues; ii) customer relations including customer awareness and a mechanism and timeline for handling/resolving their complaints/grievances; and iii) segregation of customer assets from futures brokers' assets.
The board shall formulate and ensure adoption of a code of conduct/code of ethics to promote integrity of its business, its board, its employees and its accredited representatives, with special emphasis on measures for curbing any market manipulative activities such as front running, insider trading and other market abuse.
The board shall devise an effective whistle-blower mechanism enabling all stakeholders, including employees and accredited representatives, to freely communicate their concerns about any illegal or unethical practices. The board would ensure that the interest of a whistleblower is not prejudicially affected.
The board shall appoint a Chief Executive Officer (CEO) to lead the management team, and exercise executive authority over operations of the company.
Any casual vacancy occurring on the board shall be intimated immediately to the futures exchange. The board shall strive to fill such vacancy on the board as soon as possible, the SECP said.
The board is encouraged to obtain fidelity insurance against risk of misconduct, negligence or frauds committed by the officials of futures brokers, the SECP added.