. .

Overwhelming support extended by financial sector at a local seminar

June 17 - 23, 2002

The four associations belonging to non-banking financial sector fully supported the Code of Corporate Governance introduced by the Securities and Exchange Commission of Pakistan (SECP). This unanimous acceptance of the Code and the keenness for its implementation was clearly expressed at the seminar organized by Modaraba Association, Leasing Association, Investment Banks Association and Mutual Funds Association of Pakistan.

The purpose of organizing the seminar was to help the members of the participating associations assimilate the true spirit and principles of the Code so that they could ensure its implementation with clarity, confidence and commitment. Ebrahim Sidat and Masoud Naqvi, being the co-authors of the Code elaborated its various constituents. Irfan Tayebaly, a senior advocate, dealt with the legal aspects of its implementation. Etrat Rizvi, a senior leasing and banking executive, shared his experience as a practitioner and an Director of Karachi Stock Exchange.

Khalid A. Mirza, Chairman, SECP, in his key note emphasized that the Code had been introduced after extensive diligence and consultation with all the stakeholders to foster investors confidence in the capital market and mobilization of funds through stock exchanges. The efforts essentially comprised of the six elements: 1) Protection of investors interests, 2) Raising standards of corporate governance, 3) Improving disclosure standards, 4) Curbing the use of insider trading and other forms of market abuse, 5) Strengthening the role of equity as a vital means of finance and 6) Facilitating integration of Pakistan with the global markets.

Mirza said, "After introducing wide ranging reforms to ensure transparent trading and effective risk management of the stock market, the focus shifted to the listing companies. This included ensuring reliable audit, dissemination of the adequate and timely information and also to address the issue of corporate governance." A set of rules which could lead to efficiency and better performance of the listed companies and a fair return to all the stakeholders have been introduced. It is good housekeeping which could only bring improvement in the performance of listed for the companies and ensure protection of interest of all the stakeholders.

Basheer Chowdry, Chairman, Modaraba Association urged the financial sector players to adopt the Code with sincerity and consistency. Following the Code was a dynamic process. Therefore, a positive and open minded approach is necessary to evolve and derive benefits for all. He said that any practical difficulties experienced by the members in implementing the Code would be duly resolved by the associations by maintaining a close liaison with the SECP.

Humayun Murad, Chairman, Leasing Association of Pakistan, Saleem Rathod, Chairman, Investment Banks Association and Zaigham Mahmmod Rizvi, Chairman, Mutual Funds Association also expressed their full support for the implementation of the Code. They were of the view that significant advantages could be achieved through improving the image and performance of the companies by following the Code and also better monitoring of their risks through greater disclosure in the financial reports.

In the concluding session, Mirza dealt with various policy matters and provided rationale for the efforts being made by the SECP to bring qualitative and operating improvements in the capital market and corporate management. All these measures are aimed at creating conducive environment for investment and protecting of rights of investors. To facilitate smooth transition, certain relaxations have been granted. The three stock exchanges have been directed not to take any punitive action against the companies which fail to rotate their auditors after five-year tenure by December 31, 2003. He also proposed that a Corporate Governance Index may be introduced to help monitor the level of compliance of the Code by the listed companies. This would help in judging the level of the good governance achieved by the companies.