Following the international pattern, the Securities
and Exchange Commission of Pakistan (SECP) has decided in principal to
demutualize the stock exchanges in Pakistan. A seven member committee of
experts including three foreigners from Hong Kong, Singapore and
Australia has been set up to formulate a comprehensive plan of action in
this regard by June 15 this year. The Committee is headed by Mr. Shamim
Ahmed Khan, a former and the first chairman of the SECP.
This was disclosed by Dr. Tariq Hasan at a press
conference in his office in Islamabad recently. He said currently stock
markets in Pakistan work as non-profit organization, technically, a type
of joint stock company i.e. guarantee limited. The demutualization
report could suggest it to convert like a private or public limited
company. It would provide greater freedom for individuals and
institutions to invest directly in stocks. The purpose of this exercise
is to keep pace with international trends in the context of national
developmental needs. Starting in the early 1990s, the Stockholm Stock
Exchange became the first exchange to demutualise. Since then, this
trend has been followed by a number of other exchanges, namely,
Amsterdam, Australian, Copenhagen, Helsinki, Hong Kong, London, New
Zealand, Singapore, Tokyo and Toronto stock exchanges, etc. forty four
out of 52 leading stock exchanges in the world which are members of the
World Federation of Exchanges, have either demutualised or are in the
process of doing so. Demutualisation of exchanges is desirable for the
•On account of separation of management from
•On account of separation of ownership from trading rights
•Clear roles and responsibilities of owners, management, and users
(such as brokers, agents and issuers etc.)
GREATER TRANSPARENCY AND FAIRNESS
•On account of enhanced corporate regulation
•Through equitable allocation of cost of regulation across different
OPPORTUNITY FOR ENHANCEMENT OF RESOURCES
•On account of increased investment in technology
because of enhanced resources
•On account of conversion into for profit
ENHANCED RISK MANAGEMENT
•On account of greater management responsibility
INCREASED INVESTMENT OPPORTUNITY FOR THE PUBLIC
•Opportunity for non trading institutional and
retail investors to invest in the stock exchange
The Expert committee is
being set up comprising following professionals:
Shamim Ahmed Khan ex-chairman of the SECP and has
vast experience of corporate governance issues, regulation and
development of capital market, administration of company law, and
regulation of non-banking financial institutions.
Justice Aamer Raza A. Khan is a retired Judge of the
Lahore High Court. As an independent non-member director of the Lahore
Stock Exchange, he has played an active role in introducing reforms at
the exchange. He has extensive experience in the field of law.
Ebrahim Sidat is presently serving as Country
Managing Partner/CEO, Ford Rhodes Sidat Hyder & Co. he is a
prominent chartered accountant of Pakistan and has assisted in the
formulation of the Code of Corporate Governance introduced for corporate
sector of Pakistan for listed companies.
Rashid Zahir is the CEO of Saudi Pak Industrial and
Agricultural Investment Company (Pvt) Limited and also Chairman of Saudi
Pak Leasing Company. He is a well known banker and has 36 years'
experience of financial and capital markets.
Alan Cameron was Chairman of Australian Securities
and Investments Commission (ASIC) and its predecessor Australian
Securities Commission for almost eight years. He was one of the main
architects of demutualisation of stock markets in Australia.
Dr. Philip N. Pillai is a lawyer and a senior partner
in one of the leading law firms of Singapore. He has vast experience in
corporate finance, and securities market regulation. He is also a
Non-Exchange Director, Monetary Authority of Singapore. He was actively
involved in demutalisation of Singapore stock exchange.
Ashley Alder is presently working as Member and
Exchange Director, Securities and Futures Commission, Hong Kong. He is a
lawyer and has extensive experience in the field of company law and
related issues. He was actively involved in demutualisation of Hong Kong
The mandate of the Expert Committee will be:
To review and examine the present structure of stock exchanges in
Pakistan and in that context examine the legal, regulatory and financial
issues involved in the demutualisation of stock exchanges.
To advise on the
consolidation/merger and/or transformation of the stock exchanges in
Pakistan and to examine the legal, regulatory and financial issues in
To provide specific recommendations regarding demutualisation,
integration and/or transformation of the stock exchanges in Pakistan and
formulate a plan of action for implementation of the same.
The Expert Committee shall submit its report and
recommendations to SECP within 120 days of its first meeting or 15 June,
2004, whichever is earlier. An interim report is to be submitted within
60 days of its first meeting.
The SECP looks forward to the recommendations of the
Expert Committee regarding the appropriate models of demutualised
exchanges and mode of consolidation of the Pakistani bourses after
taking into account international standards and best practices and the
peculiaries of the capital marketing Pakistan.
The final decision will be made, in consultation with
all stakeholders, taking into account their legitimate interests.