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1- CUT IN POWER TARIFFS — SOON
2- TACKLING TAX EVASION
3- SECP IN ACTION
4- THE PRIVATIZATION OF KESC
5- FISCAL DISCIPLINE SOON
6- ALTERNATIVE ENERGY RESOURCES

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SECP IN ACTION

 


From SHAMIM AHMED RIZVI,
Islamabad

Feb 23 - 29, 2004
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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 following reasons:

IMPROVED GOVERNANCE

•On account of separation of management from ownership
•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 market participants.

OPPORTUNITY FOR ENHANCEMENT OF RESOURCES

•On account of increased investment in technology because of enhanced resources

COST EFFICIENCY

•On account of conversion into for profit organization

 

 

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 stock exchange.

The mandate of the Expert Committee will be:

1. DEMUTUALISATION: 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.

2. INTEGRATION/TRANSFORMATION: 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 respect thereof.

3. RECOMMENDATIONS/IMPLEMENTATION: 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.