NA body defers approval of Securities Act 2010

Absence of bills keeps stock market at risk: SECP.

ISLAMABAD: A parliamentary panel on Tuesday deferred the approval of the Securities Act 2010 aimed at ensuring stringent regulation of the stock markets and asked the Securities and Exchange Commission of Pakistan (SECP) to fine tune the draft of the bill. 

The National Assembly Standing Committee on Finance directed Ministry of Law and Justice and the SECP to review the option to club two separate bills pertaining to securities markets and empowerment of the SECP and table the new draft in the next committee meeting.

The law ministry pointed out that two different SECP bills were pending for approval in Parliament and proposed that these should be clubbed.

The standing committee also decided to invite office holders of all three stock exchanges to get their feedback on the proposed legislation.

The Securities Act 2010 intends to regulate capital markets and safeguard investor rights. Presently, the market is being regulated under the Securities and Exchange Commission of Pakistan Ordinance, 1969.

The SECP Chairman Mohammad Ali said that present legislation does not provide and explain duties of stock exchanges, system audit of stock exchanges, emergency powers of commission, regulation of clearing houses, establishment criteria for clearing houses, duties of clearing houses and depository companies.

He said that some vested interests in the Karachi stock market, having no role in its operations, have threatened the SECP that they would block the approval of SECP Act from the parliamentary panel.

Explaining the importance of emergency powers to SECP, he said that absence of these powers would keep the stock market at risk. He also mentioned that present law is silent on the issue of establishment of a stock exchange without SECP approval. At present this is not a crime and SECP’s hands will be tied if someone opts for it, Ali added.

MNA Bushra Gohar termed the new legislation a martial law for the stock market. SECP Chairman Muhammad Ali assured the committee that all the present practices of the stock market are being made part of the proposed Securities Act.

“There is an urgent need to have a proper legislation to deal with the notorious players of the stock exchange which add up to 10% of the entire stock market participants,” said Mohammad Ali.

He said that proposed Securities Act would help meet national obligations related to Anti-Money Laundering as the bill would make it mandatory for brokers to submit all necessary documents required for identity and safe investment.

He also mentioned that a key section of the proposed legislation would make it mandatory for disclosure of price sensitive information to the general public so that no specific person can use this information for his personal benefit through insider trading.

Chairman SECP proposed civil penalties to curb insider trading and said that although criminal penalty like imprisonment is proposed in the new legislation, it would be difficult to prosecute persons involved in insider trading.

Published in The Express Tribune, December 14^th, 2011.