ISLAMABAD: The federal government has directed the Pakistan Stock Exchange (PSX) to hold elections for the appointment of a new board of directors while assuring that it would protect the interests of the Chinese investors that may lose one seat in the new arrangement.
The government has also shortlisted candidates for the three vacant posts of commissioners at the Securities and Exchange Commission of Pakistan (SECP) - the frontline regulator of the corporate sector.
On Friday, Adviser to Prime Minister on Finance Dr Miftah Ismail held a meeting with SECP and PSX representatives to sort out issues regarding the constitution of a new PSX board in light of the demutualisation law and the Article of Association.
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The Article of Association clearly provides that the board of the PSX should be reconstituted once the process of demutualisation is completed. This process has been completed in June 2017, when 20% shares of the PSX were issued to the general public.
However, the minority shareholders have not yet been given representation on the PSX board. The SECP had asked to hold elections for the new board by February 28, but the PSX did not agree. There was a concern that the Chinese investor would lose a seat at the board.
The finance adviser directed the PSX to hold the elections at the earliest, said an official of the finance ministry. The PSX management assured to present the case for fresh board elections on March 12, according to another official.
The PSX was sold to a Chinese consortium that now holds a 40% stake with 20% offered to the public through an initial public offering (IPO). Brokerage houses control the remaining 40%.
The Chinese consortium got four out of seven elected seats at the board, which is not compatible to its shareholding. In case the PSX board strength remains constant at the current 15, the Chinese investor would have to lose one seat, said the officials. There are two SECP-nominated directors while the remaining five are independent.
In order to address their concerns, the government assured that the SECP would accommodate one Chinese national on the PSX board so that the current strength of the Chinese investor remains intact, according to the finance ministry officials.
According to the Companies Act 2017, the board of the company has to decide the strength of the directors at least 35 days before holding the elections. In case, the PSX board decides to hold elections in its March 12 meeting, the elections would be held after April 17.
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Ismail said that the government was endeavouring to make Pakistan's financial and capital market among the most competitive in the world. Terming the demutualisation, integration and prioritisation of stock exchanges as a landmark achievement, the adviser said that the reforms carried out during the last four years had paid huge dividends, according to an official handout.
Prime Minister Shahid Khaqan Abbasi has also conducted interviews of seven candidates for finalising three new commissioners of the SECP, said the finance ministry officials. At present, only two commissioners are working at the SECP out of the total strength of seven. There is a requirement of appointing a minimum five commissioners to keep the SECP running.
The candidates interviewed are Mohammad Razi Khan, Iftikhar Ahmed, Shahid Naseem (currently serving as Executive Director SECP), Shaukat Hussain (also SECP Executive Director), Shazib Ali, Farhan Malik and Kashif Munawar Arbab. Hafiz Mohammad Yousaf did not appear for the interview.
The finance ministry is expected to notify the new commissioners next week. After the notification of the new commissioners, the federal government will also appoint the new SECP chairman.
Published in The Express Tribune, March 3rd, 2018.
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