PSX softens rules to help business

Process eased by abolishing listing committee, relaxing requirement for audited accounts

KARACHI: The Pakistan Stock Exchange (PSX) has softened regulations to encourage businesses to raise interest-free financing for their new projects by offering shares to investors and allowing them to trade the shares at the bourse.

However, a whistle-blower informed The Express Tribune that the regulatory authorities are putting investors’ funds at risk in the name of softening the regulations ahead of some new listings, which would turn into mega scams.

“The SECP (Securities and Exchange Commission of Pakistan) and PSX have recently eased the listing process by taking several measures such as abolishing the listing committee and delegating the listing approval process to the PSX management,” PSX reported in its half-yearly report.

Furthermore, the requirement of audited accounts for the listing of securities has been reduced from five to two years, along with a number of relaxations in requirements for the listing of privately placed as well as government-backed debt securities, the report said.

Additionally, it said, audited accounts no older than eight months instead of six months are to be incorporated into the prospectus, which elaborates the aims and objectives of raising financing at the PSX for their new projects.

Moreover, the PSX regulatory framework has been amended to align the PSX listing rules with the amendments notified in the Public Offering Regulations 2017 and the requirements of the Companies Act 2017 and the Securities Act 2015, the PSX said.

Scam in the making

The whistle-blower hinted that the SECP and PSX are going to become part of a scam in the making. “The regulations have been softened to declare eligible some uneligible companies to raise financing through the PSX,” he said.

The changes in the listing regulations have been made in the recent past, he said. He alleged that the requirement for audited accounts for the listing of companies has been reduced from five to two years in a bid to hide bad financial records of companies aiming to raise funds and get listed at the PSX. “The listings would end up in a fraud.”

He also said the dissolution of the listing committee and passing on its powers to the PSX management for the approval of new listings is also aimed at allowing financially unsound companies to raise billions of rupees through the PSX.

SME, start-up listings

Besides, the SECP also approved the Growth Enterprise Market (GEM) Regulations in December 2019 to enable growth companies to raise capital efficiently through listing at the PSX. “The GEM is envisioned as a separate listing board at the PSX alongside the main board. Listing requirements for GEM have been relaxed to encourage growth companies to access the capital market to fund their expansion needs,” the PSX said. GEM rules would allow small and medium-sized enterprises (SMEs) and start-ups to raise financing for their new projects and offer their shares for trade at the bourse, it was learnt.

“IPO (initial public offering/listing) rules have been relaxed to encourage newly born companies and startups to raise financing through the stock market...and provide maximum possible investment opportunities to investors,” an SECP spokesperson told The Express Tribune.

Published in The Express Tribune, March 1^st, 2020.

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