Capital markets regulation: ‘Urgent’ bill languishing in Parliament for over 18 months

Legislation was required as a precondition to a $200 million ADB loan.

ISLAMABAD: Irony does not seem to be in short supply in Islamabad. A bill that was rushed into Parliament directly by Prime Minister Yousaf Raza Gilani – bypassing cabinet approval – due to the ‘urgency of the matter’ has now been stuck in the legislature for the last year and a half.

Wednesday’s meeting of the National Assembly Finance and Revenue Committee once again failed to approve the bill, this time due to a lack of interest in doing so by both the legislators on the committee as well as the government.

The meeting started about an hour late and Finance Minister Abdul Hafeez Shaikh and Finance Secretary Waqar Masood – whose testimony the panel had come to hear – failed to show up to the committee meeting.

For the next few minutes, the members spent much of their time criticising the finance minister and the finance secretary for failing to turn up to their appointment with the panel. “The committee takes strong exception to the absence of the finance minister and the secretary and will not tolerate such non-serious attitudes in the future,” said Fauzia Wahab, the committee chairperson. Perhaps she spoke too soon.

The committee then suddenly had to stop proceedings after three members got up and left the room without explanation, leaving Wahab haplessly wandering the halls of Parliament House looking for another member of the panel to take their place and meet the quorum requirement. She did not succeed.

The bill – supposedly one that could not wait for cabinet approval – was the Securities Bill 2010, introduced in June 2010, meant to address what were deemed to the gaps and inconsistencies in the Securities Exchange Ordinance 1969.

The bill is aimed at improving the regulations that govern the country’s capital markets, specifically the stock exchanges. It had been introduced with such urgency because the government wanted to secure a $200 million loan from the Asian Development Bank that was conditional on the bill being approved by the legislature.

The committee did spend at least some time discussing the actual bill and managed to approve at least some clause, including one requiring all three stock exchanges in the country to pay an annual licence fee, a provision that does not currently exist in the law.

Another clause approved by the panel would authorise the Securities and Exchange Commission of Pakistan require the stock exchanges to create rules under which they would inspect their member companies (investment banks and brokerage houses).

SECP Chairman Muhammad Ali also testified before the panel, in favour of the bill. “This will help establishing the writ of the regulator over the stock market,” said the regulator.

The country’s chief capital markets regulator also expressed an opinion that is widely held but is rarely stated out loud: that the country needs only one stock exchange, the one in Karachi. Ali said that companies that have multiple registrations increases the service charges they have to pay.

Published in The Express Tribune, January 19^th, 2012.