Restructuring of KSE board denied

SECP has blocked an attempt by the member-directors of the KSE to remove the chairman of the KSE board.

KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has blocked an attempt by the member-directors of the Karachi Stock Exchange (KSE) to remove the chairman of the KSE board.

A press release issued by the commission on Wednesday cited that the regulator had taken notice of a campaign by members of the KSE against a non-member director being elected chairman of the board.

The SECP has highlighted that non-member directors were introduced on the boards of bourses for ‘efficient and impartial decision-making which is in the interests of all stakeholders, including the public at large’.

The KSE board was reconstituted by the SECP in August 2002 to include four non-member directors, in addition to five member-directors. In 2005, the SECP again amended the KSE board to ensure that the chairman was elected from the non-member directors.

The official release has cited that under the current setup, where members have ownership as well as trading rights, conflict of interest and lack of transparency would be a direct result of the removal of non-member directors from the board.

The SECP has explicitly dispelled the likelihood of any restructuring on the board of directors of the stock exchanges in order to reverse the mandatory requirement of the chairman being elected from amongst the non-member directors.

Strongly opposing the recent move by KSE members, the SECP has reiterated that the board of directors should represent a balanced constitution.

Brokers vow to  challenge SECP

Members of the KSE have severely criticised the SECP for the pre-emptive move against the reconstitution of the board of directors of the exchange.

“We have not made any request to SECP to reconstitute the board as yet,” asserted a member of the exchange who is also among the current board of directors.

He explained that an extraordinary meeting of stock exchange members will be convened to vote on a proposal to reconstitute the KSE board such that only a member of the exchange may be elected chairman.

He contended that such a meeting may even be summoned without the approval of the current chairman of the exchange. Stockbrokers have also condemned the SECP for not approving the proposed margin trading system (MTS).

“The MTS was approved by a majority of the KSE board,” said former KSE director Zafar Moti. He asserted that since the SECP was a ‘back-end regulator’ it should respect the decision of the exchange.

“65 members have already signed a document calling for the reconstitution of the board of the directors,” highlighted another member. “Names of all member-directors are also included in this list.”

Published in The Express Tribune, September 2^nd, 2010.