Becoming ineffective: SECP decisions could be challenged, says NA body
A parliamentary panel has urged the government to appoint a permanent chairman and new commissioners of the Securities and Exchange Commission of Pakistan (SECP) to meet the statutory requirements, warning that decisions taken by an incomplete commission could be challenged in courts.
The unanimous recommendation was made by the National Assembly Standing Committee on Finance and Revenue, headed by Pakistan Muslim League-Nawaz’s Omar Ayub Khan, which met here on Tuesday.
It came at a time when the government was facing criticism for running important regulatory bodies without hiring their permanent heads.
Against the minimum of five commissioners working at a time, only two commissioners are currently serving in the SECP, said Tahir Mahmood, the acting chairman of the commission. Under the SECP Act of 1997, the chairman will be appointed from among the commissioners.
“Unfortunately, varying judgments of the apex court are creating problems for the government in hiring new commissioners,” said Mahmood. The Ministry of Finance has drafted fresh guidelines for their appointment, he added.
Mahmood cited the Supreme Court judgment in Khawaja Asif case and judicial activism as the reasons behind the delay in appointing the new commissioners. The SECP has vast responsibilities aimed at ensuring effective and transparent activities in the corporate sector, capital markets, insurance industry and non-banking financial institutions.
Blaming judicial activism for the delay, Mahmood said the Ministry of Finance had advertised the posts early this year but someone got a stay order from the court. He was of the view that the government was not bound to appoint the commissioners through a competitive process as the apex court ruling had allowed their hiring through head-hunting.
Mahmood, who has been working as the acting chairman for the last one and a half years, said he was also eligible to become the permanent head of the regulatory body.
“Without seven commissioners there is no SECP,” said Naveed Qamar of the Pakistan Peoples Party, adding the commission’s decisions could be challenged in courts due to its incomplete status.
Acting Finance Secretary Dr Azra Mujtaba told the committee that though her ministry had discussed the hiring of commissioners with the Ministry of Law and Establishment Division, there was a legal hurdle to their appointment.
In 2013, the Supreme Court had removed Mahmood’s predecessor, Mohammad Ali, after finding that the PPP government had brought him in violation of the law. Ali also took the plea that if his appointment flouted the SECP Act, appointments of other commissioners were also in violation of the law.
The issue of delay in appointments of the commissioners was raised in the meeting of the NA panel by its members belonging to the ruling PML-N and the opposition parties. According to Mahmood, it may take another six months before a permanent chairman is brought in.
Commenting on the capital market performance, Mahmood said currently 25% of market capitalisation was being traded at the stock exchange and 30% of it was being held by foreigners. Despite the political turmoil, foreign equity investors were driving the market, he remarked.
In the current fiscal year, five new companies were listed on the stock exchange, increasing its capital by Rs19 billion to Rs1.15 trillion.
Committee Chairman Omar Ayub cautioned the SECP that the regulator should be vigilant about chartered accountancy firms in the wake of increasing cases of fraud. He said such firms often did not qualify their comments on audit reports and in many cases they were responsible for the wrongdoing.
To this, Mahmood pointed out that the European Union had suspended the membership of the Institute of Chartered Accountants of Pakistan because of absence of an independent audit oversight committee. Now, he said, the government was in the process of framing rules to address the EU concerns.
Published in The Express Tribune, October 15th, 2014.
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