Policies: Senate panel passes Securities Bill, empowers SECP

Incorporates 18 amendments proposed by Senator Rajwana.

ISLAMABAD:

A senate panel on Tuesday unanimously passed an amended version of the Securities Bill, giving extraordinary power to the Securities and Exchange Commission of Pakistan (SECP) in regulating the markets and also ensuring preeminence of the government in policymaking. 

Continuing the practice of not giving importance to the business of standing committees, Finance Minister Senator Ishaq did not attend the committee meeting. The Bill was proposed by bureaucrats and defended by them in the meeting.

The Senate Standing Committee on Finance and Revenue incorporated 18 amendments proposed by Senator Rafiq Rajwana of PML-N before clearing the bill for a vote by the upper house of the Parliament. Rajawana’s amendments have won back the federal government’s power to issue rules in policy areas – the authority that was going to rest with the SECP under the proposed bill. Now, the SECP’s mandate will be restricted to making regulations in operational areas.

All of the Securities Act will not come into force at once, as part V of the Act that deals in regulated securities activities will have effect at a later stage, which will be determined by the federal government. The government has cited “practical difficulties” in making the part V active without giving any further explanation.

Headed by Senator Nasreen Jalil of MQM, the parliamentary panel did not address the concerns raised by the representatives of the three stock exchanges despite the committee promised to address their genuine objections on the new piece of legislation.

The Bill in question

Through the Ministry of Finance, the SECP had moved the Securities Bill aimed at removing the deficiencies and gaps in the 1969 Securities Exchange Ordinance (SEO) and streamlining the patchwork in this law.

Once approved by both houses of the Parliament and signed by the Resident, it will become an Act, ensuring a comprehensive regulatory structure which includes provisions for prescribing eligibility criteria for licencing of all market intermediaries including stock exchanges, the clearing company and the Central Depository Company.

Senator Rajwana and Senator Osman Saifullah fined tuned the proposed Bill in consultation with the SECP. The committee amended clauses relating to ownership structure and transfer of shareholding of securities exchange, NCCPL and Central Depository Company. These amendments will ensure that only those persons meeting fit and proper criteria become shareholders of clearing house, NCCPL and CDC.

The committee also relaxed conditions for the appointment of senior management of the securities exchanges by restricting the role of the SECP. Now, the SECP will not appoint the senior management of these exchanges. After the amendments, the SECP’s role will be limited to appointment of Chief Executive and Chief Regulatory Officer of securities exchanges.

Another significant amendment introduced by duo of Senator Rajwana and Senator Saifullah was that they won exemption of licencing requirement for financial institutions for trading in the stock market. The exemption for the financial institutions was won on the ground that the SECP gave similar exemption to commercial banks.

The State Bank of Pakistan had concerns that the commercial banks would not trade in government securities at the stock market, if the SECP imposed the condition of licence or trading through brokerage houses, Akif Saeed told the committee.

Aftab Chaudhry, the managing director of Lahore Stock Exchange (LSE), objected over giving emergency powers to the SECP. He said the emergency powers to close the stock market and settle the ultimate share price were unprecedented in the world.

He also accused the SECP for doing nothing for two smaller stock exchanges of the country and alleged that the regulator was leaving Lahore and Islamabad stock markets at the mercy of Karachi Stock Exchange.

The representatives of the three stock markets also accused the SECP for ignoring them at the consultation stage.

Published in The Express Tribune, March 4^th, 2015.

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