Senate panel objects to new SECP chairman’s appointment

SECP asked finance ministry to submit a list of short-listed candidates, highlighting flaws in filling key posts.

ISLAMABAD: A Senate panel on Wednesday questioned the transparency in appointment of new chairman of the Securities and Exchange Commission of Pakistan (SECP) and asked the finance ministry to submit a list of short-listed candidates, highlighting flaws in filling key posts.

The Senate Standing Committee on Finance and Revenue raised eyebrows over the way the government appointed the SECP chairman last week. Contrary to the western tradition of congressional hearings of nominees for key positions, the Senate committee held a post-appointment hearing to know the views of new SECP Chairman Muhammad Ali Ghulam Muhammad.

In his testimony, Muhammad said he has financial market background and stakes in information technology business. He said he has not handled regulatory matters but has an administrative experience of 17 years. “People with excellent educational background failed because they did not have regulatory experience,” said Senator Ishaq Dar of the PML-N.

Standing Committee Chairman Senator Ahmad Ali of the MQM said the government has a history of appointing individuals with a suspicious background. “The new chairman is coming from the stock market and the apex regulatory authority is in dispute with the same market on many issues,” said Ali.

“A lot of my views will be in disagreement with stock brokers. We as regulators want to take the capital market to the international level,” said the SECP chairman, adding the market should not be controlled by certain people.

Secretary Finance Dr Waqar Masood said the appointment of SECP chief was the prerogative of the finance ministry. Finance Minister Dr Abdul Hafeez Shaikh interviewed many candidates and recommended Muhammad’s name, which Prime Minister Yousaf Raza Gilani approved.

The committee also questioned the procedure adopted for appointing new commissioners of the SECP. Senator Haroon Akhtar said “A brokerage house wants to fill vacant posts by placing its people and if this happens it will compromise the entire financial sector.”

The SECP chairman said out of seven posts of commissioners only two are occupied, adding the process of appointment of new commissioners was going on.

The committee also discussed proposed changes to the Code of Corporate Governance of 2002 pertaining to running big firms in a transparent fashion. Senator Akhtar said the proposed amendments were very stringent which will discourage companies from listing at the stock market - a notion endorsed by the SECP chairman.

The SECP proposed that it should be made compulsory for companies to appoint at least three independent directors on their boards. The committee asked the SECP to restrict the number of independent directors to two, which was agreed by the officials.

The SECP also underlined the need of separating the offices of chief executive officer and chairman of the board of a company. The committee endorsed the proposal. According to another amendment to the code, executive directors should not be less than two and independent directors cannot sit on more than five boards at the same time. According to the current practice, independent directors sit on maximum 10 boards.

The SECP and the committee proposed the establishment of at least three committees in each board. These include a human resource committee, finance committee and audit committee. The committee also encouraged the SECP to incentivise companies for listing at the stock market.

Published in The Express Tribune, January 6^th, 2011.