Securities & Exchange Policy Board Eases Companies (Further Issue of Shares) Regulations, 2018

ISLAMABAD: The Securities and Exchange Policy Board met in Islamabad at the SECP Headquarters under the Chairmanship of Professor Khalid Mirza.

The Policy Board approved changes in the Companies (Further Issue of Shares) Regulations, 2018 to facilitate capital formation and provisions whereby the Commission could impose conditions on further issue of shares were substantially removed. Major amendments include omission of (i) the provision restricting more than one rights issue within a period of 12 months; (ii) underwriting requirements for rights issue; (iii) requirement for preparation and submission of financial projections to the Commission in case of rights issues; (iv) mechanism for pricing the further issues either at premium or at discount; and (v) information and documents currently required to be submitted along with applications for seeking approval of the Commission to issue further share capital without rights offer; preference shares; and Employees Stock Option Schemes.

Amendments to Section 186/187 empowering corporate boards to appoint CEOs in all cases were approved to be incorporated in the Companies Act, 2017 to be proposed to the Government. Also, amendments to sections 42 and 43 substantially removing the onerous requirements with respect to licensing and liquidation of section 42 companies were approved. The Board also approved the Commission’s plan for merging the Securities Act with the Futures Act together with the required rationalization / simplification. The Board also asked for a review of the LLP Act with the objective of eventual substantial rationalization/simplification of this statute.

The Policy Board also approved substantial reduction in NCCPL fees to facilitate investors and also advised the Commission to review the requirements for disclosure of financial statements on the website of trading only brokers. The Policy Board deliberated and approved the process for appointment of nominees on the Boards of PSX/CDC/NCCPL.

The Policy Board gave final directions to the Commission for reconstructing the SECP Annual Report, 2019 to include future outlook/plans for placing before the Government.

Concern was expressed by the Board regarding officials of SECP that remain attached to LEAs. The Board reiterated that LEAs should respect SECP’s position as covered by Section 41B of SECP Act, 1997 (the Act) and the Commission was urged to seek recovery of files impounded by one of the agencies.

The Board’s mandate vis a vis SECP was also deliberated upon and it was affirmed that the board will act in accordance with the provisions of the Act with the oversight role of the Board being emphasized as the cornerstone. The Board has pointed out various instances of regulatory action that needed rectification together with related policy directives.

In its recommendations to the Board, which were approved, the Insurance committee strongly advised that the ministry of commerce and SECP convince the provincial revenue authorities to remove sales tax from life, health and reinsurance as it was proving a major impediment to the growth of insurance sector, acting as a barrier to new entrants and inducing foreign insurers to leave the Pakistan insurance market. The committee recommended that Pakistan Reinsurance Company Limited to undertake valuation of adequacy of its retrocession capacity from an independent actuarial firm. The Committee had also recommended that the Commission review the concept of creating a reinsurance pool by local insurance companies to ensure that foreign exchange does not flow out of country under various ‘fronting’ practices.

The Board urged the Commission to take steps to broaden capital market and address ills of monopolization gnawing at the vitals of the market and stunting its growth — the exchange, the depositary, the clearing house etc are all monopolies. The Board observed that the market needs to grow in terms of number, size and variety of trading platforms, supporting institutions, intermediaries, supply of issues, and investors. The market’s size, reach, diversity and innovation has to substantially expand to allow for genuine competition in all aspects; and it is only then that the market will be able to play its role of promoting economic wellbeing through mobilization and allocation of resources on a risk adjusted basis.

The Securities and Exchange Policy Board, in pursuance of Section 12 of the Act 1997, comprises ex-officio members of the Ministries of Finance, Commerce, and Law, SBP, SECP and persons of eminence from the private sector.

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