The tussle between Securities and Exchange Commission of Pakistan and Pakistan Stock Exchange has finally ended, after the latter agreed to reconstitute its board and hold fresh elections, as per the directives of the SECPon Friday.
PSX director shared this in a meeting between SECP and PSX, brokered by Adviser to PM on Finance Dr. Miftah Ismail in Islamabad, where differences over the appointment of independent directors were resolved.
The finance adviser directed PSX to hold the elections at the earliest, said an official of the finance ministry.
It is expected that the board will meet on March 12th and decide a date for the elections, according to an official.
Earlier in the week, it was reported that PSX had refused to hold elections as per SECP directives insisting that its three-year term will end in February 2019.
On Dec 29, SECP issued a directive to PSX to hold elections for the new board by February 28. But due to opposition from broker directors, together with some independent directors, the process was thrown into chaos.
Following the sale of 40% of PSX’s stake to the Chinese consortium, the 15-member board of the PSX currently features four representatives of Chinese investors, three selected by the stockbrokers, two people nominated by SECP, while the remaining five are ‘independent’, selected by the government to conclude demutualization. By virtue of his position, the CEO of PSX sits on the Board as the 15th member.
As enshrined in the Companies Act, 2017, the number of independent directors on the board should not be less than the shareholder directors.
And the board of the company has to decide the strength of the directors at least 35 days before holding the elections. In case the PSX board decides to hold elections in its March 12 meeting, they will be held after April 17.
Over five meetings had been conducted in the previous month to resolve the issue, but both parties were unwilling to change their stance.
The issue had spiraled out of control due to a predicament over the election of independent directors.
After the conclusion of demutualization, the law required the reconstitution of the PSX board. And since demutualization concluded in June 2017, when 20 percent shares were divested to the public, it was critical to have the representation of these minority shareholders on the bourse’s board, said SECP’s spokesperson.
He further added that
The minority shareholders were being denied of their due legitimate right.
Dr. Miftah Ismail ordered the bourse management to resolve the issues linked to the election of its directors in conjunction with SECP as per regulatory requirements.
Ismail said that the government was endeavoring to make Pakistan’s financial and capital market among the most competitive in the world.