SECP Asks Govt to Withdraw Suo Moto Powers of Policy Board

The Securities and Exchange Commission (SECP) has suggested the government to withdraw the powers of suo motu notice of the SECP Policy Board.

Sources told ProPakistani that major changes have been proposed through amendments to the SECP Act including the selection of chairman SECP, powers of the policy board, the content of annual reports, and powers of the selection committee.

According to the changes suggested in the SECP Act, the suo motu powers of the policy board to make policy decisions or adopt policy recommendations should be omitted.

Interestingly, the policy board took suo motus on SECP decisions several times in the past and gave tough time to the management of SECP. The changes suggested in the SECP Act will, however, need approval from the parliament.

The proposed amendments suggest that the function of the policy board will be only to make recommendations to the federal government regarding securities and insurance industry, corporate sector and protection of the interest of investors. The policy board will guide the commission in respect of policy decisions. The amendments say the policy board will still approve the budget of the SECP and has been tasked to approve the three years rolling market development plan to oversee its performance.

The maximum age for the members of the policy board has been fixed at 65. At present, there is no age limit provided in the SECP Act.

Out of six independent members of the policy board, at least one will be from each province, according to the proposed amendments.

The amendments suggest a more flexible procedure for the selection of the chairman by withdrawing certain conditions. The changes suggest that a candidate should be appointed as the chairman SECP directly, without the need to be first appointed as the commissioner. Currently, only the commissioner is eligible for holding the office of chairman SECP.

In the new changes, an appellate bench of the commission is being replaced with an independent “Financial Services Market Tribunal” comprising of technical and judicial members for hearing appeals against orders passed by the SECP or any authorized officer.

To ensure independent and transparent decision-making by the officers, adequate protection has been provided in the bill whereby without a just cause, a service penalty cannot be imposed on the employee.

Some changes have also been suggested regarding the annual report of the commission. An overview of investigation and inquiries must be included in the annual report of the SECP. Moreover, details regarding the handling of investor complaints and their disposal and the declaration of interest by the chairman, commissioners, or members of the policy board will also be part of the annual report to be submitted to the parliament.

The amendments further suggest that the extension of chairman and commissioner should be given on basis of performance instead of the prerogative of the federal government. Therefore, it is suggested that the chairman/commissioner can get an extension of two years in the tenure after reviewing performance. At present, an extension can be given for three by the government without any performance review.

A process for the appointment of chairman/commissioner/private members of the policy board has also been provided in the new bill. The nomination committee will be replaced with an independent selection committee. The members will be included in the high-power committee through new rules after approval of the amendments.

The committee will recommend names of suitable candidates to the federal government for the posts of chairman, commissioner, or independent members of the policy board. The proposed bill also provides three modes of appointment that can be adopted by the selection committee for the post of commissioners/chairman/member of policy board (a) Advertisement in newspapers (b) requesting an application by invitation and (c) appointing a head-hunting firm.

To avoid conflict of interest, a member, chairman or commissioner will cease to hold office if he becomes officer or director of a public listed company or licensed entity, is in service of Pakistan, is convicted of criminal offenses of fraud, dishonesty, violence, is bankrupt or involved in activities which interfere with the independent discharge of functions of the commission, violates code of conduct, if a member fails to comply with necessary disclosure of potential and actual code of conduct and if a member of the policy board is absent from three consecutive meetings.