SUBJECT:
CORPORATE GOVERNANCE
SUBMITTED TO: Sadia Zia BY: Shoaib Ali (SP09-MBA-158) SECTION: MBA-3B DATE: 15-03-2010
Securities and Exchange Commission of Pakistan (SECP)
INTRODUCTION: The Securities and Exchange Commission of Pakistan (SECP) is a government agency whose purpose is to develop a modern and efficient corporate sector and a capital market based on regulatory principles, in order to foster economic growth and prosperity in Pakistan. SECP FORMATION: The Securities and Exchange Commission of Pakistan was created to succeed the Corporate Law Authority, which was an attached Department of the Ministry of Finance. The process of restructuring the Authority was initiated in 1997 under the Capital Market Development Plan of the Asian Development Bank (ADB). A Securities and Exchange Commission of Pakistan Act was passed by the Parliament and promulgated in December 1997. In pursuance of this Act, the Securities and Exchange Commission of Pakistan, having autonomous status, became operational on January 1 1999. The Act gave the organization the administrative authority and financial independence to carry out the reform program of Pakistans capital market with the assistance of the Asian Development Bank (ADB). Powers of the Commission have been delegated to the individual Commissioners and Appellate Benches, as envisaged in the Act. SCOPE OF SECP: The scope of the authority of the Commission has been extensively widened since its creation. The insurance sector, non-banking financial companies, and pension funds have been added to the purview of the Commission. Now the Commission's mandate includes investment financial services, leasing companies, housing finance services, venture capital investment, discounting services, investment advisory services, real estate investment trust[1] and asset management services, etc. The Commission also regulates various external service providers that are linked to the corporate sector, like chartered accountants, rating agencies, corporate secretaries and others.
CODE OF CORPORATE GOVERNANCE:
In March 2002, the Securities and Exchange Commission of Pakistan issued the Code of Corporate Governance to establish a framework for good governance of companies listed on Pakistan's stock exchanges. In exercise of its powers under Section 34(4) of the Securities and Exchange Ordinance, 1969, the SEC issued directions to the Karachi, Lahore and Islamabad stock exchanges to incorporate the provisions of the Code in their respective listing regulations. As a result, the listing regulations were suitably modified by the stock exchanges. It designed to provide a framework by which companies listed on Pakistan's stock exchanges are to be directed and controlled with the objective of safeguarding the interests of stakeholders and promoting market confidence; in other words to enhance the performance and ensure conformance of companies. The Code draws upon the experience of other countries in structuring corporate governance models, in particular the experience of those countries with a common law tradition similar to Pakistan's. The Code of Best Practice of the Cadbury Committee on the Financial Aspects of Corporate Governance published in December 1992 (U.K.), the Report of the Hampel Committee on Corporate Governance published in January 1998 (U.K.), the Recommendations of the King's Report (South Africa), and the Principles of Corporate Governance published by the Organization for Economic Cooperation and Development in 1999 have been important documents in this regard. The Code is a first step in the systematic implementation of principles of good corporate governance in Pakistan. Further measures will be required, and are contemplated by the SEC, to refine and consolidate the principles and to educate stakeholders of the advantages of strict compliance
SECP REFORM TO REGULATE MARKET:
Under this reform SECP is strictly playing its role in regulating the market. SECP has introduced a number of capital market reforms over the past years aimed at providing increased investor protection and minimization of manipulative elements in the market. Many times it had taken strict actions against violators of its rules and regulation. We can analyze SECP effort in this respect that he suspended the registration of few brokerage housed on June 30, 2009. The Securities and Exchange Commission of Pakistan (SECP), in exercise of its powers under the Broker and Agents Registration Rules, 2001, has suspended the registration of five brokerage houses on charges of noncompliance with the various provisions of the Broker and Agents Registration Rules pertaining to investor rights. SECP in its press release said that the registration of the brokerage houses will remain suspended, in the public interest and for the protection of investors and to preserve capital market integrity, till claims against them in light of the investors complaints could be ascertained and settled.
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