ISLAMABAD (October 08 2003): Demutualisation, insider trading and restricting market manipulations would be the three key capital market reform areas for the new Securities and Exchange Commission of Pakistan (SECP) chairman during the next few months.
Demutualisation is a process of converting a non-profit, mutually owned organisation to a profit, investor-owned corporation. It entails merger of the trade clearance of all the stock markets.
Demutualisation could take place in the next few months if not weeks, SECP Chairman Dr Tariq Hassan said in an exclusive interview with Business Recorder.
Around 52 percent of the stock market capitalisation of the members of the World Federation of Stock Exchanges account for demutualised exchanges, which was rapidly growing.
In Asia, demutualised stock exchanges, including the Tokyo Stock Exchange account for 76 percent of the region's market capitalisation.
There are 44 out of 52 leading stocks in the world, which have either demutualised or were in the process of doing so.
Moreover, Dr Tariq Hasan said an overwhelming concentration would be to gain further grounds on the reforms carried out previously.
“My initial aim is to sustain, consolidate the reforms undertaken by my two predecessors (Khalid Mirza and Abdul Rehman Qureshi),” he said.
A few other areas of reforms were safety and creation of awareness among the investors from risks like the recent so-called forex scam, where the SECP in collaboration with the National Accountability Bureau (NAB), State Bank of Pakistan (SBP) and the Punjab government took quick action and with the media help closed all the companies within two weeks, the SECP chairman said.
However, the investors should also be vigilant and invest by keeping eyes open. “Let the investors be aware and alert,” Dr Hasan said.
Investment protection could also be seen from a new domain of fake housing schemes, which was eating up the money of the people.
Though registration of housing schemes was a provincial matter, however, their financing through non-banking financial institutions (NBFIs) was regulated by the SECP. As the SECP collaborated with the NAB, SBP and Punjab government, it would also be active in this issue with the provincial governments.
However, no genuine business should be disrupted in any of this plan. Since the SECP was a regulator, it would only become active in some NBFI complaints against any housing scheme. Every 5-10 years, such schemes emerge quickly.
There was also a need to improve the efficiency of the SECP from within, which could have some of internal restructuring in addition to enhancing and developing expertise in additional regulatory spheres.
“A lot has been done in the risk management but there were issues needed to be addressed,” Dr Hasan said.
The area of code of corporate governance was also to be taken care of by facilitating corporate sector rather using coercive measures.
While, experts said that after the introduction of the Code of Corporate Governance resistance was also likely.
The reforms must be carried out in cohesive, sustained and systemically manner consolidated the previous gains, he said.