KARACHI (December 07 2005): The Karachi Stock Exchange (KSE) has decide to seek legal opinion following the Securities and Exchange Commission's (SECP) directive barring stockbrokers from standing for election as chairman from next year.
An emergency meeting of the Board of Directors of Karachi Stock Exchange was held on Tuesday to consider SECP letter dated November 29, 2005, directing Karachi Stock Exchange to amend its Articles with regard to election of Chairman out of the non-member Directors, latest by December 9, 2005.
The Board deliberated over the matter in detail. Since the issue involved has raised legal questions, the Board unanimously decided to seek legal opinion on the entire issue before proceeding further.
Last week, the KSE members held an informal meeting and decided not to change its regulations to bar stockbrokers from standing for election as its chairman this month, even after the stock market regulator had recommended a change in the procedure.
The exchange plans to hold elections on December 15 for appointing the chairman of the bourse starting January 1, 2006, according to a notice by Karachi Stock Exchange.
The stock market regulator also said it would not rescind its directive to the country's bourses to end the practice of appointing a stockbroker as chairman.
Market sources were of the opinion that when the board of directors of the exchange on record agreed to help the stock market regulator at every phase to complete the demutualization plan, and this would result in a non-member stockbroker as the chairman of the exchange, the current measure of the stock market regulator was undue.
The war of words would result in creating panic among investors. The market which has gained handsomely on the back of positive macro economic indicators, smooth privatisation, inflow from overseas investors and stringent monetary policy of the central bank to help boosting the investors, would derail the efforts of the government.
It is learnt that the 'outside directors' at the present board of the exchange have also shown disagreement over SECP's directive and are of the opinion that it is uncalled for as demutualisation process was likely to be completed by July next early.
In a directive last month, Pakistan's Securities and Exchange Commission recommended the change in a bid to improve governance and transparency. The proposal was part of recommendations made by a government-appointed task force that investigated the reasons behind a 25 percent slump in the benchmark index in March. The stock market regulator said in the statement it was not mandatory for the exchanges to comply with the proposal. The benchmark Karachi Stock Exchange index declined 1.2 percent on November 30 on concerns that the decision would lead to a conflict with the regulator. On December 1, the index gained 0.6 percent on speculation that the regulator would withdraw the proposal.