KARACHI (December 31 2005): The members of Karachi Stock Exchange (KSE) in a meeting on Friday rejected the directive of the Securities and Exchange Commission of Pakistan (SECP), and would seek legal opinion against barring stockbrokers' appointment as chairman of the bourse.
According to some senior members of KSE, the extraordinary general meeting held on Friday in Karachi Stock Exchange trading hall was well attended, and a unanimous decision was taken to reject the directive of the SECP.
The KSE would now enter into a legal battle and would seek legal guidance to abolish the directive of the SECP over the appointment of stockbrokers as the chairman. “The paper work would be started from next week, and there is likelihood that the able guidance of Sharifuddin Pirzada would be sought to set aside the directive of SECP, allowing the local bourse to appoint stockbroker as chairman for 2006.
A leading member of the stock exchange said that following seeking legal help the able lawyer, after listening to the plea, said that 'SECP is not regulating, rather it is a take-over of the stock market'.
“Whenever, there is a move of takeover, there would always be a voice against it and we are still ready to compromise, and the matter should be resolved in an amicable way.
Not a single member's voice was in favour of SECP's ruling. The board of directors would again meet on Saturday to discuss ways and means to end the row, and as to what legal steps could be taken. “SECP has not responded to our proposals, and its stance was stiff.”
As the exchange is heading towards demutualization, the directive was unwarranted, a trader said. He said that SECP even turned down the request of the non-member directors (appointed by SECP) of KSE.
The statement of KSE said that an Extraordinary General Meeting of the Members of the Karachi Stock Exchange (Guarantee) Limited was held on Friday at 4:45 pm at the Exchange premises, which was attended by 90 members of the Exchange.
Muhammad Yasin Lakhani, Chairman presided. At the very outset, he asked Muhammad Yacoob Memon, Acting Managing Director, to read out the notice of EOGM and the subsequent three letters received from SECP before the General Body.
The Resolution regarding amendments in the Articles of Association of the Exchange in light of the directive received from the Securities & Exchange Commission of Pakistan was discussed by the General Body. It was noted by the members that they are not against the induction of the non-member Chairman on the Board.
However, since the demutualization process has been initiated and the KSE has indicated to go ahead with the process on a fast track, there was a fear amongst the members that they might not get a fair deal vis-à-vis their assets and trading rights if majority of member directors is not retained in the Board.
Replying to the questions by a few members, the Chairman informed the house that it was suggested to SECP to arrive at an amicable resolution to the problem in such a way that it should be acceptable to both KSE and SECP.
The Board passed a unanimous Resolution that the existing ratio/parity in voting rights of the elected members of the Board of Directors be maintained. Accordingly, this alternative proposal was communicated to the SECP and as assured by some of the SECP nominated Directors, the response from SECP was expected to be received before the start of the EOGM. However, the response was not received before the start of the meeting.
Thereafter, the Chairman put the proposed Resolution regarding amendments in the Articles of Association to vote by show of hands. There was none to favour the Resolution and, accordingly the General Body unanimously rejected the Resolution.