Securities & Exchange Commission of Pakistan Act, 1997

Body Corporate Status Extends to whole of Pakistan Perpetual succession Common seal May sue and be sued in its own name May contract

Authority: Power originates from government. Policy making by government Commission: Power originates from stakeholder (persons having interest) and government. Majority is from private side. Hence, policy making is largely shifts from government to private sector. Dealing in Securities u/s. 2(j) means making or offering to make, whether as principal or agent, with any person or inducing or attempting to induce any person to enter into or to offer to enter into1. any agreement for or with a view to acquiring, disposing of, subscribing for or underwriting securities, or 2. any agreement the apparent or ostensible purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the value of securities;

Commissioners1 u/s. 5
1. Shall not be less than 5 and more than 7 2. Majority from private sector. 3. The Commissioners, including the Chairman2, shall be paid such remuneration and allowances as are determined by the Commission3 may with the approval of the Board4. 4. A person who is more than 62 years of age, on the date of his appointment, shall not be appointed as a Commissioner; and 5. A Commissioner shall cease to hold office attaining the age of 65 years. Remember, No act or proceeding of the Commission shall be invalid by reason only of the existence of a vacancy in, or defect in the constitution of the Commission.

Terms of Commissioners u/s. 7

1. Term A Commissioners a. Not less than three of the first appointed Commissioners b. Excluding Chairman c. Select at random ballot procedures approved by Board d. Term of two years e. May be re-appointed for a further term of 3 years f. At the end of each term, or at the end of the cumulative period of 5 years, the relevant number of Commissioners shall cease to hold office. 2. Term B Commissioners a. Commissioners appointed other than Term A commissioners b. Include Chairman c. Term of office 3 years d. May be re-appointed for a further term of 3 years e. At the end of each term, or at the end of the cumulative period of 6 years, the relevant number of Commissioners shall cease to hold office.

1 Commissioner u/s. 2(h): Means a Commissioner of the Commission and shall include the Chairman thereof 2 Chairman u/s. 2(d): Means the Chairman of the Commission 3 Commission u/s. 2(g): Means the Securities and Exchange Commission of Pakistan (SECP) 4 Board u/s. (c): Securities and Exchange Policy Board

SECP
Divisions
Insurance Division Securities Market Division Specialized Companies Division

Company Law Division Sukkur

Company Registration Offices

Quetta

Peshawar

Multan

Lahore

Faisalabad

Karachi

Islamabad

The Chairman u/s. 6

One of the commissioners is appointed Chairman of the Commission by Federal Government Can not be appointed for two consecutive terms Chairman shall be the CEO Shall have a casting vote in the event of a tie Responsible for Day to day administration Assisted by other Commissioners in carrying out functions

The Securities and Exchange Policy Board u/s. 12

Appointed by Federal Government Board shall consist of 10 Members o 5 Private Sector Members Private Sector Persons5 Term of office 4 years Can be re-appointed Shall cease to hold office on attaining the age of 65 years. o 5 Ex officio Members Representing Govt. & Commission Consisting of Secretary Finance Secretary Law Chairman of the Commission Deputy Governor State Bank of Pakistan Advisor on Finance to Prime Minister Term of Office: as long as designated If ex-officio Member is unable to attend meeting of policy board, if approved by the Board, he may authorize an officer not below the rank of Additional Secretary of his Division If disqualified or resigns his office, the Federal Government shall In case person is a Secretary Finance or Law, appoint another Secretary as Member; In case of a Deputy Governor, appoint another Deputy Governor as Member

5 Private Sector Person u/s. 2(p) A person who is not in the service of Pakistan or of any statutory body or any body which is owned or controlled by the Federal Government or a Provincial Government not including a University or an educational institution.

Frequency of Meeting & Quorum of Policy Board u/s. 13

Frequency: Board shall meet at least four times in a calendar year. Quorum: four Members, including the Chairman. Remember, The procedure and conduct of business of the board shall be regulated by the regulations made by the Board. Board my invite others to meetings or deliberations for the purpose of advising it on any matter but such person shall have no right to participate in any decision or vote.

Committees of the Board u/s. 15

1. Board may constitute such number of its committees as it considers necessary or expedient. 2. A committee constituted shall act in accordance with the regulations made by the Board. 3. Meetings of a committee shall be held at such times and places as the chairman of the committee may determine. 4. The non ex-officio Members, Commissioners or employees and any other person invited to attend any meeting of the Board or a committee shall be entitled to compensation and reimbursement of expenses as determined by regulations of the Board.

Conflict of Interest u/s. 16 & 17

Interest: A person shall be deemed to have an interest in a matter if he has any a. Interest b. Pecuniary (monetary) or c. Otherwise, that gives rise to a conflict between his duty and such interest, impairing his ability to consider and decide any question impartially or to give any advice without bias. In such instances, it is required by law to disclose such interest. 1. Disclosure by Commissioners and Members: a. Prior to any discussion of the matter in which a Commissioner or Member has any interest, he shall disclose in writing the fact of his interest and the nature thereof b. To commission or the Board or a Committee in which matter is to be discussed or decided. c. Disclosure of interest shall be recorded in the minutes prior to any discussion or decision. d. After disclosure, the Commissioner or Memberi. Shall not take part not be present in any deliberation or decision; and ii. Shall be disregarded for the purpose of constitution of a quorum. e. If the Commissioner is the Chairman, he shall disclose his interest to the persons concerned in the matter. Also he shall not take part, or continue to take part in determining the matter unless everyone concerned in it consents. 2. Notification by others: Persons other than Commissioners & members who are required to consider, deliberate, advice on a matter in which they have an interest shall forthwith give to the commission a written notice stating they have an interest and set out particulars of the interest whenever it is necessary to avoid the conflict of interest.
If chairman becomes aware that a Commissioner has the interest, what should he do? 1. If Chairman considers that the Commissioner should not take part or continue to take part in determining the matter, he may direct the Commissioner accordingly; or 2. In any other case, cause the Commissioners interest to be disclosed to the persons concerned in the matter.

Failure to disclose Interest Any Commissioner or Member who fails to disclose his interest shall be guilty of an offence and shall on conviction be liable to imprisonment for a term which may extend to one year, or a fine not exceeding one million rupees, or both. Defence: It shall be a valid defence for a person charged with an offence, if he proves that he was not aware of the facts constituting the offence and that he exercised due care and diligence in discovering those facts which he ought reasonably to have known in the circumstances.

Disqualification of Members & Commissioners u/s. 18

Conviction for moral turpitude Adjudged insolvent; Incapable of performing his duties Failure to Disclose interest In case of Member o other than ex-officio, Absence for 3 consecutive meeting without leave of the Board o ex-officio Member, failure to appoint another person to act as member u/s. 12(5)

Removal of Members or Commissioners u/s. 19

Upon disqualification by the order of Federal Government A Member or Commissioner shall only be removed o If disqualification arises from the judgment or order of a court or tribunal of Competent jurisdiction and o An enquiry shall be made to provide him opportunity of being heard

Resignation by Member or Commissioner

He may resign at any time by a written notice to the Federal Government Remember, the office of a Member or Commissioner shall be vacated if he dies and it shall be ipso facto6

Functions of Commission u/s. 20

1. Regulatory Functions: Regulating, a. the issue of securities b. the business in Stock Exchanges, Commodity Exchange and any other securities markets; c. substantial acquisition of shares and the merger and take-over of companies; d. professionals who provide services within the financial services markets; e. professional organizations connected with the insurance business; 2. Registering Functions a. Registering and regulating the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds registrars to an issue, underwriters, and such other intermediaries who may be associated with the securities markets in any manner; 3. Supervising & Monitoring Functions a. Supervising and monitoring the activities of any Central depository and Stock Exchange clearing house7 b. Prohibiting fraudulent and unfair trade practices relating to securities markets;
Ipso Facto: All the Fact itself Clearing House u/s. 2(f): means a clearing house by whatever name or designation established or arranged to be established by a Stock Exchange for the registration of dealing in securities or settlement of trading in futures contracts;
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c. Calling for information, undertaking inspections, conducting inquiries and audits of the Stock Exchanges and intermediaries and self-regulatory organizations in the securities markets; d. Ensuring and monitoring compliance by insurers, insurance surveyors and insurance intermediaries of all laws, rules and regulations pertaining to insurance for the time being in force; 4. Promotion Functions a. Promoting and regulating self-regulatory organizations including securities industry b. Promoting investors education and training of intermediaries of securities markets; c. Encouraging the organized development of the capital market and the corporate sector in Pakistan; d. Encouraging the organized development of the insurance market in Pakistan; e. Promoting and regulating development of Private Pension Schemes and Funds; and f. Promoting and regulating any scheme, fund, arrangement or undertaking established by or on behalf of companies and state owned corporations as employers, for entitlement of post employment benefits of their employees. 5. Maintenance Functions a. Maintaining and issuing panels of auditors and approving audit firms for financial institutions, listed companies and NBFIs; b. Conducting investigations in respect of matters related to SECP Act & the Companies Ordinance 1984 c. Conducting investigations for the purpose of investigating insider trading in securities and initiating actions against the offenders; 6. Advisory Functions a. Proposing regulations for the registration and regulating the working of collective investment schemes, including unit trust schemes b. Considering and suggesting reforms of the law relating to companies and bodies corporate, securities markets

Responsibility of the Commission u/s. 20

The Commission shall strive 1. to maintain facilities and improve the performance of Companies and of securities markets 2. to maintain the confidence of investors in the securities markets by ensuring adequate protection 3. to achieve uniformity in performance of its functions & in exercise of its powers; 4. to administer laws effectively but with a minimum of procedural requirements 5. to received, process, and store, efficiently and quickly the documents lodged with, and the information given to it, under SECP Act 1997, the Companies Ordinance 1984 or any other law; 6. to ensure that the documents, and the information is available as soon as possible for access by the public; 7. to maintain the confidence of holders of insurance policies by protecting the interests of policy holders and beneficiaries of insurance policies in all matters 8. to improve existing methods and devise new options for the expeditious settlement of claims and disputes between insurers and policy holders and between insurers and intermediaries; 9. to promote efficiency in the conduct of insurance business; 10. to promote the establishment and development of professional and educational organizations connected with insurance business; 11. to promote awareness among consumers with respect to the benefits of insurance 12. to take whatever action it can take and is necessary to enforce and give effect to the SECP 1997, the Companies Ordinance, the Law of Insurance or any other law

Powers of the Commission u/s. 20

Shall have all necessary powers as may be necessary to perform its duties and functions under SECP Act Power to organize: Can organize itself into division, wings or other sub-division u/22(2) Power to Approve: Can grant approval to o All Public companies incorporated in Pakistan intending to issue or offer for sale securities outside Pakistan; or to list such securities on s stock exchange outside Pakistan o All bodies Corporate incorporated outside Pakistan intending To issue or offer for sale securities to public; To list securities on a Stock exchange If, already listed, for the listing of and quotation of additional securities Power to delegate: Can delegate its power to one or more Commissioners or any officer of the commission(u/s.10) Power to Call & Inspect Documents: For the purposes of a proceeding or enquiry, a Commission, Commissioner or an officer to whom powers have been delegated may require o To produce before any books, accounts or other documents relating to any matter the examination of which may be considered necessary o To furnish to an officer of the Commission information and documents relating to any matter as may be necessary for the purposes of the proceeding or enquiry.

Functions of the Board u/s. 21

1. Advisory Functions: In consultation with the Commission, advise Federal Government on all matter relating to a. Securities and insurance industry b. Regulation of i. companies and corporate sector ii. Insurance Sector c. Protection of the interests of i. investors; ii. Policy holders d. Measures to encourage self-regulation by the Stock Exchange, insurers, insurance intermediaries, insurance surveyors, and NBFIs e. Measures to promote the development of and to regulate the securities market and the insurance market; 2. Considering and Approval Functions a. any regulations with respect to implementation of Policy Decisions by the Commission b. the Budget for each financial year of the Commission 3. Supervisory Functions a. Oversee the performance of the Commission b. Exercise all such powers and functions conferred or assigned by SECP Act 4. Prescribing Functions a. Specify fees, penalties & other charges chargeable by the Commission 5. Opinion to Federal Government a. Express written opinion on any policy matter referred by Federal Government or Commission

Powers of the Board u/s. 21

1. All policy decisions, including any change in respect of all matters within the jurisdiction of the Commission shall be made only by the Board 2. Board may make policy decision; o Suo motu8; or o Adopt policy recommendations of the Commission with or without modifications
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Suo motu: At its own motion

Investigation & Proceedings by Commission u/s. 29

1. Sou motu powers with commission with respect to investigation. 2. Commission may appoint such number of investigating officers as it considers necessary. 3. Investigating officer shall have all the powers given u/s 30 of SECP Act.

Powers of Investigating Officers u/s. 30 1. Enter any place or building only after written order of the commission signed by any two commissioners a. To inspect and make copies of or take extracts; and b. Where he believes that an offence has been committed has a power to make investigation or inspection, to search for, seize, take possession of and detain any object or documents which may be used as evidence. 2. Require any person to produce before him documents which are in custody or control of that person 3. A person who a. fails deliberately to produce or b. Obstructs or hinders an investigating officer, shall be guilty of an offence and shall be liable on conviction to a fine which may extend to one million rupees or to imprisonment for a term not exceeding one month, or both. Documents seized and taken possession of by the investigating officer may be inspected by a person entitled to inspect under SECP Act and authorized in writing by commission. Complaint to Commission of conduct of Investigating Officer u/s. 30(6)(7) Any Person aggrieved may lodge a complaint to the commission. Commission shall within fifteen days of receipt of the complaint, commence a hearing to determine the veracity of such complaint in accordance with prescribed procedures. Forcible Entry9 u/s. 31 An investigating officer may enter any place or building by force, if necessary with a written order of the Commission signed by any two Commissioners. If, on enquiry it is found that the exercise by an investigating officer of his power was vexatious10, excessive or with mala fide intent such officer shall be dismissed from service and punishable with a fine which may extend to five hundred thousand rupees and imprisonment for a term not exceeding one year. Whenever a criminal court imposes a fine it shall order that a sum equal to the whole or any part of the fine recovered o Be paid to the complainant and o In case the fine is not recovered the sum shall be paid out of the Fund. Power to call for Examination u/s. 32 Commission may by notice in writing require any person acquainted to appear before an authorized investigating officer. Person examined shall be bound to answer all relevant questions in truth, whether or not the statement is made wholly or partly. Statement o Person shall be examined orally and his statements during examination shall be reduced into writing
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Forcible Entry: Means to enter any place or building against wishes. Vexatious: Instituted without sufficient grounds and serving only to cause annoyance to the defendant.

o Written statement will be signed by the person making such statement and he shall affix his thumb print on it. o The investigating officer shall endorse thereon under his hand the fact of such refusal and the reason therefore, if any, stated by the person examined

Obligation to maintain Confidentiality of Information u/s. 35

Certain persons are not allowed to make a record of, or disclose to any person or make use of any information for any purpose which is or was acquired by him due to official capacity at any time o Acting as a Member of the Board, or o Engaged as a Commissioner or employee of the Commission, or o Authorized to perform or exercise any function or power of the Commission or on his behalf or to render services to Commission in the capacity of a consultant or adviser; Except to the extent necessary to perform his official duties or the performance or exercises of such a function or power either directly or indirectly as Member of the Board, Commissioner or employee of the commission etc. Disclosure of information as required or permitted by any law for the time being in force shall be taken to be authorized use and disclosure. Any person who discloses such information against provisions u/s 35(1) shall be liable on conviction to a fine not exceeding one million rupees or to imprisonment for a term not exceeding one year or both. Commission shall take all reasonable measures to protect from unauthorized use or disclosure. The Chairman may impose conditions to be complied with in relation to the information disclosed to it and persons in respect of whom conditions are imposed shall be bound to comply with them.

Disclosure of Information u/s. 35

The disclosure of information is authorized use and disclosure to a, i. Stock Exchange, ii. Clearing house, iii. Central depository or such other body corporate notified or specified for the purpose. If o The chairman is satisfied that it will enable or assist to monitor compliance with, enforce or perform functions or exercise powers o Disclosure is made by a person authorized by the Chairman for the purpose. If information is disclosed to a body u/s. 35(8), such person shall not without the written consent of the chairman; o Disclose the information to a person who is not an officer, employee, professional adviser or agent of the body corporate; or o Use the information otherwise than for the purpose of monitoring compliance with, enforcing or performing functions or exercising powers The Chairman may delegate all or any of his functions and powers relating to disclosure of information

Permitted Disclosure u/s. 36

1. Producing a document To a court a. in the course of criminal proceedings or b. in the course of any proceedings under this Act, the Ordinance or any other law enforce 2. disclosing to a court in the course of any proceedings, that came under his notice in the performance of official duties or in the performance of a function or the exercise of a power; or 3. producing a document or disclosing information a. to a person to whom, in the opinion of the Commission, it is in the public interest that the document be produced or the information be disclosed; or b. that is required or permitted by any law for the time being in force in Pakistan or any other jurisdiction to be produced or disclosed, as the case may be; or c. To the Commission.