Executive Summary

Our interview’s purposal was

accepted on 22:03:2009 by Mr Zahoor, on the request of our
department of Business Administration Superior University
Raiwind Road Lahore.

We interview about the History of Security & Exchange

Commission of Pakistan.

We asked about Vissions & Missions of Security & Exchange

Commission of Pakistan, and get some Information about the
Company.

We asked about Process of Registration of Company and

documentation of companies.
History of Security & Exchange
Commission of Pakistan
The Securities and Exchange Commission of Pakistan (SECP) has
succeeded the Corporate Law Authority (CLA) which had been
administering the corporate laws in the country since 1981. The
Authority was a government department attached to the Ministry
of Finance and therefore lacked the financial and administrative
autonomy required to build a regulatory structure conducive to
the growth of the financial sector.

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 from January 1st 1999.

The establishment of the SECP is an important milestone in the

evolution of the regulatory framework for the capital market in
Pakistan. The policy decisions regarding the constitution and
structure of the Commission were incorporated in the 1997 Act.
Powers of the Commission have been delegated to the individual
Commissioners and Appellate Benches, as envisaged in the Act. A
Corporate Plan for the Commission was prepared with the
assistance of ADB consultants, which covers organizational
structure, reporting relationships and functional profiles,
information systems strategy, plans to upgrade facilities like
premises etc.,
Vissions & Missions of Security &
Exchange Commission of Pakistan.

Mission Statement.

To promote an efficient and transparent capital market, develop

the corporate sector and protect the investor through responsive
policy measures, effective regulation and enforcement of best
governance practices.

Vision Statement.

To install and sustain a dynamic, modern and proactive regulatory

body that provides impetus for the development of a fair, efficient
and transparent capital market and a robust corporate sector.
Policy Board of Security & Exchange
Commission of Pakistan.

The Policy Board is entrusted with the responsibility to provide

guidance to the Commission in all matters relating to its functions
and to formulate policies in consultation with the Commission.

In addition, it is responsible for advising the Government on

matters falling within the purview of the Act and other corporate
laws and to express its opinion on policy matters referred to it by
the Government or the Commission.

The Act provides that the Policy Board should consist of a

maximum of nine members

appointed by the Federal Government, including five ex-officio

members and four from the private sector. The ex-officio
members are:

(i) Secretary, Finance Division;

(ii) Secretary, Law, Justice and Human Rights Division;

(iii) Secretary, Commerce Division;

(iv) Chairman of the Commission; and

(v) Deputy Governor of the StateBank of Pakistan (SBP).

Divisions of SECP

The work of the Commission has been distributed amongst its six
divisions, each of which is headed by an Executive Director and
divided into Wings for effective administration. The Divisions are:

• Securities Market Division

• Specialized Companies(Non Banking Finance Companies

Division)

• Company Law Administration Division

• Enforcement Division

• Insurance Division

• Support Services Division

Specialized Companies Division

The Specialized Companies Division (SCD) is responsible for

regulation of leasing companies, modarabas and modaraba
management companies, mutual funds and other specialized
companies (except insurance companies). Its functions include
licensing, monitoring, regulatory compliance and enforcement of
all applicable laws.

PROCEDURE FOR REGISTRATION:

The procedure for registration consist of following steps:

• Members desirous of dealing in the business of effecting

transactions in securities shall make an application to the
commission in form A to stock exchange of which he is member.

• Stock Exchange to forward the application with in 14 days.

ELIGIBILITY FOR REGISTRATION:

The eligibility criteria for registration is given below:

1. Members of the stock exchange

2. Twenty one years of the age

3. Citizen of Pakistan
4. At least pass graduation or equivalent examination from an
institution

recognized by the Government.

5. Not lunatic or a person of unsound mind

6. Non conviction of offence fraud or breach of trust;

7. Not adjudicated as insolvent or has suspended payment or has

compounded with his creditors.

8. Five years experience in dealing in securities

9. Not a partner of brokerage firm or a director of brokerage

company which has been convicted of an offence concerning
brokerage;

10. Has not defaulted in payment of dues at a clearing house

11. Has not defaulted in compliance with the provisions of the

ordinance the act and the rules and regulation made there under;

12. Is not in default on settlement of an investor complaint where

such complaint has been adjudicated by a stock exchange or a
committee of stock exchange or the commission; and

13. Has complied with the directives of the commission in respect

of business conduct dealings with client and financial prudence.
CRITERIA FOR REGISTRATION:

The criteria for registration is

• Fulfills the eligibility criteria

• It is in the interest of stock market

APPLICATION FOR REGISTRATION:

• Person desires of acting as an agent shall make an application

to the commission in Form C through the broker with whom he is
to be affiliated and the concerned stock exchange

• Stock exchange to forward the application with in 30 days.

SUSPENSION OF REGISTRATION:
In some cases registration can be suspended. These cases may
be i.e.

• Violations of conditions of registration

• Non compliance to the requirements of Act or ordinance and

rules made under.

• Contravention of rules and regulation of the stock exchange

• Non compliance of the code of conduct

• Non compliance to directives of commission

• Failure to furnish any information required by the commission

• Non submission of periodical returns to the commission

• Furnishing false information

• Failure in the settlement of investors complaints

• No co-operation in any enquiry or investigation conducted by

the commission.

• Manipulated price rigging or cornering activities

• Inadequate financial position

• Suspension of stock exchange

ACTIONS THAT CAN BE TAKEN BY SECP:

The commission may be

• Suspend the registration of member broker

• Impose a penalty not exceeding Rs. 100,000.

CANCELLATION OF REGISTRATION:

A member broker registration can be cancelled if he found doing

some of these activities:

• Engage in insider trading

• Found guilty of fraud or convicted of criminal offences;

• Membership cancelled by a stock exchange

• No complicated with directive of commission

• Ceases to be a member of stock exchange

• Declared defaulter by stock exchange

• Surrender membership of the stock exchange

• Declared insolvent by a court

• Voluntarily surrenders certificate of registration

• Wound up by an order of Court

RENEWAL OF REGISTRATION

Requirements of initial registration applicable to renewal of

registration

SUGGESTIONS:

According to us these are some suggestions that SECP should

implement to enhance its performance
Accounting Standards:

The SECP should further strengthen audit practices and enforce

International Accounting Standards.

Holding Seminars:

The SECP should arrange seminars and hold meetings with small
investors to increase their confidence.

Regulatory Frame Work:

Securities and Exchange Commission should develop a regulatory

framework for online trading.

Hearing Process System:

All the hearings are heard at SECP head office. This takes lot of
time and also put burden on companies. So I suggest that the
commission should create hearing process system at least in
provincial capitals.

Risk Management System:

SECP should take steps to deepen the market and improve risk
management at the exchanges.

NBFCs:
More steps should be taken by SECP to develop and strengthen
mutual funds, pension funds, and the insurance industry. It should
address issues pertaining to

development of venture capital.

The SECP should take appropriate measures to develop retail

demand – encourage broker branch networks, agents in smaller
towns, maintain telecommunication networks

Research Center:

There should be proper research center. Preliminary researches

should be given to the educational institution.

Revenue Earned:

The revenue earned should be invested in those areas where they

can get maximum profit. The SECP earning a lot of revenue under
different earning heads. But this fund remains idle in Banks so
they should invest funds in different sectors to earn maximum
profit.

CONCLUSION:
The overall management of Securities and Exchange Commission
is better performing but in some areas there is need to improve
for further improvement in future.

The achievements of SECP are substantial. The SECP assisting in

fostering development of capital market and the corporate sector
while protecting small investors and its reform agenda is
ambitious but feasible. The closer consultations with stakeholders
and more in-house capacity building efforts will help meet
targets.

The SEC has also taken lot of steps to increase customer

confidence. The SEC is encouraging mergers so that to meet the
challenges of free world trade. The SEC is also worked a lot
enforce international accounting standards.

But there are certain areas, which have to be revived. The SEC is
aware of those aspects and will work more effectively to improve
market conditions. The SECP is bringing new reforms to enhance
market conditions.

These reforms include

• National Clearing and Settlement System (NCSS)

• National Commodities Exchange Limited (NCEL)

• Introduction of Futures Contracts

• Registration of Brokers/Agents

• Monitoring and Surveillance Cell

• Investor Complaints Cell

• Publication of Investor Guides