Senate approves SECP (Amendment) Bill, 2016

ISLAMABAD: The Senate has approved the Securities and Exchange Commission of Pakistan (Amendment) Bill, 2016, which the national assembly has already approved and will become an Act once the President of Pakistan signs it.

This will facilitate better superintendence and control over capital and financial services market, corporate sector and insurance industry. In March 2016, the council of common interests (CCI) had unanimously approved this Bill 2016.

The SECP is the apex regulator of the corporate sector, insurance sector, NBFCs, and capital market overseeing around as many as 70,000 registered companies.

The new law aims to cover all the deficiencies and shortcomings in the existing law. The SECP succeeded the Corporate Law Authority (CLA) in 1999 as a unified regulator of the capital markets and for superintendence and control of corporate entities. However, its mandate has continued to be enhanced through various amendments, such as floatation, management and regulation of modarabas (1999), insurance sector (2000), non-banking financial companies sector (2002), commodity futures market (2003), and real estate investment trusts (2008), etc.

The law will meet the local and international requirements for the corporate sector regulator, including the requirements of the International Organisation of Securities Commissions (IOSCO). Major deficiencies of the current law, ie, SECP Act, 1997, include limited financial/administrative independence of the SECP, lack of provisions on Acting Chairman, power to constitute committees, task forces, and increase in the membership of the SECP Policy Board. Besides, the SECP has ineffective enforcement powers to call for information, lack of process for prosecution of cases, recovery of penalty, delay in decision of court cases, ex parte stays, and inadequate investigation powers.

With amendments to the SECP Act, 1997, the law will, inter alia, entail provision for the appointment of Acting Chairman along with provisions stipulating the time frame, ie 120 days from the date the post falls vacant, for the appointment of the SECP Chairman and private sector member of SECP Policy Board. 

The bill also aims to widen the scope of powers and functions of the SECP pertaining to, inter-alia, regulations and facilitating growth of Shariah-compliant financial products, healthy growth of the corporate sector, and promotion of good governance.

It also aims to create awareness amongst investors and to provide protection to investors; ensuring development of sound regulatory framework to counter illegal and unfair practices in the financial services market.

It further endeavors to control and minimise market abuse, misconduct and financial crimes in the financial services market, and other sectors regulated by the SECP, etc.

Additionally, in order to introduce transparency, provisions regarding disclosure of information in public interest along with statutory powers to assess potential and emerging systemic risks in the capital market, are also introduced in the bill.  It also provides the framework for the establishment of independent Audit Oversight Board to ensure the quality of audit of public interest companies and an effective mechanism and self-regulatory organisations (SRO) to ensure compliance with regulatory regime of the regulated sectors.

The bill provides detailed provisions regarding prosecution of offences by the SECP, while powers pertaining to investigation, enforcement and call for information have been enhanced.

The promulgation of the new law would also enable the SECP to seek international cooperation and extend assistance to a foreign regulatory authority in investigation and inquiries as the current law has no statutory provision to that extent.