SECP Policy Board approves legal change to aid ‘startups’

ISLAMABAD: The Securities and Exchange Policy Board on Saturday approved an amendment into the company law to pave way for formation of ‘startup’ businesses and called for reduction in capital requirements for brokers proposed under a new regime.

“Pending enactment of this legislation, the board approved amendments to 3rd schedule to the Companies Act 2017 prescribing an appropriate definition for the term startups providing, immediate through limited, facilitation for the formation of startups,” the Securities and Exchange Commission of Pakistan (SECP) said in a statement.

The amendment into the company law was proposed by the SECP. The decision was taken at a meeting presided over by the board’s chairman Khalid Mirza. The policy board comprises ex-officio members of the ministries of finance, commerce, and law, State Bank of Pakistan and SECP and representatives from the private sector.

The SECP policy board further directed the commission to review the capital requirements proposed for each category of stockbrokers under the ‘New Broker’ regime. “These were, prima facie, excessive.”

The commission was asked to consider the introduction of a brokers regime whereby brokers simply operate as stock market intermediaries but without being permitted to hold client assets, whether securities or shares.

“This would substantially reduce any capital requirement for stock market intermediaries.”

The meeting was told that a letter was issued to recall officers deputed to law enforcement agencies. “A response would hopefully be received before the next Board’s meeting,” the commission said.

The policy board advised the commission to do a fact finding with respect to all officials of the commission which have been implicated and come out with a view “as to what occurred and if anything went wrong what was it”.

SECP further submitted its annual report for the year ended 2018/19 for approval of the policy board. It was decided that the board’s members would look into it and possibly clear it in the next meeting.

The board directed the SECP to issue a letter to all companies asking them to ensure that annual tax returns are filed in accordance with law.

The policy board expressed concern about the fact that secretary-level officials who are ex-officio members of the board do not attend board’s meetings and send their nominees instead.

“This dilutes the efficacy of the board,” the SECP said.

“The board decided to issue a letter to the ministry of finance requesting that they urge the officials concerned to do their best to attend all policy board meetings.”

The SECP policy board finalised evaluation of the performance of the commission and the Commissioners for the year ending June 30, 2019.

The board discussed several matters pertaining to “prima facie wrongful” actions by various departments of the commission and issued appropriate policy directives to the commission in this connection.

It was noted that the fees charged by National Clearing Company of Pakistan Limited (NCCPL) appeared to be somewhat excessive and the commission was asked to look into this matter with a

view to issuance of appropriate directions to NCCPL for prescribing lower fee levels.

The policy board asked the commission to carry out an exercise for amalgamation of the Securities Act 2016 and the Futures Market Act, 2017 “since this segregation did not make sense”.

The commission was further advised to place before the regulations committee of the board a comparison of these laws with the erstwhile the Securities and Exchange Ordinance 1969 and proposed amendments in the amalgamated draft legislations to propose a simplified, rationale and substantially less onerous law.