February 18, 2003	Tuesday	Zul Hijjah 16, 1423

KARACHI, Feb 17: The third annual report of the Securities and Exchange Commission of Pakistan (SECP), released recently, highlights major achievements and developments during the year from July 1, 2001 to June 30, 2002.

The report by the chief regulator details steps taken to enhance the regulatory enforcement capacity of the commission which, it said, had resulted in better monitoring of the capital market and corporate sector. During the year, the regulatory purview of the commission had been broadened and all non-banking financial institutions, with the exception of development finance institutions had been brought within the purview of the commission.

The report said that during the year under review, the commission substantially implemented the reforms envisaged under the Capital Market Development Programme of the government and the Asian Development Bank. The reforms were targeted towards engendering faith in the integrity of Pakistan’s market and sought to improve both governance and risk management at the stock exchanges.

The report discusses the activities of each division of the commission, which had been broadly categorised in terms of regulatory actions taken and monitoring/surveillance mechanisms employed to detect violations and to enforce compliance with relevant laws and regulation.

Khalid Mirza, the chairman of the commission (who resigned this month) stated that the commission was able to consolidate and deepen the reforms introduced in the securities market in the previous years as well as pursue several initiatives covering a wide spectrum of the commission’s responsibilities.

He said that after taking steps to engender faith in the integrity of the market and improve governance and risk management aspect of the three stock exchanges in the preceding year, the focus of attention turned during the year under review to corporate governance. He said that the ‘Code of Corporate Governance’ was made part of the listing regulations, which consequently became applicable to all listed companies. Other areas related to corporate governance, like dissemination of adequate and timely information as well as the issue of reliable audits, were also addressed by the commission, Mirza said.

“The performance of the market was also ranked as among the best in the world, largely, as a consequence of enhanced investor confidence arising out of the proactive regulatory approach adopted as well was the market’s visible under-valuation in relative terms,” the SECP chief said. The commission, as a regulator, had been entirely transformed through implementation of a drastic restructuring programme that was largely completed during the year under review. The SECP chairman stated that the enforcement of corporate and securities laws as well as legislation governing institutions within the purview of the commission was specifically emphasised during the year under review.

Mirza stated that of the three primary drivers of the capital market development which constitute the drip feed into the market, i.e. venture capital, securitization and corporate debt, considerable progress had been made with respect to the latter two as a consequence of satisfactory resolution of impending issues.

“Only venture capital remains a problem since the tax aspect has not been appropriately addressed so far,” said the chief regulator, who also noted down his unfinished agenda, which included efforts to: deepen the market and improve risk management at the exchanges; further strengthen audit practice and enforce IASs; clarify, reinforce and enhance standards of corporate governance; facilitate a vibrant primary market with strong underwriting and distributive capacity; develop and strengthen the mutual funds, the pension funds and the insurance industry to provide the market institutional underpinning; encourage on-line trading, Electronic Communication Networks and Alternate Trading Systems and develop a regulatory framework for on-line trading; develop and implement a phased programme for replacement of carry-over transactions or “badla” by margin financing and future contracts; and further strengthen the institutional capacity of the Commission.