KARACHI, Dec 3: “We, the members of the Karachi Stock Exchange, are not opposed to a non-member as the chairman of the stock exchange,” a statement signed by more than a hundred stock brokers, provided to Dawn on Saturday, said. But the statement went on to emphasise that a chairman nominated or appointed by the Securities and Exchange Commission of Pakistan (SECP) was not acceptable.
The brokers’ contention was that such an appointment would undermine the independence of the bourses as frontline regulators. “Let the stock exchanges continue to be the frontline regulators that should have the powers to govern the matters of the bourses,” said the brokers, adding that it was not even practicable for the apex regulator sitting in Islamabad to remote-control the day to day affairs of the stock exchanges.
They pointed to the task force report on March crisis which had criticized the fact that the SECP had tried to assume the role, also of frontline regulator in addition to being the apex regulator.
The members objected to the impression conveyed by some quarters that stock brokers were divided equally on the issue at an informal meeting held on Thursday. “All those present were unanimous in the view that the SECP directive was not acceptable, except one senior broker who tried to frighten members of dire consequences in case they did not toe the line of the regulator,” said one senior member.
Although one or two feeble voices were heard in the meeting in which 126 members had participated, to soften the stance, but according to members, which was verified from independent sources, the dissenting member’s speech was cut short by the angry crowd. One such broker said: “While we talk of privatization of state-controlled units, the SECP is making an effort to amass all authority and virtually ‘nationalize’ the stock exchanges.” He contended that all reforms directed by the regulator had been implemented by the KSE, including computerized trading on their own, while in Mumbai, the regulator had to enforce it by force.
“The apex regulator must understand that appointment of a SECP nominee as chairman is in no way in the interest of good governance, transparency and independence of the capital markets,” the brokers’ statement concluded.
It is still unclear whether the SECP would go on to enforce its directive and assume the authority of appointing non-member chairman. But legal circles believed that at least for this year, the chairman would have to be a broker as before, for there was not time enough to follow the necessary procedure of amendments in articles of association of the KSE.
It required that the board first proposes a special resolution in its meeting. That resolution was then required to be passed by a three-forth of the members present at a general body meeting convened for the purpose. And finally to effect an amendment in the articles of association, a 21-day notice must be given to the members.
Since the date of election of directors falls on December 15, there was not enough time to give the notice to effect the change.
