Morin’s last laugh and its rebuttal

Updated June 24, 2019

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In order to have the last laugh Mr Richard Morin offered his ‘version of the events’ surrounding his appointment as the CEO of Pakistan Stock Exchange (PSX) and his final bow. But he did that only by publishing an article after reaching the safety of the shores of his homeland Canada.

Chosen to be the first foreign chief executive of the PSX a year and half ago, Mr. Morin has been forever in the news. And unfortunately for all the wrong reasons.

Brokers have continued to complain of his penchant to distance himself from the community; the monthly largesse of an estimated sum of Rs5.5 million and his lavish spending on frequent visits to the beautiful North.

It is unlikely that the PSX board would have come up with a statement against Mr Morin irrespective of his performance, if the latter had chosen to remain silent

The last straw was the discovery that he was holding the posts of the CEO and CCO of of a Canadian Wealth Management Company — Archer Wealth Management (AWM), while being the CEO of the PSX.

Mr Morin refutes any wrongdoing, saying that he had declared his association with AWM at the time of his appointment, both to the PSX and the Securities and Exchange Corporation Pakistan. The PSX, however, alleged a conflict of interest i.e. the sharing of time and resources simultaneously with his own company, while being employed by the bourse.

However, the matter of Mr Morin and his association with AWM is not half as interesting and intriguing as the other revelations that follow in his article. “Why then was I pushed out the door?” asks the outgoing boss of the PSX and goes on to answer: “very simply because the arrival of a foreigner at the helm of the stock exchange constitutes an existential threat to the ‘legacy brokers’ who have long held a stranglehold on this market.

Morin went on to say that the ‘legacy of brokers’ had a powerful ally at SECP who forced the removal of independent directors from the PSX Board in April 2018. These legacy brokers and their henchmen then gained effective control of the PSX Board, installed their subservient chairman and put their nominees on all board committees as well as National Clearing Committee of Pakistan Limited and Central Depository Company Boards.

As a result, the demutualisation of PSX has effectively been rolled back, with a single broker now calling the shots from his living room.

The ex-CEO claims that despite the unrelenting attacks of legacy brokers, we made significant progress on several fronts. He reckons that Pakistan cannot afford to leave its capital market at the hands of people who see PSX as their private playground. “Instead of being feted in Islamabad, these people must be taken to task”.

The allegations of Mr. Morin and counter charges by the PSX brings out in the open what must have been a simmering battle not known to the general investors. Interestingly, Morin has coined a new word: ‘legacy brokers’.

Although broker power was well-known in the days before demutualisation of the exchange, Morin’s assertion that “a single broker” calls the shots from his living room, has a powerful ally at the SECP and a subservient chairman at the PSX, are gruesome allegations.

Incidentally the PSX CEO avoids naming names. One wonders why he piled dirt over a person but did not have the courage to name him, even though he had no intention to stay in the country.

Questions are also being raised on the role of the apex and frontline regulator. “It is surprising to note that both regulators overlooked the fact that Mr Morin was holding three positions simultaneously at AWM at the time of his appointment.

“The positions of chief compliance officer and portfolio manager have a grave conflict of interest. A person who is also the chairman cannot hold this position under any circumstances as this is against the code of corporate governance and fit and proper criteria”, says Sani-e Mehmood Khan, a former general manager of PSX.

PSX in its rebuttal stated that the “the article is a collection of frivolous allegations and fabrications which are far from reality. He (Richard Morin) had not achieved his outlined objectives as per the business plan approved by the board during his tenure of 16 months. Not a single new product was introduced during this period”.

Mr. Morin’s allegations of a nexus between legacy brokers in order to derail the reform process of the stock exchange are entirely concocted, said the PSX’s statement. “The affairs of the PSX’s board are run purely by the directors/representatives of local and Chinese shareholders and the independent directors”.

The front-line regulatory function of the PSX is fully segregated from its commercial functions and directly reports to the Regulatory Affairs Committee, which comprises of only independent directors of the PSX, and to the SECP as its extended regulatory arm.

Furthermore, Mr Morin’s contention that the trading system at the stock exchange is “leaky” does not match with the facts. PSX has a robust trading system providing automated trading solutions, fully integrated with the National Clearing Settlement System and Central Depository System ensuring all end-to-end information security aspects.

At the SECP Policy Board, there is a lack of genuine pity for Mr Morin, since the man should have been able to exercise his authority to correct all the wrong that he says he was witness to.

On the part of the PSX, except for its rejoinder on Friday, the board/management has scarcely come up with any statement expressing dissatisfaction with the performance of the outgoing managing director during his 18 months in office.

All in all, it is difficult to avoid the feeling that both sides were not inclined to pursue the matter further. It is unlikely that the PSX board would have come up with a statement against Mr Morin irrespective of his performance, if the latter had chosen to remain silent.

Published in Dawn, The Business and Finance Weekly, June 24th, 2019