ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has finalised second draft of the Rs3.35 billion budget with a deficit of Rs450 million due to massive reduction in various fees.
The first draft was rejected by the policy board for being too ‘traditional’.
“We had rejected the previous draft budget as it was too much traditional – the commission has to be pro-active and adopt the modern approach,” SECP Policy Board Chairman Khalid Mirza told Dawn.
The second draft will be presented to the SECP Policy Board for approval on Monday.
Mirza said that there was a need to reduce the fee charged over each unit of mutual funds as it would help boost growth in business.
Meanwhile, sources in the commission said the first draft of the budget was facing a deficit of around Rs54m but following the reduction of mutual fund fees from 8 basis points to 2bps over each unit, the deficit has now reached to Rs450m.
In order to limit the impact of deficit, the SECP has decided to layoff several contractual employees and dig into some of its reserves.
“This is probably the first time that the SECP is presenting a deficit budget,” said an official of the finance department in the commission, adding that the policy board’s directives were having a negative impact on the regulator.
SECP Chairman Farrukh Sabzwari represents the commission in the policy board and as there were expectations that the board will demand reduction in the huge deficit, the finance department has already prepared a contingency plan.
“The problem is that former SECP chairman Zafar Hijazi inducted around 200 personnel in the commission during his tenure which included the relatives of prominent personalities from all walks of life,” said an official adding that as a result, around 70 per cent of the SECP budget is eaten up by salary expenses.
Sources said the policy board has raised objections over the large number of manpower in the commission and the SECP’s Human Resources Department has already prepared a list of consultants and contractual employees to be laid off in near future.
The SECP is visibly overstaffed as there were around 35 persons in its law department, and a large number of consultants have also been engaged.
“A list of around 65 persons has been prepared which includes a close relative of SECP policy board chairman who was inducted by Mr Hijazi,” the official said.
Sources said the policy board had also objected to the practice in previous years when the employees used to get bonus equivalent to 2-3 salaries, including up to Rs10m for commissioners.
The main source of revenue for the SECP is fee collection but the commission has already reduced the charges on company registration from around Rs8,000-10,000 to Rs1,600, whereas the earnings from trading of shares in the stock market has also dropped significantly due to a decline in volumes.
The other avenue for the SECP was to reduce expenditures related to the litigation costs.
Published in Dawn, June 30th, 2019