KARACHI, April 4: The much-debated ‘code of corporate governance’ finally found its way into the listing regulations of the Karachi Stock Exchange. Managing Director KSE, Noman Ahmed confirmed to Dawn on Thursday that the Board of Directors in their meeting held on April 3, had passed a resolution making the ‘code’ a part of the listing regulations.

The “code’ which essentially is a set of radical reforms to discipline the country’s corporate sector, was promulgated by the chairman Securities and Exchange Commission of Pakistan (SECP) on March 5. The Exchanges were asked to incorporate the clauses in their regulations within thirty days. The 47 clauses of the ‘code’ are to be enforced ‘in such manner’ and ‘with effect from such dates’ as have been separately specified in an Appendix to the code. The enforcement ranges from ‘with immediate effect’ to ‘July 1, 2002’ or ‘when next election is due’. The applicability of the ‘code’ spans the entire corporate sector in Pakistan. It encompasses banks, Modarabas, leasing companies; insurance companies and all of the publicly listed companies.

The KSE MD said that the Board in their April 3 meeting had also approved the incorporation of the Regulator’s directives issued on February 7 and March 5, relating to the ‘improvement in the quality of audits’. These included that all listed companies should facilitate the Quality Control Review (QCR) of the audit working papers and that they should authorize their auditors to make available all relevant information including audit working paper to the QCR Committee of ICAP; no listed company should appoint or retain auditor, who had been found guilty of professional misconduct by the Commission or by a Court, for a period of three years unless a lesser period is determined by the Commission etc; no listed company should appoint or retain an auditor who has been engaged by the company as an accountant or adviser or to provide any service, including services related to the designing of accounting systems or compilation of accounts. A later March 5 directive by the Regulator added that A listed company should also not appoint or retain an auditor, if a person associated with the auditor is, or has been, at any time during the preceding six months engaged as a consultant or advisor or to provide any service, including service related to the designing of accounting systems or compilation of accounts.

Other important matters approved by the KSE Board on April 3, Noman Ahmed said, included the approval of ‘arbitration procedure’. For disputes involving sum of less than half a million rupees, the Board empowered the KSE MD to give his verdict, while for higher sum, the arbitration committee would comprise three members including the KSE MD, one member and a non-member.

And lastly, the KSE Board, approved management’s proposal for improvement of Risk Management Systems (RMS) for circulation to the members for comments/feedback. The proposals forwarded were in addition to those circulated earlier on March 12.

The measures proposed on April 3 include: (1) In line with the proposal for collecting additional deposits on Members’ outstanding purchase position in COT for each scrip, additional deposits should also be collected on Members’ outstanding sale position in COT for each scrip calculated in accordance with the same rates of deposits and (2) In order to monitor the total amount of COT financing in the market, the Members shall be required to disclose and provide details of client to client COT positions within their brokerage houses, on a daily basis.

KSE MD said that April 12 had been fixed as the last date for receipt of comments from members and others; April 15 was the date of final approval by the Board and the date for implementation of the proposals had been set as May 20.