ISLAMABAD, July 19: Securities and Exchange Commission of Pakistan (SEC) on Friday issued a directive imposing a number of restrictions on the brokerage houses in respect of listed companies and trading in the securities of certain listed companies.

The objective, an official source told Dawn, was to ensure greater transparency and integrity in the financial market. Besides, it would go a long way towards curbing unfair trade practices and restoring investor confidence in the securities market, he added.

The most important measure announced by the SEC, therefore, was to prohibit the brokers and nominees of brokerage houses from holding the position of director or nominee of a listed company. The directive would be applicable to listed companies as a result of elections to be held after August 31, 2002.

Under the directive, the following shall not be eligible to become a director or a nominee director of a listed company:

i) Any broker or brokerage firm registered with SEC or the chief executive officer, chief financial officer, head of internal audit, research analysts, traders, agents or nominees thereof;

ii) Anyone holding a controlling interest in, or a director, chief executive officer, chief financial officer, head of internal audit, research analysts, traders, agents or nominee of an incorporated brokerage house registered with the Commission; and

iii) Firms/companies owned or controlled by any of those mentioned in (i) and (ii) above.

Notwithstanding the restrictions mentioned above, the SEC further stated, “anyone can become a director of a listed company if he has a minimum shareholding of 10 per cent or above, in the company where he intends to become a director/ nominee director.”

Subject to the above-mentioned directives, the SEC further ordered, a broker/brokerage firm or an incorporated brokerage house whose directors or nominee directors are represented on the board of directors of a listed company shall not trade in the securities of such a listed company.

Nor shall any broker act as a consultant/adviser to a listed company of which he/his nominee is a director.

The above directive, SEC went on to state, would not be applicable to a non-executive director on the board of an incorporated brokerage house provided, however, that the incorporated brokerage house shall neither trade nor act as a consultant/adviser to such listed company of which the non- executive director is a director.

The above directive would be applicable to such director of a listed company as is elected as a director as a result of an election held after August 31, 2002.

The SEC, it was further stated, may relax all or any of the above conditions on a case-to-case basis.