ISLAMABAD, Sept 14: The Securities and Exchange Commission of Pakistan (SECP) has decided to reconstitute the board of Pakistan Mercantile Exchange Limited (PMEX) and number of directors will also be reduced to 10 from the existing 13.

The issue of reconstituting the PMEX board had been under discussion between commodity exchange and the regulator since May 30, 2012, after the shareholders expressed concerns that they had a minority representation in the PMEX board.

The shareholder directors were uneasy due to the recurring losses faced by the commodity exchange as PMEX had a negative equity of Rs156 million by June 2012.

Under the current arrangement there are six SECP nominated directors and one managing director in PMEX board compared to six shareholders elected directors.

The two directors at PMEX Board Ayesha Aziz and Ruhail Mohammad submitted their resignations after the PMEX board meeting held on September 11, 2012.

The other SECP nominated directors including Aizaz Sarfraz, Kamran Y. Mirza, Muhammad Hanif and Rizwan Ahmed Kehar are also expected to give their resignation in coming days.

While, the managing director PMEX Samir Ahmed had already retired after his three year contract expired on August 9, 2012.

The remaining six are the elected share holder directors of PMEX – which includes Abdul Majeed nominee of KSE, Shahid Mehmood nominee of LSE, Mian Ayaz Afzal nominee of ISE and the three nominees of National Bank are Amir Shehzad, Rehmat Ali Hasnie and Syed Hasan Irtiza Kazmi.

The NBP has three directors at the PMEX board as the institution injected Rs200 million in the commodity exchange to bail it out of losses.

The final decision for the reconstitution of the PMEX board was made in its meeting held on September 11, 2012.

Apart from one Managing Director, it has been decided that the number of nominated directors would be reduced to three and all would be nominated and appointed by the SECP as against the current practice, where six independent directors are nominated by the PMEX and appointed by the SECP.

However, there exists a conflict between the PMEX and the SECP over the granting trading rights to shareholders directors.

The PMEX board in its meeting on September 11, decided that there would be three directors in the reconstituted board ‘with or without trading rights’ that has been reduced from six, whereas the shareholders directors without trading rights would be three.

“To ensure that there is no conflict of interest – we want that the shareholder directors not to have trading rights,” said an official of the SECP.

However, the new composition of the board as proposed by the corporate sector regulator has to be notified by the PMEX board.

“It is essential to make PMEX successful so that more commodity exchanges can be established in the country,” said the official.