ISLAMABAD, Jan 28: To protect the rights of small shareholders and eradicate the weaknesses in the current setup, the Securities and Exchange Commission of Pakistan (SECP) has established a task force which will identify weaknesses and gaps in the current protection mechanism for minority shareholders of listed companies.

The task force will also suggest ways and means to overcome these gaps through shareholder activism. Headed by Nisar Ahmed Khan, the task force consists of representatives from the SECP, three stock exchanges, Institute of Chartered Accountants of Pakistan, institutional investors, nominees of professional accounting bodies and other stakeholders.

An official of the SECP said that the findings of the task force will help in disciplining the dominant shareholders and protecting the minority shareholders.

“We want to ensure that the issues faced by the small investors are rectified in a cordial manner,” said a senior official of the Securities Markets Division of SECP.

The decision to establish a task force to suggest measures for the protection of small investors in the bourses has come in the light of the prevalent international practices.

The SECP has said that in Malaysia, Minority Shareholder Watchdog Group (MSWG) was set up in the year 2000 as a government initiative to be part of a broader capital market framework to bring about awareness and help protect the interests of minority shareholders through shareholder activism.

The SECP officials have also said that a proposal was under consideration to establish a permanent platform for dialogue and cooperation on minority shareholder issues.

The forum will act as grievance handling and dispute resolution platform for minority shareholders and create awareness among minority shareholders regarding their rights.

“A permanent forum in this regard will also help in identifying and analysing best practices, challenges, opportunities and initiatives for the further development,” the official said.

“But it should not be considered that the SECP has not done anything to protect the small investors from the shocks,” he added.

Of the several measures taken by the Commission for protection of minority shareholders’ interests, revamping the Code of Corporate Governance with special emphasis on independent directors is an important one.

The SECP has also made it mandatory for all listed companies to maintain functional websites, stating that ‘websites provide timely information that minority shareholders may require for contesting election’.

“The other measures including regulations governing investment in associated companies and robust disclosures in the financial statement of listed companies has restricted the powers of the majority shareholders, who are mainly owner family,” the officials added.