KARACHI: Chairman, Securities and Exchange Commission of Pakistan, Mohammad Ali, along with his team visited the Karachi Stock Exchange on Wednesday and held a hastily summoned informal meeting of members.
Stock brokers already incensed by a steep decline in both the value and volume of shares had drawn daggers last week, when they issued press release “rejecting the brokers’ regulation regime ‘concept paper’ of the SECP. The Wednesday’s meeting was attended by the KSE Board; the bourse management and about a half of the 200-strong broker fraternity, who voiced their feelings, which as a broker said was none in too good cheer.
A joint press release issued by the SECP and the KSE in the evening stressed upon ‘consultative process and coordinated approach in future’.
But before drawing upon the contents of the joint statement, it has to be reminded that an extra-ordinary general meeting of the KSE brokers is scheduled to be held on Thursday, where the apex regulator’s proposal to extend the term of office of board of directors of the bourses from currently prevailing one to two years would be put up for approval; the brokers’ had declined an earlier suggestion to raise the period from one to three years. Also according to a member, a meeting of the regulators islikely to be held with the Federal Board of Revenue (FBR) on Thursday over the Capital Gains Tax (CGT).
“The team would try to present the case of low collection under the new regime due to investors’ nervousness over the collection method,” he said.
Brokers have been clamouring to convince the taxation authorities that the best way to collect the gain tax on shares trading was to collect it under presumptive tax regime, which they believe, would enhance the revenues of the government as well as help in improving the working of tax department and building up overall confidence of investors.
The SECP-KSE joint press release issued on Wednesday stated that the regulators-members meeting discussed various important market related matters, including the proposed new broker registration regime.
The SECP briefed the participants on the various significant steps taken by it to ensure sustainability and boost confidence of the market participants.
“It was emphasised that all reform measures that have been introduced in the past and currently being considered were in close coordination and consultation with the relevant stakeholders and are designed to improve trading volumes and enhancing retail participation in the stock market,” the statement said.
It observed that the participants were briefed on the SECP’s strategic objectives for the coming years. The key objectives highlighted include: (i) Structural and regulatory reforms for the market; (ii) Measures for investor education/awareness, restoration of investor confidence and expansion of market outreach; (iii) Development of equity market in particular the derivative market, (iv) Development of debt market, (v) Development of commodity and currency markets; (vi) Strengthening the capital market intermediaries for efficient operations and improved regulation; (vii) Improving governance, risk management, efficiency and transparency in the market operations (viii) Development of Islamic Products and Shariah-compliant investment alternatives; and (ix) Image-building of the market.
The joint release stated: “While discussing the concept paper on proposed new ‘Broker Registration Regime’, the SECP reiterated that the proposed regime would help in strengthening the market by allowing only fit and proper brokers to operate in the market. It would provide a framework where only qualified, experienced, sustainable, technically and financially strong market participants would operate as brokers.
“All these measures will help in better protection of the interests of the investors and would lead our market another step closer to acceptable best international standards,” the release said.
It was also clarified that the concept paper was sent to the exchanges for soliciting comments and that the regime would be finalised after giving due consideration to the concerns and feedback of the stakeholders. In addition, other proposals such as, corporatization of exchanges, streamlining the account opening process and corporate governance issues, including matters related with the Clearing House protection fund, were also discussed.
The SECP assured that all proposals were under the review process and the future course of action would be taken in the light of legal provisions with the aim to provide appropriate facilitation and support to the market.
“The regulators agreed to continue the consultative process and coordinated approach in future also to ensure implementation of various market reform measures,” the joint press release concluded.