SECP Establishment and Functions in 40 Characters

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Chapter #02

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Establishment of SECP
The securities and exchange commission of
Pakistan (SECP) was established on January
01, 1999 to replace the corporate law
authority (CLA).

The SECP was established under section 3 of
the Securities and Exchange Commission of
Pakistan Act, 1997 for supervision and
regulation of the corporate entities, stock
markets and self-regulatory organizations.

It has been provided in the SECP act that
the commission shall have a financial
administrative and operational autonomy.
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Appointement and Head Office
The federal government is the appointing
authority of the commission. It may appoint as
many members of the commission, (called the
commissioners), as it deems fit and necessary
for the smooth function of the commission.

The SECP shall be a body corporate with
perpetual succession and common seal. It may
sue and sued in its own name and may enter into
contracts and acquire assets and incur liabilities

The head office of the commission shall be
situated in Islamabad. The commission is
empowered to open as many offices in other
cities of the country as are needed.
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Objectives of the Commission
The Securities and Exchange Commission of
Pakistan act, 1997 (SECP Act) has specified the
following objects of the securities and exchange
commission of Pakistan (SECP):
1) Beneficial regulation of capital markets,
2) Superintendence and control of corporate
entities , and
3) Regulation of the matters connected with or
incidental to the corporate entities
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Commissionner appointement
The members of the commission are called
commissioners. The federal government may
appoint as many commissioners as are deemed
necessary. However the minimum number of
commissioners shall not be less than five and not
more than seven. Other provisions are:

1) The majority of the commissioners shall
be always be of private sector person

Private sector person means a person means
who is not in the service of Pakistan or anybody
owned or controlled by the federal government
or a provincial government excluding a
university or an educational institution.

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Commissionner appointement
2) In discharge of its functions and exercise
of its powers, the SECP shall conduct its
proceedings in this accordance with the
regulations made by it.

3) The remuneration and allowances of the
chairman and the commissioners shall
determined by SECP with the approval of
the policy board.

4) Any vacancy in or defect in the constitution
of the SECP shall not invalidate any act or
proceeding of the SECP.

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Qualification of Commissionner
A person to be appointed as commissioner should
be a person known for his;

1) Integrity
2) Expertise
3) Experience and
4) Eminence in any relevant field including the
following fields.

Securities market;
Law;
Accountancy;
Economics;
Finance
Insurance and
Industry
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Disqualification of Commissionner
The following persons cannot be appointed or remain as
commissioners or members of the policy board.

1) A person who has been convicted of an offence
involving moral turpitude;
2) A person who has been or is adjudged insolvent;
3) A person who is incapable of the discharging his duties
4) A person who being a member remains absent from
three consecutive meetings of the policy board
5) If a person is ex-officio member and fails to appoint
another person to board as member during his
absence
6) A person who fails to disclose any conflict of interest at
or within the time provided
7) A person who contravenes any of the provisions of the
SECP act
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Chairman Commission & Functions
A chairman appointed by the Federal Government
heads the commission.
The chairman shall be the chief executive of the
commission.
A person shall not be appointed as chairman of the
commission for more than two consecutive terms.

Functions of the Chairman
1) Day to day administration of the affairs of the
commission.
2) Supervision of the smooth functioning of the
commission according to the provisions of the
SECP act and regulations made by the commission
3) Furnish information and reports as and when
required by the federal Government and the
securities and exchange policy board (policy board)

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Terms of Office Commissionner
For the purpose of term office the commissioners
are categorized as:

1) Term A commissioners
2) Term B commissioners and
3) Commissioners

The provisions relating to the term of office of each
of the above categories are summarized in the
coming paragraphs.
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Term A commissioners
These are the commissioners who are selected at
random ballot out of the commissioners (excluding
the chairman of the commission) appointed under
the securities and exchange commission of Pakistan
act,1997 for the first time. The minimum number of
such commissioners shall be three.

The term of such commissioners shall be two years.
Term A commissioners may be reappointed for a
further period of three years.
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Term B commissioners
These are the commissioner who is not selected
as term A commissioners.

The term of such commissioners shall be three
years.

Term B commissioners may be reappointed for
a further period of three.
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Commissioners
Any commissioners appointed after the expiry of the
term of Term A or Term B commissioners or upon the
occurrence of any vacancy shall hold the office for a
period of three years.
Term B commissioners, such commissioner if eligible
may be re-appointed.
Note:
The categories of term A or term B commissioners do
not exist since the year 2002. Now only commissioners
are functioning in the SECP.
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Vacation of Office & Removal
Vacation of Office by Members or
Commissioners
The office of any commissioner of the commissioner
the member of the policy board vacated upon the:
Removal by the federal government;
Resignation; or
Death of the member or commissioner.
Removal by Federal Government
The federal govt. may remove any of the members of
the policy board if such person becomes disqualified
under any provision of the SECP act and only if the
disqualification arises from the judgment or order of:
A court;
A tribunal of competent jurisdiction; or
An impartial person or body of person constituted
according to the rules, after due enquiry.
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Power and Functions of SECP
The companies ordinance 1984

The Securities and Exchange Commission of Pakistan
act, 1997 specify in detail,

The Functions and Powers of the SECP. Functions and
powers of the commissioner under the both statuses
are discussed hereunder:
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Functions and powers under the Companies Ordinance
1) Confirm alteration in memorandum
2) Impose terms and conditions while confirming alteration in memorandum
3) Extend the period of its order confirming the alteration with the registrar.
4) Hear the appeal against refusal of registrar to register the memorandum and
articles of a company.
5) Approve adoption of certain names by a company.
6) Hear appeal against decision of the registrar about the proposed name of a
company.
7) Grant a license for establishment of an association not for profit.
8) Cancel the license issued under section 42. If the company violates any of the
conditions imposed at the time of granting license
9) Allow conversion of a public company into private company.
10) Grant relief from consequences of default in complying with conditions
constituting a company a private company
11) Approve prospectus and allow issuance of prospectus more than thirty days
before the subscription list is due to open
12) Approve the issue of offer to public for shares or debenture by a person
holding more than ten percent (10%) of the shares of debentures of the
company.
13) Grant approved for issue for issue of securities outside Pakistan.
14) Approve a financial institution to be appointed of transfer agent on behalf of
the company
15) Hear appeal against refusal of directors to register the transfer of shares.
16) Allow a company to issue shares at a discount.
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17) Permit a company to issue shares to employees under employees stock
option scheme
18) Permit a company to purchase its own shares under buy-back of shares
rules
19) Allow reflection in the register of mortgages and charges.
20) Extend the period for holding annual general meeting at a place other than in
town of its registered office.
21) Allow a listed company to hold an annual general meeting at a place other
than in the town of its registered office.
22) Call for a general meeting, if default is made by company in holding its any
general meeting.
23) Order for fresh election of directors on request of substantial acquirer of
shares in a listed company
24) Prescribe the amount default in whose payment may render a person
ineligible for the office of director.
25) Approve a loan to director by a company
26) Prescribe the limit exceeding which the acquisition or disposal of an asset by
company should be made by passing aboard resolution
27) Prescribe the qualification of company secretary.
28) Prescribe the qualification and functions of independent share registrar of a
listed company.
29) Grant approval for appointment of sale purchase sale or distribution agent.
30) Specify the class of companies or undertakings to which provisions regarding
investment in associated companies shall not apply.
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31) Empower any person to inspect the register of members and directors
shareholdings on its behalf.
32) Many require submission of statements of beneficial owners of listed
securities.
33) Recover benefits from unauthorized trading of listed securities by directors
officers, etc
34) May prescribe that certain particulars be included in the book of account of
specified companies
35) Authorize some officer to inspect books of accounts kept by a company.
36) Order conducting of special audit
37) Exempt a company from disclosure of certain information in directors report.
38) Require submission of additional statements of accounts and reports.
39) Permit a company to withhold or defer the payment of dividend one declared
by the company
40) Appoint auditors of a company in a case where auditors are removed
41) Appoint a qualified person as auditor of a company where company has
appointed any unqualified or disqualified person as the auditor.
42) Prescribe the additional matter to be included in auditors report.
43) Appoint a person to investigate the affairs of a company.
44) Initiate action against management of a company under certain cases
45) Impose restrictions on transfer of shares of debentures
46) Issue license to a non-banking finance company
47) Make rules for functioning of NBFCS.
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48) File a petition for winding up of a company
49) Make order for payment of unclaimed dividend
50) Prescribe fees payable under the companies ordinance
51) Enforce compliance with the provisions of the companies
ordinance
52) Furnish annual report to the federal government
53) Delegate its powers to registrar or any other officer.
54) Power to make regulations necessary to carry out the
purposes of the companies ordinance.
55) Power to issue directives circulars guidelines, etc
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Powers and Functions under the SECP Act;
1) Identify and recommend the matters requiring the policy
discussion by board
2) Regulate the issue of securities
3) Regulate the business in stock exchange commodity exchange
and any other securities market;
4) Supervise and monitor the activities of any central depository
and stock exchange clearing house.
5) Register and regulate the working of the
1) Stock brokers
2) Sub-brokers
3) Share transfer agents
4) Bankers to an issue
5) Trustees of trust deeds
6) Registrars to an issue
7) Underwriters
8) Portfolio managers
9) Investment advisors and
10)Any other intermediaries

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6) Propose regulations for the registration and regulating the
working of collective investment schemes, including unit trust
schemes
7) Promote and regulate self-regulatory organizations
8) Prohibit fraudulent and unfair trade practices relating to
securities markets
9) Promote investors education and training of intermediaries of
securities markets
10)Hear and decide investor complaints against persons involved
in brokerage business for any violation of rules etc
11)Conduct investigations in respect of matters related to the
SECP act or the companies ordinance 1984
12)Regulate substantial acquisition of shares and the merger and
take-over of companies
13)Regulate professionals who provide services within the
financial services markets
14)Maintain and issue panel of auditors for different companies
15)Call information from the stock exchanges and undertake
inspections conduct inquiries and audits thereof;
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16)Consider and suggest reforms of the law relating to companies
bodies corporate or securities markets
17)Encourage the organized development of the capital market
and the corporate sector in Pakistan;
18)Conduct research relating to the capital market and the
corporate sector;
19)Perform the functions and exercise the powers of the corporate
law authority under the companies ordinance 1984, the
securities and exchange ordinance 1969 the modaraba
companies and modaraba (floating and control) ordinance 180
and any other law ot the time being in force. However the
power of the corporate law authority to make rules or
regulations cannot be exercised by the commission
20)Perform the functions and exercise the powers of the federal
government under the federal government to make rules or
regulations cannot be exercised by the commission
21)Propose regulations in respect of all or any of the aforesaid
matters for the consideration and approval of the board
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22)Exercise powers discharge duties and perform functions
assigned to it under the law of insurance
23)Ensure and monitor the compliance of law by the insurers ,
insurance surveyors and insurance intermediaries
24)Regulate the organized connected with insurance business;
25)Encourage the organized development of the insurance market
in Pakistan
26)Promote and regulate development of private pension scheme
and fund ;and
27)Promote and regulate any scheme fund arrangement or
undertaking established by companies or corporations for
entitlement of post-employment benefits of their employees
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Security and Exchange Policy Board
Securities and Exchange Policy Board

The policy board is the highest authority within the
jurisdiction of the SECP act. It supervises the
functions of the commission and determines the
policy matters concerning the smooth functioning of
the commission, the corporate entities and the self-
regulatory organizations.

The federal government shall appoint the chairman of
the policy board out of the members of the board

Powers and functions of policy board
The policy board has the following powers and has to
perform the following functions under the SECP act:
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1) If required advise the federal government after consultation with the
commission on the matters relating to the Securities industry and
insurance industry; Regulation of companies and corporate sector;
Protection of the interests of the investors

2) Consider and approve any regulations with respect to implementation
of policy decisions, proposed by the commission.

3) Consider and approve the budget of the commission for each
financial year.

4) Express its opinion on any policy matters referred by the federal
government on the commission

5) Oversee the performance of the commission under the SECP act,
1997

6) Exercise all such powers and perform all such functions as are
conferred or assigned to it under the SECP act 1997

7) Specify fees penalties and other charges payable under the SECP act
1997.
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Members of the Board
The total number of the members of the policy board is fixed
as nine (9). Five (5) of the members of the board shall be
appointed out of the government employees and the
remaining four (4) from the private sector.

The following officers of the government shall be the
members of the board:

1) Secretary to the government of Pakistan, finance
division;
2) Secretary to the government of Pakistan, law division;
3) Secretary to the government commerce division;
4) The chairman of the SECP; and
5) A deputy governor of the state bank of Pakistan
nominated by the governor of the state bank of
Pakistan.
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Term of Office of the Members
An ex-officio member of the board shall hold office till
such time as her holds the office by virtue of which he
is a member. He will cease to be a member upon
transfer, retirement resignation or termination or in
any other way ceasing to hold the concerned office.

The private sector member shall hold office for a term
of four (4) years. Such members, if eligible may be
reappointed for a further period of four years. After
the expiry of their second term of four (4) years.
After the expiry of their second term such members
cannot be re-appointed. Further upon attaining the
age of sixty-five (65) years a member shall cease to
hold the office.
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The Meeting of the Board
The policy board shall have at least four (4) meetings curing
a calendar year. The quorum for these meetings shall be four
(4)

With the approval of the board an ex-officio member may
authorize an officer of his division shall not be below the rank
of additional secretary.

The rule of majority shall prevail in all decisions of the board.
In the event of a tie, the chairman of the board shall have a
casting vote.

The board is empowered to invite any person who is not a
member to attend any of its meetings. The person so
attending the meetings cannot participate in any decision or
vote at the meeting.
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