ISLAMABAD: Securities and Exchange Commission of Pakistan here on Friday unveiled the structure and road map for demutualisation of stock exchanges under which foreign stock exchange; investment bank or Central Depository Company could acquire management of any stock exchange.
National Assembly Standing Committee on Finance and Revenues met in the parliament house under the chair of Fauzia wahab. Secretary Finance, Dr Waqar Masood Khan and SECP Chairman, Razi-ur-Rehman Khan were present on the occasion.
Chairman, SECP, briefed the committee on salient features of the proposal and said that demutualized stock exchange shall comprised of strategic investor with 40 percent shares, general public with 20 percent shares and existing brokers with the remaining 40 percent. Explaining the term of strategic investor, chairman SECP said that it can be stock exchange of foreign country having capital and latest technology, investment bank and central depository company. The strategic investor would be allowed to obtain 40 percent shares with total neutral management control.
Local institutions will be getting shares from the remaining after sale of shares to strategic investor and general public. However, strategic investor may acquire more shares from general public by not exceeding its holding from 51 percent of paid up capital(further acquisition not before 3 years of acquisition), Razi explained. Trading Rights Entitlement (TRE) certificate holder and their connected persons shall not hold majority on the board of any stock exchange. Chairman of the board of any stock exchange shall not be a director who represents TRE certificate holder.
The commission may direct divestment of shares by initial shareholders, a member of public or TRE certificate holder if the holding exceeding 1 percent shares of a stock exchange. The same is applicable for any financial institution whose holding period exceeds 5 percent. The shares of stock exchanges shall be listed on any stock exchange and within time, as may be prescribed by the SECP and consultation with board of directors of stock exchanges. Stock exchanges shall not issue any new TRE certificate to any person until June 30, 2010 unless two third of TRE certificate holders decide otherwise. Thereafter 15 TRE certificates shall be offered for issuance from July 1, 2010 to December 31, 2019.
The SECP would have powers to order for integration of two or more stock exchanges after their submission of scheme of integration and compliance with procedures.
Offence & Penalties: The Commission would have powers to suspend the privilege and or hold a stock exchange liable to a penalty of Rs 20 million, in case offence is committed by it under the act. The same is applicable for any director, shareholder, TE certificate holder, and committee member to the limit of Rs 1 million.
Stock exchanges shall not make any amendment in Memorandum and Articles of Association, commence any proceeding of winding up, or sell immoveable asset, without approval of the SECP.
Time Lines: Within 30 days of promulgation of the bill stock exchanges would be required to constitute demutualisation committees fully authorised to approve valuation of stock exchanges, enter into negotiations with strategic investor and determine offer price for offer of sale of shares to general public.
Within 45 days of promulgation of the bill every stock exchange shall submit its valuation, revaluation. Propose authorised paid up capital, name of the proposed members and director, proposed plan for segregation of commercial and regulatory functions, draft memorandum, article of association and five year development plan.
Within 30 days of the receipt of the aforementioned information, the SECP shall approve the aforementioned and nominate six directors for each stock exchange.
Within 30 days of receipt of the aforementioned approval, a stock exchange shall adopt memorandum and article of association, allot shares to initial members, and deposit 60 percent of shares in block account, issue certificate and TRE to share holders.
Within 7 days of adoption, a stock exchange shall submit copy of resolution, certificates from auditors and CDC for allotment and deposit, respectively, of shares to initial shareholders. And within 7 days of receipt of aforementioned information, the registrar shall issue a certificate of re-registration, first directors shall replace the previous directors from such date and stock exchange shall stand demutualised.
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