Five years after being presented in parliament, the senate on Thursday passed the Securities Bill-2015, paving the way to upgrade and consolidate legal structure for regulating the capital markets.
The bill was moved by Minister of State for Interior Muhammad Balighur Rehman on behalf of Finance Minister Ishaq Dar. The bill would now move to the National Assembly for discussion and approval prior to becoming a law.
The capital markets are primarily being regulated under Securities and Exchange Ordinance 1969 (SEO 1969), whereas the corporate sector regulator derives inputs from two more laws — the Companies Ordinance 1984 and the Takeover Ordinance 2002.
The new law not only has clear directives related to fit and proper criteria of key market players but has higher degree of transparency and strong penalties on business conduct too.
The new features in the Securities Bill 2015 include declaring of insider trading as criminal offence compared to a civic offence under the existing law.
The winding up of businesses by the brokerages has been made difficult so that the investors’ money could be recovered as much as possible.
Similarly, for the first time comprehensive details related to Public Offering have been covered in the law, and criminal laws would apply on the issuer making defective or misleading prospectus.
The issue of conflict of interest too has been covered at length, while the brokers and their agents are required to maintain high standards, the brokers can be charged under the new law for misleading advertisements.
The ‘Emerging Powers’ of the SECP in the new Bill include liquidate the position of any security, terminate trading in any security market, suspend trading in any security market, confine trading to liquidation of securities positions, limit trading to a specific price range. “Most of these powers are currently not specified anywhere in the law- but the commission has to issue special directives in this regard whenever required,” said an official.
At the same time a new clause ‘Destruction of Evidence’ has been added in the law to facilitate supervisions and investigations by the regulator.
“Crash and market manipulations discourage the investors from capital markets and strong laws are needed to expand the investor base in this sector,” the official said.
Another clause to check market manipulation has been added, giving more powers to the regulator in seeking details of trades of any listed company.
The new law also allows establishment of new securities exchanges, clearing houses and central depository companies.
The Securities Bill was presented in the National Assembly in 2010. However, it could not be taken up by the relevant standing committee. The finance ministry resubmitted it to parliament in January 2015 and the Senate Standing Committee on Finance approved it on March 2, 2015 as a result the bill has been cleared in Senate.