Corporate Law Final AH

8/8/2019 Corporate Law Final AH

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Corporate and

Securities Regulationin Pakistan

Goher e Shabtab

Contemporary issues in

Corporate Law and Governance

LL.M(Corporate Law)


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Securities Regulation

Introduction


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What is Securities Regulation?

A field that covers the interaction between the

law and the securities industry.

This includes many different topics,some addressed by

some form of public law,

some by private law and

some by industry agreements, practices and

customs.


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Function of Securities

Regulation

The laws of securities regulation aims at

(1) protecting investors,

(2) increasing market efficiency, (3) completing organization of the market

firm,

(4) capturing wealth for some members of the

industry and

(5) affecting competition in the industry.


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Objective

The objective is to provide for the

Protection of investors

Regulation of markets &

Dealings in securities


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Regulations relating to

Regulation of Securities

Securities and Exchange Ordinance, 1969

Companies Ordinance, 1984

Securities and Exchange Commission ofPakistan Act, 1997

Central Depositories Act, 1997

Listed Companies (Substantial Acquisition ofVoting Shares and Takeovers) Ordinance,

2002


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Major Regulatory Bodies of

Financial Securities in Pakistan.

1. Securities and Exchange Commission ofPakistan-SECP

Basic institutional framework Unified regulator for all the activities on the

companies sector except banking

2. State Bank of Pakistan Regulator for the Banking Companies only


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Securities and

Exchange Commissionof Pakistan Act

Establishment of SECP for the

beneficial regulation of the capital

markets, superintendence and

control of corporate entities forconnected matters


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SECP- A regulatory body

A federal agency that administers Pakistans

securities laws to protect the investing public

and maintain smoothly functioning markets. It Succeeded the Corporate law Authority

and came into existence on Jan 01, 1999.

The SECP board is directly answerable tothe parliament.


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SECP-Divisions

It consist of 06 divisions

Security market

Enforcement Insurance

Support services

Non-banking financial sector

Company law administration


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SECP-Functions

The Securities Market Division at SECP is

responsible for the regulation of all aspects

of the securities market including:

licensing and coordination,

regulation of secondary market,

public offerings, market intermediaries and market

surveillance.


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State Bank of Pakistan

Established in 1948, (SBP) is the nationscentral bank.

The State Bank of Pakistan regulatescommercial banks and microfinance banks.

The responsibilities of the Bank are to ensurethe soundness of the financial system

through the licensing process and

regular supervision of commercial & microfinancebanks.


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SBP-A regulatory body

Regulatory Process

Risk Based Approach

Licensing

Supervision

Enforcement


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Central

Depository Companyof Pakistan Limited

For the establishment and

operation of book entry system

for the transfer of securities by

CDCs


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Central Depository Company

of Pakistan Limited (CDC)

Incorporated as a public limited (Unlisted) companyin 1993, is the only depository in Pakistan.

It started operations in September 1997.

Sole entity handling the electronic (paperless)settlement of transactions

carried out at all three stock exchanges of the country.

Through its efficient functioning, approximately 99%of the market settlement is in book entry form.

It is regulated by the (SECP).


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CDC-Description

CDC is an electronic book entry systemused to record and maintain securities andtheir transfers registration.

The system changes the ownership of securities

without any physical movement or

endorsement of certificates & execution of transfer instruments.


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Aim of CDC

The aim of CDC Pakistan is

to operate as a central securities depository onbehalf of the financial services industry so as to

contribute to the country's ability

to support an effective capital market system

which will attract institutional and retail level

investors from Pakistan and abroad


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Companies Ordinance1984

Consolidate and amend the law

relating to companies and certain

other associations for the purpose

of healthy growth of corporateenterprises, protection of investors

and creditors


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Mechanism of the Company

Law

Evidence of ownership

Share receipt

Register of members Rights determination

Right of Voting

Exercising ownership

Separate Control Management

Audit


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Cont

Through law, juristic person is formed

That can sue and be sued In the name of the company

Can ensure liability

companies have limited liability is a universally

accepted principle


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Memorandum and Articles of

Association

Memorandum

Is the Constitution of companies

Have the sanction of law behind it

Articles ofAssociation Contract between the share holders & promoters


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Separation ofOwnership and

Control

Share-holders are the owners of company which is

by virtue of

Their voting rights as to voting for election/removal of

A director& And an auditor

But the control is separate from the ownership which

is exercised by management

The directors Because they are bound by the articles of association and

are not in direct contract with the share-holders.


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Annual General Meeting (AGM)

At the end of every year, the companies arerequired to hold AGM in which Directors are appointed/removed

Financial statements are shown

Auditors are appointed/removed

In listed companies, it is mandatory to holdthe AGM quarterly now


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AUDIT

Audit

Qualification of the Auditors

QualityA

ssurance Credibility

Mitigation

Review of the Audited Accounts

Winding Up (liquidation)


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Securities and

Exchange Ordinance,1969

Overview


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Why S & E Ordinance?

Comes in the national perspective of

the Securities Regulation

Provides a national regulatory

framework with its objectivescombined with that of other

regulations to work more efficiently


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Securities and Exchange

Ordinance 1969

Objective


Ensures fair dealings and prohibits insider trading Regulation of markets

Registration and regulation of stock exchange

Dealings in securities

Delisting and regulation of transfer of securities

Prohibition & liability for insider trading


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Mechanism..

Delisting of securities

Regulation of

issuers, proxies,

central depository companies

Business for transfer agents, balloters etc

Business for different sort of companies

Power to make rules and regulations


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Securities Regulation

Overview


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Why These Regulations are

needed and how do they work?

The core objectives of securities regulation are the

Protection of the investors

Reduction of the systematic risk

Its not the Securities regulation alone but also the

general legal framework for the efficient regulation

and implementation of securities law.

Securities Regulation can not be effective if not

made across the borders.


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Securities Regulation-

approach Securities Regulation work keeping in view three

perspectives

International perspective of Securities Regulation

regarding its

Objectives and principles

Legal framework and implementation

National perspective of securities regulation with

respect to its

Development

Regulation

Reforms and future trends


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International Perspective

International organization is securities

commission (IOSCO)

Leading international grouping of securities

market regulators

Current membership comprises regulatory bodies

from different countries having day-to-day

responsibilities for securities regulation and the administration of securities law

International objectives and principles


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IOSCO

IOSCO, the international organization through the

cumulative experience and knowledge after

combining objectives and principles of securities

regulation has come up with 30 principles ofsecurities considering


Fair,efficient and transparent trade practices

Reduction of systematic risk Which serve as the mother of all security law.


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Requisite legal framework

Effective securities regulation requiresappropriate legal framework Company law

Commercial code

Taxation laws

Bankruptcy and insolvency

Competition law

Banking law

Dispute resolution system


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National Perspective

Market development (developmental

regulation)

Beneficial regulation of the capital markets,superintendence and control of corporate

entities.

Determines the functions and powers of the

commission and the Syndicate.

Administration & enforcement of several

corporate and securities law by SECP


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Cont..

Regulatory Policy

Efficient & Cost effective regulation

consultative rule making

Facilitating implementation Stringent enforcement

Regulatory role

Advisory function

Ensure investor protection National Regulatory Framework

Investor protection paramount


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Reforms and Future Trends

Code of Governance

Establishment of Pakistan institute of Corporate

Governance

Improvement in governance of stock exchanges Institutional development

Setting up of CDC

Establishment of National Clearing Company(NCCPL)

SECP reorganization

Improved risk management measures

Rotation ofAuditors


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Cont..

Business facilitation

Re-regulation of Corporate Sector Corporate Tax rationalization

Co-operation with Regional Securities

Regulators

Establishment of South Asian Securities

Regulators Forum


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Conclusion

Impact on the market


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Impact on the market

Each of these Acts have various regulations

having their own impact

1. Extensive Regulations

2. Every Regulation has a cost

3. Investors would get confused


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Present Situation

A country like ours which comes under theambit of developing countries and the

economic variations it undergoes with an

unstable economy has hard task to invite theinvestors and to give them security due to theover-whelming and extensive laws and

regulations which have been adopted from thedeveloped countries with an advanced and

stable economy, which in turn leaves aquestion mark towards the progress of our

market in the modern corporate world.


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Impact on securities market

An unresolved issue is what impactdifferences in legal regimes governing the

securities industry actually have on the

behavior of securities markets?


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Corporate Control

The market for corporate control has

attracted attention because it is a deviceby which the control of important

economic institutions can be wrested

from one incumbent management and

transferred to another


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SpecialTh

anks

Dedicated to Dr.Tariq Hassan forall the motivation which enabled

me to think through & submit my

project with keen interest

Corporate Law Final AH

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