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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
Protection of investors
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
Protection of investors
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