Department of Commerce BS Final Year

Submitted to: Maam Sadia Submitted by: Neelofar Saeed Subject Financial Institution Submitted on: August 18, 2010

First of all I would like to thank Almighty Allah who gave me strength to complete my assignment on Securities and exchange Commission of Pakistan, then I greatly thankful for the efforts of my honorable teacher Maam Sadia who give us this opportunity to present myself in front of her as well as class mates. Without her feedback and guidance, this report would never been completed. She help me to stay motivated and on schedule. She dealt with all of my day-today problems and questions. I wish to thank all my class mates who graciously support me for making this report. This report helped to accelerate my understandings of financial institutions and now I can utilize a unique learning experience in my career.

Introduction
The Securities and Exchange Commission of Pakistan (SECP) is the top regulatory body in the country to regulate the corporate sector and the capital market with the aim to ensure clearness and efficiency in the functioning of its financial markets. One of the main functions of SECP is to include companies under the companies ordinance, 1984 (the Ordinance). The SECP work is around the registration of the companies. Means it deals with all the companies registered under the Companies Ordinance, but not with the Banking Companies. Its strategy is to develop an efficient and dynamic regulatory body that fosters principles of good governance in the corporate sector, ensures proper risk management procedures in the capital market, and protects investors through responsive policy measures and effective enforcement practices.

Mission Statement
"To promote an efficient and transparent capital market, develop the corporate sector and protect the investor through responsive policy measures, effective regulation and enforcement of best governance practices."

Vision Statement
"To install and sustain a dynamic, modern and proactive regulatory body that provides impetus for the development of a fair, efficient and transparent capital market and a robust corporate sector."

History of SECP
The Securities and Exchange Commission of Pakistan (SECP) was set up in pursuance of the Securities and Exchange Commission of Pakistan Act, 1997 under the Capital Market Development Plan of the Asian Development Bank (ADB). This Act institutionalized certain policy decisions relating to the constitution and structure, powers, and functions of the SECP, thereby giving it administrative authority and financial independence in carrying out its regulatory and statutory responsibilities. The SECP became operational in January 1999 and has come a long way since then. It was initially concerned with the regulation of corporate sector and capital market. Over time, its mandate has expanded to include supervision and regulation of insurance companies, non-banking finance companies and private pensions. The SECP has also been entrusted with oversight of various external service providers to the corporate and financial sectors, including chartered accountants, credit rating agencies, corporate secretaries, brokers, surveyors etc. The challenge for the SECP has improved multiple with its increased mandate.

Functions of SECP

The Commission Secretariat is headed by MR. ABDUL REHMAN QURESHI, Secretary. It coordinates the overall functioning of the SECP and liaises with external entities, including government agencies and multilateral and international organizations. In addition, it supervises the internal monitoring function within the SECP and is responsible for the management of donor-funded projects. Director heads these functions. The internal audit function is headed by the Director. Administratively, the internal audit is a part of the Chairman Secretariat.

Organizations and their functions

SECP includes different organizations namely division and divide them into different categories such as: Company law division

It is responsible for monitoring and enforcing observance of listed companies (except insurance companies, non-banking finance companies and modarabas) with relevant laws and applicable accounting standards through review of published accounts, inquiry, and examination. Its objective is to improve regulatory compliance for creating a healthy corporate culture and promote good corporate governance that ensures clearness thereby protecting the stakeholders rights and strengthening investors confidence. Securities market division

It 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. Its objective is to provide for the protection of investors, regulation of markets and dealings in securities. Specialized companies division

The SCD strives to provide a regulatory environment which is conducive for development and promotion of a robust Non-Bank Financial (NBF) Sector. The major functions performed by SCD for the NBF Sector include: licensing, registration, regulation, on-site inspection, off-site surveillance and enforcement. The underlying objective is to safeguard the interest of the stakeholders while at the same time facilitate diversification and innovation in products and services of NBF sector. Insurance division

It is responsible for supervision and development of insurance sector, including life and non-life insurance companies, takaful operators, insurance intermediaries and

bodies connected with insurance like Insurance Association of Pakistan, Pakistan Insurance Institute and Pakistan Society of Actuaries. Its their aim to ensure protection of the interests of insurance policyholders and to promote sound development of the insurance industry. Law division

Law Division has been given the mandate for ensuring risk management of the affairs of SECP. Its objective is the Law Division ensures that all legal services are performed with the highest integrity and in accordance with the finest ethical standards of the legal profession for achieving the statutory mandate of SECP.

Role of SECP
As the regulator of an emerging market the SECPs regulatory philosophy is based on the principle of developmental regulation. SECP, therefore, laid considerable emphasis on market development while administering and enforcing various corporate and securities laws. SECPs regulations are based on: Consultative rule making Facilitating implementation Stringent enforcement

Now we will take just an overview of the role, the SECP plays in the capital markets of Pakistan. We will focus on the recent developments made by the SECP but first we will discuss the traditional role of the Securities and Exchange Commission of Pakistan. 1. Regulating the issue of Securities The Securities and Exchange Commission of Pakistan is the regulatory authority in Pakistan and responsible for making the various rules regarding the Capital Markets. 2. Regulating the business in Stock Exchange and Other securities markets The SECP not only regulate the business of Stock Exchanges but also regulate the business of other securities markets. For example; the SECP is now specially promoting the insurance sector and formulating the various rules to protect the policy holders. 3. Monitoring the Capital Markets

Through monitoring the capital markets, SECP also gather the information about the reasons of the fluctuations in the markets, detect the flaws in the policies, identifying the unfair capital market practices are some examples. 4. Registering SECP also propose regulations for the registration and regulating the working of collective investment schemes, including unit trust schemes SECP promotes and regulates self-regulatory organizations including securities industry and related organizations such as stock exchanges and associations of mutual funds, leasing companies and other NBFIs. SECP also regulate substantial acquisition of shares and the merger and take-over of the companies. 5. Prohibiting Fraudulent and Unfair Trade Practices The SECP has formulated various rules to protect the investors and companies against the fraudulent and unfair trade practices. According to the Section 29(1) of The SECP Act, 1997, the Commission may conduct the investigations in respect of any matter that is offence under this Act. 6. Promoting Investors Education and Training For helping the capital markets of our country the SECP has designed numerous programs to educate the investors. The basic purpose of these programs is to make the investors able to understand the nature of capital market. The SECP is also training the intermediaries of the securities markets. This will leads to the better understanding between the SECP policies, investors, and the Capital Market. 7. Calling for Information and Undertaking Inspection The SECP can also call for the information and undertake the inspections, conduct inquiries and audits of the Stock Exchanges and intermediaries and self-regulatory organizations in the securities market. By conducting the audit of the Stock Exchanges the SECP enables itself to get the real position of its capital market and comes to know that the either the Stock Exchanges are following the rules or not. 8. Suggesting Reforms of Law SECP consider and suggest the reforms of law relating to the companies and bodies corporate, securities markets, including changes to the constitution, rules and regulations of companies and bodies corporate, Stock Exchanges or clearing houses. 9. Encouraging the Development

The SECP performed its role as the greatest encourager of the development of the not only the capital markets but also for the other related markets. SECP has formed a research wing for identifying the areas of improvement to make those areas better. The research wing of the SECP can conduct research in any of the matters relating to markets. 10. Regulating the Insurance Business The SECP is ensuring and monitoring compliance by insurers, insurance surveyors and insurance intermediaries of all laws, rules and regulations pertaining to insurance for the time being in force. SECP is also regulating professional organizations connected with the insurance business and encouraging the organized development of the insurance market in Pakistan. 11. Maintaining the Investors confidence SECP plays an important role in maintaining the confidence of the holders of the insurance policies by protecting the interests of the policy holders and beneficiaries of insurance policies in all matters, including assignment of insurance policies, nominations by policy holders, insurable interest, and surrender value of policies of life insurance, and other terms and conditions of contracts of insurance. 12. Disclosure of Information to the Public Its necessary for the companies listed at any stock exchange in Pakistan to issue the opinion of a qualified auditor along with the financial reports. It is also necessary to disclose all necessary matters in the financial statements and reports to provide the best information to the public and reducing the chances of fraud. 13. Settlement of Disputes SECP also performs its role as the authority to resolve the potential disputes between the parties I.e. investors and companies. SECP is not only solving these matters but also is trying to improve existing methods and advise new opinions for the expeditious settlement of claims and disputes between the parties.

Scope of SECP
The SECP is strongly pursuing the process of demutualization and incorporation of stock exchanges. For this purpose, SECP has prepared a preliminary road map for demutualization and incorporation, which has been shared with the stock exchange. Moreover, SECP has engaged the services of legal expert to draft special legislation (Act and accompanying Rules and Regulations) to enable demutualization and

incorporation of exchanges. Broad discussion on the enabling legislation is in process and is expected to be finalized shortly. SECP is keeping a close relationship with stock exchanges to drive the process of demutualization and possible incorporation. In this regard, soon after the submission of report by expert committee on demutualization and incorporation, comprising of international and national experts, SECP initiated a consultative process with all the stakeholders. In this regard, it arranged various meeting with all the three stock exchanges to discuss the modalities and implementation of demutualization and possible incorporation.