SECP ‘struggling’ to demutualise bourses
Despite the passage of two years, the Securities and Exchange Commission of Pakistan (SECP) has not been able to pursue the case of demutualisation of stock exchanges.
The only progress made so far is that three stock exchanges of the country are currently under discussions to find strategic investors for the bourses.
So far, only the Karachi Stock Exchange (KSE) has signed non-disclosure agreements with international investors. Meanwhile, the Lahore Stock Exchange (LSE) and Islamabad Stock Exchange (ISE) have not even entered the advanced stage of discussions with strategic investors.
The SECP seems unable to have fulfilled its role of keeping a check on the delays or to address the grievances of stocks exchanges in this regard.
On the other hand, the KSE maintains that the progress was in accordance with the law.
“The time frame according to the law is within two years of demutualisation,” says Shehzad Chamdia, head of demutualisation committee at KSE.
“The SECP can direct stocks exchanges within two years to enter into agreement with strategic investor - and that has been done by the Commission on August 26, 2014 that is, one day before the expiry of two year period.”
The ISE is still in the preliminary stage of discussions with three investors and even the ‘ due diligence’ process has not even been worked out.
Incidentally, the SECP instead of issuing any note of concern has lauded the efforts of the Islamabad Stock Exchange to get foreign strategic investors and financial institutions for the sale of its shares.
In a recent meeting after the expiry of two year term, the SECP team led by its acting chairman Tahir Mehmood visited the ISE head office. Mehmood was briefed about the progress so far made by ISE for strategic sale to foreign investors.
The SECP delegates were told that the ISE was at the advanced stage of achieving the goal of divestment.
On the other hand managing director ISE, Mian Ayaz Afzal said that the ISE is still working over the matter of finding a strategic investor and acknowledged that the regulator has not issued any directive or notice to the ISE for the delay and expiry of two years.
However, a senior official of the ISE said that the delay in finding the strategic investor was due to the political situation in country.
“The year period after the approval of demutualisation act in August 2012 up to the elections in May 2013 went through paper works only,” the official added, “Whereas now when the economic stability was beginning to be visible a new crises has propped up.”
Similarly, the LSE has too failed to achieve any progress in this regard.
The LSE blames the SECP for not acknowledging the ground realities.
“The criteria established for the strategic investor is too strict and only 28 or 29 parties fit into it,” said a member of the Demutualisation Committee LSE.
“We have told this repeatedly to the SECP that the criteria needed to be relaxed so that bourses in Australia, Malaysia etc could enter into agreement with any Pakistani Stock Exchange – but the Commission has yet to respond to it,” he added.