Securities and Exchange Commission of

Pakistan

Introduction
It is government organization which aims to develop modern and well-organized corporate sector
and capital market based on sound and regulatory principles so that there is sustainable growth
and prosperity in Pakistan. Secp was formed to succeed the corporate law authority which was
was a part of department of the ministry of finance. Its reformation was started in 1997 under the
capital market development plan of the Asian development bank. A securities exchange
commission of Pakistan act was approved by the parliament and announced in December 1997.
Through this act the securities and exchange commission of Pakistan became operational as an
independent body in January 1999. This act gave the organization the administrative authority
and financial independence to carry out reform of Pakistan’s capital market with collaboration of
Asian development bank. The powers of the commission have been handed to individual
commissioners and appellate benches as order by this act. The scope of the authority of the
commission have been expanded by including insurance sector, non banking financial companies
and pension funds in the commission. The commission also includes investment financial
services, leasing companies, housing finance services, venture capital investment, discounting
services; investment advisory services real estate investment trust and management services etc.
The commission also regulates various external service providers that are connected to corporate
sectors i.e. chartered accountants, rating agencies, corporate secretaries etc.

Core objectives
1) To protect investors and maintain the integrity and reliability of the securities of the
markets.

2) To reduce systematic risk in order to encourage growth of strong corporate sector and
capital market in Pakistan.

3) To develop an efficient and active regulatory body those promote principles of good
governance in the corporate sector.

4) To ensures proper risk management procedure in capital market and protects investors
through proper policy measure.
 5) To administer other key participants in the securities world, including stock exchange,
broker dealers, investment advisors, mutual fund and public utility.

Organizational Structure/Activities
Securities and Exchange Commission of Pakistan works under the supervision of the Securities
and Exchange Policy Board.

Securities and exchange policy board

The government appoints securities and exchange policy board consisting of nine members,
including five ex-officio members and four from the private sector. The ex-officio members are
sectary finance division, sectary law and justice division, sectary commerce division, chairman
of the commission and a deputy governor of state bank of Pakistan. A member not being ex-
officio member shall hold office for a term of four years and shall be eligible for re-appointment
for one further four year term but not more. Members are no allowed to hold office at the age of
sixty five years. The board meets often as may be necessary for the performance of its functions
but not less than four times in a year.

The main objective of the board is to provide guidance to the commission in all matters relating
to its functions and devise policies discussing with the commission. The policy board is also
responsible for advising the government on matters pass on by the government.

Chairman

The federal government appoints one of the commissioners to be the chairman of the
commission and no commissioner will be appointed chairman repeatedly for more than two
consecutive terms. The chairman is the chief executive officer of the commission and together
with other commissioners is responsible for the day to day management of the affairs of the
commission.

The Commission

The commission is body with collective responsibility. The chairman is the Operational and
decision-making authority of the commission who is the chief executive officer of the
commission. He is helped by the commissioners, mainly to manage the working of various
operational units.

The Commission Secretariat

Commission secretariat is headed by one of the commissioner who performs the functions of the
secretary as well as an advisor to the commission. The main function of the commission
secretariat is to help the chairman with the coordination of other departments of secp and
external unit to achieve the objectives of secp in an efficiently.

• Function/Activities

He has many responsibilities, which include the performance of all office work as
specified in the secp act 1997 and the rules regulations. The secretary also acts as a
secretary to the securities and exchange policy board. The secretary has also to conduct
meetings of the committees. His normal duties are issuing notice of the meetings of the
commission and the policy board, maintain the minutes of the meetings and to watch the
execution of the decisions made by the Commission and the Policy Board. Besides all
this the secretary may also perform the following functions.

i. To represent the commission in any forum if so allowed by the chairman.

ii. Accept service of all notices and other documents and other documents on behalf
of the commission.

iii. To certify a decision made by the commission.

iv. To communicate to the relevant people, all decision made in the meeting.

v. Perform all other duties and powers as maybe assign to him by the chairman
from time to time.

The IACC Department

This department is headed by director of the department. IACC coordinates the overall
functioning of the commission and liaises with external entities, including government agencies,
ministries and multilateral and international organization. It also help the management of
corporate government regime and donor funded project besides handling investors and
companies complaints. It contacts with the print and electronic media for proactive circulation of
information relating to key regulatory measures and initiative undertaken by the commission.

• Operational Structure and Activities

The Operational Structure and Activities of IACC Department

 International affairs wing

 i. Contact with IOSCO to initiate reform based assignments relating to
IOSCO objectives and principles compliance assessments, IOSCO
multilateral MOU signing of and related matters thereof including the
amendments needed in the legal framework, work on the mandate under
IOSCO working group 3 and other ongoing tasks under various IOSCO
forums such as EMC,EMCAB etc.

ii. Contact with equal regulatory authorities for implementation of bilateral

agreements on regulatory cooperation, enforcement assistance, and
information sharing, and observe the implementation of such
arrangements.

iii. Works with international assessments such as Pakistan’s Financial Sector

Assessment Program and World Bank’s mission, ADB mission etc.

iv. To Implement of Anti Money Laundering Program, examine of AML

Ordinance 2007 and coordinate to frame rules, regulations and
guidelines on AML and work related to APG mutual evaluation of AML.

v. Work for improvement of Corporate Governance including liaison with

Pakistan Institute of Corporate Governance and consider amendments in
Code of Corporate Governance etc.

vi. To Implement of SECP CSR Initiatives including the matters relating to

Institute of Capital Markets etc

vii. To assist to meet the Commission overall training requirements.

 Internal and external communication wing

i. Regularly contact with print and electronic media to provide information on the
reforms made by the commission. Regular press briefings on various reform
measures and publication of the annual report.

ii. To provide materials for Economic Survey of Pakistan, Report on Quality

Assurance Procedures, Report on Principles of Policy, Finance Minister’s budget
speech, Prime Minister/Finance Minster messages for different forums and
matters relating to Exit Control List.

 Internal and external coordination wing

i. To Monitor and follow up of complains and appeals received from investors,

companies and other stakeholders.
 ii. Works relating to messages received from Ministries and Parliament/assembly
matters.

iii. Timely implementation of donor funded projects. Work on related reports,

accounts and reconciliation of outstanding amounts.

iv. Matters relating to SBP-SECP meetings and proposal for amendments in Income
Tax Ordinance.

v. To maintain an up-to date library.

 Information Resources centre

i. To print resources such as books, journals etc.

ii. To Subscribe of different online and offline resources from national and
international organization.

Information System and Technology Division

This department is headed by Executive director. It provides information technology leadership

to SECP, to build the organizational information structure and to expand technology support. In
short the IS and Technology division is the technology partner for all members of the SECP
community and is ISO certified.

• Objective

The objective of the information system and technology division is to provide efficient
support to the commission regarding all aspects of information system and technology. It
is responsible for organizing and implementing an integrated system design to support
the workings of the commissions and its communication with the company registration
office throughout Pakistan. The IS and T department aims to provide services right, first
time, in time and every time to maximize the commissions productivity and minimize
the stakeholders complaints.

• Functions/Activities

This division has six different functional units, applications, systems, networks, database
and data recovery. Apart from this unit the divisions also manage an information
resource center (library) for the commission. The division role in secp is to provide
information technology leadership, to build the commission’s information infrastructure
and effectively participate in making it a modern and efficient regulator.
 The division strives to expand technology support to create the information technology
environment that the commission needs in order achieve its mission and vision. In short
we can say that the mission is to be technology partner for all the members of secp
community.

Internal Audit Department

Audit department serves as an independent evaluation function with the commission. It works in
accordance with an internal audit guide and internal audit charter, and make reports to the audit
committee. The internal audit manual outlines the standard, guidelines and procedures for the
internal audit department.

Activities

During the year the internal audit department carried out the following major activities.

i. Evaluate the payroll processing, petty cash management, revenue collection, travel, and
procurement and administration functions.

ii. Pre audit of all third party payments at the head office.

iii. Monthly examine the budget allocations and utilization.

iv. Analysis the monthly reports and annual accounts of the commission.

v. Post audit of transactions of the support services division of the commission.

vi. Analyzing the control environment at the company registration office.

At the end of each audit a report of observation and recommendations would be submitted to the
audit committee for interview and the chairman and concern commissioner and for necessary
action by the department head.

Legal Department

This department is headed by executive director. It operates under the direct guidance of
chairman and is responsible to manage the legal affairs of secp and provide unbiased legal advice
to each operational division and department of the secp.

• Objective

The objective of legal department of Securities and Exchange Commission of Pakistan is

to manage its legal affairs.

• Function/Activities

The legal department has the following functions

 i. General Wing

This wing works as an umbrella. It supports the executive directors in all matters
pertaining to legal department.

ii. Advisory Wing

The advisory wing provides impartial legal advice to the operational division and
department of sec and federal government departments that refer advisory work to
secp for seeking its expertise in corporate and financial matters.

iii. Litigation Wing

The litigation wing manages court case on behave of secp. In this regard the
litigation wing is supported by the operational division or department of secp in
which the case arises.

iv. Adjudication and Review Wing

The adjudication and review wing is responsible for inspection and drafting of the
following.

a. Orders, notifications, circulars and notices

b. Contracts and memoranda of understanding

c. Working papers and concept papers

v. Legislation Wing

The legislation wing is responsible for drafting and vetting legislation for the
secp. In addition the legal department also be referred legislation for drafting and
vetting from federal government.

HR and Training division

The human resource and training division is headed by director. It is responsible for different
activities that include main power planning, recruitment, selection and capacity building of the
secp employees. The division has the following department and activities.

i. HR Department

The HR department has different responsibilities that include main power

planning recruitment and developing HR policies and procedures managing
employee benefits and compensation, coordinating with other departments in
 connection with staff development and processing employee promotions,
transfers, retirements and discharge.

ii. The Training Department

It carry out the necessary activities for capacity building of the secps
employees. These activities are meant to improve the productivity of
employees providing them with new skills, knowledge and abilities, ensuring
their continued usefulness to the organization and meeting their personal desire
for advancement.

The Company Law Division

This department is headed by executive director. It has been given a number of responsibilities
that include regulation, monitoring and enforcement of laws related to the corporate sector.

The division is divided into two departments with different functions and activities.

i. Registration Department

This department is headed by executive director and the department is responsible for
administration of the companies’ ordinance 1984 and the rule and regulation made
there under. Its main function includes registration of companies regulating their
functions and monitoring of corporate compliance through examination of statuary
returns and accounts. The registration department supervises and coordinates and
monitors the working of company registration offices.

ii. Enforcement and Monitoring Department

This department is also headed by executive director. It is responsibilities are

monitoring and implementing compliance of listed companies with related laws and
valid accounting standards through examination of publish accounts, investigation
and prosecution. In case of disobedience necessary actions are taken against those
companies.

Specialized Companies Division/Functions

This division is headed by commissioner or chairman. The division gives a regulatory setting
which is helpful for development and strong non bank financial sector. The NBF sector under
SCD contain of Non Bank Finance Companies, Mutual Funds, Pension Funds, Real Estate
Investment Trusts, Private Equity Funds, Modaraba Management Companies and Modarabas.
The key functions performed by SCD for the NBF Sector include, licensing, registration,
regulation, onsite inspection, offsite surveillance and enforcement. The primary objective is to
safeguard the interest of the stakeholders while at the same time to assist diversification and
innovation in products and services of NBF sector. For operational ease and to make it efficient
the SCD has been divided into two departments’ i.e. policy and regulation department and
supervision department. The policy and regulation department based on Islamabad carry out the
function of licensing, registration, provision of comprehensive regulatory framework and
granting necessary regulatory approvals to NBP sector. The supervision department is in Karachi
and and is responsible for centralized function of one site inspection, offsite inspection and
enforcement.

Finance and Admin Division/Activities

This department is responsible for giving instruction and controlling the work of accounting,
helping entire operations of the secp and ensuring its proper functioning. It has been divided into
the following department.

1) The Finance department

The finance department is headed by executive director. It is responsible for controlling and
directing the areas of accounting, treasury management, budgeting and preparation of periodic
financial reports of secp.

2) The Administration Department

The administration department is headed by director. It is responsible for providing essential

support services to all departments of secp.

Securities Market division

Securities market division is headed by executive director. The duty of this division is the
regulation of all parts of securities market including licensing and coordination, regulation of
secondary market, public offerings, market intermediaries and market inspection.

 Objective

To give protection to the investors, regulation of markets and dealing in securities.

 Divisional Structure and Function/Activities

This division has been divided into four wings and they perform the following functions.

1) Market Monitoring and Surveillance and Beneficial Ownership Wing

2) Brokers and Agents Registration, Inspection and Complaints Wing

3) Stock Exchanges, Depository and Clearing, Policy and Regulation Wing

4) Capital Issues Wing

1) Market Monitoring and Surveillance and Beneficial Ownership Wing

 This wing monitors trading activities at stock exchange on real time basis. The wing
watch price changes on scrips, monitor abnormal prices and turn over, detect cases of
market manipulation and insider trading and carry out details investigation in such
cases.

2) Market Monitoring and Surveillance and Beneficial Ownership Wing

The responsibility of this wing is registration of brokers and agents, detailed inspection
of brokers and handling investor complaints. The registration of brokers and agent creat
a direct regulatory connection for ensuring investor protection and observance of code
of conduct annex to the brokers and agents’ registration rule, 2001. To have discipline
within stock exchanges and their members, it carries out inspection of books and
records of the members of stock exchange.

3) Stock Exchanges, Depository and Clearing, Policy and Regulation Wing

This wing is responsible for the improvement and evaluation of policies and regulation
governing main capital market institutions, including stock and commodity exchanges,
central depository company, national clearing company and other market participant

4) Capital Issues Wing

The Wing deals with the cases concerning approval of prospectuses for public offer of
securities. It also deals with cases regarding issue of securities outside Pakistan under
Section 62A of the Companies Ordinance 1984, registration of Special Purpose
Vehicles under the Companies Rules 1999 etc.

Insurance Division

SECP is regulating the insurance industry, since January 2001. Before, it was controlled by the
ministry of commerce government of Pakistan.

Role/Activities of Insurance Division in Insurance Sector

The main purpose of this division is to strengthen and maintain an effective regulatory
environment in which insurance companies can flourish and expand. The activities or function of
this division are as follow.
 i. To Protect the interest of insurance policyholders
ii. Necessary changes in the regulatory framework to strengthen SECP role as a only
insurance regulator.
iii. To Enhance of regulatory framework for Insurance.
iv. To provide insurance protection to less privileged segment of the society.
v. Insurance Awareness Programs.
vi. To enhance public image of the insurance industry

Laws Governing SECP

Following are some of the laws which govern the securities and exchange commission of
Pakistan.

1) Anti money laundering ordinance, 2009

2) Listed companies( substantial acquisition of voting shares and take over) ordinance 2002

3) Insurance ordinance 2000

4) Securities and exchange commission of Pakistan act,1997

5) Central depository act, 1997

6) Companies ordinance, 1984

7) Modaraba companies and Modaraba (floating and control) ordinance, 1980

8) Companies (appointment of legal advisors) act, 1974

9) Securities and exchange ordinance 1969.