| About The Division
The Securities Market Division (SMD) is responsible for monitoring, regulating,
and developing the securities market. It regulates the primary and secondary markets
as well as market intermediaries through registration, surveillance, investigation,
enforcement, and rule making, with the objective of protecting investor interests.
The SMD also processes and grants approvals to prospectuses for public offering of
both debt and equity securities. In addition, it institutes appropriate regulatory
reforms to develop and promote the market, engender investor confidence and
instill transparency, effective risk management and good governance at the
three stock exchanges, Pakistan Mercantile Exchange, Central Depository Company
and National Clearing Company.
The division has three departments:
| Functional profiles
These are the functional profiles of various wings of the SMD’s departments.
| Policy, Regulation and Development Department
Stock Exchanges, Depository and Clearing House Wing
It formulates the regulatory framework of the three stock exchanges, the CDC and
the NCCPL. This entails devising regulatory framework for these capital market
entities for improved risk management in their operations and procedures,
introduction of new products and systems, good governance, increased transparency
and improved investor protection etc. The SEDC is also responsible for continuously
reviewing and revamping the existing regulatory framework in view of the
changing market needs and to keep abreast of international developments,
including compliance with relevant IOSCO Objectives and Principles of
The wing is actively involved in the development of new products and systems
for the equity markets, aimed at providing new avenues of liquidity and
investment alternatives to the investors and the market participants, and
improving efficiency and efficacy of the procedures in place at these entities.
This includes formulating detailed methodology/product or system design for the
introduction of new financial products (leverage, equity etc.) and systems
in collaboration with these entities and other relevant stakeholders.
It processes registrations of the capital market entities in accordance with
the eligibility requirements set out in the respective laws. In order to
effectively discharge its functions, the wing liaises closely with the boards
of directors and managements of these entities and other governmental agencies
and ministries. The SEDC through active representation on various forums,
committees and focus groups facilitates continuous review of the capital markets
for proactive identification of areas for growth and development of the capital
markets. The wing exercises the SECP’s powers to order suspension and delisting
of securities of the non-compliant companies at the stock exchanges in the best
interests of the market and investors.
Commodities and Derivatives Wing
It formulates the regulatory framework and for continuously reviewing/revamping
the existing regulatory framework of the Pakistan Mercantile Exchange Limited (PMEX)
for improved risk management, introduction of new products and systems,
good governance and transparency, improved investor protection and for accommodating
the changing local and international market needs.
The wing is involved in diversifying the existing product portfolio of the PMEX
in commodities and currencies by introducing products targeting hedging and
speculative needs of various market segments for enhancing activity and for
broadening the investor base. This includes introduction of new commodities
and currencies futures contracts and changes to the contract specifications
of the existing contracts in line with the best international practices and
suitability of these contracts in accordance with the local market needs.
The wing also processes registrations of commodities exchanges on behalf of the SECP.
It also formulates the product design and regulatory framework for introduction
of derivative products.
| Public Offering and Regulated Persons Department|
Beneficial Ownership Wing
It monitors the trading activities of specified officers and more than
10% shareholders of all listed companies to protect the interests of small
shareholders of listed companies. Such beneficial owners are discouraged to
make a windfall gain. Thus, in compliance with section 103 of the 2015 Securities
Act every director, chief executive, company secretary etc. and every person who
is a beneficial owner of more than 10% of a listed equity security is required to
file a return of beneficial ownership within 7 days of the attaining of status of
beneficial owner and to report changes in shareholding within 7 days of the change.
The said returns of beneficial ownership are examined to detect the cases where
the gain has been made on account of purchase and sale or sale and a purchase
transaction made within the period of six months. .Pursuant to the provisions
of section 105 of 2015 the Securities Act, the beneficial owners are required
to report and tender the amount of such gain to the SECP for onward credit the
same to the Federal Consolidated Fund.
Brokers' Registration and Investor Complaints Wing
It registers brokers and agents of stock exchanges and brokers of
mercantile exchange. It also handles investor complaints against brokers of
stock exchanges and mercantile exchange. The registration of brokers and
agents establishes a direct regulatory nexus for ensuring investor protection
and observance of Code of Conduct by brokers and agents. The wing plays an
instrumental role in ensuring effective resolution of investor complaints
and grievances, particularly those of small investors.
In an effort to ensure investor protection and provide relief to aggrieved
investors, it works in close coordination with stock exchanges.
In case of defaulting members, it diligently monitors default procedures
to provide relief to investors aggrieved by such defaults.
Capital Issue Wing
It deals with the cases regarding approval of prospectuses for public
issue/offer of securities. The prospectus of any company inviting public
subscription for its securities is required to be approved by the SECP
under the 2015 Securities Act, prior to its issue, circulation and publication.
It also processes cases regarding issue of securities outside Pakistan under
the Securities Act, registration of Special Purpose Vehicles (SPV), the
underwriters and the registrars and transfer agents. In addition, it also
regulates mattes under the 1996 Companies (Issue of Capital) Rules, pertaining
to initial public offerings and cases of making more than one application by
a single applicant for subscription of shares. It is also responsible for
the development of primary market both equity and debt.
It is also responsible for devising the SECP reform agenda for the organized
development of an active and transparent secondary debt capital market in Pakistan.
The wing takes reform initiatives to address prevailing shortcomings in the
existing structural, regulatory and operational framework of the debt market
for more synchronized development of the Pakistani capital markets as a whole.
It develops and reviews policies and regulations for the debt market, including
new product development and system enhancements etc. based on international
legal standards and best practices. The roadmap prepared by the wing involves
extensive stakeholder consultation to ensure effective implementation of the
same through task identification with the capital market infrastructure
institutions and other relevant stakeholders.
Surveillance, Supervision and Enforcement Department (SSED)|
Market Surveillance Wing
It is responsible for monitoring and vigilant surveillance of the trading activities
at the three stock exchanges to ensure that market participants are not exposed
to manipulation or any unfair play. It keeps a close watch on price movements of
scrips, monitors abnormal prices and turnover through state-of-the-art
surveillance software. It also detects cases of market manipulation, front running
and insider trading and conducts detailed investigations and inquiries in such cases.
Market Watch and Development Wing
It is primarily responsible for closely monitoring the index movement based on
the impact of the media and research reports. It circulates a daily stock market
report and summary of unusual movement or pattern in the stock market such as
sudden rise or drop in the index, volume of a particular sector or scrip, for
onward analysis to the Market Surveillance Wing. It analyzes corporate
announcements made by companies and their impact on the stock price, researches
on developed jurisdictions, maintains required database for the Market
Surveillance Wing. It also reports market position at the close of market,
including foreign investment, KSE100 index drivers, summary of MTS and futures to
the head of department on a daily basis.
Media and Research Wing
This wing closely observes the news media, including TV, newspapers, the Internet
etc. to prepare reports related to stock market, companies and macroeconomic
factors relating to capital market. Such reports are forwarded to the Market
Watch and Development Wing and Market Surveillance Wing for analysis. It also
analyzes research reports of brokerage houses, examines the periodical financial
statements and reports important features to the relevant wings. In addition,
it prepares and presents case studies to all officers of the department on
enforcement actions taken on market abuse in various jurisdictions.
Compliance and Inspection Wing
It ensures compliance with relevant rules and regulations by the stock exchanges
and other market intermediaries to strengthen the market oversight and enforcement
through offsite inspection. The offsite inspection mostly comprises of reporting,
as per prescribed format and frequency to the SECP by the regulated entities.
Such reports are assessed and analyzed to identify and provide compliance status,
which may lead to identify potential high-risk areas. In order to infuse discipline
within stock exchanges and their members, the wing also plans to undertake
inspection of books and records of the members of the stock exchanges.
Onsite inspection involves a detailed and comprehensive review of policies,
procedures and internal control systems, established to assure compliance with
the rules and regulations and to assess financial health of the entity.