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      Specialized Companies Division
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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 investors interest. SMD also processes and grants approvals to prospectuses for public offering of both debt and equity securities. In addition, it is entrusted with instituting 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 Mercentile Exchange, Central Depository Company and National Clearing Company.

The division consists of the below mentioned departments:

Functional Profile
SMD is divided into following:
Policy, Regulation and Development Department

The SEDC is mandated with formulating 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 to continuously review and revamp the existing regulatory framework in view of the changing market needs and to keep abreast of the international developments including compliance with relevant IOSCO Objectives and Principles of Securities Regulation. 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, derivatives etc.) and systems in collaboration with these entities and other relevant stakeholders. The SEDC processes registrations and is empowered to grant renewals on behalf of the Commission to the capital market entities entrusted with the depository and clearing functions. In order to effectively discharge its functions, the Wing maintains a close liaison 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 is also entrusted with carrying out the powers of the Commission for ordering suspension and delisting of securities of the non-compliant companies at the stock exchanges in the best interests of the market and the investors.

The CC is presently responsible for formulating 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 CC 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 international best practices and suitability of these contracts according to the local market needs. The Wing processes registrations of commodities exchanges on behalf of the Commission.

The DCM is responsible for devising SECP reform agenda for the organized development of an active and transparent secondary debt capital market in Pakistan. DCM’s scope entails carrying out 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. The Wing is involved in developing and reviewing 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 DCM entails extensive stakeholder consultation for ensuring effective implementation of the same through task identification with the capital market infrastructure institutions and other relevant stakeholders.

The Capital Issues Wing (CIW) 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 Companies Ordinance, 1984 prior to its issue, circulation and publication. CIW also processes cases regarding issue of securities outside Pakistan under Section 62-A of the Companies Ordinance, 1984, registration of Special Purpose Vehicles (SPV) under the Companies (Asset Backed Securitization) Rules, 1999, relaxation from the requirements of the Companies (Issue of Capital) Rules, 1996 pertaining to Initial Public Offerings and cases reported under Section 18-A of the Securities and Exchange Ordinance, 1969 which prohibits submission of more than one application by a single applicant for subscription of shares.

Market Supervision and Registration Department

Beneficial Ownership Wing is responsible to monitor the trading activities of specified officers and more than ten percent shareholders of all listed companies in order to protect the interest of small shareholders of the listed companies. Such beneficial owners are discouraged to make windfall gain. Thus, incompliance of Section 222 of the Companies Ordinance every director, chief executive, chief accountant company secretary etc. and every person who is a beneficial owner of more than 10 ten percent of a listed equity security is required to file a return of beneficial ownership on Form-31 within 30 days of the attaining of status of beneficial owner and to report changes in shareholding on Form-32 within 15 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. Such amount of gain is recoverable as an arrear of land revenue.

This Wing ensures the compliance of relevant rules and regulations by the Stock Exchanges and other market intermediaries to strengthen the market oversight and enforcement through off-site inspection. The off-site inspection mostly comprises of reporting, as per prescribed format and frequency to the Commission 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. On-site inspection entails 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.

The Wing is entrusted with registration of brokers and agents and handling investor complaints. The registration of brokers and agents establishes a direct regulatory nexus for ensuring investor protection and observance of Code of Conduct annexed to the Brokers and Agents Registration Rules, 2001. The Wing also plays an instrumental role in ensuring effective redressal 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 works diligently in monitoring the default procedures to provide relief to investors aggrieved by such defaults.

Market Surveillance and Special Initiative Department (MSSID)

The Wing 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. The Wing 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.

This wing is responsible for the execution of the special projects assigned to it.

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