ISLAMABAD: In a bid to woo stock market players, the Securities and Exchange Commission of Pakistan (SECP) has started undoing some of the stern actions taken by its former management.

In addition, it has also accepted certain longstanding demands of the stockbrokers.

Last week, the SECP amended Demutualisation Act 2012 on brokers’ demand. Foreign investors can now collectively hold up to 10 per cent of the PSX stock. The SECP can increase the limit to 20pc later on.

“This demand was presented to SECP’s former chairman Zafar Hijazi, but he ignored it,” said a senior SECP official.

“There is no specific interest of the brokers in PSX shares. It was foreign investors’ demand. They wished to have a long-term presence in Pakistan,” said Aqeel Karim Dhedhi of AKD Securities.

“Stock market investment is a lot like shopping. For foreign investors, Pakistan is one shop. They can go to another country (for stock investment) so we need to have the best options to attract buyers,” he said.

The SECP also took some key measures recently, such as clipping the wings of the Surveillance Department established by Mr Hijazi and former commissioner of the Securities Market Division (SMD), Akif Saeed.

SECP’s acting chairman Zafar Abdullah also transferred 15 of around 28 personnel of the SMD Surveillance Department.

It was under the advice of the Surveillance Department that the SECP filed criminal cases against some investors and brokers for market manipulation a few months back. But the commission failed to actively follow these criminal cases in court. As a result, no meaningful objective has been achieved so far.

An official of the SECP said the commission lacked the required level of evidence against the investors and brokers to pursue these cases.

One person said that the action against stockbrokers by Mr Hijazi and Mr Saeed gave the impression that all market players were criminals.

“One reason for the continuous growth of the real estate market and investments in gold and prize bonds was that they entailed a lower level of regulation and documentation,” he added.

Another issue that hurt some market players was the introduction of the know-your-customer (KYC) form by Mr Saeed, which was to be implemented by mid-December.

However, Mr Abdullah has extended the implementation time to March 31 next year following a strong reaction from the brokers.

Another move by the SMD was to make the management rating mandatory for each brokerage house. Although the requirement has been placed on hold by the incumbent management, market participants have taken it negatively.

“This was not regulation or overregulation. This was the strangulation of the market,” said stockbroker Yasin Lakhani.

He said extensive paperwork scares away investors, especially individuals who are mainly retired people. “Overregulation and over-taxation are drawing investors to other avenues of investments,” he added.

Reaching its peak on May 25, the stock market benchmark index touched the intraday high of 53,127 points. It is currently hovering below the 40,000-point level. More importantly, the daily trading volume was less than 100 million shares.

Brokers continue to stay away from the market as they blame the regulator for the index decline.

“The volume speaks for itself. There is limited participation in the market because of a lack of confidence and unclear policies by the regulator. That is why buyers are not active in the market,” Mr Dhedhi said.

Noting that there is no managing director at the Pakistan Stock Exchange (PSX), he added, “Even the PSX board is not complete. There was a controversy about independent directors. What has the regulator done to address the reservations of the stockbrokers? Nothing,” he added.

The new managing director of the PSX, Richard Morin, is likely to take charge of his office in the second week of January next year.

The last acting managing director, Haroon Askari, retired on Nov 30 when the SECP did not extend his one-month tenure because he was 67.

“But why did the SECP keep renewing his appointment for 30 days for several months?” said a stockbroker who declined to be named.

External relations departments of the SECP and the PSX did not respond to questions related to the concerns expressed by brokers.

Published in Dawn, December 26th, 2017