ISLAMABAD: The Sec­urities and Exchange Com­mission of Pakistan (SECP) has tightened the regime to establish non-government organisations (NGOs) in a bid to curb political interference by them.

The SECP said that existing conditions were prone to misuse in certain circumstances. It further said that new conditions will apply to all ‘associations’ (NGOs), including existing licensed ones as well as ones those seeking fresh licences.

The SECP has modified the conditions for grant of licence to NGOs registered under Section 42 of the 1984 Companies Ordinance and a new Circular 45/2015 in this regard has been issued to ‘plug-in possible loopholes in the existing regime’.

“New condition has been imposed in line with Section 197 of the Ordinance which prohibits political contributions and participation in any political campaign for elective public office or other political activities akin to those of a political party,” the SECP said.

The SECP added one of the several loopholes in the current regime include awarding remunerations to family members of directors in NGOs and facilitating them or receiving indirect remunerations in a subsidiary entity of the said association.

The SECP also said that directors often change after the grant of licence and that new directors do not possess sufficient skills and expertise, which was contrary to the whole exercise of ensuring fit and proper criteria observed at the time of grant of licence.

The SECP noted that certain NGOs, with promoters having political agenda or affiliation, might be used as a forum for political activities which otherwise are the activities of a political party registered under relevant law.

In such a case, funds of the association can be applied for political purposes, in violation of Section 197 of the 1984 Ordinance which prohibits making of political contributions to any political party or for any political purpose to any individual or body.

“To plug these loopholes, the new circular requires that a member as well as his family members shall not be allowed remuneration whereas the restriction shall extend as well to remuneration from subsidiary entities of the association,” the SECP circular stated.

Under the new rules, members are not allowed to quit with the sole reason to assume job of the association on remuneration, whereas it further prohibits the quitting member or his/her family members to receive remuneration from the association or its subsidiary entities for at least five years after quitting of the member.

Fit and proper requirements will be applied to new member director proposed by the association in lieu of the quitting subscriber or director, the SECP said.

Published in Dawn, December 18th, 2015