Assignment No 3

Subject:-
Financial Management

Submitted to:-
Muhammad Shoaib Sajjad

Submitted by:-
Rumesa Manzoor
Sp16-BBA-008

Dated:-
22-11-2017
Question no 1:-
What is the primary concept that drives SECP laws and
regulations?

Answer:-
Laws:-
Legal Adviser.
(1) Every company shall appoint at least one Legal Adviser on
retainership to advise such company in the performance of its functions
and the discharge of its duties in accordance with law: Provided that a
company in existence immediately before the commencement of this Act
shall be deemed to have complied with the provisions of this sub -section
if it appoints a Legal Adviser before the expiration of three months from
such commencement.
(2) No person other than an advocate or a registered firm shall be
appointed to be a Legal Adviser.
Rules & Regulations

Regulatory Framework

The Stock Exchange are governed under the Securities and Exchange
Ordinance 1969 Framework. The ordinance prohibits dealing in listed
securities outside the Stock Exchange by any person and transaction in
securities listed in the Stock Exchange. The Capital market has a
triangular foundation in Pakistan comprising of the Stock Exchange,
Central Depository Company (CDC) and National Clearing Company
Pakistan Limited (NCCPL).

1. SECP
The Securities and Exchange Commission of Pakistan (SECP) was set up
in accordance to the Securities and Exchange Commission of Pakistan
Act, 1997. The main purpose of the Securities and Exchange Commission
of Pakistan (SECP) is to develop a smooth functioning and efficient
corporate sector and a capital market based on sound regulatory
principles, so as to promote sustained economic growth in the economy.
The SECP covers the following entities in their laws and regulations:
 Corporate Sector (Private and Public Companies)
 Capital Market (Equity Market, Debt Market, Derivatives Market)
 Insurance
 Non-Banking Financial Institutions (NBFIs)
 Pensions
 Professional Service Provider

SECP's role is to develop corporate sector and capital market based on

the sound regulatory principals to foster economic growth. SECP
provides guidance to the new market entrants and safe guards their rights.
SECP acts as a regulatory body and monitors all economic activities.For
more details
2. NCCPL

In the capital market development program, Asian Development bank

gave recommendations to have a separate individual and centralized
system for all three Stock Exchanges. So in replacement of the old system,
a complete automated electronic settlement system was developed called
the National Clearing & Settlement System (NCSS).Any security which
becomes live in Central Depository System, on ready status, is inducted
accordingly into the National Clearing & Settlement System (NCSS).

The main purpose of the NCSS system is to act as clearing house for all
capital market transactions. The system provides clearing and settlement
services for all markets including Ready, Future, CFS, IPO, etc. The
system caters and facilitates brokers, non brokers, and bank.

3. Central Depository Company (CDC)

The three Stock Exchanges are linked to the Central Depository System
(CDS) of the Central Depository Company. The company was developed
to remove physical securities management. The current prevailing system
helps in transferring shares from one client account to another through an
electronic book entry system (CDS). The main aim of the CDC is to act
as a central depository of securities on behalf of all the financial
institutions and investors.For more details

It has solved investor problems related to stock handling on the

settlement date, registration of shares, and exercise of corporate action
benefits. This system has resolved issues like Physical Shares Handling,
unproductive physical shares settlement, risk management and pledge
procedures. This has helped in quicker settlement and increased stock
market performance. About 97% trades settled by the Stock Exchange are
now handled through the CDS. Other benefits may include:

 Instantaneous transfer of ownership (electronically)

 Elimination of fake certificates
 Convenience / Savings to investors
 Confidence building of foreign & local investors by reducing the
transaction risk
 Greater transparency of transactions
 Substantial savings in stamp duty
a. CDC Account Types

There are generally two options that an investor or broker has, to open an
account with the CDC. These are:

i. Sub Accounts:

Investors open client accounts (sub accounts) with the participants

(brokers and financial institutions) without direct access to CDC. This
option had the disadvantage of complaints by investors of mishandling of
shares by brokers.

ii. Investor Account Services:

Investors open account services giving direct access to the CDC.

Question no2:-

How does the SECP ensure that investors have this information?

Answer:-

In accordance with laws of the government of Pakistan and of

internationally accepted standards, the Securities and Exchange
Commission of Pakistan (SECP) is committed to protecting the privacy of
users visiting its website.
As a matter of policy, the SECP does not collect information on users
visiting its website, unless the information is voluntarily provided by
them. In case of a requirement by any agency within the government, the
information may be shared with them although information will never be
given out for commercial purposes without the consent of the user.
The information collected by the SECP can be used for official purposes,
internal reviews, and improvement of website and to contact users, if
needed. The SECP strives to provide a facilitative regulatory environment
and services forsmall and medium enterprises, for foreign investors, for
promoters, for listed companies, for non banking finance companies, for
issuance of term finance certificates and for dormant companies through
e-services and establishing differentfacilitation centers in all big cities of
Pakistan.The SECP has uploaded a separate link for investors on its
website and where important information/link can be found. These
include:
 List of registered brokers or agents of the exchanges
 Sample forms for account opening and sub account opening
 Investor complaint forum
 Investor guide and FAQs
 List of defaulter brokers of PSX
 Links to regulation for PSX and other exchanges Other updates and
information
 Important contact information
INFORMATION COLLECTED BY THE SECP
All information that can be used to identify an individual is considered
“personally identifying information.” The SECP does not retain
personally identifiable information about user based on browsing of our
website, unless the user chooses to provide such information to the SECP
through sending an email, registering as a user, participating in a survey,
responding to feedback etc.
Like other departments, agencies and regulatory bodies, the SECP may
request personally identifiable information from you in order to provide
requested services. However, such information is handled as in the case
of a personal visit to a department, agency or organization.
EMAIL AND FORMS
If you send us an electronic mail message with a question or comment
that contains personally identifying information, or fill out a form that
emails us information, we will use this personally identifying information
only to respond to your request. We may redirect your message to another
government agency or person who is in a better position to respond to
your query or comment.
All email messages received contain the email addresses of persons who
voluntarily communicated with us or requested information from us.
Users’ email addresses are not shared with any non-governmental or
commercial entities without the users’ consent. When a user has given
SECP their email address for purposes of communicating with or
requesting information from the SECP, that communication becomes part
of the public record and may be subject to public inspection and copying,
if not protected by the law.

SECURITY MEASURES
Considering the importance of integrity of information and systems, the
SECP has taken appropriate safeguards ensuring the security of
information. We strive to rid our systems and data of destruction,
corruption, unauthorized access and breach of confidentiality.
We have taken many steps to safeguard the integrity of our computer
systems and networks. These steps include, but are not limited to
individual authentication, the security of transmitted data, security
monitoring, auditing and encryption of your information.
SHARING OF USER’S INFORMATION
Except as provided by applicable laws, we do not collect, use or disclose
user information without the user’s knowledge and approval. We do not
share user information with third parties unless we have informed users
about the disclosures or have prior consent. Links to other sites.
POLICY REVISION AND NOTIFICATION OF CHANGES
The SECP may at any time revise or update this policy without notice.
We may inform our users about policy changes through notices on this
page containing a version number and date. Any information collected
under the current policy will remain subject to these terms. Information
collected after any changes take effect will be subject to the revised
privacy policy.

Question no3:-

The SECP also enforces their regulation .approximately how

many cases does the SECP bring annually against individuals
and companies who break their laws?
Answer:-

ANNUAL AUDITED ACCOUNTS

1.
Companies are required to file Annual Audited Accounts:
Following companies are required to file annual audited accounts with
Registrar:
All public companies (including associations not for profit and companies
Limited by guarantees); and
Private companies having share capital of Rs. 7.5 Million or more.
2.
Filing of Annual Audited Accounts:
In terms of the Companies Ordinance,1984 (the “Ordinance”), every
listed company is required to file with the Registrar at least three copies
of annual audited accounts duly signed/authenticated, whereas in case of
other companies, at least two copies, within 30 days from the date of
Annual General Meeting. Moreover, in terms of the Ordinance, every
listed company is required to file 5 copies of annual audited accounts
with the Registrar and the Commission at least 21 days before Annual
General Meeting.
3.
Authentication/signing of the annual accounts:
The annual accounts are required to be approved by the directors and
signed by the chief executive and at least one director. Where the chief
executive is for the time being not present in Pakistan, then the
balance-sheet and profit and loss account or income and expenditure
account of the company should be signed by at least two directors present
for the time being in Pakistan.
4.
Director’s duty to lay Accounts:
Annual audited Accounts must be approved from the directors (required
under Section 196 of the Ordinance) and then laid before the Annual
General Meeting (AGM) within four months of closing of accounts.
5.
Printing of Accounts:
Sufficient copies of annual accounts with notice, directions and auditors,
reports etc. are required to be printed by the listed companies and are
required to be circulated to the members, Commission, Stock Exchange
and the Registrar.
6.
Time for laying the Accounts
First Annual Accounts:
First annual accounts are to be laid in first Annual General Meeting
required to be held in first eighteen months after the incorporation of the
company but within four months of closing of accounts.
Subsequent Annual Accounts:
Subsequent annual accounts are laid once in AGM, required to be
held in each calendar year.
7.
Period of Annual Accounts:
The period of accounts should not exceed twelve months.
8.
Audit of Annual Accounts:
The balance sheet and the profit and loss accounts and income and
expenditure account are audited by the statutory auditor of the company
and auditor’s report is to be attached with the annual accounts.

Question no4:-

What are common SECP violations that require civil enforcement action?

Answer:-

ISLAMABAD – April 19, 2010: Market integrity is the core objective of

any securities regulator and is crucial for the well-functioning of the
capital market. Market surveillance, in particular plays a significant role
in detecting and deterring potential market abuse and avoiding
disruptions to the market from anomalous trading activities. Where such
cases are detected, the actions are taken in accordance with the law.
The Securities Market Division of the Securities and Exchange
Commission of Pakistan (“the Commission”) performed active
monitoring and surveillance of the stock market during the last twelve
months. The focus was to check the compliance of prevailing regulatory
framework, enforcement and development of fair and transparent market.
This is also evident from numerous enforcement cases initiated and
actions taken during the period under review. In twenty two different
cases for violation of securities laws with special reference to insider
trading, price manipulation, short/blank selling, wash trades, broker
misconduct and noncompliance of the Listing Regulations, the Orders
were issued after conducting hearings and penalties were imposed under
the Securities & Exchange Ordinance, 1969 and Brokers & Agents
Registration Rules, 2001 to the members of the Stock Exchanges and
other market stakeholders (copies of the Orders available on SECP
website). Moreover, warning letters were issued to forty four members of
the Karachi Stock Exchange and six members of Lahore Stock Exchange
for possible violations. Besides, warning letters were also issued to two
banks for non-compliance of the securities laws. In addition, a Stock
Exchange was also penalized for violation of the Securities & Exchange
Ordinance, 1969. The Commission suspended the registration of five
members of the Karachi Stock Exchange on June 26, 2009 due to
unresolved investor’s complaints. Subsequently, to ascertain the quantum
of these complaints and other related issues, the Commission initiated
enquiry 2 against these brokerage houses under Section 21 of the
Securities & Exchange Ordinance, 1969.
The said enquiries were conducted by joint teams comprising of officers
from the Commission, Karachi Stock Exchange and Central Depository
Company of Pakistan. The enquiry teams have submitted the enquiry
reports to the Commission. Based on the findings of these reports, the
Commission has initiated legal action under the relevant provisions of the
laws against the persons who were involved in prohibitive activities.

Moreover, in the interest of public at large and in view of the large

number of investors complaints mainly pertaining to the alleged
non-transfer of shares and non-payment of funds, the enquiries have also
been initiated under section 21 of the Securities & Exchange Ordinance,
1969 against the four expelled / defaulter brokerage houses of the Karachi
Stock Exchange during the first half of 2010.

During the period, twenty six cases of possible violation of Section 224
of the Companies Ordinance, 1984 were detected / processed with respect
to tenderable gain. The gain was tendered to the issuers in three cases and
to the Commission in four cases. The Orders were passed in five cases
after due process and Show Cause Notices have been issued in nine cases.
The Commission is determined to pursue its agenda for fair market
practices, transparency and investor confidence for the growth,
development and stability in the capital market.

Question no5:-

When was the SECP established?

Answer:-

Securities and Exchange Commission of Pakistan (SECP) established

under the Securities and Exchange Commission of Pakistan Act 1997 was
operationalized as a body Corporate on 1st January 1999. SECP replaced
Corporate Law Authority, the former corporate regulatory body. It has
been vested with adequate operational, administrative and financial
autonomy. The SECP’s head office is at the Federal Capital, Islamabad
and it has eight regional offices (Company Registration Offices), one at
Federal Capital, four at provincial capitals and three in other major cities
i.e. Multan, Faisalabad and Sukkur. The SECP has been organized into
following Divisions:
• Company Law Division;
• Securities Market Division;
• Specialized Companies Division;
• Finance & Admin Division;
• HR& Training Division;
• Insurance Division;
• Information System & Technology Division.

Functions :-
SECP’s main functions include; regulation of securities market and
related institutions like Central Depository Company (CDC), Credit
Rating Companies and Modarabas (funds operating on the basis of
Islamic economic principles); administration of the company law;
regulation of non-banking finance companies like leasing companies,
investment banks and mutual funds, regulation of insurance business and
private pensions. One of the important functions of the SECP is the
incorporation/registration of companies. This task has been entrusted to
the Registration Department, Company Law Division which has its field
offices known as Company Registration Offices (CROs) for the purpose
of incorporation / registration of different type of companies. Since the
inception of SECP, a number of operational changes have been
introduced and a friendly environment has been created at the CROs.
Incorporation of companies has been made much easier, smooth and swift
ensuring completion of this process within three days. Other public
services like availability of name, providing of certified copies etc., are
rendered within one day. eServices has been launched by the SECP in
Sep. 2008, which facilitates online availability of name, online
incorporation of companies and e-filing of statutory returns. It enables the
promoters and management of the company to interact online using the
eServices portal, without visiting the SECP offices. Online services save
time and resources, increase efficiency, create a paperless environment,
promote confidence and strengthen the country’s economy.
INCORPORATION OF A COMPANY:-
For the convenience of general public, promoters and directors of
companies, SECP has established its eight CROs at Islamabad, Karachi,
Lahore, Peshawar, Faisalabad, Multan, Sukkur and Quetta. Online
facilities for incorporation of companies and filing of returns have been
made available. registration of companies and monitoring of their
working according to law, functions of CRO’s include providing services
and guidance and also to ensure that the companies and their directors
comply with the statutory requirements as provided under the Companies
Ordinance, 1984 (the Ordinance). The record of companies maintained by
the CROs is public record and the investors, shareholders, creditors and
general public, may inspect the record of any company whenever they
need and they may also obtain certified copy of any specific document on
payment of nominal amount of fee. Any three or more persons associated
for lawful purpose may, by subscribing their names to the Memorandum
of Association and complying with the requirements of the Ordinance
form a public company and any one or more persons so associated may,
in like manner, form a private company. If only one member forms a
private company, it is called a single member company and if it is formed
by more than one member, it is termed as a private company. Prior
approval of the Ministries/Departments etc. noted against each category
of the following companies is required to be obtained before
incorporation of companies: -
(a) A banking company
I) Ministry of Finance II) State Bank of Pakistan
(b) A non-banking finance company (NBFC) Securities and Exchange
Commission of Pakistan
(c)A security service providing company Interior Division
(d) A corporate brokerage house Stock Exchange (for transfer of member
ship card in favour of proposed company)
(e) A money exchange company State Bank of Pakistan
(f) An Association not for profit u/s 42 of the Companies Ordinance,
1984 Licence from Securities and Exchange Commission of Pakistan
(g) A trade organization u/s 42 of the Companies Ordinance, 1984
Licence from Ministry of Commerce

Question no6:-

How is the SECP organized?

Answer:-
The Securities and Exchange Commission of Pakistan (SECP) is
the financial regulatory agency in Pakistan whose objective is to develop
a modern and efficient corporate sector and a capital market based on
sound regulatory principles, in order to encourage investment and
foster economic growth and prosperity in Pakistan.

The Securities and Exchange Commission of Pakistan (SECP) is the

successor of the erstwhile Corporate Law Authority (CLA), which was an
attached department of the Ministry of Finance. The process of
restructuring the CLA was initiated in 1997 under the Capital Market
Development Plan of the Asian Development Bank (ADB). A Securities
and Exchange Commission of Pakistan Act was passed by the Parliament
and promulgated in December 1997. In pursuance of this Act, the SECP,
having autonomous status, became operational on January 1 1999. The
Act gave the organization the administrative authority and financial
independence to carry out the reform program of Pakistan’s capital
market.
The scope of the authority of the SECP has been extensively widened
since its creation. The insurance sector, non-banking financial companies,
and pension funds have been added to the purview of the Commission.
Now the SECP's mandate includes investment financial services, leasing
companies, housing finance services, venture capital investment,
discounting services, investment advisory services, real estate investment
trust and asset management services, etc. The SECP also regulates
various external service providers that are linked to the corporate sector,
like chartered accountants, rating agencies, corporate secretaries and
others.

The Securities and Exchange Commission of Pakistan (SECP) launched

celebrations of the World Investor Week (WIW) 2017 through its
nationwide educational activities. A variety of events were launched
during the week where experts from private, public, academic shared
their thoughts, experiences. They further discussed results of research
projects specifically regarding the importance of financial literacy in the
country.
The speakers articulated investor attitudes and behaviours, investment
obstacles, potential avenues and future prospects of Pakistan as emerging
market. The WIW is a worldwide campaign to raise awareness about the
importance of investor education and protection, promoted by the
members of the International Organization of Securities Commissions
(IOSCO).

Question no7:-

What are the four division of the SECP?

Answer:-

Division of SECP is:-

COMPANY LAW DIVISION
It is responsible for incorporation and dissolution of companies and
acceptance/ maintenance of information. It also monitors and enforces the
corporate legal framework to promote transparency, accountability, good
corporate governance and practices.
 CORPORATIZATION & COMPLIANCE DEPARTMENT:-
It is responsible for administration of the Companies Ordinance, 1984,
and the rules and regulations made under it, along with other relevant
laws. It registers companies, regulates their statutory functions, and
monitors corporate compliance. It supervises the working of the eight
Company Registration Offices (CROs).
 COMPANY REGISTRATION OFFICES:-
The SECP has eight company registration offices located at Lahore,
Peshawar, Islamabad, Karachi, Quetta, Faisalabad, Multan and Sukkur.

SPECIALIZED COMPANIES DIVISION

It provides a regulatory environment for a robust non-banking financial
(NBF) and modaraba sector. It also registers modaraba companies.
 POLICY, REGULATION & DEVELOPMENT DEPARTMENT:-
It performs the functions of licensing, registration, provision of regulatory
framework and granting necessary regulatory approvals to the NBF sector
which includes mutual funds, REIT funds, pension funds, private funds
and modarabas and microfinance, leasing companies and investment
banks.
 SUPERVISION & INFORCEMENT DEPARTMENT:-
It is primarily responsible for centralized functions of on site inspection,
offsite surveillance and enforcement of NBF sector.
 CORPORATE SUPERVISION DEPARTMENT:-
It supervises compliance by listed companies, public unlisted companies,
private companies having paid-up capital of Rs100 million and above and
companies formed under section 42 and 43 of the 1984 Companies
Ordinance (except insurance companies, non-banking finance companies
and modarabas) of the corporate legal framework.

SECURITIES MARKET DIVISION

It monitors, regulates, and develops the capital markets. It regulates the
primary and secondary markets as well as licensed entities and regulated
persons through licensing, surveillance, investigation, enforcement, and
rule making. It also processes and grants approvals to prospectuses for
public offering of both debt and equity securities.
 POLICY, REGULATION AND DEVELOPMENT
DEPARTMENT:-
It designs and administers SECP’s capital market reform agenda,
including review and formulation of regulatory policies and framework;
managing licensing, renewals and governance affairs of securities
exchanges, central depositories and clearing houses; implementation of
structural reforms, introduction of new products; and corporate
governance standards for listed companies.

 PUBLIC OFFERING & REGULATED PERSONS

DEPARTMENT:-
It formulates the regulatory framework for commodity exchange and
approves the new products for listing. It registers brokers and agents of
the stock and commodity exchanges, the debt securities trustees,
underwriters, balloters and transfer agents and book runners.
 SURVEILLANCE, SUPERVISION & ENFORCEMENT
DEPARTMENT:-
It is responsible for monitoring and surveillance of the trading activities
at stock exchanges. It is also responsible for oversight, offsite monitoring,
onsite inspections, investigations and enquiries of the capital market
participants.
 COMMODITY MARKET DEPARTMENT
It designs and administers SECP’s commodity market reform agenda,
including review and formulation of regulatory policies and framework;
managing governance affairs of futures exchanges and brokers;
implementation of structural reforms; and introduction of new products.

INSURANCE DIVISION
It regulates, supervises and promotes sound development of the insurance
sector, which includes life and non‐life insurance companies, thank ful
operators, insurance surveyors and intermediaries.