Role of SECP in Corporate governance:

Good corporate governance seeks to create an institutional framework that encourages all
participants of the governance system to contribute towards better corporate performance
through an alignment of their objectives.

The Securities and Exchange Commission of Pakistan (SEC) has taken several important steps to
improve corporate governance in the country. While the governance of stock exchanges has
significantly improved with the inclusion of independent directors and appointment of
independent managing directors, the SEC is actively working on developing the first Code of
Corporate Governance for Pakistan Features of the Code of Corporate Governance Salient
features of the Code are as follows:

• The Code shall be applicable to listed companies, banking companies, Development Financing
Institutions (DFIs), Non-bank Financial Institutions (NBFIs), insurance companies, mutual funds,
unit trusts, and companies/corporations held or controlled by the Government. Other
companies are encouraged to follow the Code.

• A statement of compliance with the Code shall be published by companies. The statement
shall be reviewed by the auditors, to the extent that compliance with the Code can be
objectively verified.

• Effective representation of minority shareholders and non-executive directors on the board

of companies has been ensured.

• Corporate and financial reporting framework has been re-defined to foster better disclosure
requirements.

• Audit Committees are required to be established by all companies within the purview of the
Code.
Role of SECP in Corporate governance:

Good governance and corporate governance stands ensuring the interest of various
stakeholders making capital market transparent protecting rights of minority shareholders and
attracting and retaining foreign investment importance of corporate governance role of SECP
March 2002 Revision in the code 2012 PICG the corporate compliance transparency disclosure
and accountability standards will improve significantly in the capital markets.

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 authority 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 to the erstwhile
Corporate Law Authority (CLA), which was an attached department of the Ministry of Finance.
The process of the CLA's restructuring was started in 1997 under the Capital Market
Development Plan of the Asian Development Bank (ADB). The parliament passed the Securities
and Exchange Commission of Pakistan Act, which was promulgated in December 1997.
Consequently, the SECP, having an autonomous status, became operational on January 1,
1999. The Act gave the organization the administrative authority and financial autonomy to
carry out the reform program for Pakistan’s capital market.

The scope of the authority of the SECP has been gradually widened. The insurance sector, non-
banking financial companies, and pension funds have been added to the purview of the SECP.
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.
Role of SECP in corporate governance:
The importance of good corporate governance practices for companies and explains the duties and
responsibilities of directors and managers of a company in terms of the Code of Corporate Governance
and the Companies Ordinance, 1984. The Securities and Exchange Commission of Pakistan (SECP) has
prepared a manual of corporate governance which explains the responsibilities of management,
directors and auditors of listed companies in achieving compliance with good governance practices
The SECP issued the Code of Corporate Governance in March, 2002, which was subsequently
incorporated in the listing regulations of the stock exchanges. The code seeks to establish a framework
of good corporate governance whereby a company is managed in compliance with best practices.

While discussing the roles and responsibilities of directors, the manual explains their fiduciary duties
under corporate as well as Islamic law. It also distinguishes between the responsibilities of the Chief
Executive Officer, the Company Secretary and Chief Financial Officer.
The manual provides certain guidelines which directors have to follow while reviewing financial
statements.
It also highlights the qualifications of external auditors of a company and the procedure for the
appointment of the first auditors as well as subsequent auditors of a company.

Steps to Improve Governance of Stock Exchanges:

To improve governance, efficiency and transparency in the stock exchanges, the following measures
have been taken:

Forty percent non-member directors are appointed on the board of each of the three stock exchanges in
Pakistan (Karachi, Lahore and Islamabad). Moreover, the directors of stock exchanges cannot delegate
operational powers to any person other than the Managing Director. The Managing Director of each of
the three stock exchanges is appointed/removed with the approval of SEC.

The number of broker-directors in the Central Depository Company (CDC) has been reduced from five
to three (out of a total of nine) and the Board of Directors of CDC cannot delegate operational authority
to anyone except the CEO.

Furthermore, the SEC has nominated a director on the Board of CDC.The Chairman of the CDC is to be a
non-broker professional. Brokers and Agents Registration Rules have been notified, which define the
eligibility requirements of brokers and lay down a comprehensive code of conduct. Only registered
brokers are allowed to trade at the exchanges.