KARACHI: The Pakistan Stock Exchange and Securities and Exchange Commission of Pakistan are engaged in a struggle over the bourse’s board of directors’ election.
At end of December 2017, the SECP had notified the PSX to hold for the new board by February 28th, but due to stringent opposition by broker directors in tandem with independent directors, has caused delays, reported Dawn.
A broker said the three-year term of the current board will end in February 2019 and it had accommodated the Chinese members, after which fresh elections would be held next year.
But a source at SECP said who is aware of the developments noted as per the law the board would be reconstituted on conclusion of demutualization process.
He added SECP was emphasizing that the public which holds 20 percent shareholding in the PSX should also have representation on the bourse’s board.
Over five meetings have been conducted in the previous month to resolve the issue, but both parties were unwilling to change their stance.
Rahat Kaunain Hassan, one of the independent directors had resigned on Monday. An email addressed to the board by her said several meetings of the board had been held, but no development had taken place on the issue in response to the SECP instructions for conducting fresh elections.
According to Ms Kaunain, PSX was opposing the instructions notified by SECP, which had no legal standing. And her email seems to align with Chinese views in which she said, “I fully agree with the Chinese representatives that the board and its meetings should primarily be focused on developing the business of the exchange, rather than being entangled in controversies or frivolities.”
But people outside with knowledge of the issue stated both sides were at loggerheads over the appointment of independent directors.
Till the conclusion of demutualization, SECP was empowered to appoint independent directors to the PSX board. As PSX is now a listed entity and operating under Companies Act, 2017, it is bound to follow the rules laid down as application to all other listed companies.
According to a PSX director, the SECP notification cannot override the law, which states all listed companies are required to hold elections of its board every three years and the present board’s term is due for expiration in Feb 2019.
But there is an interesting twist in this saga, why is PSX bent upon delaying elections of the board? Since the term of current SECP chairman will end in August 2018 and SECP will have power to nominate independent directors of its choosing, if the election was to be held now, said the broker director on PSX board.
But the SECP source contended SECP had given PSX the right to allot the number of directors and newly elected shareholder directors alongside representatives of 20 percent public shareholding and current independent directors choose new independent directors to the board.
A senior official at SECP believes PSX has not conformed to its directives and failed to form a new board of directors by February 28th. He said the apex regulator was empowered under Section 159 of Companies Act, 2017 to displace the PSX and enforce its order.
