Regulating capital formation

Capital formation has become an essential part of the strategy for growing modern day businesses. The capital markets provide these business opportunities to raise financing to embark on a journey of growth and expansion. However, the corporation at times, blinded by self interest, may mislead investors by painting a rosy picture of their business prospects. 

In these cases, the role of the regulator is important as it recommends legislation to protect the interest of investors while also ensuring that ease of doing business is not compromised in the process. 

Security Exchange Commission of Pakistan (SECP) in an attempt to achieve the aforementioned, has published a concept note to enhance the transparency of further issue of share capital by moving towards a more disclosure based regime while also streamlining the process by benchmarking against comparable international markets. The experts in the subject matter have analyzed it to be an attempt to revamp a regulation that was becoming obsolete. However, they have criticized the lack of use cases presented by the commission in its proposal.