Failed coup widens gulf between bourse, SECP

Posted on 02.21.07 by StockPK Team @ 1:40 pm    

The issue of the removal of MA Lodhi, Managing Director of Karachi Stock Exchange (KSE) that ended up with his hard victory, has once again raised the question of transparency at the local bourse and sparked the tension between the SECP nominated non-members directors and KSE elected member directors on board.

The allegations that the Securities and Exchange Commission of Pakistan (SECP) nominated directors pinned on MD was that he was not performing his duties efficiently. They explained that the sitting MD earlier failed to manage the Callmate Telips Telecard Limited (CTTL) crisis that took place a couple of months back. It was not for the first time the issue like CTTL emerged at the local bourse, they explained.

In his defence, MA Lodhi put many counter arguments and tried to prove the inefficiency of SECP nominees on board. For example, they wanted to acquire many advantages that are prohibited to them by law i.e. asking to acquire trading rights. Moreover, they seldom attend the scheduled board meeting or left meeting in mid of its progress, Lodhi reported.

The issue of the removal of MD, after remaining in pending for the last three weeks turned down automatically, as large leadership of KSE supported MD in chair. The issue however has opened the Pandora’s box.

It was not only a one-to-one tussle between KSE brokers backed Managing Director MA Lodhi and Zafar A Khan, who is SECP nominee Director then Chairman-KSE, but the tussle underlined the widening gulf between the two apex bodies i.e. KSE and SECP, a broker on the condition of anonymity told to The News.

The issues that SEPC and KSE wanted to handle with their respective bureaucratic and non-bureaucratic styles are included the endless probe against the 88 members, who are allegedly found involved in violating the trading rules and regulations at the local bourses. Secondly, the full and final implementation of revised Risk Management System (RMS) with the ending of Client Level Netting (CLN). And thirdly, the demutualisation of KSE, he added.

MD, in both the cases, looks friendly towards KSE members and vice versa. They wanted to linger on these issues in the great interest of the brokers, he was of the view.

SECP started the investigation in March 2005 and February-March 2006 crisis ended up with deserving “delay in the justice is denial to justice” quote for itself.

On the other hand, the revised RMS that was to be implemented in last November is yet to be enforced in its true spirit. This time too, the delay was made dramatically, but in the great interest of investors, he maintained.

Neither KSE nor SECP circulated the related literature to the market players, nor they conducted training workshop well before their implementations, but started blame-game for the notable delay in its implementation, another analyst observed.

Moreover, the demutualisation of KSE and other local bourses would end the monopoly of bourses’ brokers. Fortunately, the process of demutualisation has started and is to be completed by December 2007.

Both the regulatory bodies pointed fingers on each other and made each other responsible for this delay.

On these above-mentioned three issues, SECP nominated directors and KSE elected members on board have never come up with one conclusion or solutions at the end of most of scheduled meetings. They remained divided on board which reflects the thoughts and minds of two apex regulatory bodies on two different ends.

Source: The News