ISLAMABAD: The Supreme Court on Thursday directed Secretary Finance to submit a detailed report about the appointment of Muhammad Ali Ghulam Muhammad as Chairman of the Securities and Exchange Commission of Pakistan (SECP) within two weeks.
A three-member bench headed by Justice Mian Shakirullah Jan and comprised Justice Anwar Zaheer Jamali and Justice Tariq Parvez also issued notices to the SECP Chairman, Policy Board Secretary, Finance Division, Commissioner (Company Law Division) and Director of the SECP’s Human Resource Department.Finance Secretary Abdul Wajid Rana, appearing before the bench requested him to give some time to file reply, as he assumed charge of his office a week ago. He assured the court that its orders would be implemented fully.
The petition challenging the appointment of SECP Chairman was moved by former chief of the SECP’s legal department Muhammad Ashraf Tiwana who has challenged the appointment of SECP Chairman’s appointment. He prayed to the court to direct the government to immediately appoint a new Chairman and Commissioners to complete the constitution of the Commission with persons of integrity, competence and professionalism who have no direct or remote conflict of interest and are not the nominees and cronies of lobbies and interest groups in the regulated sectors.
Being an autonomous statutory body, the SECP regulates corporate and financial sectors and all corporate entities and companies across Pakistan, including the securities market, non-banking finance sector, insurance industry, stock markets, credit rating agencies, brokers, surveyors and auditors.Muhammad Ali Ghulam, appointed SECP Chairman on Dec 24, 2010 is the largest shareholder and director of a private brokerage firm – Fortune Securities Limited.The petition highlighted some regulatory failures of the SECP, including the stock market crashes of 2005 and 2008 and debacle of the National Insurance Company Limited.
‘Despite hectic efforts by Parliamentary Committees, the culprits of the 2005 market crash have not yet been identified, lest being punished’, the petition stated. ‘Similarly, the causes of the 2008 market crisis have not been investigated’, the petitioner said.The petitioner requested the court to declare the appointment of individuals who are either members of stock and commodity exchanges or brokers, directors or shareholders of brokerage companies as Commissioners or Chairman of the SECP as against the law, equity, justice, fairness, public policy and ultra vires of the law, Constitution and principles of natural justice.
The petitioner also requested the court to strike down Section 5 (5) of the SECP Act introduced through Finance Act 2003 for violating Constitutional provisions like Articles 73 (procedure with respect to money bills) and 75 (President’s assent to bills).Section 5 (5) of the SECP Act 1997 states: ‘No act or proceeding of the Commission shall be invalid by reason only of the existence of a vacancy in, or defect in the constitution of the Commission’.This insertion was given effect through the Finance Act 2003, but the Supreme Court through the 2009 Sindh High Court Bar Association case and the 2010 National Bank of Pakistan case held that changes introduced through the Finance Act were unconstitutional.
The petitioner is of the opinion that the Commission is not properly constituted and its affairs are being illegally run by the Chairman and Commissioner Tahir Mehmood under the garb of Section 5(5) of the SECP Act and thus resulting in the failure of the apex regulator to discharge its duty in accordance with the law. The petitioner called for necessary amendments to the existing SECP Act as well as to a new SECP bill pending in Parliament in a way to prohibit appointment of individuals with conflict of interest as Commissioners and Chairman of the SECP in future and ensure avoidance of ‘regulatory capture’ of the organisation in line with best international practices.The petitioner requested the court to strike down June 13th, 2011 termination order of the petitioner and declare the decision to abolish the SECP’s Law Division as illegal for being mala fide and against public interest. – Nation