By Abdul Wajid Khan ISLAMABAD, March 22 (INP-WealthPK): The proposed changes to the Securities and Exchange Commission of Pakistan (SECP) Act will help enhance the operational autonomy and governance of the corporate sector’s regulator. According to a brief of the Ministry of Finance on the (SECP) (Amendment) Bill, 2021, a copy of which is available with WealthPK, the government has proposed amendments in SECP Act to enhance the commission’s operational autonomy, establish an independent capital market tribunal and strengthen the Audit Oversight Board (AOB). The government has already introduced the bill in the National Assembly, and currently it is under review by house’s Standing Committee on Finance. The committee will consider the bill in its upcoming meetings. The existing mandate of the SECP includes regulation of corporate sector and capital market, supervision and regulation of insurance companies, supervision and regulation of non-banking finance companies and private pension schemes and oversight of various external service-providers, including chartered accountants, credit rating agencies, corporate secretaries, brokers and surveyors. The amendment focuses on enhancing SECP’s governance by providing a transparent appointment process and code of conduct for statutory posts, strengthening provisions pertaining to eligibility criteria, dismissal, tenure and conflict of interest, ensuring operations of the commission as a collegiate body, and clarifying role of the policy board. The ministry of finance says the objective of the amendments in law is to ensure that the commission is supervised by competent and experienced professionals to improve its capacity, stay independent in decision making process and enhance its accountability through introducing code of conduct and performance audit. The amendment also requires establishing a special tribunal for handling capital market-related cases. Currently, though the process of review exists in the SECP Act, it is structured in such a way that the commission effectively makes a judgement on a decision made by itself despite the safeguard that no commissioner who participated in the original decision may not be included in the appellate bench of the commissioners. This structure is fundamentally flawed, notwithstanding the integrity of the commissioners, since it inherently creates the perception of bias and undermines market confidence in the impartiality of the appellate body to overturn a decision of their peers. It also runs contrary to the general principle that there should be a clear distinction between role of the investigator, the prosecutor and the judge. To challenge a decision made by the regulatory body in the courts can be both time-consuming and expensive, and the judiciary may not be familiar with the way in which capital markets operate or the powers and the regulatory objectives of the SECP, and their role in investor protection as there is no dedicated commercial bench as yet in Pakistan. It is considered the best international practice to create an appellate structure (usually a tribunal or a panel) that is clearly defined by the statute as sitting outside the regulatory authority. This tribunal is comprised of a panel of experts who have the appropriate gravitas, expertise, independence and integrity to foster market confidence in their ability to adjudicate on decisions made by the regulatory authority with independence and impartiality. The rationale behind the amendment is to establish an independent tribunal to help regulated market participants to appeal against the decisions of the commission. As per international best practices, it is not advisable for any regulatory authority to take the role of an investigator, a prosecutor, a decision maker and then an appellate decision maker. Dealing with capital market-related cases requires special expertise and technological knowledge, which can be ensured through establishment of special tribunals. The proposed amendment also focuses on strengthening AOB’s independence, financial resources and regulatory powers. Also, the amendments are being proposed to align AOB with international standards. To streamline the functioning of AOB and bring it in line with the principles of International Organisation of Securities Commission, the role of AOB should be strengthened to ensure that auditors are subject to adequate levels of oversight and should be independent of the issuing entity that they audit.