STOCK EXCHANGES (CORPORATISATION, DEMUTUALIZATION AND INTEGRATION) REGULATIONS, 2012
[Gazette of Pakistan, Extraordinary, Part-II, 18th June, 2012]
S. R. O. 750 (I)/2012.—In exercise of its powers under Section 23 of the Stock Exchanges (Corporatisation, Demutualization and Integration) Act, 2012, the Securities and Exchange Commission of Pakistan hereby makes the following regulations namely:—
1. Short title and commencement.—(1) These Regulations may be called the Stock Exchanges (Corporatisation, Demutualization and Integration) Regulations, 2012.
(2) They shall come into force at once.
2. Definitions.—(1) In these Regulations, unless there is anything repugnant in the context or subject:
(a) "Act" means the Stock Exchanges (Corporatisation, Demutualization and Integration) Act, 2012; and
(b) "Clearing House" includes any company formed and established to provide facilities for the clearing or settlement of securities traded on a securities market registered outside Pakistan.
(2) Words and expressions not defined herein shall have the same meaning as ascribed thereto in the Act, the Securities and Exchange Ordinance, 1969, the Companies Ordinance, 1984 and the Central Depositories Act, 1997 or any rules and regulations made thereunder.
3. Criteria for approving a strategic investor.—(1) A strategic investor desirous of acquiring the shares of a stock exchange shall fulfil the following minimum criteria:—
(i) In the case of a stock exchange or a derivative exchange:
(a) is registered as a stock exchange or a derivative exchange:
Provided that in the case of a stock exchange, the companies listed on the stock exchange have a total market capitalization of at least five times of the total market capitalization of companies listed on the stock exchange, shares of which it is desirous of acquiring;
(b) has a net equity equivalent to at least Rs. 20 billion;
(c) has experience of at least five years as a demutualized exchange;
(d) is in operation since last ten years;
(e) has profit after tax in at least three of the last five years as per the audited financial statements;
(f) has a diverse range of actively traded products which may include futures, options and other internationally acceptable derivative instruments recognized by the Commission for this purpose;
(g) has a robust risk management system and default handling mechanism and good track record of handling market settlements; and
(h) has been provided such classification by an international index provider as acceptable by the Commission for this purpose.
(ii) In the case of a depository company or a clearing house—
(a) is registered as a depository company or a clearing house in the country in which it operates;
(b) has a net equity equivalent to at least Rs, 20 billion or is a wholly owned subsidiary of a stock exchange which fulfills the criteria mentioned in sub-regulation 3(I )(i) above;
(c) has for, at least the past five years, been associated with a stock exchange or a derivative exchange which fulfills the criteria mentioned in sub-regulation 3(1)(i) above; and
(d) has profit after tax in at least three of the last five years as per the audited financial statements.
(iii) has sufficient operational and technical resources to assist in the development and promotion of the stock exchange shares of which it is desirous of acquiring;
(iv) any other condition as may be specified by the Commission at the time of granting the approval:
Provided that the Commission may relax any of the conditions as contained in regulation 3(1 )(i) and 3(l)(ii) except regulation 3(l)(i)(c) after taking into consideration the reputation, past track record, overall financial and operational strengths and expected benefits from a stock exchange, derivative exchange, clearing company or a depository company.
(2) Notwithstanding anything contained in sub-regulation (1) above, a registered stock exchange, derivative exchange, depository company or clearing house, as the case may be, shall not be approved as a strategic investor if it is a connected person of the trading right entitlement certificate ("TREC") holder(s) of the stock exchange shares of which it is desirous of acquiring.
4. Criteria for approving a firm of Chartered Accountants.—The Commission shall approve a firm of Chartered Accountants for the purposes of revaluation of the assets and liabilities of a stock exchange in accordance with Section 4(1)(b) of the Act, in consideration of the following:
(a) the partners or directors of the entity must not be a 'connected person' of the stock exchange or directors of the stock exchange of which the revaluation is to be carried out;
(b) it must not be engaged either in the external or internal audit of the stock exchange of which the revaluation is to be carried out.
Explanation,—For the purpose of this regulation the firm of Chartered Accountant shall include an entity providing audit services or an entity holding license for management consultancy from the Institute of Chartered Accountants of Pakistan.
5. Manner of operating the blocked account.—The Board of Directors of a stock exchange operating a blocked account in pursuance of Section 9(2) of the Act, shall do so in the following manner:
(a) A CDC Participant account shall be opened by the stock exchange under which separate sub-accounts for each initial shareholder shall be opened. The account .shall be opened on the basis of a resolution of the Board of Directors of the stock exchange;
(b) Sixty per cent of the total shares of the stock exchange shall be held in the sub-accounts of the initial shareholders in a manner that each sub-account shall hold sixty per cent of the shares allotted to each initial shareholder.
(c) No movement or pledging of shares held in the sub-accounts shall be allowed except the transfer pursuant to the sale of shares to the strategic investor, the general public and the financial institutions in accordance with the Act and requirements of these regulations;
(d) When the stock exchange reaches an agreement for the sale of not more than forty per cent shares to the strategic investor in accordance with the requirements of Section 12(1)(a) of the Act, the shares may be transferred in the name of strategic investor subject to the following conditions:—
(i) The stock exchange shall provide a copy of the agreement executed with the strategic investor to the Commission, showing the number of shares to be sold and the price at which the sale is agreed;
(ii) The agreement shall describe among other matters the terms and conditions for payment and transfer of shares;
(iii) Evidence regarding the sufficient funds available with the strategic share holder to execute the transaction including but not limited to account statement; and