Internship Report on SECP 2009

Acknowledgment


With all praise and thanks to Almighty Allah, who has been so kind in blessing us with the energy, quest, courage, sanity and resources to complete my internship and prepare report on time?
Next, I am humbly grateful to our Venerable Teacher Mrs. Basit B.Tayyab, who furnished me with the opportunity to complete this project. I am also thankful to Prof. Ghulam Shabair Khan Niazi who allowed me for internship at such tremendous place.

I would also like to thank Mr Abdur Rehaman Qureshi Commissioner Enforcement And Monitoring Division for being patient and keeping me on my toes . It was his guidance that helped me a lot in learning. I would also like to thank Mr A.J.Bhatti Because without his assistance I would not have been able to do a lot of things. His friendly attitude served as a motivating force for me. I will always remember him for his managerial and personal qualities.

Other people who I would like to thank are

Mr Assad (Deputy Director SC Division)

Mr Faisal (Asst Director SS Division.)

Mr Murtaza (Asst Director SM Division)
Mr Suleman (Junior Executive SC Division)
Miss Nazish ( Junior Executive SM DIvision)

Adnan Azhar
MBA III (E)


Signature Page
Quaid-I-Azam University Islamabad.
Securities and Exchange Commission of Pakistan, NIC Building Blue Area,
Islamabad.







Supervisor:

Signature _______________________

Name ________________________

Designation ________________________







Coordinator & Development Division:

Signature _________________________

Name __________________________


TABLE OF COTENTS
S.No: NAME PAGE No.
Executive Summary 1

CHAPTER # 1

1.1 History of SECP 3

1.2 Mission and Vision Statement 4
CHAPTER # 2
2 Introduction of SECP 6

CHAPTER # 3
3 Securities and Market Division 10
3.1 Brokers and Agent Registration Wing 12
3.2 Agents Registration Rules 15
3.3 Investment In Stock Exchange 16
3.4 Important Terms used in Stock Exchange 17


CHAPTER # 4
4 Specialized Companies Division 26

4.1 NBFCs Rules 27
4.2 Different Wings of SCD 29
4.3 MI Wing 30
4.4 Self Regulatory Organization 32
4.5 Modarbas And NBFCs 33




CHAPTER # 5

5 Support Services Division 40

5.1 Finance & Account Wing 41


6 Findings 46


7 Suggestions 49

8 Conclusion

8 Bibliography



List of Charts
Sr. No. Chart Page No.
1 Organizational Chart
2 Chart Of SM Division
3 Chart Of SC Division
4 Chart Of SS Division
5 Collection of Fees Chart
6 System For Recording Payroll Chart



EXECUTIVE SUMMARY
My internship proposal was accepted in June 2003 on the request of our department of Admin Sciences Quaid-I-Azam University, Islamabad. My internship was remained with the management of SECP. I joined Islamabad Stock Exchange on July 2, 2003.
During my Internship I worked in three divisions of SECP. During my internship I learnt a lot. I worked in Securities Market Division, Support Services Division, and specialized companies (Non Banking finance companies).
The first chapter includes organizational chart and some basic information about Securities and Exchange Commission of Pakistan.
I worked for two and half weeks in SM division. During this period I was associated with Mr. Murtaza who works in a Brokers and Registration wing. While working with him I got knowledge about rules and regulations for brokers and registration. The basic rules and regulations for brokers and agent registration are included in the chapter of SM Division. This chapter holds basic information about working of this division and the information about Stock Exchange.
I worked for two and half weeks in SC Division. During this period I learnt about Modarbas and non-banking finance companies. The chapter of SC division includes information about all NBFCs, Modarbas and also rules relating to these companies. The final part includes the research work on which I was given a chance to work.
I also worked in SS Division. This department deals with finance and accounts wing, human resource wing, and administration wing. The chapter of SS Division includes some basic information about working of this department.
In the end based upon my stay at that particular organization some humble suggestions have been given as well.

.











CHAPTER # 1
HISTORY OF SECP


The Securities and Exchange Commission of Pakistan (SEC) has succeeded the Corporate Law Authority (CLA) which had been administering the corporate laws in the country since 1981. The Authority was a government department attached to the Ministry of Finance and therefore lacked the financial and administrative autonomy required to build a regulatory structure conducive to the growth of the financial sector.
The process of restructuring the Authority was initiated in 1997 under the Capital Market Development Plan of the Asian Development Bank (ADB). A Securities and Exchange Commission of Pakistan Act was passed by the parliament and promulgated in December 1997. In pursuance of this Act, the Securities and Exchange Commission of Pakistan, having autonomous status, became operational from January 1st 1999.
The establishment of the SEC is an important milestone in the evolution of the regulatory framework for the capital market in Pakistan. The policy decisions regarding the constitution and structure of the Commission were incorporated in the 1997 Act. Powers of the Commission have been delegated to the individual Commissioners and Appellate Benches, as envisaged in the Act. A Corporate Plan for the Commission was prepared with the assistance of ADB consultants, which covers organizational structure, reporting relationships and functional profiles, information systems strategy, plans to upgrade facilities like premises etc., skills development and financial plans.













Mission Statement

"To promote an efficient and transparent capital market, develop the corporate sector and protect the investor through responsive policy measures, effective regulation and enforcement of best governance practices."



Vision Statement

"To install and sustain a dynamic, modern and proactive regulatory body that provides impetus for the development of a fair, efficient and transparent capital market and a robust corporate sector."















CHAPTER # 2
ORGANIZATIONAL CHART











Securities and Exchange Policy Board


The Policy Board is entrusted with the responsibility to provide guidance to the Commission in all matters relating to its functions and to formulate policies in consultation with the Commission.

In addition, it is responsible for advising the Government on matters falling within the purview of the Act and other corporate laws and to express its opinion on policy matters referred to it by the Government or the Commission.
The Act provides that the Policy Board should consist of a maximum of nine members
appointed by the Federal Government, including five ex-officio members and four from the private sector. The ex-officio members are:

(i) Secretary, Finance Division;
(ii) Secretary, Law, Justice and Human Rights Division;
(iii) Secretary, Commerce Division;
(iv) Chairman of the Commission; and
(v) a Deputy Governor of the StateBank of Pakistan (SBP).

Divisions of SECP

The work of the Commission has been distributed amongst its six divisions, each of which is headed by an Executive Director and divided into Wings for effective administration. The Divisions are:
• Securities Market Division
• Specialized Companies(Non Banking Finance Companies Division)
• Company Law Administration Division
• Enforcement Division
• Insurance Division
• Support Services Division
Securities Market Division

The Securities Market Division (SMD) is responsible for regulation of all aspects of the securities market. The SMD is divided into the following Wings:
•
Brokers and registration wing4
Market Monitoring and Surveillance
Investor Complaints
Beneficial Ownership
Capital Issues
Stock Exchange wing


Specialized Companies Division

The Specialized Companies Division (SCD) is responsible for regulation of leasing companies, modarabas and modaraba management companies, mutual funds and other specialized companies (except insurance companies). Its functions include licensing, monitoring, regulatory compliance and enforcement of all applicable laws. The SCD is divided into thefollowing Wings:

• Leasing
• Modaraba companies and modarabas
• Mutual funds and other specialized companies

Enforcement and Monitoring Division
Enforcement and Monitoring Division (EMD) is responsible for review of published accounts of listed companies, investigation, compliance with relevant laws and regulations by listed companies and prosecution (except in relation to specialized companies and insurance companies). The EMD comprises the following Wings:
• Accounts
• Investigation
• Compliance and Prosecution

Company Law Administration Division
Company Law Administration Division (CLAD) is charged with the responsibility of administering and enforcing the Companies Ordinance 1984 as well as laws, rules and regulations. The CLAD is also responsible for supervision of the Commission's field offices in various cities i.e. the Company Registration Offices (CROs). The Division consists of the following Wings:
• Coordination and Liaison
• Regulation and Compliance
• Enforcement, Investigation and Prosecution
• Licensing, Approvals and Appeals


Insurance Division
The Insurance Division (ID) is responsible for regulating the insurance sector. It administers the law of insurance that covers licensing and supervision of insurers and other entities regulated under these laws. The ID is divided into the following Wings.
• Actuarial Services
• Life Insurance Prudential Supervision
• Non-life Insurance Prudential Supervision
• Market Conduct Supervision
• Enforcement and Prosecution

Support Services Division
The Support Services Division (SSD) is responsible for providing efficient support services to the entire Commission. These services include recruitment and human resource development, administration as well as financial management and maintenance of accounts. The SSD comprises the following Wings:

• Human Resource
• Administration
• Finance and Accounts















CHAPTER # 3

CHART OF SM DIVISION





SECURITIES MARKET DIVISION
The regulation of securities market is a core function of a commission. The securities market division monitors and regulates the securities market in pursuance of powers vested in the commission under securities and exchange ordinance 1969 and the rules framed there under as well as the act.
Functions of SMD:

The main functions of SMD are
1. Regulates both secondary and primary markets including market intermediaries.
2. Offsite regulation and monitoring of stock exchange.

Wings of SMD:
The Division is divided into the following Wings:
1. Capital Issues
2. Monitoring and Surveillance Wing
3. Beneficial Ownership Wing
4. Broker Registration and Inspection Wing
5. Investor complaint wing
6. Stock Exchanges Wing
1.Capital Issues:
The Capital Issues Wing of the SMD deals with approval of prospectuses for public offer of securities. Under the Companies Ordinance, 1984, the prospectus of any company inviting public subscription for its securities is required to be approved by the Commission prior to its issue, circulation and publication. The Wing al so deals with cases relating to further issue of capital and inter-corporate financing.

Functions:
(i) Processing cases for new issues, offer for sale and issue of prospectus.
(ii) Issue of shares at discount/premium.
(iii) Processing cases under investment under section 208.
(iv) Matters pertaining to privatization of public sector companies.
2.Beneficial Ownership Wing:
In order to protect the interests of minority shareholders and to discourage the management of listed companies from making windfall gains on the basis of privileged inside information, every director, chief executive, management agent and person holding 10 percent or more shares in a listed company is required to file certain prescribed returns for beneficial ownership. Also, any gains made by beneficial owners in transactions completed (purchase and sale or sale and purchase) within a six-month period are to be reported to the issuer and the Commission and tendered as stipulated in the law.
Functions:
i. Examination of returns of beneficial owners filed by Directors/chief Executive/company secretary etc. and more than 10% shareholder of the listed companies.
ii. Examination of Form A and comparison of additional information filed by the Company with Form 31/32 filed by the beneficial owners.
iii. Handling cases of appeal, filed in the appellant Bench, against the orders passed u/s 224 of the Companies Ordinance, 1984.
iv. Process the cases of complaints, against Members of Islamabad Stock Exchange.

3.Investor complaint wing:
The Investor Complaints Wing within the SMD has emerged as an efficient and Effective instrument for the protection of investors’ interests, in particular, those of Small investors. The Wing has successfully brought about quantitative as well as Qualitative improvements to redress investor grievances.
4.Monitoring and Surveillance Wing:
The Market Monitoring and Surveillance Wing (MSW) were set up within the Commission in October 2000 to facilitate initiatives in risk management. The MSW has two specific functions:
(i) Monitoring of systemic risk at the exchanges; and
(ii) Surveillance to detect general or specific instances of market abuse. The MSW monitors the market by using on-line data available on the websites of the exchanges. It takes cognizance of price and turnover aberrations to determine possible market malpractices, such as blank selling, insider trading, etc.

The MSW issues a comprehensive market report at the end of every day, which focuses on the latest market information and risk parameters. In view of the importance of risk management in the COT market, a daily report specific to the COT market is also prepared and distributed within the Commission.

Functions:
i. Surveillance of trading and identification of unusual price or turnover movement

ii. Monitoring/Surveillance of Systemic Risk Indicators

iii. Surveillance of Market Ills (Blank Selling, Price Manipulation, Insider Trading etc)

iv. Analysis and daily reporting of Market activity and risk indicators

v. Assistance and co-ordination in investigations, as required

vi. Assistance and co-ordination in approving stock market regulations, particularly in the area of risk management & market development

vii. Periodic reporting relating to above, as and when needed



5.Stock Exchange Wing:
The stock exchange wing has following functions.
(i) Co-ordination with stock exchanges.
(ii) Co-ordination with directors nominated by SEC on different stock exchanges.
(iii) Dealing with IFCs and other agencies such as ADB, World Bank etc. for new products or matters relating to development of capital market.
(iv) Assisting ED (Chairman Secretariat in matters related ADB’s Financial Market (non-bank) Governance Programme2002-2005

(v) Developing new instruments for capital market.

(vi) Adjudicating on complaints as per delegation of powers.






Broker Registration and Inspection Wing
While working in SM division I got a chance to learn about brokers and agents registration. Below I have discuss the working of broker registration which I have learned during my internship.
OBJECTIVES
• To understand the Brokers and Agents Registration Rules 2001.
• To provide an easy guide towards the procedures of registration and renewals.

BACK GROUND

The registration wing was established in july 2001 in view of amendment to SEC ordinance 1969 and promulgation of brokers and agents registration rules 2001 notified on My 10, 2001.

REGULATORY FRAMEWORK:
The regulatory framework for
• Securities and exchange ordinance 1969
• Brokers and agents registration rules 2001
• Member’s agents and traders (Eligibility Standards) rules 2001.

REGISTRATION REQUIRED FOR:
The registration required for
• Members of stock Exchange
• Accredited agents affiliated with the members of stock exchange

PROCEDURE FOR REGISTRATION:
The procedure for registration consist of following steps:
• Members desirous of dealing in the business of effecting transactions in securities shall make an application to the commission in form A to stock exchange of which he is member.
• Stock Exchange to forward the application with in 14 days.

ELIGIBILITY FOR REGISTRATION:
The eligibility criteria for registration is given below:
1. Members of the stock exchange
2. Twenty one years of the age
3. Citizen of Pakistan
4. At least pass graduation or equivalent examination from an institution recognized by the Government.
5. Not lunatic or a person of unsound mind
6. Non conviction of offence fraud or breach of trust;
7. Not adjudicated as insolvent or has suspended payment or has compounded with his creditors.
8. Five years experience in dealing in securities
9. Not a partner of brokerage firm or a director of brokerage company which has been convicted of an offence concerning brokerage;
10. Has not defaulted in payment of dues at a clearing house
11. Has not defaulted in compliance with the provisions of the ordinance the act and the rules and regulation made there under;
12. Is not in default on settlement of an investor complaint where such complaint has been adjudicated by a stock exchange or a committee of stock exchange or the commission; and
13. Has complied with the directives of the commission in respect of business conduct dealings with client and financial prudence.


CRITERIA FOR REGISTRATION:
The criteria for registration is
• Fulfills the eligibility criteria
• It is in the interest of stock market,
SUSPENSION OF REGISTRATION:
In some cases registration can be suspended. These cases may be i.e.
• Violations of conditions of registration
• Non compliance to the requirements of Act or ordinance and rules made
here under
• Contravention of rules and regulation of the stock exchange
• Non compliance of the code of conduct
• Non compliance to directives of commission
• Failure to furnish any information required by the commission
• Non submission of periodical returns to the commission
• Furnishing false information
• Failure in the settlement of investors complaints
• No co-operation in any enquiry or investigation conducted by the
commission.
• Manipulated price rigging or cornering activities
• Inadequate financial position
• Suspension of stock exchange


ACTIONS THAT CAN BE TAKEN BY SECP:
The commission may be
• Suspend the registration of member broker
• Impose a penalty not exceeding Rs. 100,000.





CANCELLATION OF REGISTRATION

A member broker registration can be cancelled if he found doing some of these activities:
• Engage in insider trading
• Found guilty of fraud or convicted of criminal offences;
• Membership cancelled by a stock exchange
• No complicated with directive of commission
• Ceases to be a member of stock exchange
• Declared defaulter by stock exchange
• Surrender membership of the stock exchange
• Declared insolvent by a court
• Voluntarily surrenders certificate of registration
• Wound up by an order of Court




















AGENTS REGISTRATION PROCESS

APPLICATION FOR REGISTRATION:
The for registration as agent consist of following steps:
• Person desires of acting as an agent shall make an application to the commission in Form C through the broker with whom he is to be affiliated and the concerned stock exchange
• Stock exchange to forward the application with in 30 days.

ELIGILIBILITY CRITERIA:
The eligibility criteria for applicant registration is:
• Twenty one years of age
• Citizen of Pakistan
• Not lunatic or a person of unsound mind
• Non conviction of an offence fraud or breach of trust
• Not removed as an agent
• At least passed graduation of equivalent examination from an institution recognized by the Government.
• Has attended a course for the agents
• Two years experience
• Faithfully compiled with the directives of the commission.


CERTIFICATE OF REGISTRATION
• Fulfills the eligibility criteria
• The commission may grant certificate of the registration to the applicant
• The commission shall send an intimation of registration to concerned stock exchange

RENEWAL OF REGISTRATION
Requirements of initial registration applicable to renewal of registration





BASIC KNOWLEDGE ABOUT INVESTMENT IN STOCK EXCHANGES:

INTRODUCTION:

Everyone today appreciates the need to save whether for a house, for children’s education, a wedding, or for use after retirement. All these goals can be realized through excellent financial planning. An intelligent plan entails investing your money in an appropriate combination of assets with potential to generate the income needed to achieve your goals. If you invest wisely, you can maximize the earning on your investments.

There are many investment avenues available, but a wise investor does not invest on impulse, a hot tip or follow the herd. An investor should discriminate between information, casting away irrelevant and illogical pieces of information, and checking for opportunities and facts before making an intelligent choice of investments.

STOCK EXCHANGE:
The stock exchange provides a market place where shares can be bought and sold.

Role of the Stock Exchange?
1. The stock exchange admits companies for trading at their
2. securities.
3. It provides a market for raising capital by companies.
4. It provides a market place for shares of listed public companies to be bought and sold, by bringing companies and investors together at one place.
5. The exchange’s role is to monitor the market to ensure that it is working efficiently, fairly and transparently.

Stock Exchanges in Pakistan:
There are three stock exchanges in Pakistan:
i) Karachi Stock Exchange (Guarantee) Ltd.
ii) Lahore Stock Exchange (Guarantee) Ltd.
iii) Islamabad Stock Exchange (Guarantee) Ltd.
Of these, Karachi Stock Exchange is the biggest exchange in the country.

Trading and Settlement:
The stock exchanges have introduced a computerized trading system
to provide a fair, transparent, efficient and cost effective market
mechanism to facilitate the investors.
The trading system comprises of four distinct segments, which are:
i) T+3 Settlement System;
ii) Provisionally Listed Counter;
iii) Spot Transactions; and
iv) Futures Contracts.

T+3 Settlement System:
In the T+3 settlement system, purchase and sale of securities is netted
and the balance is settled on the third day following the day of trade.

Benefits of T+3 Settlement System:
• It reduces the time between execution and settlement of trades,
which in turn reduces the market risk.
• It reduces settlement risk, as the settlement cycle is shorter.

Provisionally Listed Counter:
The shares of companies, which make a minimum public offering of Rs.100 million, are traded on this segment from the date of publication of offering documents When the company completes the process of dispatch/credit of allotted shares to subscribers, through CDC it is officially listed and placed on the T+3 counter. Trading on
the provisionally listed counter then comes to an end and all the outstanding transactions are transferred to the T+3 counter with effect from the date of official listing.

Spot/T+1 Transactions:
Spot transactions imply delivery upon payment. Normally in spot transactions the trade is settled within 24 hours.

Futures Contract:
A Futures contract involves purchase and sale of a financial or tangible asset at some future date, at a price fixed today.



















SHARES

Each share represents a small stake in the equity of a company. You can buy large or small lots to match the amount of money you want to invest. A company’s share price can rise or fall as a result of its own performance or market conditions.
Once the shares are brought and transferred in your name your name will be entered in the company’s share register, which will entitle you to receive all the benefits of share ownership including the rights to receive dividends, to vote at the company’s general meetings to receive the company’s reports.
If you decide to sell your shares you will need to deliver share certificates to the broker in time for the transaction to be completed.

IMPORTANT THINGS TO KNOW ABOUT EQUITIES

If you can afford to take some risk and have the ability to endure the market’s ups and downs, equity investments may grant you good returns. Do not invest any money with the stockbroker as a deposit at fixed rate of return. Such a deposit has no legal standing and
the investor is exposed to risk of losing his money. You must know the rates of fees and commissions charged by the broker/stock exchange as these affect your costs, and hence your returns.
The aim of investing in stocks and shares is to buy at low and sell at high. Knowing when is however, the problem. Many investors attempt to time the market: they try to figure out when the market is going up and buy before it does and then anticipate when it is going to crash and sell before that. Usually you try to buy when the upswing has begun and sell as the downswing starts. However, such accuracy is extremely difficult to achieve. The stock market is driven by two emotions: greed and fear. People are caught up in the boom fever and pay beyond the worth of shares this is the greed that drives bull markets. In bear markets, people get carried away with the ruling pessimism and are eager to sell their investments believing in the worst rumors this is the fear that dominates bear markets. Be careful in selecting your broker. Ensure that he/she is licensed by the SEC to trade and the stock broking firm has a good track record. Give clear instructions to avoid
ambiguity, check trade confirmations received and keep a proper record of all your transactions. All the registered brokers are listed at the web site of SEC.
















TRADING

Your first step is to contact a stockbroker or an investment adviser.

Introducing Stockbrokers:
Stockbrokers are your link to the stock market. Their job is to help you get the best price available when you want to buy or sell your shares. Be careful in selecting your broker.

The Mechanics of Share Dealing:
There are various ways of investing in the stock market: you can deal directly in shares; invest through a unit trust or investment trust or let your investment be handled by an advisor.

Opening of Account:
Once you have decided the broker with whom you intend to deal, you should ensure that an account is opened in your name by filling the account opening form. It is imperative that the terms and conditions prescribed in the account opening form are read very carefully and well understood. It will be in your interest if you give clear instructions as to who can operate the account. It is preferred if the investor gives instructions that business can only be transacted in the account on his instructions.

Buying/ Selling Directly:
When you have decided to buy/sell shares in a particular company, contact your stockbroker. You can ask to buy/sell a fixed number of shares or shares up to a certain value. Get the contract note confirming your order immediately and check for the following information.
a) Name and number of securities;
b) Date on which the order is executed;
c) Nature of transaction (spot, ready or forward and also whether
bought or sold);
d) Price at which the transaction is executed; and
e) Commission charged by the broker;












VARIOUS WAYS OF BECOMING A SHAREHOLDER

Shares of the company are offered at the stock market at the following stages.

Initial Public Offering (IPO):
When companies offer shares to the general public for the first time it isknown as a flotation or an Initial Public Offering (IPO). These shares can be bought directly from the company without paying stockbroker’s commission. You might see an advertisement in a newspaper from a company issuing shares or your stockbroker might tell you about a company making an IPO. Simply fill in the share subscription form and deposit the form along with subscription cheque in a branch of the designated bank(s).

Right Issues:
Right shares are issued when companies need to raise additional capital to finance their new expansion projects or to meet working capital needs, etc. In case of rights issues, the existing investors have the right to subscribe to these new shares in proportion to their respective shareholdings.

Trading Market:
The most common way of buying/selling in stock market is through trading in the secondary market. Through a stockbroker you can buy shares from existing investors who wish to sell them and vice versa.



IMPORTANT CONSIDERATIONS FOR INVESTORS

Before you invest in shares, you must consider a number of factors

How Much Money Can You Afford to Invest?
Investment in shares does not result in instant yields. Do not invest any money which you may need immediately, since the price of shares can go up and down, It is advisable to keep some money in a deposit account to meet your financial obligations in the near future. In this way, you will not be forced to sell shares even at low price, if cash is needed urgently.

How Do You Want to Invest?
There are various ways of participating in the stock market:

1.You can invest directly by purchasing shares through a broker. You may buy shares in one company or you may spread your risk by investing in a number of different companies to give you a ‘portfolio’ or collection of shares.

2.You can invest indirectly and through collective investment schemes such as open-ended unit trusts and closed-ended mutual funds. This would reduce your risk further.

Need Advice OR Want to Make Your Own
Decisions:
Investors can choose to make their own share dealing decisions or take advice from a professional. Buying and selling shares and tracking their performance can be time consuming but it is rewarding for those who have the time to manage their own investments. Some investors deal with stockbrokers directly while others prefer to use the
services of professional managers who have discretionary powers to manage the investment portfolio.



WHAT HAPPENS ONCE YOU ARE A SHAREHOLDER

There are several types of shareholders: some are long term investors who simply tuck away their investments for years while others trade frequently and keep a close eye on how their shares are performing. You can check your shares’ performance in various ways. A daily indicator of share price movements is available in many newspapers and also on website of the relevant stock exchange. You may access this information directly or through your stock broker/advisor.
Informative articles about many companies are regularly published in newspapers and investment magazines. Your stockbroker may also provide valuable information. Some publish newsletters for their clients, reflecting their views on the performance of selected companies. Annual reports of companies also contain useful information. Some companies have shareholder relations departments, which can help with factual information.

INVESTOR PROTECTION:
You should always ensure that the stockbroker you choose is licensed by the Securities and Exchange Commission of Pakistan (SEC) to trade. Prefer stock brokerage firms with good track record. As a shrewd investor, you should know your rights and responsibilities and should beware of the rules that govern your investments as well as the legal recourse available, in case things go wrong. You can report abuse to the SEC, whose mission is to
ensure the development of a fair, efficient, and transparent securities and futures market. Although its main function is regulatory in nature, the SEC has the ultimate responsibility to protect the investor through market supervision and ensuring that its laws and regulations are complied with.
Stock exchanges are the frontline regulators; they must play a proactive role. Send all your complaints in writing to the respective stock exchange(s) with full details, including the complainant’s name, address and telephone number etc. In case you do not get a response to your complaint, please contact the “Complaint Cell” in the SEC.






IMPORTANT TERMS

Bear – an investor who anticipates a falling market and, therefore, sells the security in the hope of buying it back at a lower price.
Blue Chip – A large well-established company with a history of profitable operation.

Bonds – Fixed-income securities, which entitle the holder to a pre-determined return during their life and repayment of principal at maturity.

Bull – An investor who anticipates a rising market and, therefore, buys the security in the hope of selling it later at a higher price.

Capital Gains Tax – Tax payable on profit arising from appreciation in value of investment, realized at the time of selling or maturity of investment.

Carry-over Trades –Equity repurchase transactions, better known, as “Badla”; these are an established form of transactions used in the stock market for temporary financing of trades by speculators and jobbers.

Dividend – That part of a company’s profits which is distributed among shareholders, usually expressed in rupee per share or percentage to paid up capital.

Earnings per share (EPS) – A profitability indicator calculated by dividing the earnings available to common stockholders during a period by the average number of shares actually outstanding at the end of that period.

Equity – The owners’ interest in a company’s capital, usually referred to by ordinary shares.

Floatation – The occasion when a company’s shares are offered on the stock market for the first time.

Fund managers – A company, which invests and manages investors’ money, with the aim of maximizing capital growth.

Initial Public Offering (IPO) – The offering of equity shares of a company to the general public for the first time.

Insider trading – The purchase or sale of shares by someone who possesses ‘inside’ information on a company’s performance which information has not been made available to the market and which might affect the share price. In Pakistan, such deals are a criminal offence.

Investment companies – A company, which issues shares and uses its capital to buy securities and shares in other companies.

Listed company – A company whose securities are admitted for listing on a stock exchange.

Long position - When an individual purchases securities of a company he is said to have a long position in the company’s shares. For example an owner of shares in PTCL is said to be "long PTCL" or "has a long position in PTCL." If you are long, you would like the share price to go up.

Market capitalization – The total value of a company’s equity capital at the current market price.

Nominee – A person or company holding securities on behalf of others, but who is not the owner of such securities.

Option – The right (but not the obligation) to buy or sell securities at a fixed price within a specified period.

Ordinary shares – The most common form of shares, which entitle the owners to jointly own the company. Holders may receive dividends depending on profitability of the company and recommendation of directors.

Portfolio – A collection of investments

Price/earning ratio (P/E ratio) – The P/E ratio is a measure of the level of confidence (rightly or wrongly) investors has in a company. It is calculated by dividing the current share price by the last published earnings per share.

Primary market – Where a company issues new shares, either for the first time, or at the time of issuing additional securities.

Privatization – Conversion of a state-owned company to a public limited company (plc) status.

Private company – A company that is not a public company and which is not allowed to offer its shares to the general public.

Public limited company (plc) – A company whose shares are offered to the general public and traded freely on the open market and whose share capital is not less than a statutory minimum.

Rights Issue – The issue of additional shares to existing shareholders when companies want to raise more capital.

Securities – A broad term for shares, corporate bonds or any other form of paper investment in capital market instruments.

Settlement – Once a deal has been made, the settlement process transfers stock from seller to buyer and arranges the corresponding exchange of money between buyer and seller.

Short Selling- The act of borrowing stock to sell with the expectation of price reduction with the intention of buying it back at a cheaper price.

Stockbroker – A member of the stock exchange who deals in shares for clients and advises on investment decisions.

Stock Market – The market place where shares of publicly listed companies are bought and sold.

Unit trust – An open-ended mutual fund that invests funds in securities and issues units for sale to the public. It can repurchase these units at any time.

Yield – The aggregate return earned on an investment taking into account the dividend/interest income and its present capital value.




















Chapter # 4
CHART OF SC DIVISION





SPECIALIZED COMPANIES DIVISION
(Non Banking Finance Companies Division)
The specialized companies are responsible for regulation of leasing companies, Modarbas and Modarba management companies, Mutual funds and other Specialized Companies except Insurance.

Functions Of SC Division:
1. Licensing
2. Monitoring
3. Regulatory compliances
4. Enforcement of all applicable Laws.

NBFC:
NBFC is a company duly licensed by the commission would be able to carry out any any one or more of the following forms of business, subject to compliance with the prescribed criteria:
1. Investment finance services
2. Leasing
3. Housing finance services
4. Venture capital Company
5. Discounting services
6. Investment advisory services(as management company of close-ended mutual funds)
7. Asset management services (as management company of open-end mutual funds)















Non-Banking Finance Companies
(Establishment and Regulation) Rules, 2003

• Part VIII-A inserted in the Companies Ordinance, 1984 for establishment and regulation of NBFCs (promulgated in November 200).
• NBFC Rules issued in April 2003.


Salient Features of Part VIII-A of the Companies Ordinance, 1984

• Only a NBFC duly licensed by the Commission to undertake specified activities

• Power to make rules for establishment and regulation of NBFCs

• Power to issue directions

• Power to remove any director/chief executive/chairman or any other officer and to appoint another person in his place

• Power to supercede Board of directors of a NBFC

• Special/Inquiry audit can be ordered for detailed scrutiny of the affairs of a NBFC.




















Non-Banking Finance Companies
(Establishment and Regulation) Rules, 2003
• Eligibility criteria for establishing a NBFC
• To be a public limited company under the Companies Ordinance
• To comply with the minimum equity requirement
• To allot at least fifteen per cent of the paid-up share capital to the promoters
• Separate licensing requirements for each function of NBFC
• Minimum equity requirement for each business activity
Investment Finance Services Rs. 300 million
Leasing Rs. 200 million
Housing Finance Rs. 100 million
Venture Capital Co. Rs. 5 million
Discounting Services Rs. 200 million
Investment Advisors asset Managers Rs. 30 million
• Maintenance of books of accounts
• Appointment of directors, chief executive and chief financial/accounting officer
• Bar on acquiring controlling interest in any company
• Issuance of COIs/CODs
• Exposure limits for different activities
• Rules for Venture Capital Fund, Open-end and Closed-end Schemes incorporated in NBFC Rules

NBFC RULES PERTAINING TO MUTUAL FUNDS

• Floatation of closed-end fund in trust structure has been made possible.
• Exposure to any sector by a fund has been fixed at twenty five per cent of its net assets.
• A fund shall keep all of its assets with a custodian.
• Mechanism for conversion of closed-end funds into open-ended funds has been provided.
• Capital gains portion of income of funds has been excluded from the definition of distributable income.

OPEN-END SCHEMES
• The purpose of borrowing by an open-end scheme and period for repayment of such borrowing by a fund has been specified.
• Open-ended schemes can also be subjected to special audit.
• Minimum seed capital of one hundred million rupees has been prescribed for launch of second open-ended scheme by an asset management company.
• The Commission can require submission of any periodic or special reports on affairs of funds and issue directives to trustees and the fund managers on any aspect of the management by a fund.


DIFFERENT WINGS OF SCD

The SCD division is divided into five wings i.e.
1. NBFC-1
2. NBFC-2
3. MODARBA WING
4. MONITORING AND INSPECTION WING
5. LEGAL AFFAIR SECTION

1.NBFC-1:
It comprise of investment banks, leasing companies, discount houses, and housing finance companies.

Functions of NBFC-1:
• It regulates all these entities i.e. investment banks, leasing companies, discount houses, and housing finance companies.
• It also performs enforcement action against these entities.



2.NBFC-2
It comprise of investment companies and investment advisor, asset management companies, Open-end and Close-end Mutual Funds, venture capital companies and venture capital funds.

Functions of NBFC-2:
• It regulates all these entities i.e. companies and investment advisor, asset management companies, Open-end and Close-end Mutual Funds, venture capital companies and venture capital funds.
• It also performs enforcement action against these entities.


3.MODARBA WING:
It comprise of all Modarba companies and Modarbas.

FUNCTIONS:
• Regulation and enforcement actions.

4.LEGAL AFFAIR SECTION:
It performs following functions
• It handles court cases.
• It deals with all internal legal matters.
• Vetting of show causes and orders by all the wings of SCD.



5.MI Wing:

I worked in MI wing of NBFC. The MI wing perform offsite and onsite inspection of all the entities of SCD. It also review and analyze the annual and quarterly account of all the entities being regulated by SCD.


Functions of MI Wing
1. Review and analysis of annually and quarterly accounts and periodical returns of all the entities being regulated by SCD.
2. On-Site inspection of all the entities of SCD.
3. Preparation and submission of inspection/monitoring reports to ED for enforcement actions.

Offsite Inspection:
In offsite inspection, the officials of SECP review the annually, quarterly accounts and periodical returns of all the entities being regulated by SCD. They also perform analysis of annually, quarterly accounts and periodical returns of all the entities being regulated by SCD.


Objectives of Off-Site Inspection:
1. The main objectives of On-Site inspection are: Whether the reports of organizations meet the standard set by State bank Of Pakistan.
2. To determine whether the report are being prepared at time
3. To determine whether the report are accurate
4. To take corrective action against those do not follow the rules

Process of Analysis:
Analysis is done in four step process. These four steps are;
1. Gather data from reports provided by the organizations.
2. Calculation of different ratios.
3. Organization of ratios into similar groups.
4. Examine ratios and draw conclusion.

Terms:
There are certain terms that are used during offsite inspection are;

Early Warning System: It is a system which enables a bank provision to identify those banks which reflect high probability of financial difficulty.

SBPOSS: It is the abbreviation of State Bank of Pakistan Offsite surveillance system.

Peer Group: In bank analysis we compare bank with not one bank but with large no of banks which is called Peer Group.

Peer Group Ratios: These are derived from a group of banks similar in term of asset size, operating income markets with similar characteristics.

Spectrum: It is the range of values of ratios for all banks or Peer groups.

RATIOS USED FOR ANALYSIS:
Capital to risk weighted assets
Dividend paid to afte tax income
Growth rate of capital
Growth rate of assets
Total advances to total assets
Avg earning assets to average total assets
Trade off balance sheet temsto total assets
Core deposits to total asset growth
Earning ratios
Yeild on loans
Foreign exchange incometo operating income
Liquidity ratios
Current deposit to total deposit
Rate sensitive assets to rate sensitive liabilities




Onsite Inspection:
In onsite inspection, the employee of SECP himself visits the organization instead of just reviewing their books of accounts at office. It is the requirement of SECP that every organization should maintain its record. These records can be reviewed by SECP officials any time.

Procedure for Onsite Inspection:
1. Firstly, inspection questionnaire is prepared.
2. Then on the basis of evaluation, scope of inspection is determined.
3. View historical records
4. Inspect the records. During inspection reconcile the statements with GL, subsidiary ledger, and trial balance.
5. For unusual fluctuations from one period to another, investigate the reasons.
6. Finally, prepare the memorandum, which includes all the information.






BASIC INFORMATION ABOUT MODARBAS AND NBFC’S

MODARBAS

The Modarba is an Arabic term and implies that a contract between two parties. Rab-Ul-Mal entrusts money to other party called Mudarib, to put in his management expertise and utilized in agreed manner.
In modarba, profit are shared on agreed ratio and losses in the proportion of capital investment. Modarbas issue certificates instead of shares known as certificate of Modarbas.

REGULATORY FRAMEWORK FOR MODARABA SECTOR
• Modaraba Companies and Modaraba (Floatation & Control) Ordinance, 1980
• Modaraba Companies and Modaraba Rules, 1981
• Prudential Regulations for Modarabas, 2000
• Companies Ordinance, 1984



MUTUAL FUND
A mutual fund is managed by a management company. The management company is a bank of human resources, considered to be professionally qualified personnel. The portfolio of mutual fund is managed by a "Portfolio Manager", whose responsibility is to be invested in, and satisfies the desire of the investors. While selecting the securities for investment, these managers analyze economic conditions, industry trends, government regulations and their impact on the stocks, and forecasts for the specific stocks to the project the future outcome generated by the companies. As we all know that the economic and business condition do not remain constant, so these managers also revise their portfolio with the passage of time, as the circumstances demand.

The Concept of Mutual Funds:
The concept is very simple, small investors invest their money into a common pool or fund and hand over the investment decision to fund manager/ portfolio manager. This is expected to have several advantages for the small investors: no more searching for good buys or relying on the neighborhood sub-broker for advice or even waiting anxiously for the allotment. All this is taken care of by the cumulative bargaining power of the fund, which has trained professionals managing it.
Every day, the fund manager/ portfolio manager counts up the value of all fund's holding, figures out how many shares have been purchased by shareholders, and then calculates the Net Asset Value (NAV) of the mutual fund, the price of a single share of the fund on that day. If you want to buy shares, you just send the manager your money, and they will issue new shares for you at the most recent price.
If the fund manager is doing good job, the NAV of the fund will usually get bigger your shares will be worth more.
TYPES OF MUTUAL FUNDS:
There are two types of mutual funds, which are:
• Open-end mutual funds
• Closed-end mutual funds
OPEN-ENDED MUTUAL FUND:
Open-end mutual funds are those where subscription and redemption of shares are allowed on a continues basis. The price at which the shares of open-end funds offered for subscription and redemption is determined by the NAV after adjusting for any sales load or redemption fee. In Pakistan there exists only six open ended mutual funds; National Investment (Unit) Trust (NIT) in the public sector and Pakistan Stock Market Fund (PSM), Pakistan Income Fund (PIF), Unit Trust of Pakistan (UTP), UTP Income Fund and United Money Market Fund (UMMF) in private sector.
CLOSED-END MUTUAL FUND:
Closed-end mutual funds are those where the shares are initially offered to the public and are then traded in the secondary market. The trading usually occurs at a slight discount to the NAV.
Sources of Profit Generation:
A mutual fund can generate profits from three different sources, which are:
• Dividend
• Capital Gains
• Appreciation of Share Price







Dividend:

Mutual fund generate income from dividends received from other joint stock companies whose shares the fund holds. A mutual fund uses this dividend income to distribute dividend to its own stock holders.

Capital Gains:

As discussed earlier the portfolio manager changes the portfolio of the fund with the passage of the time and also with the changes in economic and business conditions. So due to the sale and purchase of shares, the mutual fund generates capital from the sales/ purchase of stocks. The capital gain generated by the mutual fund is also used to pay dividends to the investors of the fund.

Appreciation of Share Price:

Mutual funds also increases the wealth/investment of their shareholder through appreciation's of share price of the mutual fund. For example if the subscription price of a mutual fund is Rs.11.00, and after a period of seven months the price goes upto Rs.18.00, thus the investor gets a profit of Rs.7.00 if he sell the mutual fund's shares in the market.
Advantages of Mutual Funds:
• Mutual Funds substantially lower the investment risk of small investors through diversification in which funds are spread out into various sectors, companies, securities as well as entirely different markets. It is always the objectives of a fund manager to maximize a funds return for a given level of risk, however the dangers of "over-diversification" are always prevalent which would inevitably lead to a reduced return on the portfolio.
• Mutual Funds mobilize the saving of small investors and channel them into lucrative investment opportunities. As a result, mutual funds add liquidity to the market. Moreover, given that the funds are long term investment vehicles, they reduce market volatility by offering support to scrip prices.
• Mutual Funds are provide the small investor access to the whole market which individually, would be difficult to achieve.
• The investors saves a great deal in transaction cost given that he has access to a large number of securities by purchasing a single share of mutual fund.
The investors can pick and choose a mutual fund to match his particular needs.


Disadvantages of Mutual Funds:
As such there is no major disadvantage attached to the mutual funds. However, the possible disadvantages could be:
• Economic and Business Conditions: As the business and economic conditions do not remain constant, the mutual fund may face some difficulties in future. Specially if the manager does not shuffle the investment portfolio with the passage of time, or some other major unforeseen disaster/event changes the investment scenario.
Portfolio Managed by Managers: Portfolio of a mutual fund is managed by the portfolio managers due to which the investors has no say in the affairs of a mutual fund.
History of Mutual Funds in Pakistan:
Mutual Funds were introduced in Pakistan in 1962, with the public offering of National Investment (Unit) Trust (NIT) which is an open-end mutual fund in the public sector. This was followed by the establishment of the Investment Corporation of Pakistan (ICP) in 1966, which subsequently offered a series of closed-end mutual funds.
Currently there exists one open end (NIT) mutual fund in public sector and eight open-ended and fourteen closed-ended mutual funds (including ICP Lot 'A' 12 funds managed by ABAMCO Ltd. and ICP Lot 'B' 13 funds & SEMF managed by PICIC) under private sector management.

Rules Govern Mutual Funds in Pakistan
There are two rules govern mutual funds in Pakistan, which are:
1. Investment Companies and Investment Advisors' Rules, 1971. (govern closed-end mutual funds)
2. Asset Management Companies Rules, 1995. (govern open-ended mutual funds)
These rules however only apply to private sector operated mutual funds and are not applicable to NIT and ICP mutual funds.






LEASING
Alternative to funding or alternative to acquisition:
Leasing is merely an alternative to funding, or it is an alternative way of acquiring the equipment. If it were a pure financial alternative, the user should stay in the position of a virtual borrower. In other words, the user can look at leasing as a mode of financing - just as loan, bond or other borrowing option.
If it were an alternative mode of acquiring an asset, such as an asset-renting option, it becomes a distinctive way of getting to use an asset without owning, or almost-owning it. In this case, the user would be looking at leasing as an alternative mode of acquiring the equipment, significantly different from a plain financing alternative.
If a lease plan is a funding alternative, it is called a financial lease. If it is not a financial alternative alone, it is an operating lease.
Most lessors are financial intermediaries, and therefore, are obviously comfortable with financial leases. Most leasing in the World is still financial leasing. However, operating lease plans are also available for many equipments now. Operating leasing is certainly a faster growing segment of leasing business.
Explanatory Notes:
Equipment leasing
The use of the word "Equipment leasing" is to distinguish it from real estate leasing. Within the broad meaning of "equipment" is included everything other than real estate, and of course, employee leasing.
Financial intermediaries
Financial intermediaries means institutions or entities which mediate in the flow of money from one sector of the economy to the other. Banks are typical financial intermediaries - they source money from depositing public, and route it to the borrower corporates.





INVESTMENT BANKS
Investment Banks generate funds mainly through issuance of certificate. They provide long term loans and also function as underwriter.



VENTURE CAPITAL COMPANIES:

Venture capital companies make investment in two ways:
Ø Invest directly in venture projects.
Ø Create joint venture capital.









Research Work
SRO (Self Regulatory Organization)

During my internship I was given a chance to work on research paper of SRO. The basic purpose behind this research was to come up with a proposed model of SRO in Pakistan. Self-Regulations are rules formulated by private agencies to govern professional and trading activities.

Types of Self-Regulations:
There are three types of self-regulations.
1. Delegated self regulation
2. Hybrid self regulation
3. Voluntary self regulation
However The SRO’s can take that is most convenient to them. It may be for profit or not for profit, public limited or private limited.
There might be a relationship between SRO and Govt. regulatory body or not. The nature of relationship may vary from Hybrid SRO’s to Delegated SRO’s.

Dangers of SRO:
One of the perceived dangers of SRO’s is that it might be anti competitive. The entrance of new firms might be hurdled. For this registration procedure of new firms must be in hand of Govt. authority.

SRO’s and Third Party:
In SRO’s there should be involvement of third party. If all the members of SRO’s are from the organizations then the rules and policies of SRO’s will be beneficial for these organizations and not for consumers. The reason for this is that they will look after their interest and not that of consumers. So, consumer should be the member of SRO’s. There should be in house complaint procedure.

Reasons for SRO’s:
1. It will raise industry standards.
2. It will serve as marketing tool to attract new customers and advertisement.
3. It will increase industry motivation.
4. It will be more transparent and accountable.
5. SRO’s will be more flexible to respond to changes.
6. Govt. can save its regulation cost.

Costs Associated With SRO’s:
There are two costs associated with SRO’s
1. Administrative cost
2. Compliance cost










CHAPTER # 5

CHART OF SS DIVISION

















SUPPORT SERVICES DIVISION
The Support Services Division (SSD) is responsible for providing efficient support services to the entire Commission. These services include financial management and maintenance of accounts, development and administration of human resources, and maintenance of communication and management information systems through automation and introduction of new information technology. This Division is headed by Mr. M. Javed Panni, Executive Director. The SSD comprises the following Wings:
• Human Resources
• Administration
• Finance and Accounts
• Information Technology

1. Human Resources Wing:
The human resource department is responsible for recruiting, staffing and development of employees. They are using Human Resource System. This system helps to maintain relevant employee records by the Human Resource Wing. It is also an important MIS component with facilities for generation of various management reports.

2. Administration Wing:
This wing is also known as purchase department. It deals with the procurement policy of the department.

3. Information Technology:
The Information Technology (IT) provides efficient support to the Commission regarding all aspects of Information Technology. It is responsible for organizing and implementing an integrated system designed to support the workings of the Commission and its communication with the Company Registration Offices (CROs) throughout Pakistan.




4. Finance and Accounts Wing
The working of finance and account wing is divided into four sections
1. Revenue Section
2. Payment Section
3. Final Account section
4. MIS Reporting & budget preparation
1.Revenue Section:
The revenue department performs the following functions:

Data entry:
It enters all revenue receipts received from various branches of Habib Bank Ltd.
It also enters all MTs received from banks.

Reports:
It prepares the monthly revenue report.

Reconciliation:
It also performs the bank reconciliation.

Miscellaneous Functions:
It performs some miscellaneous functions such as maintenance of monthly bank statements, maintenance of revenue regarding receipts etc.

System for recording fees:
The chart given on the next page shows the system for recording fees.













2. Payment Section:
The payment section deals with all personal claims and all other expenses. The personal claims include the salary and all other benefits such as pension, provident fund. While expenses include stationery, miscellaneous, repair and maintenance expense. The payment section deals with
• Payroll
• Imprest

PAYROLL:

The section has system for payrolls known as payroll system.

System Recording for Payroll:

The system for recording payroll is given in the following chart:





Imprest:
It is like a petty cash. It is the amount reserved for daily expenditures. This amount is reserved for payments up to 5000 and for the payments of utility bills. If payments are more than amount reserved than these payments are send to head office for payment.

3.Final Account Section:
Final Account department gets input from payment and revenue department.

Input:
Payment voucher
Revenue voucher
Payroll Schedules

Functions:
• Comparing the divisions journal voucher with the detailed whole organizations journal vouchers summary.
• This section prepares the journal voucher.
• It pass closing entries

Budget Preparation:
This section prepares the budget on the estimation of previous year budget. It also maintains system generated financial statements.

Depreciation:
Depreciation is the systematic allocation of the cost of asset over its useful life.The SECP uses straight-line method for depreciation. I.e.
After its useful life if asset is still used then its value in books will be one.











FINDINGS

I worked in various departments of SECP. During my internship I tried to have critical view of the SECP. From establishment SECP has worked a lot to increase market conditions.

Positive Aspects

According to my point of view the positive aspects of SECP are

Customer Confidence:
The SECP has taken number of steps to increase customer confidence. The investor complaint wing is one of the steps taken by SECP to improve customer confidence.

Non-Banking Finance Companies:
The commission has implemented the concept of non bank finance company the main objective behind the introduction of NBFC is to consolidate the activities of the non bank financial sector under on e umbrella.

International Accounting Standards:
The commission has done a lot for observation of the international standards.


Code of Corporate Governance:
The commission has successfully implemented the code of corporate governance. The Code has been issued by the Commission after an extensive consultative process and is the result of joint efforts of the Commission and ICAP.
The Code primarily aims to establish a system whereby a company is directed and controlled by its directors in compliance with best practices so as to safeguard the interests of a diverse range of stakeholders. It proposes to restructure the composition of board of directors to introduce representation by minority shareholders. The Code emphasizes openness and transparency in corporate affairs and decision-making process. It also requires directors to discharge their fiduciary responsibilities in the larger interest of all stakeholders in a transparent, informed, diligent, and timely manner. The salient features of the Code are as follows:
(i) The Code encourages representation of independent non-executive directors
And those representing minority interests on the boards of directors of listed
Companies.
(ii) It lays down the qualification and eligibility criteria for directors of listed
Companies.
(iii) While reinforcing the powers, responsibilities and functions of the board of
Directors, the Code formalizes the corporate decision making process and
Requires adequate documentation of policies and decisions of directors.
(iv) It seeks to strengthen corporate working, internal control system and external
Audit requirements of listed companies.
(v) Corporate and financial reporting framework has been re-defined to foster
better disclosure.
(vi) Audit Committees and internal audit functions are required to be established
by all listed companies.
(vii) A statement of compliance with the Code is required to be published by

Working Conditions:
The working conditions in SECP are good for employees.

Qualification of Employees:
The qualification of employees is high as compare to other Pakistani organization.

Investor Complaints:
The Investor Complaints Wing within the SMD has emerged as an efficient and Effective instrument for the protection of investors’ interests, in particular, those of small investors. The Wing has successfully brought about Quantitative as well as Qualitative improvements to redress investor grievances.

Well Thought-Out Reforms:
SEC has implemented a well thought-out reform program to address several distortions in the capital market and the corporate sector. The main objective of the reform program is to achieve market integrity -- a fair, transparent, and efficient market that engenders investor confidence.

Transparency Measures:
There are certain transparency measures taken by SECP are
• 38 out of 41 IAS adopted.
• All listed companies are required to publish their quarterly accounts.
• Abolished the system of disclosed trading which was a major source of front running.

Risk Management measures:
The risk management measures taken by SECP are
• Net capital balance requirement redefined and enhanced 10 times
• Capital Adequacy introduced -- exposure of brokers not to exceed 25 times net capital balance
• Introduction of T+3 system
• Margin requirements strengthened

Payroll System:
The Payroll System is used to process salaries of employees of the Commission and to provide other facilities, like automatic tax computation and deduction, loans, generation of statements relating to salary payments, etc.

Human Resource System:
This system helps to maintain relevant employee records by the Human Resource Wing. It is also an important MIS component with facilities for generation of various management reports.

Fixed Assets System
This system is designed to keep a record of fixed assets of the Commission and assist in automatic calculation of periodic depreciation.









Negative Aspects
But there are certain negative aspects associated with SECP. These things hinder the performance of SECP

Awareness:
Most investors are not aware about the steps taken by SECP.

Training System for Brokers and Agents:
There is no training system for brokers and agents


Research System:
There is no proper research system. There is no proper research department in SECP. The existing research department cannot do extensive research.

Registration Requirements:
The registration requirements for brokers and agents in SECP are same as that of stock exchange. So SECP should improve its standards so that will increase customer confidence.

Complaint Hearing System:
There is no complaint hearing system at major cities. The complaints are heard only at Islamabad.

Idle Fund:
The revenue collected remains idle in bank. They don’t utilize it for investment purposes.

Internship Procedure:
The internship procedure is too long. To get internship in SECP student has to wait for a long period.
















SUGGESTIONS

According to me these are some suggestions that SECP should implement to enhance its performance;

Accounting Standards:
The SECP should further strengthen audit practices and enforce International Accounting Standards.

Holding Seminars:
The SECP should arrange seminars and hold meetings with small investors to increase their confidence.

Regulatory Frame Work:
Securities and Exchange Commission should develop a regulatory framework for online trading.

Hearing Process System:
All the hearings are heard at SECP head office. This takes lot of time and also put burden on companies. So I suggest that the commission should create hearing process system at least in provincial capitals.

Demutualization:
It should encourage and assist the demutualization of stock exchanges.


Risk Management System:
SECP should take steps to deepen the market and improve risk management at the exchanges.

NBFCs:
More steps should be taken by SECP to develop and strengthen mutual funds, pension funds, and the insurance industry. It should address issues pertaining to development of venture capital.

Broker and Agent:
The SECP should take appropriate measures to develop retail demand – encourage broker branch networks, agents in smaller towns, maintain telecommunication networks etc.



Research Center:
There should be proper research center. Preliminary researches should be given to the educational institution.


Revenue Earned:
The revenue earned should be invested in those areas where they can get maximum profit. The SECP earning a lot of revenue under different earning heads. But this fund remains idle in Banks so they should invest funds in different sectors to earn maximum profit.

Internship Procedure:
Internship procedure should be improved. The HR department should be given autonomy in case of internship procedure. For internees they should not take approval from chairman because lot of time wasted in that process.

















CONCLUSION

The overall management of Securities and Exchange Commission is better performing but in some areas there is need to improve for further improvement in future. The achievements of SEC are substantial. The SEC assisting in fostering development of capital market and the corporate sector while protecting small investors and its reform agenda is ambitious but feasible. The closer consultations with stakeholders and more in-house capacity building efforts will help meet targets.

The SEC has also taken lot of steps to increase customer confidence. The SEC is encouraging mergers so that to meet the challenges of free world trade. The SEC is also worked a lot enforce international accounting standards.

But there are certain areas, which have to be revived. The SEC is aware of those aspects and will work more effectively to improve market conditions. The SEC is bringing new reforms to enhance market conditions. These reforms include

• National Clearing and Settlement System (NCSS)
• National Commodities Exchange Limited (NCEL)
• Introduction of Futures Contracts
• Registration of Brokers/Agents
• Monitoring and Surveillance Cell
• Investor Complaints Cell
• Publication of Investor Guides






BIBLOGRAPHY

1. The first important thing is the discussions with the staff of the bank especially with the manager of the branch.
2. Reading the annual report of SECP.
3. Surfing the website of the Securities and Exchange Commission of Pakistan (www.secp.gov.pk)
4. Reading the annual reports of the SECP.
5. Reading the articles in newspaper related to SECP.
6. Reading the material provided by the staff of SECP.