Securities and Exchange Commission of Pakistan (SECP) ordered an independent study to analyze the role of stock exchanges as well as the apex regulator, the SECP itself, in the 2008 stock market crises.
An independent consultant Shamim Ahmed Khan has been hired in view of maintaining transparency in the study report that would analyze the role of the regulator and the management of stock exchanges and other shareholders.
The study of market crises entailing long term negative impact for the market needs to be carried out for helping SECP in its policy formulation regarding ensuring adequate levels of transparency and general developments of the capital markets of Pakistan.
Addressing a press conference in Islamabad Friday, the SECP spokesman Imran Ghaznavi announced that the apex regulator of stock markets had hired the services of Khan for analyzing the issue in greater detail.
Khan would prepare a report on the background, impact and recommendations to avoid future recurrence of the 2008 stock market crises in Pakistan. He would identify the factors leading to issues observed in the Pakistani securities market in 2008 and analyze the correlation of market movement with trends in the global market.
The study would also evaluate the rational for placing a floor on the share prices of listed securities w.e.f. August 27, 2008 (the Floor) in terms of Force Majeure Regulations of the Regulations Governing Risk Management for Karachi Stock Exchange (KSE), Lahore Stock Exchange (LSE) and Islamabad Stock Exchange (ISE) respectively.
It would also analyze the role of SECP in the decision to impose the floor and the subsequently remove the Floor on December 15, 2008.
Khan would also present the review of the imposition of the Floor on the share prices in the market and on the market participants and shareholders and determine the extent to which any market participant benefited or was disadvantaged by the imposition of Floor as the case may be.
He would examine the events which took place during the imposition of the Floor, and the subsequent measures taken to bring regulatory and operational reforms for enhancing transparency and investor protection.
He would also examine whether the Central Depository Company (CDC) played the role of a frontline regulatory of the depository system.
Khan has served as Chairman SECP during April 1997 to March 2000.
The study would help SECP in assessing how our markets are currently poised in comparison to the year 2008 and in identifying areas which require special focus of the regulator.
