KARACHI: Stung by the nine-year low volumes at the Karachi Stock Exchange, which ostensibly had reduced many from riches to rags, a 125-member strong stock broker fraternity gathered at the bourses’ auditorium on Thursday afternoon.
The single point agenda of the informal meeting was to discuss amendment in Articles of the Exchange that would allow replacement of the SECP-nominated chairman by a broker chairman.
Member directors together with leading brokers including Yasin Lakhani; Akeel Karim Dhedhi (AKD); Arif Habib and Haji Ghani Haji Usman sat on the dais. The last named, spearheading a movement for the cause was said to have already collected approvals of 105 of the 200-member fraternity.
As the meeting progressed, brokers vent their anger at the “takeover of the KSE by non-stakeholders, so called professionals”, who they said had ruined the capital market. The two-hour debate culminating on a unanimous voice to give a call for a general body meeting, where resolution would be moved to amend the articles.
A broker, who came out of the ‘ijlaas’ (meeting), said that an extraordinary general meeting of the members will be called on a 21-day notice, after a formal requisition signed by 25 members is endorsed by the Exchange.
The minutes of such an ExGM would be posted to the apex regulator, demanding an end to the rule of non-member directors and appointment of a broker chairman in place of the sitting SECP-nominated head of the board. But what if the apex regulator declines to concede to such a demand?
A letter circulated by the KSE members after the meeting contained the answer: “The meeting expressed its determination to amend the Articles of the Exchange and resist any move against the proposal of the members of KSE for restructuring of the KSE Board and reversal of the discriminatory requirement of the chairman of the Board being elected from amongst the non-member directors”, it said.
A couple of brokers observed that in case the SECP exercised its power of veto (on the possibility and legality of which there were varied views); the members could knock at the doors of the Court or take the extreme measure of closing down the market.
The members’ letter did not amplify all that but stated: “Any dictatorial move to block the legal and democratic rights of members of the Exchange to reverse the failed reforms (of installation of non-member directors and outside chairman on the Board) would be resisted forcefully”.
The members put the blame for a 105 days closure of the market in 2008 on the “Board having majority and chairman of non-members, in connivance with the apex regulator”. And the stock brokers said: “Surprisingly no inquiry committee was formed by the Regulator against this heinous crime of inflicting a loss of over Rs2 trillion to the investing public”.
The statement mentioned the pinch: “The KSE a one-time vibrant market having a daily turnover of 400 million shares had slipped to an average of 30 million shares”. And a broker recalled that so low a volume was last seen in Dec 2001 when average daily turnover was 53m shares (US$27m), though at the time Pakistan market size was as small as US$5bn.
Last month average daily volume stood at 57m shares or US$22m with market cap at US$33bn, six times the size of 2001. The broker statement mentioned in detail the actions of the Chairman of KSE in regard to the recent majority decision of the Board in respect of introduction of a leverage product.
And it struck the final blow: “The SECP has also remained hostage to the chairman KSE — who after all is only a member of the Board consisting of 10-members — by delaying consideration on KSE’s proposal on leverage product”.
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