Hafeez Shaikh urged to announce relief measures for brokers and investors

KARACHI: The Pakistan Stockbrokers Association (PSA) has urged the Advisor to the Prime Minister on Finance & Revenue Dr Abdul Hafeez Shaikh to give incentives to the stock brokers and investors due to natural calamity which caused huge losses in Pakistan Stock Exchange (PSX).

In a letter sent to Hafeez Shaikh, the Secretary PSA Bilal Farooq Zardi said, “stock market took severe blow as a result of natural calamity and no one in the country suffered monetary losses except stock brokers and investors who were required to fetch huge losses in absolute terms.”

Despite the fact that magnitude of the losses was intense and social distancing had to be kept, he said, investors/clients, where possible, co-operated with stock brokers. However, stock brokers, being the TREC Holders, and solely responsible for any and all transactions were on toes to arrange for all the losses, he said in letter.

The letter claimed that it is indeed a cause of concern that when entire world was and is trying hard to make necessary arrangements for the business continuity and even our own Central Bank took steps and announced different measures for Pakistani entrepreneurs, our Apex Regulator was preparing to bring in structural changes in form of new broker regime.

The Secretary said our representatives met with the Chairman Standing Committee on Finance on January 30, 2020 and requested him to take notice of development being articulated by the Apex Regulator under the umbrella of new broker regime. Chairman Standing Committee was kind enough to invite us in the meeting of Standing Committee on Finance scheduled on February 06, 2020 wherein our representatives were vocal on changes being proposed, he said.

The entire house was of the opinion that any set of regulations should only be brought after consultation and agreement of regulated entities. Hence, SECP was given time to incorporate changes suggested by the Association. During discussions, it was also the desire of the honourable members to make public, the investigations conducted since 2015. Nothing in response of this has been materialized as yet.

Therefore, he said keeping in view the devastating impact that COVID-19 has brought to the stock brokerage fraternity and capital market investors, PSA requests you to take immediate and timely action in order to save both the stock brokerage industry and the investors of capital market.

Accordingly, the PSA submit proposals for perusal and consideration in order to incentivize the investors at the Stock Market. We hope that the Pakistan Stock Market will also be given due consideration and our proposals will get favour of approval.

Taxation Issues:

1. “Security” definition under Section 37A(3) of IT Ordinance, 2001 may please be amended in a retrospective manner to nullify the effect of an erroneous SHC Judgement;
2. Capital Gain Tax on disposal of securities may please be abolished for three years;
3. Tax on dividend income may please be abolished for investors holding 1% or less of the issued capital of the company;
4. Please release our “Capital” stuck in Income Tax Refunds;
5. Section 67 of Income Tax Ordinance, 2001 shall not be applicable on Capital Gains and Dividend Income;
6. Investment in stocks falling under Section 111 of the IT Ordinance, 2001 may please be exempted from tax;
7. Corporate Tax Rate may please be reduced to 20%;
8. Notification for abolishment of CVT may please be issued.

For SECP, PSX and SBP:

1. Section 153 (k) of Companies Act, 2017 – Restrictions imposed may please be abolished;
2. The existing number of independent directors on the Board of PSX be reduced from existing 1/2 to 1/3 with immediate effect and (2) seats so vacant be reserved for two nominees of the Association which may please be made mandatory;
3. Powers of Regulators under Section 169 & 170 of the Securities Act, 2015 may please be made “Subject to approval of Federal Government”;
4. Pakistan Stock Exchange may be allowed to play its role as a Front Line Regulator through restoration of its authority;
5. Indemnities provided to Commission may please be restricted to acts done in good faith;
6. Functions of CDC & NCCPL be merged with the Exchange to reduce cost of doing business;
7. “Investor account” may please be made mandatory;
8. Margin Financing – To reduce cost, role of NCCPL in MF may please be abolished and condition of A category auditor may please be relaxed;
9. Margin eligible securities may please be increased;
10. Requirement of Base Minimum Capital (BMC) may please be abolished;
11. Per UIN limit in MTS be increased to 5% from 2%;
12. Reduction in interest rates on bank borrowings for investment in stock market;
13. Restrictions imposed by SECP on Sponsors of Stock Brokerage Houses may please be relaxed;
14. All major pension funds and corporations like State Life (SLIC), EOBI etc. be encouraged to invest in equity by increasing capital market allocation.

About The Author