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  "title": "Securities Act, 2015",
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  "text": "Page 1 of 108  \r\n \r\n \r\n \r\n \r\nTHE SECURITIES ACT, 2015 \r\n \r\n \r\n \r\nCONTENTS \r\n \r\n \r\nPART I \r\nPRELIMINARY \r\n 1. Short title, extent and commencement. \r\n2. Definitions. \r\nPART II \r\nSECURITIES EXCHANGES \r\n3. Licensing requirement. \r\n4. Eligibility for licensing. \r\n5. Grant of licence. \r\n6. Duties of securities exchange. \r\n7. Regulations of securities exchange. \r\n8. Approval of regulations or amendments to regulations of securities exchange. \r\n9. Statutory obligation of securities broker to comply with regulations of securities exchange. \r\n10. Securities exchange to assist the Commission. \r\n11. Review of disciplinary action taken by securities exchange. \r\n12. Power of the Commission to issue directions to securities exchange. \r\n13. Emergency powers of the Commission. \r\n14. Suspension or cancellation of securities exchange licence. \r\n15. Effect of cancellation of licence. \r\n16. Accounts and audit. \r\n17. Power of the Commission to appoint auditor. \r\n18. Annual report. \r\n19. Listing of securities. \r\n\r\n \r\nPage 2 of 108  \r\n20. Compulsory listing. \r\nPART III \r\nCLEARING-HOUSES \r\n21. Interpretation. \r\n22. Licensing requirement. \r\n  \r\n \r\n23. Eligibility for licensing. \r\n24. Grant of licence. \r\n25. Duties of clearing house. \r\n26. Regulations of clearing house. \r\n27. Approval of regulations or amendments to regulations of clearing house. \r\n28. Statutory obligation of clearing members to comply with regulations of clearing house. \r\n29. Clearing house to assist the Commission. \r\n30. Review of disciplinary action taken by clearing house. \r\n31. Power of the Commission to issue directions to clearing house. \r\n32. Emergency powers of the Commission. \r\n33. Suspension or cancellation of clearing house licence. \r\n34. Effect of cancellation of licence. \r\n35. Accounts and audit. \r\n36. Power of the Commission to appoint auditor. \r\n37. Annual report. \r\n38. Proceedings of clearing house take precedence over laws of insolvency. \r\n39. Duty to report on completion of default proceedings. \r\n40. Net sum payable on completion of default proceedings. \r\n41. Disclaimer of property, rescission of contracts, etc. \r\n42. Enforcement of judgments over property subject to market charge, etc. \r\n43. Clearing member to be party to transactions as principal. \r\n44. Property deposited with clearing house. \r\n45. Preservation of rights, etc. \r\nPART IV \r\nCENTRAL DEPOSITORY COMPANIES \r\n46. Interpretation. \r\n47. Licensing requirement. \r\n \r\nPage 3 of 108  \r\n48. Eligibility for licensing. \r\n49. Grant of licence. \r\n50. Duties of central depository. \r\n51. Regulations of central depository. \r\n52. Approval of regulations of central depository. \r\n53. Obligation of CDS element to comply with regulations and procedures of central depository. \r\n54. Central depository to assist the Commission. \r\n55. Power of the Commission to issue directions to central depository. \r\n56. Emergency powers of the Commission. \r\n57. Suspension or cancellation of licence. \r\n58. Effect of cancellation of licence. \r\n59. Accounts and audit. \r\n60. Power of the Commission to appoint auditor. \r\n61. Annual report. \r\n62. Preservation of rights, etc. \r\nPART V \r\nREGULATED SECURITIES ACTIVITIES \r\n63. Scope of regulated securities activities. \r\n64. Licensing requirement. \r\n65. Eligibility for licensing. \r\n66. Representatives. \r\n67. Accreditation of representatives. \r\n68. Application for licence. \r\n69. Grant of licence. \r\n70. Power of the Commission to impose conditions. \r\n71. Power of the Commission to issue directions to regulated persons. \r\n72. Register of regulated persons. \r\n73. Notification of change in register particulars. \r\nPART VI \r\nCONDUCT OF REGULATED SECURITIES ACTIVITIES \r\n74. Standards of conduct. \r\n75. Business conduct regulations. \r\n76. Issue of contract notes. \r\n77. Short selling. \r\n \r\nPage 4 of 108  \r\n78. Customer assets. \r\nPART VII \r\nACCOUNTS, CAPITAL REQUIREMENTS AND AUDIT \r\n79. Accounts and records to be kept. \r\n80. Financial resources regulations. \r\n81. Failure to comply with financial resources regulations. \r\n82. Monitoring compliance with financial resources regulations. \r\n83. Auditor to be appointed. \r\n84. Audited accounts to be lodged with the Commission. \r\n85. Auditor to report to the Commission in certain cases. \r\n86. Power of the Commission to appoint auditor for special audit. \r\n \r\nPART VIII \r\nPUBLIC OFFERS OF SECURITIES \r\n87. Offer of securities. \r\n88. Approval, issue, circulation and publication of prospectus. \r\n89. Contents of prospectus. \r\n90. Expert to be independent. \r\n91. Expert's consent to issue of prospectus containing statement made by him. \r\n92. Criminal liability for defective prospectus. \r\n93. Compensation for false or misleading prospectus. \r\n94. Abridged prospectus. \r\n95. Issue of securities outside Pakistan. \r\n96. Disclosure of price sensitive information. \r\n97. Notification of required disclosure by the Commission or a securities exchange. \r\n98. Power of the Commission to require production of records and documents concerning listed \r\ncompanies. \r\n99. Remedy in cases of unfair prejudice by listed companies. \r\n100. Power of the Commission to issue directives to listed companies. \r\n101. Duty of directors and others to disclose shareholding in listed company. \r\n102. Register of directors' interests notified under section 101. \r\n103. Notification to the Commission of directors and other's interest. \r\n104. Trading by directors and others. \r\n105. Tender of gain to be credited to Federal Consolidated Fund. \r\n \r\nPage 5 of 108  \r\n106. Directive by the Commission. \r\n107. Notification to the Commission of prescribed information. \r\nPART IX \r\nTAKEOVERS \r\n108. Interpretation. \r\n109. This Part not to apply to certain transactions. \r\n110. Acquisition of more than ten per cent voting shares of a company. \r\n111. Acquisition of voting shares beyond prescribed limits or control of a company. \r\n112. Number of voting shares and offer price. \r\n113. Appointment of manager to the offer. \r\n114. Timing of the public announcement of intention. \r\n115. Public announcement of intention and public offer not to contain misleading material. \r\n116. Conditional offer. \r\n117. Persons to whom public offer shall be made. \r\n118. Prohibition for acquirer. \r\n119. Prohibitions on board of directors of the target company. \r\n120. Competitive bid. \r\n121. Upward revision of offer. \r\n122. Withdrawal of public offer. \r\n123. Security to be furnished by the acquirer. \r\n124. Conduct of takeovers. \r\n125. Powers of Commission to issue directions under this Part. \r\n126. Penalties for non­compliance. \r\nPART X \r\nINSIDER TRADING \r\n127. Application of this Part. \r\n128. Prohibition of insider trading. \r\n129. Inside information. \r\n130. Insiders. \r\n131. Listed companies' responsibilities to disclose inside information. \r\nPART XI \r\nOTHER MARKET ABUSES \r\n  \r\n132. False trading and market rigging transactions. \r\n \r\nPage 6 of 108  \r\n133. Market manipulation. \r\n134. Fraudulently inducing trading in securities. \r\n135. Employment of fraudulent or deceptive devices. \r\n136. False or misleading statement inducing securities transactions. \r\nPART XII \r\nSUPERVISION AND INVESTIGATION \r\n \r\n137. Power of the Commission to call for information. \r\n138. Inspection. \r\n139. Investigation. \r\n140. Destruction of documents. \r\n141. Powers of the investigator in relation to investigations. \r\nPART XIII \r\nPOWERS OF INTERVENTION BY COMMISSION IN RELATION TO LICENSED \r\nPERSONS \r\n \r\n142. Scope of powers under this Part. \r\n143. Restriction of business. \r\n144. Restriction on dealing with property. \r\n145. Maintenance of property. \r\n146. Rescission and variation of prohibition or requirement. \r\n147. Notices. \r\n148. Winding up orders. \r\n149. Orders of Court. \r\nPART XIV \r\nDISCIPLINE OF LICENSED PERSON \r\n \r\n150. Disciplinary action in respect of licensed person. \r\n151. Determination of “fit and proper”. \r\n152. Other circumstances for disciplinary action in respect of licensed persons. \r\n153. Effect of cancellation or suspension of licence. \r\n154. Procedural requirements for exercise of disciplinary powers under this Part. \r\nPART XV \r\nMISCELLANEOUS \r\n \r\nPage 7 of 108  \r\n \r\n155. Indemnity. \r\n156. Rights of applicants and holders of licence. \r\n157. Civil liabilities. \r\n158. Standard of proof. \r\n159. Offences and penalties. \r\n160. Penalty to be imposed by the Commission. \r\n161. Appeal. \r\n162. Recovery of penalties. \r\n163. Cognizance of offences. \r\n164. Prosecution of offences by the Commission. \r\n165. Register of notifications issued by the Commission. \r\n166. Liability of directors, etc. for offences by companies. \r\n167. Liability of licensed person for acts of representative, etc. \r\n168. Securities acquired in good faith. \r\n169. Power of the Commission to make regulations. \r\n170. Power of the Commission to issue directions to a securities exchange, clearing house and \r\ncentral depositor. \r\n171. Forms. \r\n172. Codes and guidelines, etc. \r\n173. Act not to affect the powers of the State Bank of Pakistan. \r\n174. Act to override other laws. \r\n175. Power to make rules. \r\n176. Removal of difficulties. \r\n177. Transitional provisions. \r\n178. Repeal and savings. \r\n \r\n \r\n \r\n \r\n \r\n \r\nPage 8 of 108  \r\nTHE SECURITIES ACT, 2015  \r\nACT No. III OF 2015 \r\n[6th May, 2015] \r\nAn Act to amend and consolidate law for the regulation of the securities industry and the protection \r\nof investors \r\nWHEREAS it is expedient to amend and consolidate law for the regulation of the securities \r\nindustry, the protection of investors and for the matters connected therewith or ancillary thereto; \r\nIt is hereby enacted as follow:— \r\nPART 1  \r\nPRELIMINARY \r\n1. Short title, extent and commencement. — (1) This Act may be called the Securities \r\nAct, 2015. \r\n(2) It extends to the whole of Pakistan. \r\n(3) Except for PART V, this Act shall come into force at once, and PART V of this Act \r\nshall come into force on such date as the Federal Government may, by notification in the official \r\nGazette, appoint. \r\n2. Definitions. In this Act, unless there is anything repugnant in the subject or context,— \r\n(i) “accredited” means accredited in accordance with section 67; \r\n(ii) “associate”, in relation to— \r\n(a) an individual, means — \r\n(I) that individual's spouse, son, adopted son, step­son, daughter, \r\nadopted daughter, step­daughter, father, stepfather, mother, \r\nstepmother, brother, stepbrother, sister or stepsister; \r\n(II) any company of which that individual is a director; \r\n(III) any company in which that individual or any of the persons \r\nmentioned in sub­clause (i), has control of twenty per cent or \r\nmore of the voting power in the company, whether such control \r\nis exercised individually or jointly; or \r\n(IV) any employee of that individual; or \r\n(b) a company, means another company in w hich the first­mentioned \r\ncompany has control of not less than twenty per cent of the voting power \r\nin that company, \r\n \r\nPage 9 of 108  \r\nand a reference in this Act to an associated person or associated company shall \r\nbe construed accordingly; \r\n(iii) “auditor” means a chartered accountant as defined in clause (b) of sub­section \r\n(1) of section 2 of the Chartered Accountants Ordinance, 1961 (X of 1961), to \r\nbe appointed from the panel of auditors approved by the Commission to perform \r\nthe functions assigned to auditors under this Act; \r\n(iv) “balloter” means a person who provides services to an issuer for selecting the \r\nrequired number of applicants of public issue through a ballot; \r\n(v) “bank” means a bank licenced  under section 27 of the Banking Companies \r\nOrdinance, 1962 (LVII of 1962); \r\n(vi) “central depository” means any company licensed by the Commission for the \r\nhandling of securities, as envisaged in the Central Depository Act 1997 (XIX of \r\n1997) and licensed under section 49 of this Act; \r\n(vii) “clearing facility” means a facility for the clearing and settlement of securities \r\ntraded on a securities exchange; \r\n(viii) “clearing house” means a company that is licenced by the Commission as a \r\nclearing house under section 24; \r\n(ix) “clearing member” means a person who, is admitted as a clearing member for \r\nclearing and settlement on his own behalf as well as on behalf of others under \r\nthe regulations of a clearing house; \r\n(x) “Commission” means the Securities and Exchange Com mission of Pakistan \r\nestablished under section 3 of the Securities and Exchange Commission of \r\nPakistan Act, 1997(XLII of 1997); \r\n(xi) “commissioner” means a commissioner as defined in section 2 (h) of the \r\nSecurities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997); \r\n(xii) “company” means a company as defined in clause (7) of sub­section (1) of \r\nsection 2 of the Companies Ordinance, 1984 (XLVII of 1984); \r\nExplanation:— The expression “company” used in this Act, shall, wherever the \r\ncontext requires, al so include a body corporate or corporation established by \r\nany special enactment for the time being in force; \r\n(xiii) “control” includes the right to appoint majority of directors or to control \r\nmanagement or policy decisions, exercisable by a person individu ally or \r\nthrough any person acting in concert, directly or indirectly, whether by virtue of \r\nhis shareholding, management right, shareholders agreement, voting agreement \r\nor otherwise; \r\n(xiv) “Court” means the Company Bench of a High Court as provided in secti ons 7 \r\nand 8 of the Companies Ordinance, 1984 (XLVII of 1984); \r\n(xv) “customer” means a person on whose behalf a regulated person carries on any \r\n \r\nPage 10 of 108  \r\nregulated securities activity and includes any person commonly known as an \r\ninvestor; \r\n(xvi) “customer assets” means money received, receivable or retained by or any other \r\nproperty deposited with, a regulated person in the course of his business for \r\nwhich he is liable to account to his customer, and any money or other property \r\naccruing there from; \r\n(xvii) “customer money” means money of any currency that, in the course of carrying \r\non his regulated securities activity, a regulated person holds or receives on \r\nbehalf of a customer or which he owes to a customer; \r\n(xviii) “default proceedings” means proceedings or other action taken by a clearing \r\nhouse, stock exchanges and central depository under its default regulations; \r\n(xix) “default regulations”, means those provisions of the regulations which provide \r\nfor the initiation of proceedings or other action if a clearing mem ber has failed \r\nor appears to be unable or likely to become unable, to meet his obligations for \r\nall unsettled or open market contracts to which he is a party; \r\n(xx) “depository receipt” means a certificate or other record, whether or not in the \r\nform of a document, which— \r\n(a) is issued by or on behalf of a person who holds any shares, debt \r\nsecurities and warrants of a particular issuer; and \r\n(b) acknowledges that another person is entitled to rights in relation to the \r\nshare, debt securities and warrants, debt securities and warrants of the \r\nsame kind; \r\n(xxi) “director”, in relation to a company, includes any person occupying in relation \r\nto the position of a director, by whatever name called; \r\n(xxii) “expert” includes banker, securities advisor, engineer, valuer, a ccountant, \r\nlawyer and any other person whose profession gives authority to a statement \r\nmade by him; \r\n(xxiii) “family” means a spouse and lineal ascendants and descendants; \r\n(xxiv) “futures broker” means a person who, by way of business, whether as principal \r\nor agent,— \r\n(a) makes or offers to make with any person or induces or attempts to induce \r\nany person to enter into or to offer to enter into any agreement for or \r\nwith a view to the purchase or sale of a futures contract; or \r\n(b) solicits or accepts any order for, or otherwise dealing in, a futures \r\ncontract; \r\n(xxv) “futures exchange ” means a public company that is licensed by the \r\nCommission as a futures exchange; \r\n \r\nPage 11 of 108  \r\n(xxvi) “holding company” means a holding company as defined in section 3 of the \r\nCompanies Ordinance, 1984 (XLVII of 1984); \r\n(xxvii) “issuer”, in relation to securities, means any person who has issued or \r\nproposes to issue a security; \r\n(xxviii) “licenced person” means any person or entity licence d under this Act and \r\nincludes a regulated person; \r\n(xxix) “listed company” means a public company, body corporate or other entity \r\nany of whose securities are listed on securities exchange; \r\n(xxx) “listed securities” means securities listed on the securities exchange; \r\n(xxxi) “majority shareholder ” means shareholder who holds, owns or control, \r\ndirectly or indirectly, more than fifty percent of the shares having voting \r\nrights in a company or who, for other reasons, has domination or control of \r\nthe company and in cludes a group of shareholders who collectively own \r\nmore than fifty percent of shares or otherwise have that domination or \r\ncontrol; \r\n(xxxii) “margin” means the amount of cash, approved securities or any other form \r\nof margin as prescribed; \r\n(xxxiii) “market contract” means­ \r\n(a) a contract subject to the regulations of a clearing house entered into by \r\nthe clearing house with a clearing member under a novation and for the \r\npurpose of clearing and settlement of transactions using the clearing \r\nfacility before or after default proceedings have commenced; or \r\n(b) a transaction which is being cleared or settled using the clearing facility \r\nand subject to the regulations of a clearing house, whether or not a \r\nnovation referred to in sub­clause (a) is to take place; \r\n(xxxiv) “money” includes any form of money, whether represented by a cheque or \r\nother payable order or otherwise; \r\n(xxxv) “non­banking finance company” shall have the same meaning as assigned \r\nto it in clause (a) of section 282A of the Companies Ordinance, 1984 (XLVII \r\nof 1984); \r\n(xxxvi) “offeror” means any person or entity holding, directly or indirectly, such \r\nnumber of securities as may be prescribed and offers such securities for sale \r\nto the public or invites any other person to make subscription for such an \r\noffer and includes an issuer; \r\n(xxxvii) “prescribed” means prescribed by regulations made by the Commission; \r\n(xxxviii) “principal”, in relation to a representative, means the regulated person which \r\nthe representative represents; \r\n \r\nPage 12 of 108  \r\n(xxxix) “private company” means a private company as defined in clause (28) of \r\nsub­section (1) of section 2 of the Companies Ordinance, 1984 (XLVII of \r\n1984); \r\n \r\n(xl)  “private offering (non­public offering) or private placement” means an offer \r\nto sell or issue securities to a group of investors (whether individual or \r\ninstitutional) not more than the number prescribed and not using the print or \r\nelectronic media for inviting offers; \r\n(xli)  “prospectus” means any document described or issued as a prospectus and \r\nincludes any document, notice, circular, material, advertisement, offer for \r\nsale document, publication or other invitation offering to the public (or any \r\nsection of the public) or inviting offers from the public for the subscr iption \r\nor purchase of any securities of a company, body corporate or entity, other \r\nthan deposits invited by a bank and certificate of investments and certificate \r\nof deposits issued by non­banking finance companies; \r\n(xlii)  “public company ” means a public c ompany as defined in clause (30) of \r\nsub­section (1) of section 2 of the Companies Ordinance, 1984 (XLVII Of \r\n1984); \r\n(xliii)  “qualified institutional buyer” means — \r\n \r\n(a) a bank; \r\n(b) a financial institution as defined under clause (15A) of sub­section (1) \r\nof section 2 of the Companies Ordinance, 1984 (XLVII of 1984); or \r\n(c) any other entity, which is notified by the Commission as a 'qualified \r\ninstitutional buyer based on the criteria prescribed under regulations; \r\n(xliv)  “quotation and trade reporting system” means the operation of facilities that \r\npermit the dissemination of price quotations for the purchase and sale of \r\nsecurities and reports of completed transactions in securities; \r\n(xlv)  “record” means all documentary, electronic and digital materials created, \r\ngenerated, sent, communicated, received or stored, regardless of physical \r\nform or characteristics; \r\n(xlvi)  “regulated market” means any securities exchange, over­the­counter market \r\nor platform that is licensed by the Commission; \r\n(xlvii)  “regulated person” means a person or entity licenced by the Commission \r\nunder Part V of this Act to carry on any regulated securities activity; \r\n \r\n(xlviii)  “regulated securities activity ” means a regulated secu rities activity as \r\nspecified in section 63; \r\n \r\nPage 13 of 108  \r\n(xlix)  “regulations” means regulations made by the Commission under this Act; \r\n(l) “representative” means an individual, by whatever name called, in the \r\nemployment of or acting for or by arrangement with, a regulated person, \r\nwho carries out for that regulated person any such activity (other than work \r\nordinarily performed by accountants, clerks or cashie rs), whether or not he \r\nis remunerated, and whether his remuneration, if any, is by way of salary, \r\nwages, commission or otherwise; and includes any officer of a company \r\nwho performs for the company any such activity whether or not he is \r\nremunerated, and whe ther his remuneration, if any, is by way of salary, \r\nwages, commission or otherwise and includes an agent of a regulated \r\nperson; \r\n(li)  “rules” means rules made under this Act; \r\n(lii)  “securities” in the case of listed instruments includes— \r\n(a) shares and stock of a company (shares); \r\n(b) any instrument creating or acknowledging indebtedness which is issued \r\nor proposed to be issued by a company including, in particular, \r\ndebentures, debenture stock, loan stock, bonds, notes, commercial \r\npaper, sukuk or any other  debt securities of a company, whether \r\nconstituting a charge on the assets of the company or not (debt \r\nsecurities); \r\n(c) loan stock, bonds, sukuk and other instruments creating or \r\nacknowledging indebtedness by or on behalf of a government, central \r\nbank or public authority (Government and public debt securities); \r\n(d) modoraba certificates, participation term certificates and term finance \r\ncertificates; \r\n(e) any right (whether conferred by warrant or otherwise) to subscribe for \r\nshares or debt securities (warrants); \r\n(f) any option to acquire or dispose of any other security (options); \r\n(g) units in a collective investment scheme, including units in or securities \r\nof a trust fund (whether open­ended or closed end); \r\n(h) the rights under any depository receipt in respe ct of shares, debt \r\nsecurities and warrants (custodian receipts); and \r\n(i) any other instrument notified by the Commission to be securities for the \r\npurposes of this Act, \r\nbut does not include — \r\n(a) futures contracts; \r\n(b) bills of exchange; \r\n \r\nPage 14 of 108  \r\n(c) promissory notes; and \r\n(d) certificates of deposit; \r\n(liii) “securities adviser” means a person, who — \r\n(a) gives investment advice on whether, which, the time at which or the terms or \r\nconditions on which, securities may be bought, sold, exchanged or subscribed \r\nfor; \r\n(b) issues analyses or reports, for the purposes of facilitating the recipients of the \r\nanalyses or reports to make decisions on whether or the time at which or the \r\nterms or conditions on which, specific securities may be bought, sold, \r\nexchanged or subscribed for; or \r\n(c) advises on the management of a portfolio of securities for another person — \r\n(i) without holding property of the other person; and \r\n(ii) on terms that preclude him from doing so, \r\nbut does not include — \r\n(I) a bank; \r\n(II) a person who gives such advice or issues such analyses or reports — \r\n(A) in a newspaper, magazine, book or other publication which is made \r\ngenerally available to the public, and which does not have as its principal \r\nor only object the provision of advice or the issue of analyses or reports, \r\nconcerning securities; or \r\n(B) in television broadcast or radio broadcast for reception by the public, \r\nwhether on subscription or otherwise; and \r\n(III) any other person excluded to the such extent as may be notified by the \r\nCommission; \r\n(liv)  “securities broker” means a trading right entitlement certificate holder or “TRE” \r\ncertificate holder who, by way of business, — \r\n(a) makes or offers to make with any person or induces or attempts to induce \r\nany person to enter into or to offer to enter into, any a greement for or \r\nwith a view to buying, selling, exchanging or subscribing for, securities; \r\nor \r\n  \r\n \r\nPage 15 of 108  \r\n(b) solicits or accepts any order for or otherwise trading in, or effects \r\ntransactions in, securities for clients or on its own account; \r\n(Iv) “securities exchan ge” means a public company that is licensed by the \r\nCommission as a securities exchange under section 5; \r\n(lvi)  “securities manager ” means a person who manages or offers or agrees to \r\nmanage, with or without remuneration, a portfolio of securities belonging to \r\nanother person, whether on a discretionary authority granted by that other \r\nperson or otherwise; \r\n(lvii)  “securities market” means any market or place at which or any service or facility \r\n(whether electronic or otherwise) by means of which, offers or invitations to \r\nsell, purchase or exchange securities are regularly made on a centralized basis, \r\nbeing offers or invitations that a re intended or may reasonably be expected, to \r\nresult, directly or indirectly, in the acceptance or making, respectively, of offers \r\nto sell, purchase or exchange securities; \r\n(lviii)  “senior management officer ” includes, chief executive officer/ managing \r\ndirector, deputy managing director/chief operating officer and chief regulatory \r\nofficer or holder of such positions by whatever name called; \r\n(lix)  “settlement”, in relation to a market contract, includes partial settlement; \r\n(lx)  “shelf registration ” means an arrangement that allows a single offering \r\ndocument allowing companies to make multiple offerings as disclosed in the \r\noffering document within a prescribed time and subject to prescribed \r\nconditions; \r\n(Ixi)  “subsidiary” means a subsidiary as defined in section 3 of the Companies \r\nOrdinance, 1984 (XLVII of 1984); \r\n(lxii)  “substantial shareholder”, in relation to a company, means a person who has an \r\ninterest in shares of a company — \r\n(a) the nominal value of which  is equal to or more than ten per cent of the \r\nissued share capital of the company; or \r\n(b) which enables the person to exercise or control the exercise of ten per \r\ncent or more of the voting power at a general meeting of the company; \r\n(lxiii)  “trading in securities” means (whether as principal or agent) — \r\n(a) making or offering to make with any person, or inducing or attempting \r\nto induce any person to enter into or to offer to enter into, any agreement \r\nfor or with a view to the purchase or sale of a security; or \r\n(b) soliciting or accepting any order for or otherwise trading in a security; \r\n(Ixiv)  “trading right entitlement certificate” or “TRE certificate” means a trading right \r\nentitlement certificate as defined in the Stock Exchanges (Corporatization, \r\nDemutualization and Integration) Act, 2012 (XV of 2012); \r\n \r\nPage 16 of 108  \r\n(lxv)  “trading right entitlement certificate holder” or “TRE certificate holder” means \r\na trading right entitlement certificate holder as defined in the Stock Exchanges \r\n(Corporatization, Demutualization and Integration) Act, 2012 (XV of 2012); \r\nand  \r\n(lxvi)  “underwriter” means a person who — \r\n(a) on a firm commitment basis purchases newly issued securities  or \r\nsecurities offered for sale for the purpose of public resale on behalf of \r\nthe issuer or offeror or who guarantees to an issuer or offeror that the \r\nunsold residue of the issuer's public issue or sale will be taken up; or \r\n(b) on a best efforts basis acts as an underwriter for the issuer. \r\nPART II  \r\nSECURITIES EXCHANGES \r\n3. Licensing requirement. — (1) No person shall establish or operate or assist in \r\nestablishing or operating or hold himself out as operating a securities market except under and in \r\naccordance with a securities exchange licence granted by the Commission under section 5. \r\n(2) The Commission shall determine the number and places for the establishment of \r\nsecurities exchanges. \r\n4. Eligibility for licensing.— (1) Subject to sub­section (2), a public company having an \r\nobject to operate as a stock exchange shall be eligible for licensing as a securities exchange only if — \r\n(a) it has, and maintains at all times, a minimum paid­up capital (net of losses) of \r\nrupees five hundred million or such higher amoun t as may be notified by the \r\nCommission; \r\n(b) not more than such percentage of share of the company as may be notified by \r\nthe Commission is held directly or indirectly by a — \r\n(i) securities broker or any connected person or the majority shareholder of \r\nsuch securities broker, or an associate of the majority shareholder of \r\nsuch securities broker; \r\n(ii) securities exchange or any connected person or the majority shareholder \r\nof such securities exchange, or an associate of the majority shareholder \r\nof such securities exchange; \r\n(iii) futures broker or any connected or the majority shareholder of such \r\nfutures broker, or an associate of the majority shareholder of such \r\nfutures broker; or \r\n(iv) futures exchange or any connected person or the majority shareholder of \r\nsuch futures exchange, or an associate of the majority shareholder of \r\nsuch futures exchange: \r\n  \r\n \r\nPage 17 of 108  \r\nProvided that the Commission may in the official Gazette notify \r\nany class or classes of persons to hold such number of shares of the \r\nsecurities exchange as the Commission deems appropriate; \r\n(c) its promoters, directors, majority shareholders, senior management officers \r\nfulfill the fit and proper criteria as may be prescribed; and \r\n(d) it satisfies such other conditions as may be prescribed. \r\n(2) For the purposes of clause (b) of sub­section (1), two or more companies are connected \r\ncompanies if one of them is — \r\n(a) the holding company of the other; \r\n(b) a subsidiary of the other; or \r\n(c) a subsidiary of the holding company of the other. \r\n5. Grant of licence. — (1) A public company eligible for a licence may apply to the \r\nCommission to be licenced as a securities exchange in such form and manner as may be prescribed. \r\n(2) The application under sub­section (1), shall be accompanied by the prescribed fee. \r\n(3) The Commission may require an applicant to provide the Commission with such further \r\ninformation as it considers necessary in relation to the application, in such form or verified in such \r\nmanner as the Commission may direct. \r\n(4) The Commission may, in writing, sub ject to such conditions or restrictions as it may \r\nthink fit to impose, grant licence to a public company as a securities exchange if the Commission is \r\nsatisfied that the company shall operate a fair, transparent and efficient securities market; manage any \r\nrisks associated with its business and operations prudently and enforce compliance by TRE certificate \r\nholder and listed companies with its regulations. \r\n(5) In the exercise of its powers to grant licence  under sub­section (4), the Commission \r\nshall have regard to whether,­ \r\n(a) the company's regulations make satisfactory provision for— \r\n(i) a fair, transparent and efficient market in securities that are traded \r\nthrough its facilities; \r\n(ii) the proper regulati on and supervision of TRE certificate holder and \r\nlisted companies; \r\n(iii) appropriate measures for the protection of customers; \r\n(iv) an equitable distribution of the dues, fees and other charges levied by \r\nthe company; \r\n(v) the trading in securities by its officers and employees; and \r\n(vi) any other matters as may be prescribed; \r\n \r\nPage 18 of 108  \r\n(b) the company has sufficient financial, human and system resources to — \r\n(i) establish and operate a fair, transparent and efficient securities market; \r\n(ii) meet contingencies or disas ters, including events such as technical \r\ncomplications occurring with automated systems; and \r\n(iii) provide adequate security arrangements; \r\n(c) the company has made arrangement with respect to the appointment, removal \r\nfrom office and functions of the persons responsible for making or enforcing \r\nthe exchange regulations, in such manner to secure a proper balance — \r\n(i) between the interests of the TRE certificate holder of the company; and \r\n(ii) between the interests of the company or its TRE certificate h older and \r\nthe public interest: \r\nProvided that the arrangements shall not be regarded as \r\nsatisfying these requirements unless the persons responsible for such \r\nmatters include a number of persons independent of the company, its \r\nTRE certificate holder and other regulated persons sufficient to ensure \r\nthe balance referred to in sub­clause (ii); and \r\n(d) it would not be contrary to the public interest to licence the company. \r\n(6) Subject to the provisions of this Act, a securities exchange licence shall be grant ed \r\nsubject to such annual renewal fee as may be prescribed. \r\n6. Duties of securities exchange. — (1) It shall be the duty of a securities exchange to \r\nensure — \r\n(a) a fair, transparent and efficient market in securities that are traded on its \r\nsecurities market; and \r\n(b) that risks associated with its business and operations are managed prudently. \r\n(2) In discharging its duty under sub­section (1), a securities exchange shall — \r\n(a) act in the public interest; and \r\n(b) ensure that the interest of investor, customer and public at large prevails where \r\nit conflicts with the interest of the securities exchange, TRE certificate holder, \r\nshareholders, board of directors and management. \r\n(3) A securities exchange shall operate its facilities in accordance with the regulations  \r\nmade under section 7 and approved under section 8. \r\n(4) A securities exchange shall regulate the operations, standards of practice and business \r\nconduct of TRE certificate holder and their representatives and other employees in accordance with \r\nthe regulations, policies, procedures and practices of the securities exchange. \r\n \r\nPage 19 of 108  \r\n(5) A securities exchange shall ensure that the listed companies and its designated officers \r\nshall comply with the regulations, policies, procedures and practices of the securities exchange. \r\n(6) A securities exchange shall preserve confidentiality with regard to all information in its \r\npossession concerning TRE certificate holder and their customers, except that such information may \r\nbe disclosed by the securities exchange as and when required in writing to do so by the Commission \r\nor by a clearing house under its regulations or required under any law for the time being in force, or it \r\nis ordered to do so by the Court. \r\n(7) A securities exchange shall have efficient procedures and arrangements for addressing \r\ncustomer's complaints. \r\n(8) The securities exchange shall put in place such structural provisions, operating \r\nprocedures, and surveillance techniques to detect and prevent insider trading and market abuse. \r\n(9) A securities exchange shall immediately notify the Commission if it becomes aware — \r\n(a) of a financial irregularity or other matter which in the opinion of the securities \r\nexchange may indicate that its financial integrity is in question or that it is \r\nunable to meet its legal obligations; \r\n(b) that any TRE certificate holder is unable to comply with any regulation of the \r\nsecurities exchange or any financial resources regulation; \r\n(c) of a financial irregularity or other matter which in the opinion of the securities \r\nexchange may indicate  that the financial standing or integrity of a TRE \r\ncertificate holder is in question or that a TRE certificate holder may not be able \r\nto meet his legal obligations; or \r\n(d) of non­compliance or violation by a company listed on such securities exchange \r\nof any provisions of this Act or any regulations made by there under. \r\n(10) A securities exchange shall immediately notify the Commission of any action taken \r\nagainst a TRE certificate holderor listed company. \r\n(11) A securities exchange shall at all times provide  and maintain, for the conduct of its \r\nbusiness,— \r\n(a) adequate and properly equipped premises; \r\n(b) automated systems with adequate capacity, facilities to meet contingencies or \r\nemergencies, physical, virtual and logical security arrangements and technical \r\nsupport; and \r\n(c) comprehensive business continuity plan. \r\n(12) A securities exchange shall ensure that appointment or removal of chief executive \r\nofficer and chief regulatory officers by whatever names called is made with the prior approval of \r\nthe Commission. \r\n7. Regulations of securities exchange. — (1) Without limiting the generality of \r\nsub­section (4) of section 5, the regulations of a securities exchange, may make provision— \r\n \r\nPage 20 of 108  \r\n(a) with respect to the constitution, powers and functions of the governing body of \r\nthe securities exchange and matters relating to disciplining of the directors, \r\nofficers and functionaries of the securities exchange; \r\n(b) with respect to the development of risk management system, including control \r\nmeasures and safeguards with respect to large exposures, and matters connected \r\ntherewith; \r\n(c) with respect to the risk management procedures, misalignment of incentives and \r\nconflict of interest between securities broker, its employees and its clients; \r\n(d) with respect to disclosure of conflict of  interest by directors and employees of \r\nthe securities exchanges; \r\n(e) with respect to the eligibility, admittance and conduct of TRE certificate holder; \r\n(f) with respect to listing and delisting of securities; \r\n(g) with respect to the appointment and functioning of internal auditors; \r\n(h) expulsion, suspension or disciplining of TRE certificate holder for conduct \r\ninconsistent with just and equitable principles in connection with trading in \r\nsecurities or for a contravention of the regulations of the securities exchange; \r\n(i) with respect to liquidation of the assets of securities brokers deposited or in \r\ncontrol of the securities exchange to fulfill customer claims arising there from; \r\n(j) with respect to the terms and conditions under which securities may be traded; \r\n(k) with respect to operational, information system and regulatory audit of \r\nsecurities broker and securities exchange including the regular assessment of \r\ntrading systems as well as the assessment of reliability and effectiveness of all \r\nrisk management and control measures implemented by securities exchange; \r\n(l) with respect to the mechanism for inspection and provisions relating to audit \r\nand compliance of securities brokers including cooperation with other licensed \r\nentities for violation of any requirem ent of this Act or any rules or regulations \r\nmade there under; \r\n(m) with respect to proprietary trading by TRE certificate holder; \r\n(n) effective surveillance and monitoring to detect and prevent insider trading and \r\nmarket abuse practices; \r\n(o) with respect to fair and properly supervised trading practices; \r\n(p) with respect to the prohibition of trading in securities by securities brokers or \r\ntheir representatives, either directly or indirectly, for their own accounts or \r\naccounts of associated persons, except in accordance with the regulations of the \r\nsecurities exchange; \r\n(q) with respect to measures to prevent manipulation, market rigging and artificial \r\n \r\nPage 21 of 108  \r\nmarkets in its securities market; \r\n(r) for preventing the excessive use of credit by way of initial or maintenan ce \r\nmargin in respect of the purchase or carrying of any securities; \r\n(s) for effective know your customer and customer due diligence policies and \r\nprocedures and other matters ancillary to anti­money laundering; \r\n(t) the recording and publishing of details of trading; \r\n(u) the financial integrity of securities broker such as to provide reasonable \r\nassurance that all obligations out of the trading in securities on the securities \r\nmarket of that securities exchange will be met; \r\n(v) with respect to the fee and charg es payable for facilities and services provided \r\nby the securities exchange; \r\n(w) with respect to brokerage and other charges by securities brokers; \r\n(x) with respect to the equitable allocation of the dues, fees and other charges levied \r\nby the securities exchange; \r\n(y) with respect to settlement of claims and dispute resolution between any of its \r\nsecurities brokers, or between securities brokers and their customers, or between \r\nsecurities brokers and their accredited representatives or between accredited \r\nrepresentative(s) of securities brokers and their customers, in relation to any \r\nmarket contract of the securities exchange; \r\n(z) where a securities broker appears to be unable or likely to become unable, to \r\nmeet his obligations in respect of one or more market contracts, to enable action \r\nto be taken to close out his position in relation to all unsettled market contracts \r\nto which he is a party, including facilitation in default proceedings; and \r\n(aa)  generally for the carrying on the business of the securities exchange with due \r\nregard to the interests and protection of the investing public. \r\n(2) The regulations of a securities exchange shall apply to — \r\n(a) the securities exchange, its employees and its directors and the securities \r\nexchange shall be responsible to ensure their compliance with such regulations; \r\n(b) securities brokers, their representatives and other employees and the securities \r\nbroker shall be responsible to ensure their compliance with such regulations; \r\nand \r\n(c) listed company. \r\n(3) The power to make  regulations conferred by this section on the securities exchange \r\nshall be subject to the condition of previous placement of the said regulations on the website of the \r\nsecurities exchange along with the rationale for eliciting public opinion thereon for a period of not less \r\nthan seven days starting from the date of its placement on the website: \r\n \r\nPage 22 of 108  \r\nProvided that, on an application by the securities exchange, the Commission may waive the \r\ncondition of eliciting public opinion in cases requiring the immediate impl ementation of a proposed \r\nregulation(s). \r\n(4) The Commission may, by notice in writing served on a securities exchange, require        \r\nit — \r\n(a) to make regulations specified in the notice within the period specified; or \r\n(b) to amend regulations referred to i n the notice in the manner and within the \r\nperiod specified in the notice. \r\n(5) Where the Commission is satisfied that a securities exchange has not complied with a \r\nrequirement referred to in sub­section (4) within the period specified in the notice, the Com mission \r\nmay make or amend the regulations specified in the notice instead of the securities exchange and the \r\nregulations so made or amended shall be deemed to have been made or amended by the securities \r\nexchange and shall have effect accordingly. \r\n8. Approval of regulations or amendments to regulations of securities exchange .— \r\n(1) No regulation of a securities exchange or any amendment whether by way of rescission, \r\nsubstitution, alteration or addition to a regulation shall have effect unless it has the approval in writing \r\nof the Commission. \r\n(2) A securities exchange shall submit or cause to be submitted to the Commission for its \r\napproval the regulations and every amendment thereto that require approval under sub­section (1), \r\ntogether with explanations of  their purpose and likely effect, including their effect on the investing \r\npublic, in sufficient detail to enable the Commission to decide whether to approve them or refuse to \r\napprove them. \r\n(3) The Commission shall, by notice in writing served on the securi ties exchange, give its \r\napproval or refuse to give its approval to the regulations or amendment of the regulations, as the case \r\nmay be, or any part thereof. \r\n(4) The Commission may give its approval under sub­section (3) subject to requirements \r\nthat shall be satisfied before the regulations or amendment of the regulations or any part thereof take \r\neffect. \r\n(5) Subject to the approval of the Commission under sub­section (3) all regulations or \r\namendments to the regulations made by the securities exchange shall be notified in the official Gazette \r\nand shall take effect from such date as may be specified in the notification. \r\n9. Statutory obligation of securities broker to comply with regulations of securities \r\nexchange. Securities broker of a securities exchange shall comply with the regulations of that \r\nexchange. \r\n10. Securities exchange to assist the Commission.  A securities exchange shall provide \r\nsuch assistance to the Commission as the Commission may require for the performance of the functions \r\nand duties of the Commission, including the furnishing of such returns and the provision of such books \r\nand other information relating to the business of the securities exchange or in respect of trading in \r\nsecurities or any other information as the Commission may require fr om time to time forth proper \r\nadministration of this Act. \r\n \r\nPage 23 of 108  \r\n11. Review of disciplinary action taken by securities exchange.— (1) Where a securities \r\nexchange reprimands, impose penalty, suspends, expels or otherwise takes disciplinary action against \r\nsecurities broker in accordance with its regulations, the securities exchange shall immediately inform \r\nthe Commission in writing of the name of the securities broker, the reason for and nature of the action \r\ntaken, the amount of any sum imposed by way of penalty and the period of any suspension. \r\n(2) The securities exchange shall grant an opportunity of being heard to the securities \r\nbroker before it impose a penalty, reprimands, suspends, expels or otherwise takes disciplinary action \r\nagainst the securities broker: \r\nProvided that where the securities exchange is satisfied that delay in the suspension of securities \r\nbroker shall be detrimental to the interest of investors the public in general, the securities exchange \r\nmay, after recording reasons in writing, immediately sus pend the securities broker till the time an \r\nopportunity of hearing is provided to the securities broker and a final decision is taken within a period \r\nof not more than thirty days. \r\n(3) The Commission may, on its own motion or on application by an aggrieved person, \r\nreview any disciplinary action taken by a securities exchange under sub­section (1) and may affirm, \r\nmodify or set aside the decision of the securities exchange after giving the securities broker and the \r\nsecurities exchange an opportunity of being heard. \r\n(4) Nothing in this section shall preclude the Commission, in any case where a securities \r\nexchange fails to act against a securities broker, from suspending, expelling or otherwise disciplining \r\na securities broker, but before doing so the Commission shall give the securities broker and the \r\nsecurities exchange an opportunity to be heard: \r\nProvided that where the Commission is satisfied that delay in the suspension of any securities \r\nbroker shall be detrimental to the interest of investors or the public i n general, the Commission may, \r\nafter recording reasons in writing, immediately suspend any securities broker till the time an \r\nopportunity of hearing is provided to the securities broker and a final decision is taken within a period \r\nof not more than thirty days. \r\n (5) Any action taken by a securities exchange under sub­section (1) shall be without \r\nprejudice to the power of the Commission to take such further action as it deems fit with regard to the \r\nsecurities broker or his licence. \r\n12. Power of the Commissio n to issue directions to securities exchange. — (1)The \r\nCommission may, if it considers it necessary or expedient — \r\n(a) for ensuring fair, transparent and efficient securities markets or for ensuring fair, \r\ntransparent and efficient clearing and settlement of securities transactions; \r\n(b) for ensuring the integrity of, and proper management of systemic risks in, \r\nsecurities markets; \r\n(c) for ensuring a fair and proper governance structure of the securities exchange; \r\nor \r\n(d) in the interest of the public or for the  protection of customers, issue directions \r\nto a securities exchange by notice in writing either of a general or specific \r\nnature. \r\n \r\nPage 24 of 108  \r\n(2) Without prejudice to the generality of sub­section (1), any direction issued under that \r\nsub­ section may relate to — \r\n(a) the trading or the termination of trading on or through the facilities of that \r\nsecurities exchange; \r\n(b) any securities listed or quoted on that securities exchange; \r\n(c) the manner in which securities exchange carries on its business,; \r\n(d) removing or suspending the directors or officers of the securities exchange from \r\noffice or suspending securities brokers of the securities exchange; and \r\n(e) any other matter that the Commission considers necessary for the effective \r\nadministration of this Act or the rules or regulations made under the Act, \r\nand the securities exchange shall comply with any such direction. \r\n13. Emergency powers of the Commission. — (1) Where the Commission has reason to \r\nbelieve or decides on the recommendation of the securities exchange, th at an emergency exists or \r\nwhere the Commission considers it necessary or expedient in the interest of the public or section of the \r\npublic or for the protection of customers, the Commission may direct by notice in writing a securities \r\nexchange to take such action as it considers necessary to maintain or restore fair, transparent and \r\nefficient trading in securities or any class of securities, including but not limited to,__ \r\n(a) liquidate any position in respect of any securities or any class of securities; \r\n(b) terminate trading on a securities market; \r\n(c) suspend trading on a securities market; \r\n(d) confine trading to liquidation of securities positions; \r\n(e) order the liquidation of all positions or part thereof or the reduction in such \r\npositions; \r\n(f) limit trading to a specific price range; \r\n(g) modify trading days or hours; \r\n(h) require any person to act in a specified manner in relation to trading in securities \r\nor any class of securities; and \r\n(i) modify or suspend any of the regulations of a securities excha nge, and the \r\nsecurities exchange shall comply with that direction. \r\n(2) Where the Commission suspends trading on a securities market under clause (c) of sub­ \r\nsection (1) the suspension shall be for a period not exceeding three months, provided that the \r\nCommission may, if it considers it necessary, extend the suspension for one further period not \r\nexceeding three months at the expiry of which the Commission shall either notify the securities \r\nexchange in writing that the suspension has expired or proceed to can cel the securities exchange \r\nlicence or pass such orders as it deems appropriate. \r\n \r\nPage 25 of 108  \r\n(3) Where a securities exchange fails to comply with a direction of the Commission under \r\nsub­ section (1), within such time as is specified by the Commission, the Commission m ay take all \r\nnecessary actions as it deem appropriate. \r\n(4) In this section, “emergency” means — \r\n(a) an act of government affecting securities; \r\n(b) any major market disturbance which prevents the market from accurately \r\nreflecting the forces of supply and demand for such securities; or \r\n(c) any other situation or practice which in the opinion of the Commission \r\nconstitutes an emergency. \r\n14. Suspension or cancellation of securities exchange licence .— (1) The Commission \r\nmay, by notice in writing served on the securities exchange,— \r\n(i) suspend the license granted under this Act with effect from the date specified in \r\nthe notice for such period as may be specified in the notice; or \r\n(ii) cancel a securities exchange licence granted under this Act with effect from the \r\ndate specified in the notice; or \r\n(iii) supersede the governing body or other authority of the securities exchange; or \r\n(iv) suspend or remove the director, officer, or a TRE certificate holder from his \r\noffice or securities exchanges, \r\nif the securities exchange — \r\n(a) ceases to comply with the eligibility conditions specified in section 4; \r\n(b) ceases to operate a securities market that it has been licensed to under section \r\n5; \r\n(c) is being wound up or enters into an arrangement with its creditors or member s \r\nwithout the prior written approval of the Commission; \r\n(d) fails to comply with any requirement of this Act or any other applicable law; \r\n(e) fails to comply with a direction of the Commission; \r\n(f) fails to provide the Commission with information required by the Commission \r\nor provides false or misleading information; \r\n(g) is operating in a manner detrimental to the public interest; or \r\n(h) requests the Commission to do so. \r\n(2) For the purposes of clause (b) of sub­section (1) a securities exchange shall be deemed \r\nto have ceased to operate its securities market if — \r\n(a) it has ceased to operate its securities market for more than thirty days unless it \r\n \r\nPage 26 of 108  \r\nhas obtained the prior written approval of the Commission to do so; or \r\n(b) it has ceased to operate such securities market under a direction issued by the \r\nCommission under section 12 or 13. \r\n(3) The Commission may by the notice served under sub­section (1) permit the securities \r\nexchange to continue, on or after the date on which the suspension or cancellation is to take effect, to \r\ncarry on such activities affected by the suspension or cancellation as the Commission may specify in \r\nthe notice for the purpose of — \r\n(a) closing down the operations of the securities exchange; and \r\n(b) protecting the public interest. \r\n(4) Except where responding to a request under clause (h) of sub­section (1), the \r\nCommission shall not take action under sub­section (1) without first giving the securities exchange an \r\nopportunity of being heard. \r\n(5) Where the Commission suspends or cancels the licence of a securities exchange under \r\nthis section, it shall cause notice of that fact to be published in at least two daily newspapers having \r\nwide circulation. \r\n(6) Any notice of suspension under sub­section (1) may direct that the functions of the \r\ngoverning body of the securities exchange shall be performed during the period of suspension by such \r\nperson as may be specified in the notice. \r\n15. Effect of cancellation of licence.  A cancellation of licence  referred to in section 14 \r\nshall not operate so as to — \r\n(a) avoid or affect any agreement, transaction or arrangement entered into on the \r\nsecurities market operated by the securities exchange where the agreement, \r\ntransaction or arrangement was entered into  before the cancellation of the \r\nlicence; and \r\n(b) affect any right, obligation or liability arising under such agreement, transaction \r\nor arrangement. \r\n16. Accounts and audit.—(1) A securities exchange shall keep proper books of accounts \r\nand records of its pr ofit and loss, assets and liabilities and all other transactions of the securities \r\nexchange as may be prescribed. \r\n(2) The securities exchange shall send audited financial statements along with auditor's \r\nreport of the securities exchange for the financial year, including such other items as may be prescribed, \r\nwithin three month after the end of each financial year or such later time as allowed by the Commission. \r\n(3) The Commission may, where it deems appropriate, also require operational and \r\nregulatory audit to be conducted by an independent auditor in a prescribed manner. \r\n(4) The auditors report shall be in such a manner as may be prescribed. \r\n(5) The auditors shall have a right of access at all reasonable times to the books, accounts, \r\nvouchers and other records of the securities exchange and are entitled to require from officers of the \r\n \r\nPage 27 of 108  \r\nsecurities exchange such information and explanations as they consider necessary for the performance \r\nof their duties as auditor. \r\n(6) The accounting and other records required to be reported under this section shall be \r\npreserved by the securities exchange for a period of ten years or such longer period as may be \r\nprescribed. \r\n17. Power of the Commission to appoint auditor. — (1) Where the Commission is \r\nsatisfied that it is in the public interest to do so, it may appoint in writing an auditor for special audit, \r\nat the expense of the securities exchange, to examine, audit an d report, either generally or in relation \r\nto any matter, on the books, accounts and records of a securities exchange. \r\n(2) The Commission may appoint special auditors to furnish the Commission with a \r\nregulation compliance audit report in the form and manner prescribed. \r\n18. Annual report.— (1) A securities exchange shall, within four months after the end of \r\nits financial year or such later time as allowed by the Commission, give to the Commission an annual \r\nreport that includes — \r\n(a) a description of the activities undertaken by the securities exchange in the \r\nfinancial year; \r\n(b) the resources (including financial, technological and human resources) that the \r\nsecurities exchange had available, and used, in order to ensure compliance with \r\nits obligations and,  in particular, its obligation to ensure that the securities \r\nmarket of the securities exchange operates in a fair, transparent and efficient \r\nmanner; \r\n(c) an analysis of the extent to which the securities exchange considers that the \r\nactivities undertaken, and resources used, have resulted in full compliance with \r\nall of its obligations under this Act, rules and regulations made under the Act; \r\nand \r\n(d) an independent regulation compliance report from the auditor certifying \r\nregulatory compliance of the securities exchange during the financial year. \r\n(2) The securities exchange shall ensure that the annual report is accompanied by such \r\nother information and statements as may be prescribed. \r\n(3) The annual report shall be accompanied by an audit report. \r\n19. Listing of securities.— (1) A company that wishes to have its securities listed on a \r\nsecurities exchange shall submit an application in the form and manner specified by the securities \r\nexchange, and send a copy of the application to the Commission. \r\n(2) Upon receipt of an application under sub­section (1), the securities exchange may, if it \r\nis satisfied after making such inquiry as it may consider necessary that the applicant fulfils the \r\nconditions prescribed in this behalf, list the securities for trading on the securities exchange. \r\n(3) Where a securities exchange refuses to list a company's securities, the Commission \r\nmay, either on petition by the applicant made within the prescribed time or on its own motion, direct \r\nthe securities exchange to list the securities. \r\n \r\nPage 28 of 108  \r\n(4) Where, after the listing of securities, the Commission or securities exchange finds that \r\nthe application is deficient in any material respect or that the company has failed to comply with any \r\nprescribed condition or requirement and that the continued listing of the securities would not be in the \r\npublic interest, the Commission or the securities exchange may, by order, either require the company \r\nto correct the deficiency or comply with the prescribed condition or requirement within the time \r\nspecified in the order or revoke the listing. \r\n(5) A company's listed securities may be delisted on application by the company to the \r\nsecurities exchange which may deny the application or grant it on such conditions as appear necessary \r\nor appropriate for the protection of customers. \r\n(6) Where a securities exchange refuses to delist a company's securities, the Commission \r\nmay, on petition by the company made within the specified time, direct the securities exchange to \r\ndelist the security. \r\n(7) The Commission or a securities exchange may, if it considers it to be in the interests of \r\nan orderly market or in the public interest so to do, by order recording the reasons, suspend for a period \r\nnot exceeding sixty days the trading of any listed securities and may, from time to time, fo r stated \r\nreasons and in the said manner extend the suspension for such further periods as it deems appropriate. \r\n(8) No application for the listing of securities shall be refused and no listing shall be \r\nrevoked, without first giving the relevant company an opportunity to be heard. \r\n20. Compulsory listing. Where the Commission, having regard to the nature of and the \r\ndealings in a company's securities, is of the opinion that it is necessary or expedient in the public \r\ninterest so to do, it may, after consulting the securities exchange and giving the company a n \r\nopportunity of being heard, direct the securities exchange to list the company's securities. \r\n \r\nPART III  \r\nCLEARING-HOUSES \r\n21. Interpretation.— (1) In this Part — \r\n(a) “defaulter” means a clearing member who is the subject of any default \r\nproceedings; and \r\n(b) “market charge” means a charge, whether fixed or floating, created in favour of \r\na clearing house — \r\n(i) over any property which is held by or deposited with the clearing house; \r\nand \r\n(ii) for the purpose of securing liabilities arising directly in connection with \r\nthe clearing house ensuring the settlement of a market contract; and \r\n(c) “market collateral ” includes cash or any other prescribed form of collateral \r\nwhich is held by or deposited with a clearing house for the purpose of securing \r\nliabilities arising directly in connection with the clearing house ensuring the \r\nsettlement of a market contract. \r\n \r\nPage 29 of 108  \r\n(2) Where a charge is created partly for the purpose specified in the definition of “market \r\ncharge” in sub­section (1) and partly for other purposes, the charge is  in this Part a market charge in \r\nso far as it has effect for that specified purpose. \r\n(3) Where any collateral is granted partly for the purpose specified in the definition of \r\n“market collateral” in sub­section (1) and partly for other purposes, the collateral is in this Part market \r\ncollateral in so far it has been provided for that specified purpose. \r\n(4) References in this Part to the law on insolvency include references to the relevant \r\nprovision made by or under — \r\n(a) the Companies Ordinance, 1984 (XLVII of 1984); and \r\n(b) any other enactment which is concerned with or in any way related to the \r\ninsolvency of a person. \r\n(5) References in this Part to settlement in relation to a market contract are to the discharge \r\nof the rights and liabilities of the parties to the contract, whether by performance, compromise or \r\notherwise. \r\n22. Licensing requirement. — (1) No person shall establish or operate or assist in \r\nestablishing or operating or hold himself out as operating a clearing facility except under and in \r\naccordance with a clearing house licence granted by the Commission under section 24. \r\n(2) The Commission shall determine the number and places for the establishment of \r\nclearing houses. \r\n23. Eligibility for licensing.— (1) Subject to sub­section (2), a public company shall be \r\neligible for licensing as a clearing house, if— \r\n(a) it has, and maintains at all times, a minimum paid­up capital (net of losses) of \r\nrupees five hundred million or such higher amount as  may be notified by the \r\nCommission; \r\n(b) its shareholding is held, directly or indirectly, in such percentage as may be \r\nnotified by the Commission by following — \r\n(i) a securities exchange or any connected company or the majority \r\nshareholder of such securities exchange, or an associate of the majority \r\nshareholder of such securities exchange; or \r\n(ii) a futures exchange or any connected company or the majority \r\nshareholder of such futures exchange, or an associate of the majority \r\nshareholder of such futures exchange: \r\nProvided that the Commission may in the official Gazette notify \r\nany class or classes of person to hold such number of shares of the \r\nclearing house as the Commission deems appropriate: \r\nProvided further that any sale or purchase of shares of the \r\nclearing house shall be subject to the prior approval of the Commission; \r\n \r\nPage 30 of 108  \r\n(c) its promoters, directors, senior management officers fulfill the fit and proper \r\ncriteria as may be prescribed; and \r\n(d) it satisfies such other conditions as may be prescribed. \r\n(2) For the purposes of clause (b) of sub­section (1), two or more companies are connected \r\ncompanies if one of them is — \r\n(a) the holding company of the other; \r\n(b) a subsidiary of the other; or \r\n(c) a subsidiary of the holding company of the other. \r\n24. Grant of lice nce.— (1) A public company eligible for a licence may apply to the \r\nCommission to be licensed as a clearing house in such form and manner as may be prescribed. \r\n(2) The application under sub­section(1) shall be accompanied by the prescribed fee. \r\n(3) The Commission may require an applicant to provide the Commission with such further \r\ninformation as it considers necessary in relation to the application, in such form or verified in such \r\nmanner as the Commission may direct. \r\n(4) The Commission may, in writing, subj ect to such conditions or restrictions as it may \r\nthink fit to impose, grant a licence to a public company as a clearing house if the Commission is \r\nsatisfied that the company will ensure that, as far as is reasonably practical, there are fair, transparent \r\nand efficient clearing arrangements for transactions in securities; the company will manage any risks \r\nassociated with its business and operations prudently and the company will enforce compliance by its \r\nclearing members with its regulations. \r\n(5) In the exer cise of its powers to grant licence under sub­section (4), the Commission \r\nshall have regard to whether,__ \r\n(a) the company's regulations make satisfactory provision for — \r\n(i) the proper regulation and efficient operation of the clearing facility \r\nwhich it operates; \r\n(ii) the proper regulation and supervision of its clearing members; and \r\n(iii) equitable allocation of reasonable dues, fees, and other charges among \r\nits clearing members and other persons using its facilities; and \r\n(iv) any other matters as may be specified by the Commission from time to \r\ntime; \r\n  \r\n \r\nPage 31 of 108  \r\n(b) the company has sufficient financial, human and system resources to — \r\n(i) establish and operate a fair, transparent and efficient clearing facility; \r\n(ii) meet contingencies or disasters (including events such as technical \r\ncomplications occurring with automated systems) ; \r\n(iii) provide adequate security arrangements; and \r\n(iv) any other matters as may be specified by the Commission; and \r\n(c) it would not be contrary to the public interest to licence the company. \r\n(6) Subject to the provisions of this Act, a clearing house licence shall be granted subject \r\nto such annual renewal fee as may be prescribed. \r\n25. Duties of clearing house.— (1) It shall be the duty of a clearing house to ensure — \r\n(a) fair, transparent and efficient clearing and settlement arrangements for any \r\ntransactions in securities cleared or settled through its facilities; and \r\n(b) that risks associated with its business and operations are managed prudently. \r\n(2) In discharging its duty u nder sub­section (1), a clearing house shall act in the interest \r\nof the public, having particular regard to the interest of customers. \r\n(3) A clearing house shall operate its facilities in accordance with the regulations made \r\nunder section 26 and approved under section 27. \r\n(4) A clearing house shall formulate and implement appropriate procedures for ensuring \r\nthat its clearing members comply with its regulations. \r\n(5) A clearing house shall preserve confidentiality with regard to all information in its \r\npossession concerning its clearing members and their customers, except that such information may be \r\ndisclosed by the clearing house as and when required in writing to do so by the Commission or by the \r\nsecurities exchange under its regulations or required under other law for the time being in force or if it \r\nis ordered to do so by the Court. \r\n(6) A clearing house shall have efficient procedures and arrangements for addressing \r\ncustomer's complaints. \r\n(7) A clearing house shall immediately notify the Commission if it becomes aware— \r\n(a) of a financial irregularity or other matter which in the opinion of the clearing \r\nhouse may indicate that its financial integrity is in question or that it is unable \r\nto meet its legal obligations; \r\n(b) that any of its clearing members is unable to comply with any regulation of the \r\nclearing house; \r\n(c) of a financial irregularity or other matter which in the opinion of the clearing \r\nhouse may indicate that the financial standing or integrity of a clearing member \r\n \r\nPage 32 of 108  \r\nis in question or that a clear ing member may not be able to meet its legal \r\nobligations. \r\n(8) A clearing house shall immediately notify the Commission of any action taken by it \r\nagainst a clearing member. \r\n(9) A clearing house shall at all times provide and maintain for the conduct of its        \r\nbusiness, — \r\n(a) adequate and properly equipped premises; \r\n(b) automated systems with adequate capacity, facilities to meet contingencies or \r\nemergencies, physical, virtual and logical security arrangements and technical \r\nsupport; and \r\n(c) comprehensive business continuity plan. \r\n(10) A clearing house shall ensure that appointment or removal of its chief executive officer \r\nand chief regulatory officer, by whatever name called, is made with the prior approval of the \r\nCommission. \r\n26. Regulations of clearing hou se.— (1) Without limiting the generality of sub­section \r\n(4) of section 24 , the regulations of a clearing house, may make provision— \r\n(a) for the registration of or transfer of securities; \r\n(b) for the settlement of transactions involving securities; \r\n(c) for guaranteeing to its clearing members the performance of market contracts; \r\n(d) for setting up a settlement guarantee fund; \r\n(e) with respect to the constitution, powers and functions of the governing body of \r\nthe clearing house; \r\n(f) with respect to the eligibility, admittance and conduct of clearing members; \r\n(g) with respect to operational, information system and regulatory audit of the \r\nclearing house and its clearing members; \r\n(h) with respect to the manner of establishment, maintaining and operating clearing \r\naccounts with the clearing house; \r\n(i) with respect to the establishment and operations of clearing and settlement \r\nsystem; \r\n(j) with respect to the development of risk management system including control \r\nmeasures and safeguards with respect to large exposures and matters connected \r\ntherewith; \r\n(k) with respect to the establishment, maintenance and contributions to the clearing \r\nand settlement fund and investments thereon; \r\n \r\nPage 33 of 108  \r\n(l) with respect to the mechanism and procedure for satisfaction of loss or liability \r\nin the clearing settlement system; \r\n(m) with respect to the mechanism for inspection and provisions relating to audit \r\nand compliance of clearing members including cooperation with other licensed \r\nentities for violation of any requirement of this Act or an y rules or regulations \r\nmade there under; \r\n(n) with respect to the statements to be sent by the clearing house to its clearing \r\nmembers; \r\n(o) with respect to regulating access to the computer settlement system of the \r\nclearing house and the limits of such access; \r\n(p) with respect to the fee and charges payable for facilities and services provided \r\nby a clearing house; \r\n(q) with respect to the dispute resolution between clearing members, complaint \r\nhandling, disciplinary action, hearing and appeal procedure; \r\n(r) with respect to the delivery of securities for settlement through the central \r\ndepository; \r\n(s) for the expulsion, suspension or disciplining of clearing members for any \r\ncontravention of the regulations of the clearing house; \r\n(t) with respect to acting as central counter party; and \r\n(u) generally for the carrying on the business of the clearing house. \r\n(2) In addition to the requirements of sub­section (1), the regulations of a clearing house \r\nshall also include default provisions, to the satisfaction of the Commis sion, for carrying out of \r\nproceedings or other action if a clearing member has failed or appears to be unable or likely to become \r\nunable to meet its obligations for all unsettled or open market contracts to which he is a party. \r\n(3) Where a clearing house u ndertakes default proceedings, all subsequent action for \r\nsettlement of market contracts to which the defaulter is a party shall be presumed to be taken under the \r\ndefault regulations. \r\n(4) The regulations of a clearing house shall apply to the employees and representative of \r\nits clearing members, and the clearing member shall be responsible to ensure their compliance with \r\nsuch regulations. \r\n(5) The power to make regulations conferred by this section on the clearing house shall be \r\nsubject to the condition of previous publication of the said regulations on the website of clearing house \r\nalong with a rational for eliciting public opinion thereon within a period of not less than seven days \r\nfrom the date of its publication placement on website: \r\nProvided that, on an a pplication by the clearing house, the Commission may waive the \r\ncondition of placement of proposed regulations on the website of the clearing house in cases requiring \r\nthe immediate implementation of a proposed regulation(s). \r\n \r\nPage 34 of 108  \r\n(6) The Commission may, by notice in writing served on a clearing house, require it — \r\n(a) to make regulations specified in the notice within the period specified; or \r\n(b) to amend regulations referred to in the notice in the manner and within the \r\nperiod specified in the notice. \r\n(7) Where the Commission is satisfied that a clearing house has not complied with a \r\nrequirement referred to in sub­section (6) within the specified period the Commission may make or \r\namend the regulations specified in the notice instead of the clearing house and the regulations so made \r\nor amended shall be deemed to have been made or amended by the clearing house and shall have effect \r\naccordingly. \r\n27. Approval of regulations or amendments to regulations of clearing house.— (1) No \r\nregulation of a clearing house or any amendment whether by way of rescission, substitution, alteration \r\nor addition, thereto shall have effect unless it has the approval in writing of the Commission. \r\n(2) A clearing house shall submit or cause to be submitted to the Commission for its \r\napproval the regulations and every amendment thereto that require approval under sub­section (1), \r\ntogether with explanations of their purpose and likely effect, including their effect on customers, in \r\nsufficient detail to enable the Commission to decide whether to a pprove them or refuse to approve \r\nthem. \r\n(3) The Commission shall, by notice in writing served on the clearing house, give its \r\napproval or refuse to give its approval to the regulations or amendment of the regulations, as the case \r\nmay be, or any part thereof. \r\n(4) The Commission may give its approval under sub­section (3) subject to requirements \r\nthat shall be satisfied before the regulations or amendment of the regulations or any part thereof take \r\neffect.  \r\n(5) Subject to the approval of the Commission under su b­section (3), all regulations or \r\namendments to the regulations made by the clearing house shall be notified in the official Gazette and \r\nshall take effect on such date as may be specified in the notification. \r\n \r\n28. Statutory obligation of clearing members t o comply with regulations of clearing \r\nhouse.__ Members of a clearing house shall comply with the regulations of that clearing house. \r\n29. Clearing house to assist the Commission. — A clearing house shall provide such \r\nassistance to the Commission as the Commission may require for the performance of the functions and \r\nduties of the Commission, including the furnishing of such returns and the provision of such books \r\nand other information relating to the business of the clearing house or in respect of any trading in \r\nsecurities, any clearing arrangements for securities or any other information as the Commission may \r\nrequire from time to time for the proper administration of this Act. \r\n30. Review of disciplinary action taken by clearing house.— (1) Where a clearing house \r\nreprimands, penalizes, suspends, expels or otherwise takes disciplinary action against a clearing \r\nmember in accordance with its regulations, the clearing house shall immediately inform the \r\nCommission in writing of the name of the clearing member, the re ason for and nature of the action \r\ntaken, the amount of any sum imposed by way of penalty and the period of any suspension. \r\n \r\nPage 35 of 108  \r\n(2) The clearing house shall grant an opportunity of being heard to its clearing member \r\nbefore it impose penalty, reprimands, suspend s, expels or otherwise takes disciplinary action against \r\nthe member: \r\nProvided that where the clearing house is satisfied that delay in the suspension of its member \r\nshall be detrimental to the interest of investors or the public in general, the clearing hou se may, after \r\nrecording reasons in writing, immediately suspend its member till the time an opportunity of hearing \r\nis provided to the member and a final decision is taken within a period of not more than thirty days. \r\n(3) The Commission may, on its own motion or on application by an aggrieved person, \r\nreview any disciplinary action taken by a clearing house under sub­section (1) and may affirm, modify \r\nor set aside the decision of the clearing house after giving the clearing member and the clearing house \r\nan opportunity of being heard. \r\n(4) Nothing in this section shall preclude the Commission, in any case where a clearing \r\nhouse fails to act against a clearing member, from suspending, expelling or otherwise disciplining a \r\nclearing member, but before doing so the Commission shall give the clearing member and the clearing \r\nhouse an opportunity to be heard. \r\n(5) Any action taken by a clearing house under sub­section (1) shall be without prejudice \r\nto the power of the Commission to take such further action as it deem s fit with regard to the clearing \r\nmember or its licence. \r\n31. Power of the Commission to issue directions to clearing house. — (1) The \r\nCommission may, if it considers it necessary or expedient — \r\n(a) for ensuring fair, transparent and efficient clearing and s ettlement of \r\ntransactions in securities; \r\n(b) for ensuring the integrity of and proper management of systemic risks in \r\nsecurities markets; or \r\n(c) in the interests of the public or a section of the public or for the protection of \r\ncustomers, \r\n issue directions by notice in writing either of a general or specific nature to a clearing house. \r\n(2) Without prejudice to the generality of sub­section (1), any direction issued under that \r\nsub­ section may relate to — \r\n(a) the clearing and settlement of market contracts and the making of adjustments \r\nof contractual obligations arising out of those securities contracts; \r\n(b) the manner in which a clearing house carries on its business; \r\n(c) removing or suspending the directors or officers of the clearing house from \r\noffice or suspending clearing members of the clearing house; and \r\n(d) any other matter that the Commission considers necessary for the proper \r\nadministration of this Act or the rules and regulations made hereunder, \r\nand the clearing house shall comply with any such direction. \r\n \r\nPage 36 of 108  \r\n32. Emergency powers of the Commission. — (1) Where the Commission has reason to \r\nbelieve or decides on the recommendation of clearing house, that an emergency exists or where the \r\nCommission considers it necessary or expedient in the interest of the public or section of the public or \r\nfor the protection of customers or where the Commission takes action under section 13, the \r\nCommission may direct by notice in writing a clearing house to take such action as it considers \r\nnecessary including but not limited to— \r\n(a) altering conditions of delivery; \r\n(b) fixing the settlement price at which securities are to be liquidated; \r\n(c) requiring additional deposits; \r\n(d) requiring margins or additional margins for any securities; and \r\n(e) modifying or suspending any of the regulations of the clearing house,  \r\nand the clearing house shall comply with that direction. \r\n(2) Where a clearing house fails to comply with a direction of the Commission under \r\nsub­section (1), within such time as is spec ified by the Commission, the Commission may take all \r\nnecessary actions as it deems appropriate. \r\n(3) In this section, the expression “emergency” means — \r\n(a) any act of government affecting securities; \r\n(b) any major market disturbance which prevents the market from accurately \r\nreflecting the forces of supply and demand for securities; or \r\n(c) any other situation or practice which in the opinion of the Commission \r\nconstitutes an emergency. \r\n33. Suspension or cancellation of clearing house licence.— (1) The Commission may by \r\nnotice in writing served on the clearing house suspend for such period as may be specified in the notice \r\nor cancel a clearing house licence granted under this Act with effect from the date specified in the \r\nnotice if the clearing house— \r\n(a) ceases to comply with the eligibility conditions specified in section 23; \r\n(b) ceases to operate the clearing facility that it has been licensed to operate under \r\nsection 24; \r\n(c) is being wound up; \r\n(d) fails to comply with any requirement of this Act; \r\n(e) fails to comply with a direction of the Commission; \r\n(f) fails to provide the Commission with information required by the Commission \r\nor provides false or misleading information; \r\n(g) is operating in a manner detrimental to the public interest; or \r\n \r\nPage 37 of 108  \r\n(h) requests the Commission to do so.  \r\n(2) For the purposes of clause (b) of sub­section (1) a clearing house shall be deemed to \r\nhave ceased to operate as a clearing house, if — \r\n(a) it has ceased to operate its clearing house facility for more than thirty days \r\nunless it has obtained the prior approval of the Commission to do so; or \r\n(b) it has ceased to operate such clearing facility under a direction issued by the \r\nCommission under section 31 or section 32. \r\n(3) The Commission may by the notice served under sub­section (1 ) permit the clearing \r\nhouse to continue, on or after the date on which the cancellation is to take effect, to carry on such \r\nactivities affected by the cancellation as the Commission may specify in the notice for the purpose       \r\nof — \r\n(a) closing down the operations of the clearing house; and \r\n(b) protecting the public interest. \r\n(4) Except where responding to a request under clause (h) of sub­section (1), the \r\nCommission shall not cancel a clearing house licence without first giving the clearing house an \r\nopportunity of being heard. \r\n(5) Where the Commission suspends or cancels the licence of a clearing house under this \r\nsection, it shall cause notice of that fact to be published in at least two daily newspapers having wide \r\ncirculation. \r\n(6) Any notice of suspensi on under sub­section (1) may direct that the functions of the \r\ngoverning body of the clearing house shall be performed during the period of suspension by such \r\nperson as may be specified in the notice. \r\n34. Effect of cancellation of licence.  A cancellation of licence under section 33 shall not \r\noperate so as to — \r\n(a) avoid or affect any agreement, transaction or arrangement entered into on the \r\nsecurities market of a securities exchange where the agreement, transaction or \r\narrangement was entered into before the cancellation of the licence; and \r\n(b) affect any right, obligations or liability arising under such agreement, \r\ntransaction or arrangement. \r\n35. Accounts and audit.— (1) A clearing house shall keep proper books of accounts and \r\nrecords of its profit and loss,  assets and liabilities and all other transactions of the clearing house as \r\nmay be prescribed. \r\n(2) The clearing house shall send audited financial statements to the Commission along \r\nwith auditors report of clearing house for the financial year, including a profit and loss account, balance \r\nsheet, cash flow statement and such other items as may be prescribed within three months after the end \r\nof each financial year or such later time as allowed by the Commission. \r\n(3) The Commission may, where it deems appropri ate, also require operational and \r\n \r\nPage 38 of 108  \r\nregulatory audit to be conducted by an independent auditor in a prescribed manner. \r\n(4) The auditors report shall be in such a manner as may be prescribed. \r\n(5) The auditors shall have a right of access at all reasonable times to the books, accounts, \r\nvouchers and other records of the clearing house and shall be entitled to require from officers of the \r\nclearing house such information and explanations as they consider necessary for the performance of \r\ntheir duties as auditor. \r\n(6) The accounting and other records required to be reported under this section shall be \r\npreserved by the clearing house for a period of ten years or such longer period as may be prescribed. \r\n36. Power of the Commission to appoint auditor. — (1) Where the Comm ission is \r\nsatisfied that it is in the public interest to do so, it may appoint in writing an auditor for special audit, \r\nat the expense of the clearing house, to examine, audit, and report, either generally or in relation to any \r\nmatter, on the books, accounts and records of a clearing house. \r\n(2) The Commission may appoint special auditors to furnish the Commission with a \r\nregulation compliance audit report in the form and manner prescribed. \r\n37. Annual report.— (1) A clearing house shall, within four months af ter the end of its \r\nfinancial year or such later time as allowed by the Commission, give to the Commission an annual \r\nreport that includes — \r\n(a) a description of the activities undertaken by the clearing house in the financial \r\nyear; \r\n(b) the resources, including financial, technological and human resources, that the \r\nclearing house had available, and used, in order to ensure compliance with its \r\nobligations; \r\n(c) an analysis of the extent to which the clearing house considers that the activities \r\nundertaken, and resources used, have resulted in full compliance with all of its \r\nobligations under this Act, rules and regulations made under the Act; and \r\n(d) an independent regulations compliance report from the auditor certifying \r\nregulatory compliance of the clearing house during the financial year. \r\n(2) The clearing house shall ensure that the annual report is accompanied by such other \r\ninformation and statements as may be prescribed. \r\n(3) The annual report shall be accompanied by an audit report where required by the  \r\nCommission under sub­section (4). \r\n(4) The Commission may, by giving written notice to the clearing house, require the \r\nclearing house to obtain an audit report by a person to be approved by the Commission on the annual \r\nreport and on any information or statements accompanying it. \r\n38. Proceedings of clearing house take precedence over laws of insolvency. — (1) The \r\nfollowing shall not be to any extent invalid at law on the ground of inconsistency with the law relating \r\nto the distribution of the assets of a person on insolvency, bankruptcy or winding up or on the \r\nappointment of a receiver over any of the assets of a person — \r\n \r\nPage 39 of 108  \r\n(a) a market contract; \r\n(b) the regulations of a clearing house relating to the settlement of a market \r\ncontract; \r\n(c) any proceedings or other action taken under the regulations of a clearing house \r\nrelating to the settlement of a market contract; \r\n(d) a market charge; \r\n(e) the default regulations of a clearing house; or \r\n(f) any default proceedings. \r\n(2) No person, nor a court acting under the laws of insolvency, may exercise any power to \r\nprevent or interfere with — \r\n(a) the settlement of a market contract in accordance with the regulations of a \r\nclearing house; or \r\n(b) any default proceedings. \r\n39. Duty to report on completion of default proceedings .__ (1) A clearing house shall, \r\nupon completion by it of any default proceedings, prepare a report on such proceedings stating in \r\nrespect of each defaulter — \r\n(a) the action taken against the defaulter; \r\n(b) the net sum, if any, certified by the clearing house to be payable by or to the \r\ndefaulter; or \r\n(c) the fact that no sum is payable. \r\n(2) A clearing house which has prepared a report pursuant to sub­section (1) shall supply \r\nthe report to — \r\n(a) the Commission; \r\n(b) the relevant securities exchange; \r\n(c) the central depository; and \r\n(d) the defaulter to whom the report relates. \r\n(3) Where the Commission receives pursuant to sub­section (2) a report made pursuant to \r\nsub­ section (1), it may publish notice of that fact in such manner as it considers appropriate to  bring \r\nit to the attention of creditors of the defaulter to whom the report relates. \r\n  \r\n \r\nPage 40 of 108  \r\n(4) Where a defaulter receives pursuant to sub­section (2) a report made pursuant to \r\nsub­section (1), he shall, at the request of any of his creditors, — \r\n(a) make the report available for inspection by the creditor within two days from \r\nthe receipt of such request; or \r\n(b) on payment of the prescribed fee, supply to the creditor all or any part of that \r\nreport as requested. \r\n(5) In sub­sections (2), (3) and (4), “report” includes a copy of a report. \r\n40. Net sum payable on completion of default proceedings. — (1) This section shall \r\napply to any net sum certified under clause (b) of sub­section (1) of section 39 by a clearing house, \r\nupon the completion by it of any default proceedings, to be payable by or to a defaulter. \r\n(2) Where an order for receivership or winding up has been made or a resolution for \r\nvoluntary winding up has been passed, any net sum shall be — \r\n(a) provable in the bankruptcy or winding up; and \r\n(b) taken into account for the purpose of any law relating to set­off. \r\n(3) For the purposes of sub­section (2), the certificate of the clearing house as to the amount \r\nof the net sum payable shall be receivable in evidence as sufficient proof of the net sum payable. \r\n41. Disclaimer of property, rescission of contracts, etc .— (1) Section 407 of the \r\nCompanies Ordinance, 1984 (XLVII of 1984) shall not apply in relation to — \r\n(a) a market contract; \r\n(b) a contract effected by a clearing house for the purpose of realizing propert y \r\nprovided as market collateral; \r\n(c) a market charge; or \r\n(d) any default proceedings. \r\n(2) Section 406 of the Companies Ordinance, 1984 (XLVII of 1984) shall not apply to any \r\nact, matter or thing which has been done pursuant to — \r\n(a) a market contract; \r\n(b) a disposition of property pursuant to a market contract; \r\n(c) the provision of market collateral; \r\n(d) a contract effected by a clearing house for the purpose of realizing property \r\nprovided as market collateral or any disposal of property pursuant to such a \r\ncontract; \r\n(e) a disposal of property in accordance with the regulations of a clearing house as \r\nto the application of property provided as market collateral; \r\n \r\nPage 41 of 108  \r\n(f) a disposal of property as a result of which the property becomes subject to a \r\nmarket charge or any transaction pursuant to which that disposal is made; \r\n(g) a disposal of property made in enforcing a market charge; \r\n(h) a market charge; or \r\n(i) any default proceedings. \r\n42. Enforcement of judgments over property subject to market charge, etc .— (1) \r\nNotwithstanding anything contained in any other law for the time being in force, where property is \r\nsubject to a market charge or has been provided as market collateral, no execution or other legal process \r\nfor the enforcement of a judgment or order may be c ommenced or continued, and no distress may be \r\nlevied, against the property by a person not seeking to enforce any interest in or security over the \r\nproperty, except with the consent of the clearing house concerned. \r\n(2) Where by virtue of this section a person would not be entitled to enforce a judgment or \r\norder against any property, any injunction or other remedy granted with a view to facilitating the \r\nenforcement of any such judgment or order shall not extend to that property. \r\n43. Clearing member to be party to transactions as principal.— Where for the purposes \r\nof fulfilling clearing and settlement obligation or margin call or mark­to­market loss or any other \r\nobligation, whatsoever, a clearing member enters into any transaction or contract with a clearing house, \r\nirrespective of its nature, including but not limited to a market contract, in the capacity as a principal \r\nor agent, notwithstanding anything contained in any other law, rule or regulation, in such transaction \r\nor contract the clearing member shall act  and considered as Principal and liable to make payment or \r\ndelivery, to the clearing house, as the case may be. \r\n44. Property deposited with clearing house.— (1) Subject to sub­section (2), where any \r\nproperty is deposited as market collateral by a clearing member with a clearing house in accordance \r\nwith the regulations of the clearing house, then, notwithstanding any other law or rules or regulations \r\n, no action, claim or demand, either civil or criminal, in respect of any right, title or interest in such \r\nproperty held or enjoyed by any person shall lie or shall be commenced or allowed, against the clearing \r\nhouse or its nominees. \r\n(2) The operation of sub­section (1) in respect of any property deposited as market \r\ncollateral with a clearing house is subject to any modifications and exclusions provided in the \r\nregulations of the clearing house. \r\n45. Preservation of rights, etc.  Except to the extent that they expressly provide, the \r\nprovisions of this Part shall not operate to limit, restrict or otherwise affect — \r\n(a) any right, title, interest, privilege, obligation or liability of a person; \r\n(b) any investigation, legal proceeding or remedy in respect of any such right, title, \r\ninterest, privilege, obligation or liability. \r\n  \r\n \r\nPage 42 of 108  \r\nPART IV \r\nCENTRAL DEPOSITORY COMPANIES \r\n46. Interpretation.— In this Part — \r\n(a) “account holder” shall have the same meaning as is assigned to it in sub­section \r\n(3) of section 2 of the Central Depositories Act, 1997 (XIX of 1997) ; \r\n(b) “CDS element ” means central depository system element and includes  an \r\naccount holder, a participant, an issuer of eligible securities, an eligible pledgee \r\nor any other market intermediary as may be prescribed under the Central \r\nDepositories Act, 1997 (XIX of 1997) ; \r\n(c) “investor account ” means the account opened by an investor with a central \r\ndepository in accordance with the terms and conditions specified by such central \r\ndepository; \r\n(d) “investor account holder” means any individual who, or other entity which, is \r\nallowed by central depository at its discretion to open and maintain an investor \r\naccount with central depository with or without having direct access to CDS; \r\n(e) “participant” shall have the same meaning as is assigned to it in clause (17) of \r\nsection 2 of the Central Depositories Act, 1997 (XIX of 1997) ; and \r\n(f) “sub­account holder” has the same meaning as given in clause (28) of section 2 \r\nof the Central Depositories Act, 1997 (XIX of 1997). \r\n47. Licensing requirement.— No person shall establish or operate or assist in establishing \r\nor operating or hold himself out as operating a depository facility except under and in accordance with \r\na central depository licence granted by the Commission under section 49: \r\nProvided that a  licensing requirement provided in this section shall not be applicable on \r\ndepository facility provided by State Bank of Pakistan through State Bank of Pakistan­Banking \r\nServices Corporation for government securities. \r\n48. Eligibility for licensing. — A compa ny shall be eligible for licensing as a central \r\ndepository only if — \r\n(a) the company is incorporated as a public company under the Companies \r\nOrdinance, 1984 (XLVII of 1984); \r\n(b) the company complies with all the requirements in Central Depositories Act, \r\n1997 (XIX of 1997); \r\n(c) it has, and maintains at all times, a minimum paid­up capital (net of losses) of \r\nrupees five hundred million or such higher amount as may be notified by the \r\nCommission; \r\n(d) the collective shareholding of the securities exchanges does not exceed such \r\npercentage as the Commission may notify, of the total shareholding of the \r\ncompany: \r\n \r\nPage 43 of 108  \r\n \r\nProvided that the Commission may in the official Gazette notify any \r\nclass or classes of persons to hold such number of shares of the central \r\ndepository as the Commission deems appropriate: \r\nProvided further that any sale or purchase of shares of the central \r\ndepository shall be subject to the prior approval of the Commission; \r\n(e) no promoter, director, majority shareholders, senior management officer or \r\nemployee of such a company — \r\n(i) has been convicted of fraud, breach of trust or an offence involving \r\nmoral turpitude or removed from service for misconduct or has been \r\nadjudicated as insolvent; \r\n(ii) has been associated with any illegal banking business, deposit taking or \r\nfinancial dealings; \r\n(iii) has been a sponsor, director, chief executive or a senior management \r\nofficer of any defaulting entity; \r\n(iv) has ever been a defaulter of any commercial bank or financial institution, \r\nincluding non­banking f inancial institution, securities exchange and \r\nclearing house or has suspended payment or has compounded with his \r\ncreditors; \r\n(v) has ever been a defaulter or non­payer of verified unsettled claims of its \r\ncustomer as a TRE certificate holder of securities exchange; and \r\n(vi) fulfill the fit and proper criteria as may be prescribed; \r\n(f) the promoters of such company are persons of experience and integrity and have \r\nspecial knowledge of matters which the company may have to deal with as a \r\ncentral depository company; and \r\n(g) it satisfies such other conditions as may be prescribed. \r\n49. Grant of licence .— (1) A public company eligible for a licence may apply to the \r\nCommission to be licensed as a central depository in such form and manner as may be prescribed. \r\n(2) The application under sub­section (1) shall be accompanied by a prescribed fee. \r\n(3) The Commission may require an applicant to provide the Commission with such further \r\ninformation as it considers necessary in relation to the application, in such form or verified in s uch \r\nmanner as the Commission may direct. \r\n(4) The Commission may, in writing, subject to such conditions or restrictions as it may \r\nthink fit to impose, license a public company as a central depository if the Commission is satisfied that \r\nthe company will ensure that, as far as is reasonably practicable, there are fair, transparent and efficient \r\ndepository facilities, the company will manage any risk associated with its business and operations \r\nprudently, in the manner prescribed and the company will enforce co mpliance by CDS element with \r\n \r\nPage 44 of 108  \r\nits regulations. \r\n(5) In the exercise of its powers to grant licence under sub­section (4), the Commission \r\nshall have regard to, whether— \r\n(a) the company's regulations make satisfactory provision for — \r\n(i) the proper regulation and efficient operation of the depository facility \r\nwhich it operates; \r\n(ii) the proper regulation and supervision of CDS element; \r\n(iii) maintaining the accounts of its account holders, participants, \r\nsub­account holders and investor account holders in the manner as may \r\nbe prescribed; \r\n(iv) equitable allocation of dues, fees and other charges among the CDS \r\nelement and other persons using its facilities; and \r\n(v) any other matters as may be prescribed; \r\n(b) the company has sufficient financial, human and system resources to— \r\n(i) establish and operate a fair, transparent and efficient depository facility; \r\n(ii) meet contingencies or disasters (including events such as technical \r\ncomplications occurring with automated systems) ; and \r\n(iii) provide adequate security arrangements; and \r\n(c) it would not be contrary to the public interest to license the company. \r\n(6) Subject to the provisions of this Act, a licence granted under this section shall be subject \r\nto such annual renewal fee as may be prescribed. \r\n50. Duties of ce ntral depository .— (1) It shall be the duty of a central depository to \r\nensure— \r\n(a) fair, transparent and efficient depository facility; \r\n(b) that risks associated with its business and operations are managed prudently; \r\n(c) compliance with all the provisions of the Central Depositories Act, 1997 (XIX \r\nof 1997); and \r\n(d) that requirements referred to in clause (b) of sub­section (4) of section 49 shall \r\nbe evaluated, examined and certified by such independent and reputable expert \r\nand in such time intervals as may be prescribed. \r\n(2) In discharging its duty under sub­section (1), a central depository shall act in the interest \r\nof the CDS elements and in particular shall give paramount importance to the interest of the public. \r\n(3) A central depository shall operate it s facilities in accordance with the Central \r\n \r\nPage 45 of 108  \r\nDepositories Act, 1997 (XIX of 1997) and the regulations made there under. \r\n(4) A central depository shall formulate and implement appropriate procedures under its \r\nregulations, compliance of which shall be mandatory on all CDS elements. \r\n(5) A central depository shall have efficient procedures and arrangements for addressing \r\ncomplaints and taking enforcement actions thereof. \r\n (6) A central depository shall immediately notify the Commission if it becomes aware — \r\n(a) of a financial irregularity or other matter which in the opinion of the central \r\ndepository may indicate that its financial integrity is in question or that it is \r\nunable to meet its legal obligations; \r\n(b) that any of its CDS element is unable to comply with any regulation of the \r\ncentral depository; and \r\n(c) of a financial irregularity or other matter which in the opinion of the central \r\ndepository may indicate that the financial standing or integrity of a CDS element \r\nis in question or that a CDS elements may not be able to comply with legal and \r\nregulatory requirements. \r\n(7) A central depository shall ensure that appointment or removal of its chief executive \r\nofficer by whatever name called is made with the prior approval of the Commission. \r\n(8) A central depository shall at all times provide and maintain — \r\n(a) adequate and properly equipped premises; \r\n(b) automated systems with adequate capacity, facilities to meet contingencies or \r\nemergencies, security arrangements and technical support; and \r\n(c) comprehensive business continuity plan for the conduct of its business. \r\n51. Regulations of central depository. — (1) Without limiting the generality of \r\nsub­section (4) of section 49, the regulations of a central depository, may make provision — \r\n(a) with respect to the constitution, powers and functions of the governing body of \r\nthe central depository; \r\n(b) with respect to the appointment and functioning of internal auditors; \r\n(c) with respect to operational, information system, risk evaluation and regulatory \r\naudit of the central depository; \r\n(d) with respect to the mechanism for inspection, enforcement and other punitive \r\nactions relating to audit and compliance of CDS Elements including cooperation \r\nwith other licensed entities for violation of any requirement of this Act  or any \r\nrules or regulations made there under; \r\n(e) with respect to the equitable allocation of the dues, fees and other charges levied \r\nby the central depository; \r\n \r\nPage 46 of 108  \r\n(f) with respect to dissemination of information to CDS element, securities \r\nexchange, clearing house, other entities or intuitions and general public; \r\n(g) with respect to integrity and professional conduct of its employees; and \r\n(h) generally for carrying on the business of the central depository. \r\n(2) The power to make regulations conferred by this section on the central depository shall, \r\nfor eliciting public opinion thereon, be subject to condition of previous publication of the said \r\nregulations alongwith their rationale on the website of central depos itory for a period of seven days \r\nstarting from the date of its placement on website: \r\nProvided that, on an application by the central depository, the Commission may waive the \r\ncondition of placement of proposed regulations on the website of the central depos itory in cases \r\nrequiring the immediate implementation of a proposed regulation. \r\n(3) The Commission may, by notice in writing served on a central depository, require it — \r\n(a) to make regulations specified in the notice within the period specified; or \r\n(b) to amend regulations referred to in the notice in the manner and within the \r\nperiod specified in the notice. \r\n(4) Where the Commission is satisfied that a central depository has not complied with a \r\nrequirement referred to in sub­section (3) within the specifie d period the Commission may make or \r\namend the regulations specified in the notice instead of the central depository and the regulations so \r\nmade or amended shall be deemed to have been made or amended by the central depository and shall \r\nhave effect accordingly. \r\n52. Approval of regulations of central depository. — (1) No regulation of a central \r\ndepository or any amendment, whether by way of rescission, substitution, alteration or addition, to a \r\nregulation shall have effect unless it has the approval in writing of the Commission. \r\n(2) A central depository shall submit or cause to be submitted to the Commission for its \r\napproval the regulations and every amendment thereto that require approval under sub­section (1), \r\ntogether with explanations of their purpose and l ikely effect, including their effect on the investing \r\npublic, in sufficient detail to enable the Commission to decide whether to approve them or refuse to \r\napprove them. \r\n(3) The Commission shall, by notice in writing served on the central depository, give i ts \r\napproval or refuse to give its approval to the regulations or amendment of the regulations, as the case \r\nmay be or any part thereof. \r\n(4) The Commission may give its approval under sub­section (3) subject to requirements \r\nthat shall be satisfied before the  regulations or amendment of the regulations or any part thereof take \r\neffect. \r\n(5) Subject to the approval of the Commission under sub­section (3), all regulations or \r\namendments thereto made by the central depository shall be notified in the official Gazett e and shall \r\ntake effect upon such publication or such date as may be specifically specified in the notification. \r\n53. Obligation of CDS element to comply with regulations and procedures of central \r\n \r\nPage 47 of 108  \r\ndepository.— CDS element shall at all times comply with the regulations and procedures of the central \r\ndepository. \r\n54. Central depository to assist the Commission. — A central depository shall provide \r\nsuch assistance to the Commission as the Commission may require for the performance of the functions \r\nand duties of the Commission, including the furnishing of such returns and the provision of such books \r\nand other information relating to the business of the central depository or in respect of any activity and \r\narrangements in securities or any other information as the Commission may require from time to time \r\nfor the proper administration of this Act and the Central Depositories Act, 1997 (XIX of 1997). \r\n55. Power of the Commission to issue directions to central depository .— (1) The \r\nCommission may, if it considers it necessary or expedient— \r\n(a) for ensuring fair, transparent and efficient working of the central depository; \r\n(b) for ensuring the integrity and proper management of systemic risks in the \r\nsecurities markets; \r\n(c) in the interests of the public or a section of the pu blic or for the protection of \r\ncustomers, the CDS elements and their clients, \r\nissue directions by notice in writing either of a general or specific nature to a central depository. \r\n(2) Without prejudice to the generality of sub­section (1), any direction issued under that \r\nsub­ section may relate to — \r\n(a) the book­entry system of the central depository; \r\n(b) the manner in which a central depository carries on its business; \r\n(c) removing or suspending the directors or officers of the central depository from \r\noffice or suspending CDS elements of the central depository; \r\n(d) the settlement of investor or customers claims and enforcement and other \r\npunitive actions against CDS element; and \r\n(e) any other matter that the Commission considers necessary for the proper \r\nadministration of this Act and the Central Depositories Act, 1997 (XIX of 1997) \r\nor the rules and regulations made hereunder, \r\nand the central depository shall comply with any such direction.  \r\n56. Emergency powers of the Commission .— (1) Where the Commission h as reason to \r\nbelieve or decides on the recommendation of the central depository, that an emergency exists or where \r\nthe Commission considers it necessary or expedient in the interest of the public or section of the public \r\nor for the protection of customers or where the Commission takes action under section 13 or section \r\n32, the Commission may direct by notice in writing a central depository to take such action as it \r\nconsiders necessary and the central depository shall comply with that direction. \r\n(2) Where a central depository fails to comply with a direction of the Commission under \r\nsub­ section (1), within such time as is specified by the Commission, the Commission may take such \r\nother action, including but not limited to those specified in sub­section (1), as  the Commission \r\n \r\nPage 48 of 108  \r\nconsiders fit to maintain or restore fair, transparent and efficient depository facility. \r\n(3) In this section, “emergency” means — \r\n(a) any act of government affecting securities; \r\n(b) any major market disturbance which prevents the market fr om accurately \r\nreflecting the forces of supply and demand for securities; or \r\n(c) any other situation or practice which in the opinion of the Commission \r\nconstitutes an emergency. \r\n57. Suspension or cancellation of licence .— (1) The Commission may, by notice in \r\nwriting served on the central depository,— \r\n(i) suspend the license granted under this Act with effect from the date specified in \r\nthe notice for such period as may be specified in the notice; or \r\n(ii) supersede the board of directors or other authority of the central depository; or \r\n(iii) suspend or remove the director, officer or member from his office; or \r\n(iv) cancel the licence granted under this Act with effect from the date, specified in \r\nthe notice, \r\nif the central depository — \r\n(a) ceases to comply with the eligibility conditions specified in section 48; \r\n(b) ceases to operate the central depository facility that it has been licensed to \r\noperate under section 49; \r\n(c) is being wound up; \r\n(d) fails to comply with any requirement of this Act or the Central Depositories Act, \r\n1997 (XIX of 1997); \r\n(e) fails to comply with a direction of the Commission; \r\n(f) fails to provide the Commission with information required by the Commission \r\nor provides false or misleading information; \r\n(g) is operating in a manner detrimental to the public interest; or \r\n(h) requests the Commission to do so. \r\n(2) For the purposes of clause (b) of sub­section (1) a central depository shall be deemed \r\nto have ceased to operate as a central depository if — \r\n(a) it has ceased to operate its depository facility for more than thirty days unless it \r\nhas obtained the prior approval of the Commission to do so; or \r\n(b) it has ceased to operate such depository facility under a direction issued by the \r\n \r\nPage 49 of 108  \r\nCommission. \r\n(3) The Commission may by the notice served under sub­section (1) permit the central \r\ndepository to continue, on or after the date on which the suspension or cancellation is to take effect, to \r\ncarry on such activities affected by the suspension or cancellation as the Commission may specify in \r\nthe notice for the purpose of — \r\n(a) closing down the operations of the central depository; and \r\n(b) protecting the public interest. \r\n(4) Except where responding to a request under clause (h) of sub­section (1), the \r\nCommission shall not take any action under sub­section (1) against the central depository without first \r\ngiving the central depository an opportunity of being heard. \r\n(5) Where the Commission suspends or cancels the licence of a central depository under \r\nthis section, it shall cause notice of that fact to be publ ished in at least two daily newspapers having \r\nwide circulation. \r\n58. Effect of cancellation of licence. — A cancellation of licence under section 57 shall \r\nnot operate so as to — \r\n(a) avoid or affect any agreement, transaction or arrangement entered into on th e \r\nsecurities market of a securities exchange where the agreement, transaction or \r\narrangement was entered into before the cancellation of the licence; or \r\n(b) affect any right, obligation or liability arising under such agreement, transaction \r\nor arrangement. \r\n59. Accounts and audit.— (1) A central depository shall keep proper books of accounts \r\nand records of its profit and loss, assets and liabilities and all other transactions of the central depository \r\nas may be prescribed. \r\n(2) The central depository shall, w ithin three months after the end of each financial year, \r\nprepare financial statement of the central depository for the financial year, including a profit and loss \r\naccount, balance sheet, cash flow and such other items as may be prescribed. \r\n(3) The auditors shall prepare a report on the financial statement received and send such \r\nstatement to the central depository within three months from the close of financial year or such later \r\ntime as allowed by the Commission and the central depository shall forthwith af ter its receipt send a \r\ncopy of the report and a copy of the statement of accounts to the Commission. \r\n(4) The Commission may, where it deems appropriate, require all system to be audited by \r\nan independent auditor in alternate year in a prescribed manner. \r\n(5) The auditors report shall be prepared in such a manner as may be prescribed. \r\n(6) The auditors shall have a right of access at all reasonable times to the books, accounts, \r\nvouchers and other records of the central depository and are entitled to require fr om officers of the \r\ncentral depository such information and explanations as they consider necessary for the performance \r\nof their duties as auditor. \r\n \r\nPage 50 of 108  \r\n(7) The accounting and other records required to be reported under this section shall be \r\npreserved by the central depository for a period of ten years or such longer period as may be prescribed. \r\n60. Power of the Commission to appoint auditor. — (1) Where the Commission is \r\nsatisfied that it is in the public interest to do so, it may appoint in writing an auditor for special audit, \r\nat the expense of the central depository, to examine, audit and report, either generally or in relation to \r\nany matter, on the books, accounts and records of a central depository. \r\n(2) The Commission may appoint special auditors to furnish  the Commission with a \r\nregulation compliance audit report in the form and manner prescribed. \r\n61. Annual report.— (1) A central depository shall, within four months after the end of \r\nits financial year or such later time as allowed by the Commission, give to the Commission an annual \r\nreport that includes — \r\n(a) a description of the activities undertaken by the central depository in the \r\nfinancial year; \r\n(b) the resources including financial, technological and human resources, that the \r\ncentral depository had available and used in order to ensure compliance with its \r\nobligations; and \r\n(c) an analysis of the extent to which the central depository considers that the \r\nactivities undertaken and resources used, have resulted in full compliance with \r\nall of its obligations under this Act and the Central Depositories Act, 1997 (XIX \r\nof 1997) and its regulations. \r\n(2) The central depository shall ensure that the annual report is accompanied with \r\ninformation prescribed for this purposes which may include, without limitation,— \r\n(a) names of the participants who are members of the company; \r\n(b) number of account holders as well as sub­account holders; \r\n(c) list of shareholders of the company indicating change in the shareholdings, if \r\nany; and \r\n(d) names of senior management staff of the company with qualifications and \r\nexperience. \r\n(3) The annual report shall be accompanied by an audit report where required by the \r\nCommission. \r\n(4) The Commission may, by giving written notice to the central depository, require the \r\ncentral depository to ob tain an audit report, by a person to be approved by the Commission, on the \r\nannual report and on any information or statements accompanying it. \r\n62. Preservation of rights, etc .— Except to the extent that they expressly provide, the \r\nprovisions of this Part shall not operate to limit, restrict or otherwise affect — \r\n(a) any right, title, interest, privilege, obligation or liability of a person; and \r\n \r\nPage 51 of 108  \r\n(b) any investigation, legal proceeding or remedy in respect of any such right, title, \r\ninterest, privilege, obligation or liability. \r\nPART V \r\nREGULATED SECURITIES ACTIVITIES \r\n63. Scope of regulated securities activities.—  For the purposes of this Act, a person shall \r\nbe deem to be carrying on a regulated securities activity if such person carries out on business or \r\npurports to do so, as a — \r\n(a) securities broker; \r\n(b) securities adviser; \r\n(c) securities manager; \r\n(d) share registrar; \r\n(e) credit rating company; \r\n(f) balloter; \r\n(g) underwriter; \r\n(h) debt securities trustee; or \r\n(i) any other activity as may be notified by the Federal Government. \r\n64. Licensing requirement.— (1) No person shall carry on a regulated securities activity \r\nor purport to do so, unless such person is licensed by the Commission under this Act and operates in \r\naccordance with such licence. \r\n(2) A licence granted under this Act shall specify the regulated  securities activity or \r\nactivities that the regulated person is permitted to undertake and such person shall be restricted to such \r\nregulated securities activity or activities so specified. \r\n(3) The Commission may, by notification in the official Gazette, ex empt any financial \r\ninstitution or class of financial institutions from the operation of sub­section (1) subject to such terms \r\nand conditions as may be prescribed. \r\nExplanation.— For the purposes of this sub­section the expression “financial institution” shall \r\nhave the same meaning as defined under clause (15A) of sub­section (1) of section 2 of the Companies \r\nOrdinance, 1984 (XLVII of 1984). \r\n65. Eligibility for licensing .— (1) A licence in respect of a regulated securities activity \r\nshall only be granted to a public or private company except that— \r\n(a) in the case of a securities adviser, a licence may be granted to an individual; and \r\n(b) in the case of a representative, a licence may only be granted to an individual. \r\n(2) A regulated person that is licensed to i ndulge in a regulated securities activity shall be \r\n \r\nPage 52 of 108  \r\nrestricted to undertake only that activity exclusively. \r\n(3) In the case of a bank a licence under this Part except a licence for underwriting or any \r\nother regulated activity as may be prescribed shall be granted only to a subsidiary company of the bank \r\nfor such purpose and such subsidiary shall be exclusively engaged in regulated securities activities. \r\n66. Representatives.— No person shall act as a representative in carrying on business in \r\nany regulated securities activity or hold himself out as doing so, unless he is the holder of a \r\nrepresentative's licence for that regulated securities activity and is duly accredited to a principal. \r\n67. Accreditation of representatives .— (1) A representative is accredited to a principal \r\nfor the purposes of this Act only if — \r\n(a) the licence of the representative states that he is accredited to the principal; and \r\n(b) the representative is re corded as being accredited in the register of regulated \r\npersons maintained by the Commission under section 72. \r\n(2) The Commission shall not issue a representative's licence unless both the representative \r\nand the principal have informed the Commission in writing that he is or is to be accredited. \r\n(3) Where the accreditation of a representative has been terminated whether by the \r\nprincipal or the representative — \r\n(a) the principal shall immediately notify the Commission, and any \r\nsecurities exchange of which he  is a TRE certificate holder, in writing \r\nof such termination; \r\n(b) the principal shall publish in two daily newspapers having wide \r\ncirculation a notice advising of such termination and shall make \r\narrangements for the placement of the notice on the securities exchange \r\nwebsite; \r\n(c) the representative shall forthwith return his licence to the Commission; \r\nand \r\n(d) the Commission shall forthwith amend the register of regulated persons \r\naccordingly. \r\n68. Application for licence .— (1) An application for a licence unde r this Part shall be \r\nmade to the Commission in the prescribed form and shall be accompanied by the prescribed fee and \r\nshall — \r\n(a) give the Commission information it requires — \r\n(i) about the services which the applicant will hold himself out as being \r\nable to provide if the application is allowed; \r\n(ii) about the business which the applicant proposes to carry on and to which \r\nthe application relates and about any person whom the applicant \r\nproposes to employ or with whom the applicant intends to be associated \r\nin the course of carrying on the business; and \r\n \r\nPage 53 of 108  \r\n(iii) to enable the Commission to consider the matters referred to in section \r\n151; and \r\n(b) specify the location of all premises at which the records or other documents of \r\nthe regulated securities activity in respect of which the application is made are \r\nto be kept. \r\n(2) The Commission may require an applicant to provide it with such further information \r\nas the Commission considers necessary. \r\n(3) An application for the grant of a representative's licence shall be supported in the \r\nprescribed manner by a principal who is the holder of or who has applied for a licence to conduct a \r\nregulated securities activity. \r\n69. Grant of licence.— (1) Subject to the provisions of this Act, the Commission may, on \r\nan application duly made in accordance with section 68, grant the licence or refuse the application. \r\n(2) The Commission shall grant a licence if satisfied that the applicant — \r\n(a) is a fit and proper person to be licenced, having regard to the provisions of \r\nsection 151; \r\n(b) will be able, if licensed, to comply with any financial resources regulations that \r\nmay apply to the applicant; \r\n(c) has specified premises under clause (b) of sub­section (1) of section 68 that are \r\nsuitable for keeping records or other documents; \r\n(d) in the  case of an application for a representative's licence, has passed such \r\nexamination and undertaken such training as may be prescribed; \r\n(e) complies with the conditions prescribed in relation to anti­money laundering \r\nand counter financing of terrorism under the applicable laws; and \r\n(f) satisfies such other conditions as may be prescribed. \r\n(3) Subject to the provisions of this Act, a licence granted under this section shall be granted \r\nfor a period of one year and may be renewed for further periods of one year provided that,­ \r\n(a) the regulated person applies for renewal of licence one month prior to the expiry \r\nof his license; \r\n(b) pays the prescribed annual licence fee; and \r\n(c) meets the requirements of sub­section (2). \r\n70. Power of the Commission to impose conditions.— (1) The Commission may grant a \r\nlicence subject to such conditions or restrictions as it considers necessary. \r\n(2) The Commission may, by written notice served on the holder of the licence, amend or \r\ncancel any of the conditions or attach new conditions. \r\n \r\nPage 54 of 108  \r\n71. Power of the Commission to issue directions to regulated persons .— (1) The \r\nCommission may by notice in writing give a regulated person a direction under this section where it \r\nappears to the Commission that — \r\n(a) it is desirable for the protection of public interest or customers; or \r\n(b) the regulated person is contravening, has contravened or is about to contravene \r\nor has failed to comply with any provision of or requirement under this Act, any \r\nrule or any regulation made under this Act or in purported compliance with any \r\nsuch provision or requirement has furnished the Commission with information \r\nthat is false, inaccurate or misleading. \r\n(2) A direction under this section may contain all or any of the following prohibitions or \r\nrequirements, namely: — \r\n(a) require a regulated person to cease and desist from the contravention; \r\n(b) prohibit a regulated person from entering into transactions of a class or \r\ndescription specified in the notice or entering into them otherwise than in \r\ncircumstances so specified or to an extent so specified; \r\n(c) prohibit a regulated person from soliciting business from a person of a class or \r\ndescription so specified or from persons other than persons of such a class or \r\ndescription; \r\n(d) prohibit a regulated person from carrying on business in a specified manner or \r\notherwise than in a specified manner; \r\n(e) as regards any assets whether in Pakistan or elsewhere and whether they are the \r\nassets of the regulated person or not — \r\n(i) prohibit the regulated person from transferring, alienating or otherwise \r\ndisposing of such assets or from dealing with them in a manner specified \r\nin the notice; or \r\n(ii) require the regulated person to deal with such assets in, and only in, a \r\nmanner specified in the notice; \r\n(f) require a regulated person to maintain in Pakistan assets of such value as appears \r\nto the Commission to be desirable with a view to ensuring that the regulated \r\nperson will be able to meet his liabilities in respect of his business; or \r\n(g) require a regulated person to transfer contr ol of assets of a specified class or \r\ndescription to a trustee approved by the Commission, \r\nand the regulated person shall comply with such direction. \r\n(3) A direction under this section shall be for such specified period as the Commission \r\nconsiders necessary which period may be extended by the Commission as considered necessary by it. \r\n \r\n \r\nPage 55 of 108  \r\n(4) The Commission may, by written notice either of its own motion or on the application \r\nof the regulated person on whom a prohibition or requirement has been imposed under thi s section, \r\nrescind or vary the prohibition or requirement if it appears to the Commission that it is no longer \r\nnecessary for the prohibition or requirement to take effect or continue in force or, as the case may be, \r\nthat it should take effect or continue in force in a different form. \r\n72. Register of regulated persons .— (1) The Commission shall maintain a register of \r\nregulated persons in the form it considers most appropriate. \r\n(2) For each regulated person, other than a representative, the register shall record— \r\n(a) the name and address of the regulated person; \r\n(b) the date on which the licence was granted; \r\n(c) the type of regulated securities activity permitted by the licence; \r\n(d) any conditions attached to the licence; \r\n(e) the name and address of every accredited representative, manager and officer; \r\n(f) the location of the premises at which the records or other documents of the \r\nregulated person are kept; \r\n(g) where the regulated person is a company, the name of each director and of the \r\nsecretary of the company and the names of majority shareholder; \r\n(h) any order of cancellation of licence; and \r\n(i) such other particulars as the Commission considers necessary in the interest of \r\nthe investing or general public. \r\n(3) For each representative, the register shall record — \r\n(a) his name and address; \r\n(b) the date on which his licence was granted; \r\n(c) the name and address of the principal to whom he is accredited; and \r\n(d) such other particulars as the Commission considers desirable in the interest of \r\nthe investing or general public. \r\n(4) The register referred to in sub­section (1) shall be made available on the website of the \r\nCommission and securities exchange. \r\n(5) Any person may apply for a certified copy of the information contained in the register \r\nupon payment of the prescribed fee in the prescribed manner. \r\n73. Notification of change in register particulars.— Where — \r\n(a) a regulated person ceases to carry on the business to which his licence relates; \r\nor \r\n \r\nPage 56 of 108  \r\n(b) a change occurs in any matter particulars of which are required by section 72 to \r\nbe entered in the register, \r\nthe regulated person shall as soon as is practicable and  in any event within seven days give to the \r\nCommission notice in writing of the event concerned. \r\nPART VI \r\nCONDUCT OF REGULATED SECURITIES ACTIVITIES \r\n74. Standards of conduct. __ In the conduct of regulated securities activities, a regulated \r\nperson shall at all times act according to the principles of best practice and, in particular, shall — \r\n(a) observe a high standard of integrity and fair dealing; \r\n(b) act with due care, skill and diligence; \r\n(c) observe high standards of market conduct; \r\n(d) seek from customers information about their circumstances and investment \r\nobjectives which might reasonably be expected to be relevant in enabling the \r\nregulated person to fulfill his responsibilities to the customer; \r\n(e) take steps to give public information to every customer which will enable the \r\ncustomer to make a balanced and informed investment decision; \r\n(f) avoid any conflict of interest with customers and, where such a conflict \r\nunavoidably arises, to ensure fair treatment to the customer by complete \r\ndisclosure and the interests of the regulated person should never be unfairly \r\nplaced above those of the customer; \r\n(g) protect properly, by way of segregation and identification, those customer assets \r\nfor which the regulated person is properly responsible; \r\n(h) maintain adequate financial resources to meet the regulated securities activities \r\ncommitments of the regulated person and withstand the risks to which t he \r\nbusiness is subject; \r\n(i) organize and control internal affairs in a responsible manner; \r\n(j) keep proper records and maintain such records for a period of ten years or such \r\nlonger period as notified by the Commission; \r\n(k) have efficient procedures and arrangements for addressing customer's \r\ncomplaints and settlement of customer's claims; \r\n(l) have adequate arrangements to ensure that all staff employed are suitable, \r\nadequately trained and properly supervised, together with well defined \r\ncompliance procedures; \r\n(m) have adequate system of internal controls and internal audit, ensuring \r\ncompliance with the relevant laws for the time being in force; \r\n \r\nPage 57 of 108  \r\n(n) make efforts to resolve any dispute through mediation; and \r\n(o) deal with the Commission in an open and co­oper ative manner and keep the \r\nCommission informed of anything concerning the regulated person that might \r\nbe expected to be disclosed to it. \r\n75. Business conduct regulations.— (1) Without prejudice to section 169 the Commission \r\nmay make regulations requiring regulated persons to comply with such practices and standards relating \r\nto their conduct in carrying on the regulated securities activities for which they are licensed as are \r\nspecified in the regulations. \r\n(2) Without limiting the generality of sub­section ( 1), the Commission may make \r\nregulations for or with respect to — \r\n(a) the use of misleading or deceptive advertisements by or on behalf of a regulated \r\nperson; \r\n(b) the disclosure to a customer of the financial risks in respect of securities trading \r\nrecommended by the regulated person to the customer; \r\n(c) the avoidance of any conflict of interest between the regulated person and a \r\ncustomer; \r\n(d) recommendations made by a regulated person; \r\n(e) the priority to be given to customer's orders; \r\n(f) fit and proper criteria for the promoters, directors, senior management officers \r\nand officers of regulated person; \r\n(g) implementation of in­house compliance and internal audit function to ensure \r\ncompliance to the applicable regulatory framework; \r\n(h) observance of fair trade and market practices and prohibition of market abuses, \r\nfraudulent practices and deception of general public; \r\n(i) trading against a customer; and \r\n(j) any other matter relating to the practices and standards of conduct required of a \r\nregulated person in cond ucting the regulated securities activity for which the \r\nregulated person is licensed. \r\n76. Issue of contract notes.— A regulated person shall, in respect of every contract for the \r\npurchase, sale or exchange of securities entered into by him, whether as princ ipal or agent, make out \r\na contract note in such a manner as may be prescribed. \r\n77. Short selling.— (1) Except in accordance with regulations, a person shall not sell any \r\nlisted securities that he or his principal does not own either for his own account or for the account of \r\nanother person. \r\n  \r\n \r\nPage 58 of 108  \r\n(2) For the purposes of sub­section (1), a person who sells securities includes a person    \r\nwho — \r\n(a) sells the securities; \r\n(b) purports to sell the securities; \r\n(c) offers to sell the securities; \r\n(d) holds himself out as entitled to sell the securities; or \r\n(e) instructs a securities broker to sell the securities. \r\n(3) For the purposes of sub­section (1), a person is treated as owning securities only if — \r\n(a) he or his agent is legally entitled to the securities; \r\n(b) he has purchased the securities or has entered into an unconditional contract to \r\npurchase the securities, even if he does not yet have title to them; \r\n(c) he owns other securities convertible into or exchangeable for the securities and \r\nhas tendered the other securities for conversion or exchange; \r\n(d) he has an option to acquire the securities and has exercised the option; or \r\n(e) he has rights or warrants to subscribe to the securities and has exercised the \r\nrights or warrants. \r\n78. Customer assets.— (1) A regulated person shall — \r\n(a) treat and deal with all customer assets received by him from a customer in \r\nrespect of any regulated securities activity as belonging to that customer; \r\n(b) account for in a separate trust account, designated or evidenced as such, for al l \r\nthe customer assets received from the customer or accruing to the customer \r\npursuant to clause (a); and \r\n(c) not commingle those customer assets with the assets of the regulated person. \r\n(2) Without prejudice to section 169 the Commission may make regulations with respect \r\nto the segregation, safekeeping and utilization of customer assets that a regulated person holds on \r\nbehalf of a customer. \r\n(3) Without limiting the generality of sub­section (2), regulations may — \r\n(a) require customer money to be pa id into segregated bank accounts established \r\nfor customer money and designated as trust accounts or customer accounts; \r\n(b) make provision with respect to the opening, control and keeping of bank \r\naccounts and specify when and how customer money is to be paid into such \r\naccounts and require it to be dealt with, and accounted for, in the prescribed \r\nmanner; \r\n \r\nPage 59 of 108  \r\n(c) require the maintenance of records in relation to such accounts; \r\n(d) require the submission to the Commission, upon request or at prescribed \r\nintervals, of prescribed information, records and documents for the purpose of \r\nenabling the Commission to ascertain readily whether the regulations are being \r\ncomplied with; and \r\n(e) provide for any other matter relating to customer assets. \r\nPART VII \r\nACCOUNTS, CAPITAL REQUIREMENTS AND AUDIT \r\n79. Accounts and records to be kept .— (1) Every regulated person shall keep such \r\naccounting and other records as prescribed which shall sufficiently explain the transactions and \r\nfinancial position of all business relating to his lic ence and enable a true and fair financial statements \r\nto be prepared from time to time and shall keep those records in such manner and form as to enable \r\nthem to be conveniently and properly audited. \r\n(2) Without limiting the generality of sub­section (1), such accounts and other records shall \r\nbe maintained as may be prescribed. \r\n(3) The accounting and other records required to be maintained under this section shall be \r\npreserved by the regulated person for a period of not less than ten years from the date on wh ich they \r\nare made and shall at all reasonable times be open to inspection by the Commission or by any person \r\nappointed by the Commission. \r\n(4) All records shall be maintained in sufficient detail to establish readily whether or not \r\nany financial resources regulations are being complied with. \r\n80. Financial resources regulations. — (1) Without prejudice to section 169, the \r\nCommission may make regulations requiring regulated persons to have and maintain, in respect of the \r\nsecurities regulated activity for which they are licensed, the financial resources set by the regulations. \r\n(2) Financial resources regulations may— \r\n(a) require regulated persons to maintain financial resources in accordance with — \r\n(i) specified requirements as to the amount in which they are to be \r\nmaintained; and \r\n(ii) any other prescribed requirements; \r\n(b) prescribe the assets, liabilities and other matters to be taken into account under \r\nthe regulations to determine the financial resources of a regulated person and \r\nthe extent to which, and the manner in which, they are to be taken into account \r\nfor that purpose; \r\n(c) require regulated persons to submit to the Commission, at intervals set out in \r\nthe regulations, returns of their financial resources and trading activities in a \r\nform set by the Commission; \r\n \r\nPage 60 of 108  \r\n(d) require regulated persons to submit returns to the Commission in response to a \r\nrequest by the Commission for information relating to their financial resources \r\nand any trading activities; and \r\n(e) provide for any other matter relating to the financ ial resources of regulated \r\npersons. \r\n81. Failure to comply with financial resources regulations. — (1) If a regulated person \r\nbecomes unable to comply with financial resources regulations the regulated person shall — \r\n(a) notify the Commission, of that fact; \r\n(b) in the case of a securities broker, also notify the securities exchange of which \r\nthe regulated person is a TRE certificate holder, clearing house and central \r\ndepository, of that fact; and \r\n(c) cease conducting the regulated securities activity for which the regulated person \r\nis licensed, otherwise than for the purpose of giving effect to an agreement or \r\narrangement permitted under his licence and entered into before the time when \r\nit became so aware. \r\n(2) The duties of a regulated person under sub­section (1 ) shall arise as soon as the \r\nregulated person becomes aware or should, with the exercise of diligence, have become aware, of his \r\ninability to comply with the financial resources regulations. \r\n(3) A regulated person that is a company is deemed to be aware of  an inability to comply \r\nwith the financial resources regulations if a director or employee of it is so aware or should, with the \r\nexercise of diligence, have been aware of the inability. \r\n(4) Where the Commission becomes aware of an inability by a regulated person to comply \r\nwith financial resources regulations the Commission may, whether or not notice has been given under \r\nsub­ section (1), — \r\n(a) suspend the licence; or \r\n(b) permit the regulated person to carry on business on the conditions, if any, the \r\nCommission imposes. \r\n(5) Where the Commission suspends a licence for a specified period under sub­section (4), \r\nthe suspension shall be for a period not exceeding three months, provided that the Commission may, \r\nif it considers it necessary, extend the suspension for such further periods not exceeding three months \r\nat any time, at the expiry of which the Commission shall either notify in writing the regulated person \r\nthat the suspension has expired or proceed to cancel the licence, as it deems appropriate. \r\n82. Monitoring compliance with financial resources regulations .— (1) The \r\nCommission may at any time, by notice in writing served on a regulated person, require the regulated \r\nperson to satisfy the Commission that the regulated person complies with all of the requirements of \r\nthe financial resources regulations that apply to the regulated person in such manner as may be \r\nprescribed. \r\n(2) Without limiting the generality of sub­section (1), the Commission may exercise any \r\nof the powers of an auditor appointed by the Commission under section 86 for the purpose of \r\n \r\nPage 61 of 108  \r\nascertaining whether a regulated person complies with all of the requirements of the financial resources \r\nregulations that apply to the regulated person. \r\n83 Auditor to be appointed.— (1) Within one month after becoming licenced under this \r\nAct a regulated person, other than a  representative, shall appoint an auditor, approved by the \r\nCommission, to perform the functions required of an auditor of a regulated person under or pursuant \r\nto the provisions of this Act and the regulations made hereunder. \r\n(2) An auditor shall not be eligible for appointment under sub­section (1) if he is — \r\n(a) a director, officer, employee, shareholder, partner or family member of the \r\nregulated person; or \r\n(b) a partner or employee of such person; or \r\n(c) not in compliance with the section 254 of the Compa nies Ordinance, 1984 \r\n(XLVII of 1984). \r\n(3) A regulated person shall, within seven days of the appointment of an auditor, notify the \r\nCommission in writing of the name and address of the auditor. \r\n(4) A regulated person shall, within seven days, notify the Com mission in writing of the \r\nremoval or resignation of an auditor. \r\n84. Audited accounts to be lodged with the Commission. A regulated person other than \r\na representative, shall — \r\n(a) for the financial year from the day on which he commences to carry on a \r\nregulated securities activity; and \r\n(b) for each subsequent financial year, \r\nprepare financial statements, a balance sheet and a cash flow statement made up to the last day of the \r\nfinancial year which shall show a true and fair view, contain the information prescribed, and shall \r\nlodge those documents with the Commission not later than four months after the end of the financial \r\nyear, together with an auditor's report which shall express opinions on such matters as may also be \r\nprescribed. \r\n85. Auditor to report to the Commission in certain cases.— If, during the performance \r\nof his duties as auditor for a regulated person, an auditor— \r\n(a) becomes aware of any matter which in his opinion adversely affects the \r\nfinancial or regulatory position of the regulated person to a material extent; or \r\n(b) discovers evidence of a contravention of any financial resources regulations or \r\nof section 78 (customer assets) or with section 79(accounts and records to be \r\nkept), \r\nhe shall promptly report it in writing to the Commission and to the regulated person. \r\n86. Power of the Commission to appoint auditor for special audit. — Where the \r\nCommission is satisfied that it is in the interest of a regulated person, his customers or the investors or \r\n \r\nPage 62 of 108  \r\ngeneral public to do so, it may appoint in writing an auditor to conduct special audit, at the expense of \r\nthe regulated person, to examine, audit and report, either generally or in relation to any matter, on the \r\nbooks, accounts and record of the regulated person and on money, securities or other property held on \r\naccount of any other person by the regulated person or by a nominee appointed by the regulated person, \r\nif — \r\n(a) the regulated person has failed to lodge audited accounts with the Commission \r\nunder section 84; or \r\n(b) the Commission has received a report of audit under section 85; or \r\n(c) the Commission has reason to believe that the regulated person has failed to \r\ncomply with any financial resources regulations, with section 78 (customer \r\nassets) or with section 79 (accounts and records to be kept). \r\nPART VIII \r\nPUBLIC OFFERS OF SECURITIES \r\n87. Offer of securities.— (1) This Part applies to offer of securities other than Government \r\ndebt securities. \r\n(2) Subject to the provisions of this Part, no person shall make a public offer of securities \r\nunless the issuer or offeror of the securities has submitted for approval to the Commission, and the \r\nCommission has approved prospectus. \r\n(3) No person shall make a public offer of securities if such person or its directors, sponsors \r\nor substantial shareholders have b een holding the office of the directors, or have been sponsors or \r\nsubstantial shareholders in any company, which— \r\n(a) had been declared defaulter by the securities exchange; or \r\n(b) whose TRE certificate has been cancelled or forfeited by the securities \r\nexchange; or \r\n(c) which has been de­listed by a securities exchange due to noncompliance of its \r\nregulations: \r\nProvided that the Commission may grant relaxation upon reasons to be recorded, and \r\nrectification of cause leading to such de­listing. \r\n(4) Sub­section (2) shall not apply— \r\n(a) to securities offered by the State Bank of Pakistan; \r\n(b) where the securities are offered in connection with a private offering or private \r\nplacement; and \r\n(c) issue of shares of a subsidiary to the members of a listed holding compan y by \r\nway of specie dividend or any other distribution in the prescribed manner. \r\n(d) where the securities are offered by the issuer to— \r\n \r\nPage 63 of 108  \r\n(i) members or employees of the issuer; or \r\n(ii) members of the families of any such members or employees; and \r\n(e) where the securities are shares and are offered as bonus shares to any or all of \r\nthe members of the issuer; \r\n(5) A prospectus approved by the Commission shall be valid for a period of sixty days from \r\nthe date of such approval or for a longer period approved by the  Commission in case of shelf \r\nregistration, provided that the supplement to the prospectus for each offering shall contain updated \r\ndisclosures: \r\nProvided that the time period of sixty days provided for approval of prospectus may be \r\nextended by the Commission by reasons to be recorded in writing. \r\n(6) The Commission shall not be liable to any action in damages suffered as a result of any \r\nprospectus approved by the Commission. \r\n(7) A person who, in connection with a public offer of securities, makes a false or fictitious \r\napplication, commits an offence. \r\n(8) The Commission may, where it considers it appropriate, forfeit any or all of the money \r\npaid or payable in respect of an offering application under sub­section (7) after providing the applicant \r\na reasonable opportunity of being heard. \r\n88. Approval, issue, circulation and publication of prospectus. — (1) No person shall \r\nissue, circulate and publish prospectus including a self­prospectus  or supplement to the prospectus \r\nuntil it has been approved by the Commission which approval may be subject to such conditions or \r\nrestrictions as the Commission considers necessary. \r\n(2) The issuer or the offeror, as the case may be, shall, not less than twenty one days before \r\nthe proposed date of publication of the prospectus, submit a copy to the Commission for approval. \r\n(3) Where a public offer of securities is to be made in Pakistan the issuer or offeror, as the \r\ncase may be, shall publish the prospectus in full text or in such abridged form as may be prescribe, at \r\nleast in one Urdu and one English daily newspaper. \r\n(4) The prospectus shall not be published in the newspapers less than seven days or more \r\nthan thirty days before the commencement of the public subscription. \r\n(5) The issuer or the offer, as the case may be, shall make available sufficient number of \r\ncopies of the prospectus approved by the Commission under sub­section (1), free of charge, from the \r\ndate of its publication in the newspapers till the  closing of the subscription at the registered office of \r\nthe issuer, with all the securities exchanges of the country, with all the bankers to the issue, the \r\nconcerned share registrar, the concerned ballotter and the concerned credit rating agency, if any. \r\n(6) The prospectus in full text and the shares subscription form shall be uploaded on the \r\nwebsite of the issuer and shall remain there from the date of its publication in the newspapers till the \r\nclosing of the subscription. \r\n(7) No person shall issue, circulate, publish, telecast or broadcast without the prior written \r\napproval of the Commission, an advertisement, other than a prospectus, announcing a public offer of \r\n \r\nPage 64 of 108  \r\nsecurities for which a prospectus is required under this Part unless a prospectus has been p ublished \r\nand the advertisement gives an address in Pakistan from which it can be obtained. \r\n(8) The issuer or offeror, as the case may be, shall not, at any time, vary the terms of the \r\nclauses stipulated in its prospectus except subject to the approval of the Commission. \r\n(9) Where an issuer or the offerer, as the case may be, can issue, circulate and publish \r\nsupplement to the prospectus inviting the general public for subscription of the security(ies) earlier \r\noffered to the public through shelf­prospectus, provided that— \r\n(a) it has obtained prior written approval of the Commission for its issue, circulation \r\nand publication; \r\n(b) the last supplement should be published within such time period to be prescribed \r\nby the Commission; and \r\n(c) the aggregate amount of the offer or issue floated in tranches should not exceed \r\nthe total issue size as mentioned in the shelf­prospectus. \r\n(10) A copy of each supplement to the prospectus shall be filed with the registrar on or \r\nbefore the date of its issue, circulation or publication. \r\n(11) A supplement to the prospectus shall contain such information as may be prescribed by \r\nthe Commission and it shall be published in atleast all those newspapers in which the shelf­prospectus \r\nhas been published. \r\n(12) In case of any misstatement or omission of material information from the supplement \r\nto the prospectus, sections 92 and 93 shall apply mutatis mutandis. \r\n89. Contents of prospectus. — The Commission may approve a prospectus if it contains \r\nsuch information and reports as may be prescribed. \r\n90. Expert to be independent.— A prospectus shall not contain a statement purporting to \r\nbe made by an expert unless the expert is a person who is not, and has not been, engaged or interested \r\nin the formation or promotion or in the management of the company. \r\n91. Expert's consent to issue of prospectus containing statement made by him. — A \r\nprospectus that contains a statement purporting to be made by an expert or to be based on a statement \r\nmade by an expert shall not be issued, circulated or published unless— \r\n(a) the expert has given, his written consent to the issue of the prospectus with the \r\nstatement in the form and context in which it is included; and \r\n(b) there appears in the prospectus a statement that the expert has given and has not \r\nwithdrawn his consent. \r\n92. Criminal liability for defective prospectus.— A person commits an offence, who— \r\n(a) makes a misleading, incorrect, untrue or deceptive statement in a prospectus; or \r\n(b) omits information or a statement from a prospectus that this Act or any rule or \r\nregulation made under this Act, requires to be included in the prospectus. \r\n \r\nPage 65 of 108  \r\n93. Compensation for false or misleading prospectus. — Every offeror, issuer, director \r\nof an offeror or issuer or any person who has signed the prospectus shall be liable to pay compensation \r\nto any person who acquires any of the securities, in reliance upon the prospectus, to which the \r\nprospectus relates and suffers loss in respect of them as a result of any incorrect, untrue or misleading \r\nstatement in the prospectus or the omission fr om it of any matter required to be included by or under \r\nsection 89. \r\n94. Abridged prospectus.— Notwithstanding the provisions of this Part, a public offer of \r\nsecurities may be made by publication of an abridged version of a prospectus (an abridged prospectus), \r\ninstead of a prospectus, if— \r\n(a) a prospectus is prepared in accordance with section 89 and the abridged \r\nprospectus is prepared in accordance with such requirements as may be \r\nprescribed; \r\n(b) a copy each of the prospectus and the abridged prospectus is submitted to the \r\nCommission at the same time for approval and both the prospectus and the \r\nabridged prospectus are approved by the Commission; \r\n(c) sufficient copies of the prospectus are made available for collection at the times \r\nand places specified in section 88 and the abridged prospectus; and \r\n(d) the public offer complies with such other requirements as may be prescribed. \r\n95. Issue of securities outside Pakistan. — No company shall, except with the prior \r\napproval of the Commission, issue or list any securities outside Pakistan. \r\n96. Disclosure of price sensitive information. — (1) Except as provided in sub­section \r\n(4), a listed company shall disclose to the public forthwith any price sensitive information relating to \r\nthe company or its subsidiaries which has  come to the company's knowledge and which would be \r\nmaterial to an investor's investment decision, including information that— \r\n(a) is necessary to enable the public to appraise the position of the company and its \r\nsubsidiaries; \r\n(b) is necessary to avoid the creation or continuation of a false market in the \r\nsecurities of the company (false market being defined as an uninformed market \r\nor one which is based on incomplete information); or \r\n(c) might reasonably be expected to materially af fect the market activity and the \r\nprice of its securities. \r\n(2) A listed company shall ensure that, when disclosing information pursuant to clauses (a) \r\nto (c) of sub­section (1), the means it uses for disseminating information are such that it equally, timely \r\nand effectively provides access to such information by the holders of the securities of the company and \r\ninvestors. \r\n(3) A listed company meets the requirements of sub­section (1) when information that \r\naffects the market or a sector of the market generally is made public in a manner that would be likely \r\nto bring it to the attention of persons who commonly invest in securities of a kind whose price or value \r\nmight be affected by the information. \r\n \r\nPage 66 of 108  \r\n(4) A listed company may, under its own responsibility, delay the public disclosure of price \r\nsensitive information such as not to prejudice its legitimate interests, provided that— \r\n(a) such delay would not be likely to mislead public investors; \r\n(b) any person receiving the information owes the listed company a duty of \r\nconfidentiality, regardless of whether such duty is based on law, regulations, \r\narticles of association or contract; and \r\n(c) the listed company is able to ensure the confidentiality of that information. \r\n(5) In the event that a listed company is also traded or listed on a foreign market or \r\nexchange, the listed company shall ensure that where information is released to those markets the same \r\ninformation is released in Pakistan simultaneously. \r\n(6) Without limiting the generality of this section the listed compa ny shall also comply \r\nwith such further obligations and requirements as may be prescribed. \r\n97. Notification of required disclosure by the Commission or a securities exchange.— \r\n(1) A listed company shall respond promptly upon being informed by the Commission  or a securities \r\nexchange that there are unusual movements in the price or volume of its traded securities by promptly \r\ndisclosing to the public— \r\n(a) details of any matter or development of which it is aware that is or may be \r\nrelevant to the unusual movements, or \r\n(b) a statement of the fact if it is not aware of any such matter or development. \r\n(2) It shall be the responsibility of the listed company to respond promptly, in the same \r\nmanner, to any news in the print and electronic media regarding that company which may prima facie \r\naffect the opinion of investor or public at large. \r\n(3) Without limiting the general effect or provisions of this Part, listed companies shall also \r\ncomply with such further reporting obligations and requirements as may be prescribed. \r\n98. Power of the Commission to require production of records and documents \r\nconcerning listed companies.— (1) Where— \r\n(a) it appears to the Commission that there are circumstances suggesting that the \r\nbusiness of a listed company has been or is being conducted — \r\n(i) with intent to defraud its creditors or the creditors of another person; \r\n(ii) for a fraudulent or unlawful purpose; or \r\n(iii) in a manner that adversely effects any of its members; \r\n(b) it appears to the Commission that there are circumstances suggesting that a \r\ncompany was listed for a fraudulent or unlawful purpose; \r\n(c) it appears to the Commission that there are circumstances suggesting that the \r\npersons concerned with the listing of a company or the management of its affairs \r\n \r\nPage 67 of 108  \r\nhave in relation to the listing or management been guilty of fraud, misfeasance \r\nor other misconduct towards it or its members; or \r\n(d) it appears to the Commission that there are circumstances suggesting that the \r\nmembers of  a listed company have not been given all the infor mation with \r\nrespect to its affairs that they might reasonably expect, \r\nthe Commission may give directions — \r\n(i) to the directors or management of the listed company; \r\n(ii) to a subsidiary or an associated company of the listed company; or \r\n(iii) to a listed company or listed companies that own or control either \r\nindividually or collectively a majority shareholding of the listed \r\ncompany or have the power to place a majority of directors on the board \r\nof the listed company or \r\n(iv) where it appears to the Commissi on that it is in the interest of the \r\ninvestor or public interest, \r\nrequiring it, at the time and place specified in the directions, to produce the records and documents \r\nspecified in the directions. \r\n(2) The Commission may, when acting under sub­section (1), authorize a person, on \r\nproducing, if required to do so, evidence of his authority to require a listed company referred to in \r\nsub­section (1) to produce to him records and documents specified by him. \r\n(3) The Commission or authorized person may require produ ction of records and \r\ndocuments from a listed company under this section. The Commission or authorized person may also \r\nrequire production of those records and documents from a person who appears to the Commission or \r\nauthorized person to be in possession of them. \r\n(4) The power under this section to require a listed company or other person to produce \r\nrecords and documents includes the power— \r\n(a) if the records and documents are produced— \r\n(i) to take copies of them or extracts from them; and \r\n(ii) to require that person or any other person who is a present or past officer \r\nof the listed company or is or was at any time employed by the listed \r\ncompany, to provide an explanation of any of them; or \r\n(b) if the records and documents are not produced, to require the p erson who was \r\nrequired to produce them to state, to the best of his knowledge and belief, where \r\nthey are. \r\n99. Remedy in cases of unfair prejudice by listed companies. — (1) If it appears to the \r\nCommission from any information, record or other document obtai ned under this Act or the rules or \r\nregulations made under the Act or any other legislative power, that the affairs of a listed company is \r\nbeing or has been conducted in a manner unfairly prejudicial to the interests of some or all of its \r\n \r\nPage 68 of 108  \r\nshareholders, the Commission may make an application to the Court for an order under this section. \r\n(2) If on an application under this section the Court is of the opinion that the company's \r\naffairs are being or have been conducted in a manner unfairly prejudicial to the interests of its members \r\ngenerally or of some part of the members, whether or not the conduct consists of an isolated act or a \r\nseries of acts, the Court may, with a view to bringing to an end the matters complained of — \r\n(a) make an order restraining the carrying out of the act or conduct; \r\n(b) order that the company shall bring in its name the proceedings the Court \r\nconsiders fit against the persons, on the terms, the Court orders; \r\n(c) appoint a receiver of the whole or apart of the company's property or busines s \r\nand may specify the powers and duties of the receiver or manager and fix his \r\nremuneration; and \r\n(d) make any other order it considers fit, whether for regulating the conduct of the \r\ncompany's affairs in future or for the purchase of the shares of any members of \r\nthe company by other members of the company or by the company and, in the \r\ncase of a purchase by the company, for the reduction accordingly of the \r\ncompany's capital or otherwise. \r\n(3) Where an order under this section makes an alteration in or an addition to the \r\nconstitution of a company, the company shall not have power without the leave of the Court to make \r\nany further alteration in or addition to the constitution inconsistent with the order. \r\n100. Power of the Commission to issue directives to listed companies.— Where it appears \r\nto the Commission that — \r\n(a) it is desirable for the protection of members or other holders of securities or in \r\nthe public interest; \r\n(b) the listed company is in breach of listing regulations; or \r\n(c) the listed company is contravening, has contravened or is about to contravene \r\nor has failed to comply with any provision of, or requirement under, this Act, \r\nany rules or any regulations made, under this Act or in purported compliance \r\nwith any such provision or requirement, has furnished the Commission with \r\ninformation that is false, inaccurate or misleading, \r\nthe Commission may issue directive to the listed company — \r\n(i) to cease and desist from the breach of this Act or rules or regulations made there \r\nunder; \r\n(ii) to do or not to do any matter as specified under this Act or rules or regulations \r\nmade there under; or \r\n(iii) with regard to or for any other matter that the Commission considers necessary \r\nin exercise of its powers under this Act or rules or regulations made there under, \r\nand the listed company shall comply with the directive. \r\n \r\nPage 69 of 108  \r\n101. Duty of directors and others to disclose shareholding in listed company.__ (1) Every \r\nperson who becomes a director, executive officer, or substantial shareholder of a listed company shall \r\ngive notice in writing to the company— \r\n(a) of his beneficial ownership in the listed equity securities of the company or any \r\nother nature of securities as may be prescribed by the Commission; and \r\n(b) of the amount and description of the securities of the compan y and date of \r\nacquisition of beneficial ownership. \r\n(2) A director, executive officer or substantial shareholder of a listed company shall give \r\nnotice in writing to the company of any of the following events, namely: — \r\n(a) any change in beneficial ownership  mentioned in sub­section (1) and the \r\nnotification shall state the number, amount and description of securities \r\ninvolved. \r\n(b) any gain referred to in section 104. \r\n(3) The reporting requirement imposed by sub­sections (1) and (2) shall be fulfilled before \r\nthe expiration of a period of seven days beginning with the day on which the requirement first arises. \r\n(4) For the purposes of sections 101 to 107, the term “executive officer” includes but not \r\nlimited to the chief executive, chairman, chief financial officer, secretary, auditor or any other officer \r\nof the company as may be prescribed by the Commission. \r\n(5) For the purposes of sections 101 to 107 beneficial ownership of securiti es of any \r\ndirector, executive officer or substantial shareholder, in case of natural person, shall be deemed to \r\ninclude the securities beneficially owned, held or controlled by— \r\n(a) him or her; \r\n(b) the wife or husband of a director of a company, not being herself or himself a \r\ndirector of the company; \r\n(c) the minor son or daughter of a director where “son” includes step­son and \r\n“daughter” includes step­daughter; and “minor” means a person under the age \r\nof eighteen years; \r\n(d) a private company, where such dir ector, executive officer or substantial \r\nshareholder is a shareholder, but to the extent of his proportionate shareholding \r\nin the private company: \r\nProvided that “control” in relation to securities means the power to exercise a controlling \r\ninfluence over the voting power attached thereto. \r\nProvided further that in case the substantial shareholder is a non­natural person, only those \r\nsecurities will be treated beneficially owned by it, which are held in its name. \r\n102. Register of directors' interests notified un der section 101. — (1) Every listed \r\ncompany shall keep a register for the purposes of section 101 in the form approved by the Commission. \r\n \r\nPage 70 of 108  \r\n(2) Whenever a company receives notification from a director, executive officer or \r\nsubstantial shareholder pursuant to section 101, the company shall enter in the register, against name \r\nof the respective director, executive officer or substantial shareholder, the information received and \r\nthe date of the entry. \r\n(3) Whenever a listed company is notified of any matter in cons equence of requirement \r\nimposed by sub­section (1) of section 101, the company shall notify it to the Commission, within seven \r\ndays of the receipt of the information, showing therein name of director, executive officer or \r\nshareholder, date of appointment or acquisition of beneficial ownership and number of shares held by \r\nhim. \r\n103. Notification to the Commission of directors and others interest. — (1) Every \r\ndirector, executive officer or substantial shareholder of a listed company shall submit to the \r\nCommission in the prescribed form__ \r\n(a) a statement of beneficial ownership in the listed equity securities of the \r\ncompany or any other nature of securities as may be prescribed by the \r\nCommission; \r\n(b) the particulars of any change in the interest aforesaid; and \r\n(c) any change in his position. \r\n(2) The reporting requirement imposed by sub­sections (1) shall be fulfilled before the \r\nexpiration of a period of seven days beginning with the day on which the requirement first arises. \r\n(3) For the purposes of sections 101 to 107, “equity security ” means any stock or \r\ntransferable share (preferred or common) or similar security representing ownership, any security \r\nconvertible, with or without consideration, into such a security, or carrying any warrant or right to \r\nsubscribe to o r purchase such a security, any such warrant or right itself, and such other security as \r\nmay be prescribed by the Commission. \r\n104. Trading by directors and others. — Where any director, executive officer or \r\nsubstantial shareholder of a listed company irrespective of any intention makes any gain computed in \r\nthe prescribed manner, by the purchase and sale, or the sale and purchase, of any beneficially owned \r\nlisted equity securities of same class, or any other nature of securities as may be prescribed by the \r\nCommission, within period of less than six months, such director, executive officer or substantial \r\nshareholder shall make a report to the Commission in the prescribed  form before the expiration of a \r\nperiod of seven days beginning with the day on which the gain accrues: \r\nProvided that nothing in this section shall apply to any nature of acquisition as may be \r\nprescribed by the Commission. \r\n105. Tender of gain to be credited to Federal Consolidated Fund. — Where director, \r\nexecutive officer or substantial shareholder makes any gain mentioned in section 104, such director, \r\nexecutive officer or substantial shareholder shall tender the amount of such g ain to the Commission \r\nwithin the period of six months of the accrual of gain and the Commission shall credit the amount of \r\nsuch gain to the Federal Consolidated Fund. \r\n106. Directive by the Commission.— (1) Where within the period provided in section 105, \r\na director, executive officer or substantial shareholder fails or neglects to tender the gain, the \r\n \r\nPage 71 of 108  \r\nCommission may by order in writing direct such director, executive officer or substantial shareholder \r\nto tender the gain to the Commission for onward credit to the Federal Consolidated Fund. \r\n(2) where any person who contravenes or fails to comply with any provision of sections \r\n101, 102, 103, 104, 105 and 107, the Commission may by order in writing direct,— \r\n(a) in the case of an individual, to pay by way of pena lty to the Commission such \r\nsum which may extend to five hundred thousand rupees and to a further sum \r\nwhich may extend to one thousand rupees per day for every day during which \r\nthe default continues; and \r\n(b) in the case of a company, the company and its eve ry director or officer who is \r\nknowingly and willfully in default, to pay by way of penalty to the Commission \r\nsuch amount which may extend to five hundred thousand rupees and to a further \r\namount which may extend to one thousand rupees per day for every day during \r\nwhich the default continues. \r\n(3) Any person, who obstructs or contravenes or does not comply with any order or \r\ndirection given under this section commits an offence and shall be liable to pay by way of penalty such \r\namount which may extend to five million rupees or three times the tenderable gain made whichever is \r\nhigher. \r\n107. Notification to the Commission of prescribed information. — (1) Every listed \r\ncompany, once in each year, prepare in the prescribed manner and file with the Commission a return \r\ncontaining the prescribed information. \r\n(2) The return referred to in sub­section (1) shall be filed with the Commission within \r\nforty­five days from the date of the annual general meeting held in the year or, where no such meeting \r\nis held or if held is not concluded, from the last day of the calendar year to which it relates. \r\nPART IX \r\nTAKEOVERS \r\n108. Interpretation.— In this Part, — \r\n(a) “acquirer” means any person who, directly or indirectly, acquires or intends to \r\nacquire voting shares or voting rights in, or control of the target company, either \r\nby himself or through any person acting in concert; \r\n(b) “manager to the offer ” means a bank, securitie s broker or an investment bank \r\nlicensed by the Commission, appointed as per requirements of this Part; \r\n(c) “offer period” means the period from the date of public announcement of public \r\noffer to the date of closure of public offer or earlier withdrawal thereof; \r\n(d) “persons acting in concert” means— \r\n(i) persons who, with a common objective or purpose of acquisition of \r\nvoting shares or voting rights in, or control over a target company, \r\npursuant to an agreement or understanding, formal or informal, directly \r\nor indirectly co­operate for acquisition of such shares or voting rights in, \r\n \r\nPage 72 of 108  \r\nor control over the target company. \r\n(ii) without prejudice to the generality of the foregoing, the persons falling \r\nwithin the following categories shall be deemed to be persons acting in \r\nconcert with other persons within the same category, unless the contrary \r\nis established,— \r\n(A) a company, its holding company, subsidiary company and any \r\ncompany under the same management or control; \r\n(B) a company, its promoters or sponsors or its directors, and any \r\nperson entrusted with the management of the company; \r\n(C) directors of companies referred to in item (A) of this sub­clause \r\nand associates of such directors; \r\n(D) relatives of the acquirer or persons acting in concert with the \r\nacquirer; \r\n(E) a securities manager and its client, who is an acquirer; and \r\n(F) banks, financial advisors and securities brokers of the acquirer, \r\nor of any company which is a holding company or subsidiary of \r\nthe acquirer, and where the acquirer is an individual, of the \r\nrelative of such individual: \r\nProvided that this s ub­clause shall not apply to a bank \r\nwhose sole role is that of providing normal commercial banking \r\nservices or activities in relation to a public offer under this Act; \r\nExplanation.— For the purposes of this clause \r\n“associate” of a person means,— \r\n(i) any relative of such person; and \r\n(ii) trusts of which such person or his relative is a trustee; \r\n(iii) partnership firm in which such person or his relative is a \r\npartner; or \r\n(iv) private company in which the person or his relative is \r\ndirector or a member; \r\n(e) “public announcement” means the announcement of intention to acquire or offer \r\nto acquire voting shares of the target company made to the public by the acquirer \r\npursuant to this Partin the prescribed manner and includes the announcement \r\nmade in relation to a competitive bid; \r\n(f) “public offer” means the public offer for acquisition of voting shares of a target \r\ncompany and includes any competitive bid or bids made for this purpose; \r\n(g) “relative” means spouse, real and half siblings and their children, and lin eal \r\n \r\nPage 73 of 108  \r\nascendants and descendants of a person; \r\n(h) “voting shares” means shares in the equity share capital of a target company \r\ncarrying voting rights and includes any security which entitles the holder thereof \r\nto obtain or exercise voting rights; \r\nExplanation.— For the purpose of this clause shares also include all depository \r\nreceipts carrying an entitlement to exercise voting rights in the target company; \r\nand \r\n(i) “target company ” means a listed company or holding company of a listed \r\ncompany whose voting share s or control are directly or indirectly acquired or \r\nintended to be acquired. \r\n109. This Part not to apply to certain transactions.— (1) Except as provided otherwise in \r\nsub­ section (2), nothing contained in this Part shall apply to— \r\n(a) allotment of voting shares pursuant to a right issue to existing members of a \r\ncompany in proportion to their shareholding, except voting shares allotted and \r\nissued under sub­section (7) of section 86 of the Companies Ordinance, 1984 \r\n(XLVII of 1984); \r\n(b) allotment of voting shares to the licenced underwriters pursuant to any \r\nunderwriting agreement; \r\n(c) acquisition of voting shares in the ordinary course of business by banks and \r\nfinancial institutions as enforcement of security; \r\n(d) acquisition of voting shares by succession or inheritance; \r\n(e) a scheme of arrangement or reconstruction including amalgamation or merger \r\nor de­merger under any law for the time being in force; \r\n(f) exercise of option by a bank or a financial institution in pursuance of a \r\nconversion option under a loan agreement; \r\n(g) sale of shares in consequence of privatization of a unit or its management rights \r\nwithin the meaning of Privatization Commission Ordinance, 2000 (LII of 2000); \r\n(h) acquisition pursuant to inter se transfer of shares amon gst qualifying persons, \r\nbeing,— \r\n(i) relatives; \r\n(ii) persons named as promoters or sponsors in the memorandum of \r\nAssociation of target company holding not less than twenty five percent \r\nof the equity securities of the target company; \r\n(iii) a company, its sub sidiaries, its holding company, other subsidiaries of \r\nsuch holding company; \r\n(iv) major shareholders of a target company collectively exercising \r\n \r\nPage 74 of 108  \r\nmanagement control for a continuous period of three years prior to the \r\nproposed acquisition; \r\nExplanation:—For th e purposes of this clause the expression “major \r\nshareholder” means person directly holding more than twenty per cent \r\nof voting shares of the target company; \r\n(i)  a scheme of rehabilitation of a company approved under any law for the time \r\nbeing in force. \r\n(2) After the acquirer acquires voting shares pursuant to sub­section (1), the acquirer shall \r\nmake a disclosure of the acquisition in the prescribed manner. \r\n110. Acquisition of more than ten per cent voting shares of a company. — (1) Any \r\nacquirer who acquires voting shares, which, taken together with voting shares, if any, held by the \r\nacquirer, would entitle the acquirer to more than ten per cent voting shares in a listed company, shall \r\ndisclose the aggregate of his shareholding in that company to the said company, the securities exchange \r\non which the voting shares of the said company are listed and the Commission as provided in \r\nsub­section (2). \r\n(2) The disclosure mentioned in sub­section (1) shall be made within two working days    \r\nof — \r\n(a) the receipt of intimation of allotment of voting shares; or \r\n(b) the acquisition of voting shares, as the case may be. \r\nExplanation.— For the purposes of this section the expression “acquisition” shall include \r\npurchases confirmed by the TRE certificate holder of a stock exchange in accordance with applicable \r\nrules or regulations. \r\n(3) An acquirer may acquire additional voting shares within a period of twelve months after \r\nacquisition of voting shares pursuant to sub­section (1) without making disclosure as required by sub­ \r\nsection (1) in case the total acquisition does not exceed an aggregate of thirty per cent. \r\n111. Acquisition of voting shares beyond prescribed limits or control of a company. — \r\nNo person shall, directly or indirectly,— \r\n(a) acquire voting shares, which (taken together with voting shares, if any, held by \r\nsuch person) would entitle such person to more than thirty per cent voting shares \r\nin a listed company; or \r\n(b) acquire additional voting shares in case the acquirer already holds more than \r\nthirty per cent but  less than fifty­one per cent of the voting shares of a listed \r\ncompany: \r\nProvided that such acquirer shall not be required to make a fresh public offer within a \r\nperiod of twelve months from the date of the previous public offer; or \r\n(c) acquire control of a listed company, \r\n \r\n \r\nPage 75 of 108  \r\nunless such person makes a public offer to acquire voting shares of the listed company in accordance \r\nwith this Part. \r\n112. Number of voting shares and offer price.— (1) The public offer by the acquirer shall \r\nbe made for such minimum number of voting shares and for such minimum offer price as may be \r\nprescribed. \r\n(2) Where the number of voting shares offered for sale by the shareholders are more than \r\nthe voting shares offered to be acquired by the acquirer, the acquirer shall, in consultation w ith the \r\nmanager to the offer, accept the public offer or offers received from the shareholders on a proportional \r\nbasis: \r\nProvided that acquisition of voting shares from a shareholder shall not be less than the \r\nminimum marketable lot or the entire holding if it is less than the marketable lot. \r\n113. Appointment of manager to the offer.— Before making any public offer the acquirer \r\nshall appoint a manager to the offer who shall not be an associate, or a group company, of the acquirer \r\nor the target company. \r\n114. Timing of the public announcement of intention.— Any person intending to acquire \r\ncontrol or voting shares of the target company which may attract the provisions of section 111, shall \r\nmake a public announcement of its intention to acquire in such manner as may be prescribed. \r\n115. Public announcement of intention and public offer not to contain misleading \r\nmaterial.__ The public announcement of intention, the public offer, any other advertisement, circular, \r\nbrochure or any publicity material issued in respect of, or in relation to, the acquisition of voting shares \r\nshall not contain any misleading or incorrect information. \r\n116. Conditional offer.— (1) A public offer by the acquirer may be made conditional upon \r\nminimum level of acceptances: \r\nProvided that such level shall not be less than the limit prescribed by the Commission. \r\n(2) Where a public offer is made conditional upon minimum level of acceptance, the \r\nacquirer may reject all such acceptances if the same do not reach the minimum level specified in the \r\npublic offer: \r\nProvided that the acquirer shall be free to accept the acceptances even if such acceptances, put \r\ntogether, do not reach the specified minimum level. \r\n117. Persons to whom public offer shall be made. — The acquirer shall ensure that the \r\noffer letter is sent to all the shareholders of the target company whose names appear on the register of \r\nmembers of the company as on the date specified in the public announcement: \r\nProvided that where the public announcement is made pursuant to an agreement to acquire \r\nvoting shares or control of the target company, the offer letter shall be sent to the shareholders other \r\nthan the parties to the agreement. \r\n118. Prohibition for acquirer .— Where the acquirer has, neither in the public \r\nannouncement nor in the offer letter, s tated his intention to dispose of the undertaking or a sizeable \r\npart thereof, of the target company except in the ordinary course of business of the target company, \r\nthe acquirer, where he has proceeded to acquire control of the target company, shall not dispose of the \r\n \r\nPage 76 of 108  \r\nundertaking or a sizeable part thereof, of the target company for a period of two years from the date of \r\nacquisition of the control. \r\n119. Prohibitions on board of directors of the target company .— (1) The board of \r\ndirectors of the target company, during the offer period, shall not— \r\n(a) sell, transfer, or otherwise dispose of or enter into an agreement for sale, transfer, or for \r\ndisposal of the undertaking or a sizeable part thereof, not being sale or disposal of assets \r\nin the ordinary course of business of the company or its subsidiaries; \r\n(b) encumber any asset of the company or its subsidiary; \r\n(c) issue any further shares during the offer period; or \r\n(d) enter into any material contract.  \r\n(2) Once the public announcement of intention has been made, the board of directors of the \r\ntarget company shall not appoint any person who represents or has an interest in the acquirer as an \r\nadditional director or against a casual vacancy on the board of directors, till acquisition is completed. \r\n(3) The target Company shall not transfer the securities acquired by the acquirer unless all \r\nobligations have been fulfilled by the acquirer under this chapter as certified by the manager to the \r\noffer. \r\n(4) Notwithstanding anything contained in the Companies Ordinan ce, 1984 (XLVII of \r\n1984), once the acquisition of shares has been completed in accordance with this Part, the target \r\ncompany shall allow such changes in the board of directors as would give the acquirer proportionate \r\nrepresentation on the board or control of the company. \r\n(5) In case the acquirer does not get a proportionate representation on the board of directors \r\nof the target company or the number of casual vacancies so created to complete the board on the basis \r\nof proportional representation are not sufficient, the acquirer may serve a notice on the target company \r\nfor holding of fresh elections and shall submit a copy of such notice to the Commission forthwith. \r\n(6) The board of directors of the target company shall cause the election of directors to be \r\nheld within thirty days from the receipt of the notice under sub­section (5), and the elections shall be \r\nheld in accordance with the provisions of sub­sections (2) to (5) of section 178 of the Companies \r\nOrdinance, 1984 (XLVII of 1984). \r\n(7) The board of directors so elected shall hold office during the remainder of the term of \r\nthe outgoing directors of the target company. \r\n120. Competitive bid. — (1) Any person, other than the acquirer who has made the first \r\npublic announcement, who is desirous of making a compe titive bid, shall, within twenty­one days of \r\nthe public announcement of the first offer, make a public announcement of his offer for acquisition of \r\nat least same number of voting shares of the target company. \r\nExplanation.—For the purpose of this section a bid shall be deemed as competitive only if it \r\noffers a higher purchase price. \r\n(2) A competitive bid shall not be for less than the number of voting shares for which the \r\nearlier public offer has been made. \r\n \r\nPage 77 of 108  \r\n(3) The provisions of this Part shall, mutatis­mutandis, apply to the competitive bid made \r\nunder sub­section (1). \r\n121. Upward revision of offer.— Irrespective of whether or not there is a competitive bid, \r\nthe acquirer, who has made the public announcement, may make upward revision in his offer in respect \r\nto the price or the number of voting shares to be acquired, at any time up to seven working days prior \r\nto the date of the closure of public offer. \r\n122. Withdrawal of public offer .— (1) Except as provided in sub­section (2), a public \r\noffer, once made, shall not be withdrawn. \r\n(2) A public offer may be withdrawn,__ \r\n(a) if a competitive bid has been made; \r\n(b) if the sole acquirer, being a natural person, has died or has ben declared to be of \r\nunsound mind before the completion of the acquisition process; or \r\n(c) in such circumstances as may be prescribed. \r\n(3) If the acquirer who made the first public offer does not withdraw his offer within seven \r\nworking days of the public announcement of the competitive bid or does not make an upward revision \r\nof his offer within the time specified in section 121, the earlier offer on the original terms shall continue \r\nto be valid and binding on the acquirer, except that the closing date of such public offer shall stand \r\nextended to the date of closure of public offer under the last subsisting competitive bid. \r\n123. Security to be furnished by the acquirer.— (1) The acquirer shall furnish a security \r\nfor performance of his obligations on such terms and conditions as may be prescribed. \r\n(2) The total consideration payable under the public offer shall be calculated assuming full \r\nacceptances irrespective of whether the consideratio n for the public offer is payable in cash or \r\notherwise. \r\n(3) In case there is any upward revision of offer, consequent upon a competitive bid or \r\notherwise, the value of the security shall be increased as may be prescribed under sub­section (1). \r\n(4) The security furnished shall be released in such manner as may be prescribed. \r\n124. Conduct of takeovers.— (1) The Commission shall make regulations with respect to \r\nthe making and conduct of takeover offers and matters incidental and connected therewith. \r\n(2) Without prejudice to the generality of sub­section (1), the Commission may make \r\nregulations for or with respect to— \r\n(a) the form, manner, timing and submission of offers; \r\n(b) public announcements of intention and public offer; \r\n(c) independent advice to shareholders; \r\n(d) the obligations of directors; \r\n \r\nPage 78 of 108  \r\n(e) the standard of care and responsibility; \r\n(f) the timing and content of documents; \r\n(g) the offer timetable; \r\n(h) asset valuations and offer pricing; \r\n(i) restrictions on trading before and during the offer; \r\n(j) security to ensure completion of a takeover offer; \r\n(k) mandatory offers, offer size and acquisition; \r\n(l) squeeze outs; \r\n(m) competitive bids; \r\n(n) conditional offers; and \r\n(o) any other matter that the Commission considers necessary to ensure the proper \r\nconduct of takeovers. \r\n125. Powers of Commission to issue directions under this Part.__ The Commission may, \r\nin the interest of the securities market, give such directions as it deems fit including— \r\n(a) directing the person concerned not to further deal in securities; \r\n(b) prohibiting the person concerned from disposing of any of the securities \r\nacquired in violation of provisions of this Part; \r\n(c) directing the person concerned to sell the voting shares acquired in violation of \r\nthe provisions of this Part; and/or \r\n(d) taking such action against the person concerned as may be necessary. \r\n126. Penalties for non-compliance.— (1) In the event of withdrawal of public offer, except \r\nas provided in section 122, or contravention of any provision of this Part, the Commission may, after \r\nproviding reasonable opportunity of hearing, by an order in writing, debar the acquirer and any person \r\nacting in concert from acquiring voting shares of a listed company for a period of three years. \r\n(2) In case any member of the board  of directors or management of the target company \r\ncontravenes any provision of this Part, such person shall, on a finding by the Commission, after \r\nproviding reasonable opportunity of hearing, stand disqualified to hold the office of director, chief \r\nexecutive officer, by whatever name called, chief financial officer or company secretary in a listed \r\ncompany for a period of two years. \r\n(3) If any person— \r\n(a) refuses or fails to furnish any document, paper or information which he is \r\nrequired to furnish by, or under, this Part; \r\n(b) refuses or fails to comply with any order or direction of the Commission made \r\n \r\nPage 79 of 108  \r\nor issued under this Part; or \r\n(c) contravenes or otherwise fails to comply with the provisions of this Part, \r\nthe Commission may, if satisfied, after giving th e person an opportunity of being heard, that \r\nthe refusal, failure or contravention was willful, impose penalty which may extend to one \r\nhundred million rupees as may be specified in the order. \r\nPART X  \r\nINSIDER TRADING \r\n127. Application of this Part.— The provisions of this Part shall apply to listed securities \r\ntraded by listed companies and insiders described in section 130. \r\n128. Prohibition of insider trading .— (1) No person shall indulge in insider trading and \r\nany contravention of this section shall be an offence. \r\n(2) Insider trading shall include,— \r\n(a) an insider person transacting any deal, directly or indirectly, using inside \r\ninformation involving listed securities to which the inside information pertains \r\nor using others to transact such deals; \r\n(b) any other person to whom inside information has been passed or disclosed by \r\nan insider person transacting any deal, directly or indirectly, using inside \r\ninformation involving listed securities to which the inside information pertains \r\nor using others to transact such deals; \r\n(c) transaction by any person as specified in clauses (a) and (b) or any other person \r\nwho knows or ought to have known under normal and reasonable \r\ncircumstances, that the information possessed and used for transacting any deal \r\nis inside information; or \r\n(d) an insider person passing on inside information to any other person, or \r\nsuggesting or recommending to another person to engage in or dealing in such \r\nlisted securities with or without the inside information being disclosed to the \r\nperson who has dealt in such securities. \r\n(3) The following shall not be deemed as insider trading: \r\n(a) any transaction performed under an agreement that was concluded before the \r\ntime of gaining access to inside information; or \r\n(b) the disclosure of inside information by an insider person as required under law. \r\n(4) No contract shall be void or unenforceable by reason only of an offence under this \r\nsection. \r\n129. Inside information.— For the purposes of this Part the expression “inside information” \r\nmeans— \r\n \r\nPage 80 of 108  \r\n(a) information which has not been made public, relating, directly or indirectly, to \r\none or more issuers of listed securities or to one or more listed securities and \r\nwhich, if it were made public, would be likely to have an effect on the prices of \r\nthose listed securities or on the price of related listed securities; \r\n(b) in relation to derivatives on commodities, information which has not been made \r\npublic, relating, directly or indirectly, to one or more such derivatives and which \r\nare traded in accordance with accepted market practices on those markets; \r\n(c) in relation to persons responsible for the execution of orders concerning listed \r\nsecurities, information which is conveyed by a client to such person and related \r\nto the client's pending orders; or \r\n(d) information regarding decision or intentions of a person to transact any trade in \r\nlisted securities. \r\n130. Insiders.— Insiders shall include— \r\n(a) any sponsor, executive officer or director of an issuer of listed securities; \r\n(b) any sponsor, executive officer, director or partners of a legal person or \r\nunincorporated business association, in which the issuer holds a share or voting \r\nrights, directly or indirectly, of twenty­five per cent or more; \r\n(c) any sponsor, executive officer d irector or partner of a legal person or \r\nunincorporated business association who holds, directly or indirectly, a share or \r\nvoting rights of twenty per cent or more in an issuer of listed securities; \r\n(d) any sponsor, executive officer or director of an organ ization that has been \r\nengaged in the placement of securities or the public offer of securities, as well \r\nas any employee of the issuer or an organization participating in the issuing and \r\nmarketing of such securities who has had access to insider information  during \r\nhis employment, for a period of one year after leaving employment; \r\n(e) any person holding a share, directly or indirectly, which enables him to appoint \r\ndirector on the board, or ten per cent or more shares of an issuer of listed \r\nsecurities; \r\n(f) any sponsor, executive officer or director of a credit institution in which the \r\nissuer of listed Securities has an account; \r\n(g) any person obtaining inside information as part of his employment or when \r\ndischarging his usual duties in an official capacity or i n any other way relating \r\nto work performed under contract of employment or otherwise; \r\n(h) any person obtaining inside information through unlawful means; \r\n(i) spouse, lineal ascendant or descendant including step children partner or \r\nnominee of a person referred to in clauses (a) to (h); and \r\n(j) any person obtaining information or advice to trade in a security from any \r\nperson referred to in clauses (a) to (i). \r\n \r\nPage 81 of 108  \r\n131. Listed companies' responsibilities to disclose inside information.— (1) Whenever a \r\nlisted company or a person acting on their behalf, discloses any inside information to any third party \r\nin the normal exercise of employment, profession or duties, complete and effective public disclosure \r\nof that information must be made simultaneously: \r\nProvided that the provisions shall not apply if the person receiving the information owes a duty \r\nof confidentiality, regardless of whether such duty is based on a law, regulations, articles of association \r\nor contract. \r\n(2) Listed companies or persons acting on their behal f, shall maintain a list of persons \r\nemployed, under contract or otherwise in the prescribed manner, who have access to inside information \r\nand such companies and persons acting on their behalf shall regularly update this list and send it to the \r\nCommission whenever required by the Commission. \r\n(3) Listed company shall in the list of persons that have access to insider information state \r\nthat the persons listed have acknowledged the requirements of this Part related to the prohibition to \r\nconclude transactions wi th the use of inside information and to advise the persons to whom they \r\nprovide inside information. \r\n(4) Any person who contravenes the provisions of this section and regulations made \r\nhereunder shall commit an offence. \r\nPART XI \r\nOTHER MARKET ABUSES \r\n132. False trading and market rigging transactions.— (1) No person shall create or cause \r\nto be created or do anything that is calculated to create a false or misleading appearance of active \r\ntrading in securities on a securities market or a false or misleading appearance with respect to the price \r\nof securities on the securities market and any contravention of this section shall be an offence. \r\n(2) Without limiting the general nature of what constitutes a false or misleading appearance \r\nof active trading under sub­section (1), a false or misleading appearance of active trading in securities \r\nis created for the purpose of this section if a person— \r\n(a) enters into or carries out, directly or indirectly, any transaction for the sale or \r\npurchase of securities that does not involve a change in the beneficial ownership \r\nof them or offers to do so; \r\n(b) offers to sell securities at a price that is substantially the same as the price at \r\nwhich he has made or proposes to make or knows that an associate of his has \r\nmade or proposes to make, an offer to buy the same or substantially the same, \r\nnumber of them; or \r\n(c) offers to buy the securities at a price that is substantially the same as the price \r\nat which he has made or proposes to make or knows that an associate of his has \r\nmade or proposes to make, an offer to sell the same or substantially the same, \r\nnumber of them. \r\n133. Market manipulation.— (1) A person shall commit an offence, if— \r\n(a) he places an order, enters into or carries out, directly or indirectly any \r\n \r\nPage 82 of 108  \r\ntransactions, in the listed securities of a company that by themselves or in \r\nconjunction with any other transaction— \r\n(i) increase or are likely to increase, their price with the intention of \r\ninducing another person to purchase or subscribe for or to refrain from \r\nselling securities issued by the same company or a related company; \r\n(ii) reduce or are likely to reduce, their price with the intention of inducing \r\nanother person to sell or to refrain from purchasing, securities issued by \r\nthe same company or a related company; \r\n(iii) stabilise or are likely to stabilise, their price with the intention of \r\ninducing another person to sell, purchase or subscribe for or to refrain \r\nfrom selling, purchasing or subscribing for, securities issued by the same \r\ncompany or by a related company; or \r\n(iv) has the effect of misleading investors who trade in securities on the basis \r\nof closing prices. \r\n(b) he, for the purposes of inducing, dissuading, effecting, preventing or in any \r\nmanner influencing or turning to his advantage the sale or purchase of any \r\nsecurity, directly or indirectly, does any act or practice or engage in a course of \r\nbusiness, or omit to do any act which operates or would operate as a fraud, deceit \r\nor manipulation upon any person, in particular­ \r\n(i) makes any fictitious quotation; \r\n(ii) creates a false and misleading appearance of active trading in any \r\nsecurity; \r\n(iii) effects any transaction in such security which involves no change in its \r\nbeneficial ownership; \r\n(iv) enters into an order or orders for the purchase and sale of security which \r\nwill ultimately cancel out each other and will not result in any change in \r\nthe beneficial ownership of such security; \r\n(v) directly or indirectly, effects a series of transactions in any security \r\ncreating the appearance of active trading therein or of rai sing of price \r\nfor the purpose of inducing its purchase by others or depressing its price \r\nfor the purpose of inducing its sale by others; \r\n(vi) being a director or an officer of the issuer of a listed equity security or a \r\nbeneficial owner of not less than ten per cent of such security who is in \r\npossession of material facts, omits to disclose to the public through \r\nsecurities exchange any such facts while buying or selling such security. \r\n134. Fraudulently inducing trading in securities.— A person shall commit an offence, if \r\nhe induces or attempts to induce another person to subscribe for, sell or purchase securities — \r\n(a) by making or publishing any statement, promise or forecast or giving any \r\ninvestment advice that is false, misleading or deceptive; \r\n \r\nPage 83 of 108  \r\n(b) by any concealment of material facts; or \r\n(c) by recording or storing in or by means of, any mechanical, electrical or other \r\ndevice, information that is false or misleading in a material particular. \r\n135. Employment of fraudulent or deceptive devices.— A person shall commit an offence \r\nif he, directly or indirectly, in connection with any transaction with any other person involving the \r\nsubscription for the purchase or sale of securities,— \r\n(a) employs any device, scheme or artifice to defraud that other person; \r\n(b) engages in any act, practice or course of business which operates as a fraud or \r\ndeception or is likely to operate as a fraud or deception, on that other person; or \r\n(c) makes any untrue statement of a matter of fact or omits to state a material fact \r\nnecessary in order to make the statements made in the light ofthe circumstances \r\nunder which they were made, not misleading. \r\n136. False or misleading statement inducing securities transactions.— (1) A person shall \r\ncommit an offence, if he, directly or indirectly, for the purpose of inducing the subscription for, sale \r\nor purchase of securities by others, of any listed company or to maintain, increase, reduce or stabilise \r\nthe price of its securities, makes with respect to those securities or with respect to the operations or the \r\npast or future performance of the company— \r\n(a) any statement or disseminates information through the media which is, at the \r\ntime and in light of the circumstances in which it  is made, false or misleading \r\nwith respect to any material fact and which he knows or has reasonable grounds \r\nto believe to be false or misleading; or \r\n(b) any statement or disseminates information through the media which is, by \r\nreason of the omission of a material fact, rendered false or misleading and which \r\nhe knows or has reasonable grounds to believe is rendered false or misleading \r\nby reason of omission of that fact. \r\n(2) A person commits an offence if he, directly or indirectly, takes advantage of occasional \r\nor regular access to the traditional or electronic media by voicing an opinion about securities while \r\nhaving previously taken positions on that securities, without having simultaneously disclosed that \r\nconflict of interest to the public in a proper and effective way. \r\nPART XII  \r\nSUPERVISION AND INVESTIGATION \r\n137. Power of the Commission to call for information .— (1) Notwithstanding anything \r\ncontained in any other law for the time being in force, the Commission may, by notice in writing, \r\nrequire any person to furnish it with such information as it may require during the course of inquiry, \r\ninspection or investigation and for the purposes thereof, within such time and verified in such manner \r\nas it may specify. \r\n(2) The Commission may by notice in writing requir e any person to appear before it or a \r\nCommissioner or an officer authorized by the Commission or produce such record and documents as \r\nare required by the Commission. \r\n \r\nPage 84 of 108  \r\n(3) Every person required under sub­section (2), — \r\n(a) shall be bound to answer all reasonable questions put to him and state the truth; \r\nand \r\n(b) may be asked to make a statement of the facts which shall be reduced into \r\nwriting and signed by him or affixed with his signature or thumb print. \r\n(4) A Commissioner or an employee to whom any of the functions or powers of the \r\nCommission have been delegated under this section may, for the purposes of a proceeding, require \r\nanyone, — \r\n(a) to produce before him, and to allow to be examined and kept, any books, \r\naccounts or other documents in the custody or under the control of such person, \r\nbeing documents relating to any matter the examination of which may be \r\nconsidered necessary for disposing of the proceedings by such Commissioner \r\nor officer; and \r\n(b) to furnish such information and documents in his pos session relating to any \r\nmatter as may be necessary for the purpose of the proceeding. \r\n(5) The duty to supply information under this section applies notwithstanding any other \r\nenactment or law in Pakistan. \r\n(6) Any person who does not provide information required by the Commission commits an \r\noffence and is liable to be punished under this Act. \r\n138. Inspection.— (1) For the purpose of ascertaining whether a person who is or at any \r\ntime has been, a licensed person is complying or has complied with any provision of or requirement \r\nunder this Act or of any rule or regulation made under this Act or the terms and conditions of his \r\nlicence, the Commission may from time to time inspect any record or document relating to the business \r\nto which the licence applies. \r\n(2) The Commission may through a written order authorize any person, hereinafter referred \r\nto as the “authorized person”, to exercise the powers of the Commission under this section. \r\n(3) In the exercise of his powers under this section, an authorized person may— \r\n(a) require the licensed person or any other person whom he believes is in \r\npossession of or has under his control, any record or document referred to in \r\nsub­section (1), to produce it to him; \r\n(b) make inquiries of a licensed person or any other person whom he has reasonable \r\ncause to believe has information relating to any record or document, referred to \r\nin sub­section (1), concerning any such record or document or concerning any \r\ntransaction or activity which was undertaken in the course of or which may \r\naffect, the business conducted by the licensed person; and \r\n(c) inspect and make copies or take extracts from, and where necessary take \r\npossession of, such documents. \r\n(4) For the purpose of an inspection under this section, the licenced person or other person \r\n \r\nPage 85 of 108  \r\nmentioned in sub­section (3) shall afford to an authorized person access to the records or documents \r\nas may be required for the inspection and shall produce to the authorized person such records or \r\ndocuments as he may require. \r\n(5) Any person who, without rea sonable excuse, fails to comply with a requirement \r\nimposed on him by an authorised person under this section commits an offence. \r\n139. Investigation.— (1) Where the Commission has reasonable cause to believe, either on \r\nits own motion or as a result of a complaint received, that — \r\n(a) an offence has been committed under this Act or under any rules or under any \r\nregulations made under this Act or is about to be committed; \r\n(b) a licensed person may have or is about to engaged in defalcation, fraud, \r\nmisfeasance or other misconduct in connection with his licensed activity; or \r\n(c) the manner in which a licensed person has engaged or is engaging or about to \r\nengage in his licensed activity is not in the interest of the customer or the public \r\ninterest, \r\nthe Commission may in writing direct one or more of its employees or one or more other \r\npersons, hereinafter referred to as “the investigator”, to investigate any of the matters referred \r\nto in clauses (a), (b) or (c) and to report the results of the investigation to the Commission. \r\n(2) Any person who is reasonably believed or suspected by the investigator to have in his \r\npossession or under his control any record or document relevant to an investigation under this section \r\nor who is so believed or suspected of otherwise having such information in his possession or under his \r\ncontrol shall— \r\n(a) produce to the investigator, within the time and at the place as the investigator \r\nrequires in writing, any record or document specified by the investigator which \r\nis or may be, relevant to the investigation and which is in his possession or under \r\nhis control; \r\n(b) if required by the investigator, give the investigator an explanation or further \r\nparticulars in respect of any record or document produced under clause (a); \r\n(c) attend before the investigator at the time and place as the investigator requires \r\nin writing, and answer under oath administered by the investigator truthfully \r\nand to the best of his ability all questions relating to the matters under \r\ninvestigation as the investigator may put to him; and \r\n(d) give the investigator all assistance in connection with the investigation which \r\nhe is reasonably able to give, including responding to any written question by \r\nthe investigator. \r\n(3) A person commits an offence and shall be liable to be punished under this Act if he— \r\n(a) fails to produce any record or document required to be produced under clause \r\n(a) of sub­ section (2); \r\n(b) fails to comply as required under clause (b) of sub­section (2); \r\n \r\nPage 86 of 108  \r\n(c) fails to attend before the investigator as required under clause (c) of sub­section \r\n(2); \r\n(d) fails to answer a question put to him by the investigator under clause (c) of \r\nsub­section (2) or gives a false or misleading answer or who in giving an answer \r\nrecklessly makes a false statement or omits material information known to him; \r\nor \r\n(e) fails to comply with clause (d) of sub­section (2). \r\n140. Destruction of documents. — A person who destroys, falsifies, conceals or disposes \r\nof or causes or permits the destruction, falsification, concealment or disposal of any document, which \r\nhe knows or ought to know is relevant to an inspection under section 138 or an investigation unde r \r\nsection 139, commits an offence. \r\n141. Powers of the investigator in relation to investigations.— (1) The investigator shall, \r\nfor the purposes of investigations, have the same powers as are vested in a court under the Code of \r\nCivil Procedure, 1908 (Act V of 1908), while trying a suit, in respect of the following matters, \r\nnamely:— \r\n(a) Summoning and enforcing the attendance of any witness and examining him on \r\noath or affirmation; \r\n(b) compelling the discovery or production of any document or other material \r\nobject; \r\n(c) receiving evidence on affidavit; and \r\n(d) issuing commissions for the examination of witnesses and documents. \r\n(2) Any person who contravenes the requirements of clause (a), (b) or (c) of sub­section \r\n(1) and if such contravention is deliberate the investigator may, with the prior approval of the \r\nCommission, make an application to the Court for attachment of his property or require him to furnish \r\nsecurity for his appearance. \r\n(3) Any proceeding before the investigator shall be deemed to be a judicial proceeding \r\nwithin the meaning of sections 193 and 228 of the Pakistan Penal Code, 1860 (Act XLV of 1860). \r\n(4) Any contravention of or non­compliance with any orders or directions of the \r\ninvestigator exercising powers under sub­section (1) shall be an offence punishable under sub­section \r\n(8) of section 159. \r\nPART XIII \r\nPOWERS OF INTERVENTION BY COMMISSION IN RELATION TO LICENSED \r\nPERSONS \r\n142. Scope of powers under this Part. — (1) The powers conferred on the Commission \r\nunder this Part may be exercised in relatio n to any licensed person if it appears to the Commission \r\nthat— \r\n(a) the exercise of the powers is desirable for the protection of customers or in the \r\n \r\nPage 87 of 108  \r\npublic interest; or \r\n(b) he is not a fit and proper person to be a licensed person; or \r\n(c) the licensed person has contravened or failed to comply with any provision of \r\nor requirement under this Act, any rule or any regulation made by the \r\nCommission under this Act or, in purported compliance with any such provision \r\nor requirement, has furnished the Commissio n with information that is false, \r\ninaccurate or misleading. \r\n(2) The Commission for reasons to be recorded may on its own motion exercise its powers \r\nconferred by section 143, 144 or 145. \r\n(3) For the purposes of this section, the Commission may take into acc ount any matters \r\nthat could be taken into account in deciding whether to suspend or revoke a licence. \r\n(4) The powers conferred on the Commission by this Part may be exercised in relation to a \r\nperson whose licence has been suspended or revoked or other puni tive action has been taken against \r\nhim, whether or not the suspension or revocation or other punitive actions taken is the subject of appeal. \r\n143. Restriction of business.— (1) The Commission may prohibit a licensed person and its \r\ncustomers from doing any one or more of the following, namely:— \r\n(a) entering into— \r\n(i) transactions of a specified description or other than of a specified \r\ndescription; or \r\n(ii) transactions in specified circumstances or other than in specified \r\ncircumstances; or \r\n(iii) transactions to a specified extent or other than to a specified extent; \r\n(b) soliciting business from persons of a specified description or from persons other \r\nthan of a specified description; or \r\n(c) carrying on business in a specified manner or other than in a specified manner. \r\n(2) A prohibition under this section may relate to transactions entered into in connection \r\nwith or for the purposes of the regulated activity or to other business that is carried on in connection \r\nwith or for the purposes of any such regulated activity. \r\n144. Restriction on dealing with property. — The Commission may, after recording \r\nreasons in writing, as regards any property whether in Pakistan or elsewhere and whether it is the \r\nproperty of a licensed person not— \r\n(a) prohibit a licensed person from disposing of such property or prohibit him from \r\ndealing with it in a specified manner or other than in a specified manner; or \r\n(b) require a licensed person to deal with such property in, and only in, a specified \r\nmanner. \r\n \r\nPage 88 of 108  \r\n145. Maintenance of property. — (1) The Commission may require a licensed person to \r\nmaintain in Pakistan property of such value as appears to the Commission to be desirable with a view \r\nto ensuring that the licensed person will be able to meet his liabilities in respect of his regulated activity. \r\n(2) The Commission may direct that, for the purposes of any requirement under this \r\nsection, property of any specified class or description shall or shall not be taken into account. \r\n146. Rescission and variation of prohibition or requirement. — The Commission may, \r\neither of its own motion or on the application of a licensed person and its customers on whom a \r\nprohibition or requirement has been imposed under this Part, rescind or vary the prohibition or \r\nrequirement if it appears to the Commission that it i s no longer necessary for the prohibition or \r\nrequirement to take effect or continue in force or, as the case may be, that it should take effect or \r\ncontinue in force in a different form. \r\n147. Notices.— (1) The power to impose, rescind or vary a prohibition or requirement under \r\nthis Part shall be exercisable by written notice served by the Commission on the licensed person \r\nconcerned and any such notice shall take effect on such date as is specified in it. \r\n(2) If the Commission refuses to rescind or vary a pro hibition or requirement on the \r\napplication of the licensed person to whom it applies, it shall serve notice on him to that effect. \r\n(3) A notice imposing a prohibition or requirement, varying a prohibition or requirement \r\notherwise than on the application of the licensed person to whom it applies, and any notice under sub­ \r\nsection (2) shall state the reasons for which the prohibition or requirement has been imposed or varied \r\nor, as the case may require, why the application for variation or rescission was refused. \r\n(4) The Commission may give public notice of any prohibition or requirement imposed by \r\nit under this Part and of any rescission or variation thereof, and any such notice may, if the Commission \r\nconsiders necessary, include a statement of the reasons fo r the prohibition, requirement, variation or \r\nrescission. \r\n148. Winding up orders.— (1) In the case of a licenced person which is a company, if it \r\nappears to the Commission that it is desirable for the protection of customers that the company should \r\nbe wound up under the Companies Ordinance, 1984 (XLVII of 1984), the Commission may present a \r\npetition for it to be wound up under that Ordinance on the ground that it is just and equitable that it \r\nshould be wound up and that Ordinance shall apply to such petition as it applies in relation to a petition \r\npresented under that Ordinance. \r\n(2) Notwithstanding anything contained in the Companies Ordinance, 1984 (XLVII of \r\n1984),— \r\n(a) a licensed person shall not file a petition for winding up unless it satisfies the \r\nCommission in the manner prescribed that it has settled all outstanding investors \r\nclaims as per default regulations and has obtained prior approval of the \r\nCommission and the Commission may, in the interest of the public or interest \r\nof investors, impose such conditions as it deems appropriate. \r\n(b) The Court may refuse to entertain petition for winding up of a company, if the \r\nCourt is satisfied that­ \r\n(i) requirements of clause (a) have not been fulfilled; \r\n \r\nPage 89 of 108  \r\n(ii) petitioner intends to avoid or prejudice investig ation of offences under \r\nthis Act; or \r\n(iii) any other ground that the Court deems fit in the facts and circumstances \r\nof the case. \r\n149. Orders of Court.— (1) Where, on the application of the Commission, it appears to the \r\nCourt that a licensed person has contravened any provision of this Act or any condition of his licence \r\nor is about to do an act that, if done, would be such a contravention, the Court may, without prejudice \r\nto any order it would be entitled to make otherwise than pursuant to this section, make one or more of \r\nthe following orders, namely:— \r\n(a) an order restraining the licensed person from acquiring, disposing of or \r\notherwise dealing with any property specified in the order; \r\n(b) an order appointing a person to administer the property of the licensed person; \r\n(c) an order declaring a contract to be void or voidable; \r\n(d) for the purpose of securing compliance with any other order under this section, \r\nan order directing a licensed person to do or refrain from doing any act specified \r\nin the order; or \r\n(e) any ancillary order which the Court considers necessary in consequence of the \r\nmaking of any other order under this section. \r\n(2) The Court may, before making an order under sub­section (1), direct that notice of the \r\napplication be given to such persons as it considers fit or direct that notice of the application be \r\npublished in such manner as it considers fit or both. \r\n(3) The Court may, of its own motion or on the application of an interested party, reverse, \r\nvary or discharge an order made by it under this section or suspend the operation of such an order. \r\nPART XIV \r\nDISCIPLINE OF LICENSED PERSON \r\n150. Disciplinary action in respect of licensed person .— (1) Subject to section 154, \r\nwhere— \r\n(a) a licensed person is or was at any time, guilty of misconduct; or \r\n(b) the Commission is of the opinion that a licensed person is not a fit and proper \r\nperson to remain a licensed person, \r\nthe Commission may exercise such of the following powers as it considers appropriate in the \r\ncircumstances of the case— \r\n(i) suspend his licence, whether in relation to all or any of its activities for which \r\nhe is licenced, for such period or until the occurrence of such event as the \r\nCommission may specify; or \r\n \r\nPage 90 of 108  \r\n(ii) cancel his licence, whether in relation to all or any of the its activities for which \r\nhe is licensed; or \r\n(iii) publicly reprimand the licensed person. \r\n(2) Subject to section 151, where a licensed person is or was at any time, guilty of \r\nmisconduct, the Commission may make one or more of the following orders, separately or in addition \r\nto any power exercisable under clause (i), (ii) or (iii) of sub­section (1) that the licensed person shall \r\npay to the Commission by way of penalty such sum,— \r\n(a) not exceeding fifty million rupees; \r\n(b) not exceeding the amount of any profit gained or lo ss avoided by the licensed \r\nperson as a result of the misconduct in question; \r\n(c) appropriate to reimburse the Commission for the costs and expenses it has \r\nreasonably incurred in relation or incidental to the investigation of the licensed \r\nperson's conduct. \r\n(3) A licensed person ordered to make a payment under sub­section (2) shall pay the sum \r\nordered to the Commission within fifteen days or such further period as the Commission may specify \r\nby notice under section 151, after the order has taken effect. \r\n(4) A licensed person commits an offence if he fails to comply with an order under \r\nsub­section (2). \r\n(5) In this section “misconduct” means— \r\n(a) a contravention of any of the provisions of this Act, the rules, regulations made \r\nby the Commission or regulations made under this Act; \r\n(b) a contravention of any of the terms or conditions of a licence granted under this \r\nAct; \r\n(c) failure to comply with a direction of the Commission; or \r\n(d) an act or omission by a licensed person in relation to his activity which, in t he \r\nopinion of the Commission, is or is likely to be prejudicial to the public interest, \r\nand the expression “guilty of misconduct” shall be construed accordingly. \r\n(6) For the avoidance of doubt, any disciplinary action taken by the Commission under this \r\nsection or section 149 shall be without prejudice to any other action, whether civil or criminal, that \r\nmay be taken against the licensed person in respect of the same conduct. \r\n(7) In determining whether a licensed person is a fit and proper person for the purposes of \r\nclause (b) of sub­section (1), the Commission shall have regard to the matters specified in section 151. \r\n151. Determination of “fit and proper”.— (1) Subject to sub­section (2), the Commission \r\nshall prescribed the fit and proper criteria for licen sed person or in case of company, member of the \r\nboard of directors and senior management officers of licensed person. \r\n \r\nPage 91 of 108  \r\n(2) In considering whether a licensed person, in case of company, member of the board of \r\ndirectors or senior management officers is fit an d proper person for the purposes of this Act, the \r\nCommission shall, in addition to any other matter that the Commission may consider relevant, have \r\nregard to— \r\n(a) the financial status or solvency; \r\n(b) the educational or other qualifications or experience; \r\n(c) the ability to carry on their activity competently, honestly and fairly; and \r\n(d) the reputation, character, reliability and financial integrity of,— \r\n(i) where the licensed person is an individual, the individual himself; or \r\n(ii) where the licensed person is a company, the company and any officer of \r\nthe company. \r\n(3) Without limiting the generality of sub­section (2), the Commission may, in considering \r\nwhether a licensed person is a fit and proper person, take into account— \r\n(a) any information in the possession of the Commission whether provided by the \r\nlicensed person or not, relating to— \r\n(i) any person who is to be employed by, associated with or who will be \r\nacting for or on behalf of, the licensed person for the purposes of his \r\nregulated activity; \r\n(ii) where the licensed person is a company in a group of companies— \r\n(A) any other company in the same group of companies; or \r\n(B) any substantial shareholder or officer of the company or any \r\ncompany referred to in sub­sub­clause (a); \r\n(b) whether the regulate d person has established effective internal control \r\nprocedures and risk management systems to ensure his compliance with all \r\napplicable regulatory requirements applicable to him; \r\n(c) the state of affairs of any other business which the licensed person carries on or \r\nproposes to carry on. \r\n(4) In sub­clause (ii) of clause (a) of sub­section (3), “group of companies” means any two \r\nor more companies one of which is the holding company of the other or others as the case may be. \r\n152. Other circumstances for discip linary action in respect of licensed persons .— (1) \r\nSubject to section 151, the Commission may cancel the licence, whether in relation to all or any of the \r\nactivities for which he is licensed, or suspend his licence, whether in relation to all or any of the  \r\nactivities for which he is licensed, for such period or until the occurrence of such event as the \r\nCommission may specify, if — \r\n(a) where the licensed person is an individual, he— \r\n \r\nPage 92 of 108  \r\n(i) is shown by certified medical evidence to have become mentally or \r\nphysically incapable of performing the activities to which the licence \r\nrelates; \r\n(ii) has been adjudged a bankrupt, in Pakistan or elsewhere; \r\n(iii) has been adjudged as a defaulter in repayme nt of a loan in a sum \r\nexceeding one hundred thousand rupees by a court of competent \r\njurisdiction; \r\n(iv) is convicted, whether in Pakistan or elsewhere, of fraud or other offences \r\ninvolving dishonesty; \r\n(v) is in breach of this Act, any rule or any regulation  made by the \r\nCommission or a securities exchange under this Act; \r\n(vi) contravenes or fails to comply with any condition applicable in respect  \r\nof the licence; \r\n(vii) fails to comply with a direction of the Commission; \r\n(viii) fails to provide the Commission with information required or provides \r\nfalse or misleading information; \r\n(ix) ceases to carry on the business for which he is licenced; \r\n(x) is the holder of a representative's licence and the licence of the principal \r\nto whom he is accredited is cancelled or suspended; or \r\n(xi) by reason of any other circumstances, is no longer a fit and proper person \r\nto hold a licence; \r\n(b) where the regulated person is a company, — \r\n(i) the company goes into liquidation or is ordered to be wound up; \r\n(ii) a receiver of all or a substantial part of the property of the company is \r\nappointed; \r\n(iii) the company ceases to carry on the business for which it is licensed; \r\n(iv) the Commission has reason to believe that the company or any of its \r\ndirectors or employees has not performed his duties honestly and fairly; \r\n(v) the company contravenes or fails to comply with any condition \r\napplicable in respect of the licence; \r\n(vi) the company is in breach of this Act, any rule or any regulation made \r\nunder this Act; \r\n(vii) fails to comply with a direction of the Commission; \r\n(viii) fails to provide the Commission with information required or provides \r\n \r\nPage 93 of 108  \r\nfalse or misleading information; or \r\n(ix) by reason of any other circumstances, the company is no longer a fit and \r\nproper person to hold a licence. \r\n(2) Where the Commission suspends a licence under this section, the suspension shall be \r\nfor a period not exceeding three months, provided that the Commission may, if it considers it \r\nnecessary, extend the suspension for such other period as may be specified by the Commission at the \r\nexpiry of which the Commission shall either lift the suspension or proceed to cancel the licence, as it \r\ndeems appropriate. \r\n(3) The licence of a person shall be deemed to be suspended if he fails to pay the prescribed \r\nannual fee and, subject to sub­section (4), the suspension shall remain in force until such time as the \r\nCommission considers it appropriate that his licence should no longer be suspended and informs the \r\nlicensed person to that effect by notice in writing. \r\n(4) Where a licence is suspended under sub­section (3) and the prescribed fee has not been \r\npaid within thirty days after the day on which the suspension becomes effective under sub­section (3) \r\nor such further period as the Commission may specify by notice in writing to the regulated person, the \r\nlicence shall be deemed to be revoked. \r\n(5) The Commission may cancel or suspend a licence at the request of the licensed person. \r\n(6) For the purposes of sub­clause (vi) of clause (a) and sub­clause (iii) of clause (b) of \r\nsub­ section (1), a licensed person shall be deemed to have ceased to' carry on the business for which \r\nhe is licensed if — \r\n(a) he has for more than thirty days ceased to carry on the business for which he is \r\nlicensed unless he has obtained prior approval of the Commission to do so; or \r\n(b) he has ceased to carry on business under a direction issued by the Commission. \r\n(7) Where the Commission suspends or cancels the licence of a licensed person under this \r\nsection, it shall cause notice of that fact to be disseminated in such manner as the Commission deems \r\nappropriate. \r\n153. Effect of cancellation or suspension of licence .—(1) The cancellation or suspension \r\nof a licence under this Act shall not operate so as to— \r\n(a) avoid or affect an agreement, transaction or arrangement e ntered into by the \r\nlicensed person on the securities market of a securities exchange where the \r\nagreement, transaction or arrangement was entered into before the revocation \r\nor suspension; or \r\n(b) affect a right, obligation or liability arising under the agreement, transaction or \r\narrangement. \r\n(2) Where a licence is cancelled or suspended under this Part, the Commission may by \r\nnotice in writing and subject to such conditions as the Commission may specify in the notice,— \r\n(a) require the regulated person to trans fer to or to the order of, his customer such \r\nrecords relating to customer property or to the affairs of the customer held at \r\n \r\nPage 94 of 108  \r\nany time for the customer, in such manner, as the Commission may specify in \r\nthe notice; or \r\n(b) permit the licensed person to,— \r\n(i) in the case of a cancellation, carry on business operations for the purpose \r\nof closing down the business connected with the cancellation; or \r\n(ii) in the case of a suspension, carry on only essential business operations \r\nfor the protection of interests of cu stomers during the period of \r\nsuspension, \r\n \r\n154. Procedural requirements for exercise of disciplinary powers under this Part.— (1) \r\nThe Commission shall not exercise any power under section 147 or 148 without first giving the \r\nlicensed person in respect of who m the power is to be exercised a reasonable opportunity of being \r\nheard: \r\nProvided that where the Commission is satisfied that delay in the suspension of licence shall \r\ncause risk of serious financial damage to the customer of that licensed person or is detri mental to the \r\ninterest of investors or the public in general, the Commission may, after recording reasons in writing, \r\nimmediately suspend its TRE certificate till the time an opportunity of hearing is provided to the \r\nlicensed person and a final decision is taken within a period of not more than thirty days. \r\n(2) The Commission may prescribe the manner in which the licensed person shall be given \r\nan opportunity to be heard. \r\n(3) Where the Commission decides to exercise any power under section 127 or 148, the \r\nCommission shall inform the licensed person in respect of whom the power is exercised of its decision \r\nto do so by notice in writing and the notice shall include— \r\n(a) a statement of the reasons for which the decision is made; \r\n(b) the time at which the decision is to take effect; \r\n(c) in so far as applicable, the duration and terms of any cancellation or suspension \r\nto be imposed under the decision; \r\n(d) in so far as applicable, the terms in which the licensed person is to be \r\nreprimanded under the decision; \r\n(e) in so far as applicable, the amount of any pecuniary penalty to be imposed under \r\nthe decision and the period, being specified as a period after the decision has \r\ntaken effect, within which it is required to be paid. \r\nPART XV  \r\nMISCELLANEOUS \r\n155. Indemnity.— No suit, prosecution, other legal proceedings or action in damages shall \r\nlie against the Commission, commissioners, officers and employees of the Commission for anything \r\n \r\nPage 95 of 108  \r\ndone or omitted in the exercise or performance of any function, power or duty conferr ed or imposed \r\nby or under this Act or the rules and regulations made under this Act unless the act or omission is \r\nshown, to have been done or made in bad faith. \r\n156. Rights of applicants and holders of licence.— (1) The Commission shall not— \r\n(a) refuse an application for the grant of any licence in respect of any activity; or \r\n(b) cancel or suspend any licence granted under this Act, without first giving the applicant \r\nor the licence holder, as the case may be, an opportunity to be heard. \r\n(2) The Commission shall, if it refuses an application, notify the applicant in writing of the \r\nrefusal. \r\n(3) The Commission shall, if it cancels or suspends a licence, notify the licence holder in \r\nwriting of the cancellation or suspension and of— \r\n(a) the date on which the cancellation or suspension takes effect; and \r\n(b) the duration of a suspension or the event which will terminate it. \r\n(4) The manner in which a person shall be given an opportunity to be heard may be \r\nprescribed. \r\n157. Civil liabilities.— (1) Every contract made in contravention of any provision of this \r\nAct or any rule or regulations made thereunder shall be voidable as regards the rights of any party to \r\nthe contract contravening such provision or any person not being a party to the contract who acquires \r\nany right under the contract with actual knowledge of the facts by reason of which its making or \r\nperformance was in such contravention and any person affected by such contract not being himself a \r\nparty to the contravention may sue to rescind any such contract to the extent it has been consummated \r\nor for damages when recision is not possible. \r\n(2) Any person who makes or causes to be made, in any application, report or document \r\nfiled with the Commission or a securities exchange pursuant to this  Act or any rules or regulations \r\nmade thereunder, any statement which was false or misleading with respect to any material fact, at the \r\ntime and in the light of the circumstances under which it was made, shall be liable to any person who \r\nhas purchased or s old a security in reliance on such statement for damages caused by such reliance, \r\nwithout regard to the presence or absence of any contractual relationship between the two, unless the \r\nperson who made or caused to be made the application, report or document  proves that he acted in \r\ngood faith and had no knowledge or reasonable ground to believe that the statement was false or \r\nmisleading. \r\n(3) Any person who participates in any act or transaction in contravention of the provisions \r\ncontained in Part XI (market abuse) shall be liable to any person who has purchased or sold a security \r\nin reliance on such act or transaction for damages caused by such reliance, without regard to the \r\npresence or absence of any contractual relationship between the two, unless the person so contravening \r\nproves that he acted in good faith and had no knowledge or reasonable ground to believe that there \r\nwas any fraud, untruth or omission. \r\n(4) Every person who directly or indirectly exercises control over the affairs of any person \r\nliable under this section shall also be liable to the same extent as the person whose affairs are so \r\ncontrolled, unless he proves that he acted in good faith and did not directly or indirectly induce the act \r\n \r\nPage 96 of 108  \r\nor acts giving rise to the cause of action. \r\n(5) Liability under this section shall be joint and several and every person who becomes \r\nliable may recover contribution as in cases of contract from any person who, if joined in the original \r\nsuit, would have been liable to make the same payment, unless the plantiff was, and the defendant was \r\nnot, guilty of fraudulent misrepresentation. \r\n(6) No suit for the enforcement of any right or remedy provided for in this section shall lie \r\nafter the expiry of three years from the date of the accrual of the cause of action. \r\n(7) The rights and remedies provided by this Act shall be in addition to any other rights \r\nand remedies available under any other law for the time being in force. \r\n158. Standard of proof. — Where it is necessary for the Commission to establish or to be \r\nsatisfied, for the purposes of this Act other than provisions relating to criminal proceedings that a \r\nlicenced person has contravened— \r\n(a) any provision of this Act or any rule or regulation made under this Act; \r\n(b) any notice or requirement given or made under or pursuant to any provision of \r\nthis Act; \r\n(c) any of the terms and conditions of a licence granted under this Act; or \r\n(d) any other condition imposed under or pursuant to any provision of this Act, \r\nit shall be sufficient for the Commission to establish or to be satisfied as to the matter referred \r\nto in clause (a), (b), (c) or (d), as the case may be, on the standard of proof applicable to civil \r\nproceedings in summary manner in a court of law. \r\n159. Offences and penalties.— (1) Any person who commits an offence under section 128 \r\n(insider trading) shall be liable— \r\n(a) in the case of an individual, to imprisonment of either description for a term \r\nwhich may extend to three years or to a fine which may extend to two hundred \r\nmillion rupees or three times the amount of  gain made or loss avoided by such \r\nperson, or loss suffered by another person, whichever amount is higher; and \r\n(b) in the case of a company, to a fine which may extend to three hundred million \r\nrupees or three times the amount of gain made or loss avoided by such company, \r\nor loss suffered by another person, whichever amount is higher. \r\n(2) Any person who commits an offence under sections 132,133, 134, 135 and 136, Part \r\nXI (other market abuses) shall be liable— \r\n(a) in case of an individual, to imprisonment of either description for a term which \r\nmay extend to three years or a fine not exceeding two hundred million rupees, \r\nor both; and \r\n(b) in the case of a company, to a fine which may extend to three hundred million \r\nrupees. \r\n(3) Any person who contravenes the provisions of sections 3 and 22 and sub­section (1) of \r\n \r\nPage 97 of 108  \r\nsection 64 (operating without a licence or other authority) shall be liable to pay to the Commission, by \r\nway of penalty,— \r\n(a) in the case of an individual, such sum which may extend to hundred million \r\nrupees; \r\n(b) in the case of a company, such sum which may extend to two hundred million \r\nrupees; and \r\n(c) in the case of a continuing offence, a further sum which may extend to two \r\nhundred thousand rupees for every day or part thereof during which the offence \r\ncontinues. \r\n(4) Any person who commits an offence under section 92 (criminal liability for defective \r\nprospectus) shall be liable to imprisonment of either description for a term which may extend to three \r\nyears or with fine not exceeding one hundred million rup ees or with both unless he proves that either \r\nthe statement was immaterial or that he had reasonable ground to believe and did up to the time of \r\nissue of prospectus, that the statement was true. \r\n(5) Notwithstanding sub­sections (1), (2), (3) and (4), any person who— \r\n(a) contravenes or fails to comply with any provision of this Act, or of any rules or \r\nof any regulations made under this Act; \r\n(b) furnishes or produces any return, document or statement for the purposes of this \r\nAct or any requirement imposed under the provisions of this Act or of any rules \r\nor regulations made under this Act, the contents of which, to his acknowledge, \r\nare untrue, incorrect or misleading; or \r\n(c) obstructs or contravenes or does not comply with any order or direction of the \r\nCommission, including an employee of the Commission, or an authorized \r\nperson or investigator, in the performance of his duties under this Act, \r\n \r\nshall be liable to pay by way of penalty— \r\n(a) in the case of an individual, such sum which may extend to one hundred million \r\nrupees; and \r\n(b) in the case of a company, such sum which may extend to two hundred million \r\nrupees and \r\n \r\n(6) Where the offence under sub­section (5) involved fraud, deceit or deliberate disregard \r\nof the regulatory requirement such person shall be liable to pay by way of penalty— \r\n(a) in the case of an individual, such sum which may extend to one hundred million \r\nrupees; and \r\n(b) in the case of a company, such sum which may extend to two hundred million \r\nrupees; \r\n(7) Where the offence under sub­section (5) involved fraud, deceit or deliberate disregard \r\nof the regulatory requirement and suck offence resulted in substantial losses or created a significant \r\n \r\nPage 98 of 108  \r\nrisk of substantial losses to other persons or resulted in substan tial pecuniary gain to the person who \r\ncommitted the offence such. person shall be liable to pay by way of penalty,— \r\n(a) in the case of an individual, such sum which may extend to one hundred million \r\nrupees or twice the amount of loss caused or gain made whichever is higher; \r\nand \r\n(b) in the case of a company, such sum which may extend to two hundred million \r\nrupees or twice the amount of loss caused or gain made whichever is higher. \r\n(8) Notwithstanding sub­sections (1), (2), (3), (4), (5), (6) and (7), the C ommission may \r\nimpose an additional penalty, not exceeding the amount of loss caused, on an individual or a company \r\nif the individual or the company has failed to comply with any provision of this Act, or of any rules or \r\nof any regulations made under this A ct or direction given by the Commission under this Act and the \r\nnoncompliance has resulted in a loss to any other person. \r\n160. Penalty to be imposed by the Commission.— Wherever a penalty is provided for any \r\noffence, contravention of or default in complying  with, any of the provisions of this Act, rules or \r\nregulations made under this Act, such penalty shall be imposed by the Commission after providing a \r\nreasonable opportunity of hearing to the party. \r\n161. Appeal.— (1) Any person aggrieved by the final decisi on of the Commission may, \r\nwithin sixty days of the decision communicated to him, prefer an appeal to the Court. \r\n(2) The Court may, on an appeal made to it under sub­section (1), accept, set aside or vary \r\nthe decision of the Commission or make such other order as the interests of justice require. \r\nExplanation.—For the purposes of sub­section (1), “final decision of the Commission” means \r\na decision of the Appellate Bench of the Commission under section 33 of the Securities and Exchange \r\nCommission of Pakistan Act, 1997 (XLII of 1997). \r\n(3) The Court shall, at the stage of admission of the appeal or at any time thereafter on the \r\napplication of the aggrieved person and after due notice to the Commission, decide by means of a \r\nreasoned order whether the appeal is to be admitted in part or in whole depending on the facts and \r\ncircumstances of the case: \r\nProvided that the admission of the appeal shall not per se operate as a stay and nor shall any \r\nstay be granted therein unless the Commission has been given an opportunity of being heard. \r\n (4) Notwithstanding anything contained in any other law, the hearing of appeal shall \r\ncontinue day­to­day, unless sufficient cause has been shown by the parties jointly or severally which \r\nis beyond the control of the parties, the Court may adjourn the hearing for maximum of two dates and \r\nsuch adjournment shall not be more than fifteen days at any one time or for more than thirty days in \r\nall. \r\n(5) Where on third hearing any party fails to appear and address arguments before the Court \r\nshall proceed and decide appeal on merits and it shall be deemed that such party has relinquished its \r\nrights to address arguments. \r\n162. Recovery of penalties.— (1) Any penalty imposed by the Commission in the exercise \r\nof its powers under this Act or any rules or any regulations made under this Act, shall be payable to \r\nthe Commission and may be recovered by the Commission as a decree for the payment of money in \r\n \r\nPage 99 of 108  \r\ncase where the person aggrieved by such order has__ \r\n(a) preferred an appeal under section 161 of this Act and the Court upheld the final \r\norder of the Commission and it will automatically be converted into execution \r\nproceeding and no fresh notices need to be issued to appellant; or \r\n(b) not preferred an appeal to the Appellate Bench of the Commission under section \r\n33 of the Securities and Exchange Commission of Pakistan Act, 1997 (Act XLII \r\nof 1997) and the Court on application of the Commission has confirmed an d \r\nallowed conversion or initiation of execution proceedings after notices to the \r\nparties as deemed appropriate by the Court. \r\n \r\n(2) The Court shall exercise all the powers of executing court as provided in the Code of \r\nCivil Procedure 1908 (Act V of 1908), for the purposes of recovery of penalties: \r\nProvided that the Court may, for reasons to be recorded, dispense with any procedure in the \r\nCode of Civil Procedure 1908 (Act V of 1908), and follow such procedure as it may deem fit in the \r\ncircumstances of the case for expeditious disposal. \r\n(3) The executing Court may attach any immovable property or sale of any movable \r\nproperty, including bank accounts, of the person or company on whom a penalty has been imposed \r\nunder this Act by the Commission and any transactio n or attempt to alienate, transfer, encumber or \r\nmortgage such property shall be void, illegal and without any lawful authority. \r\n(4) All government departments, authorities, bodies, private entities, housing societies or \r\nschemes, by whatever name called, ba nks and any other concerned entity shall on the orders of the \r\nCourt be bound to assist the Commission in providing details of moveable or immovable property of \r\njudgment debtor. \r\n163. Cognizance of offences .— Notwithstanding anything contained in the Code of  \r\nCriminal Procedure, 1898 (Act V of 1898), no court shall take cognizance of any offence punishable \r\nwith imprisonment or fine or both, under this Act except on a complaint, in writing of the facts \r\nconstituting the offence, by an officer authorized in this behalf by the Commission singed by a \r\ncommissioner and no court inferior to that of court of session shall try any such offence. \r\n164. Prosecution of offences by the Commission. — (1) Notwithstanding anything \r\ncontained in the Code of Criminal Procedure, 1898 (Act V of 1898), all prosecution of offences under \r\nthis Act, any rules or regulations made under this Act, against any person shall be conducted by a \r\nspecial public prosecutor appointed by the Commission. \r\n(2) On receipt of complaint, the court shall issue summons as for the attendance of the \r\naccused in the first instance and on failure of the accused to appear before the court, warrant of arrest \r\nshall be issued by the court. \r\nExplanation.— For the purposes of this section, the term “complaint” shall include the report \r\nin writing of facts constituting the offence of the investigation officer of the Commission as referred \r\nto in section 139. \r\n(3) Personal attendance of the officer authorized by the Commission to file a complaint \r\nbefore the court trying the offence shall not be necessary on each date during the trail proceedings in \r\n \r\nPage 100 of 108  \r\nthe presence of special public prosecutor referred to in sub­section (1). \r\n(4) The court shall adopt procedure provided for under Chapter XX1I­A of the Code of \r\nCriminal Procedure, 1898 (A ct V of 1898) and all prosecutions before the court under this Act shall \r\nbe disposed of and the judgment pronounced, as expeditiously as possible. \r\n(5) The hearing of the matters referred to in sub­section (1) shall not be adjourned except \r\nfor sufficient cause to be recorded, or for more than fourteen days at one time and court may impose \r\nsuch cost at it may deem fit. \r\n(6) The court may, for reasons to be recorded, dispense with any procedure in the Code of \r\nCriminal Procedure, 1898 (Act V of 1898) and follow such procedure as it may deem fit in the \r\ncircumstances of the case for expeditious disposal of the complaint. \r\n165. Register of notifications issued by the Commission .— The Commission shall \r\nmaintain and make available for general public on its website a reg ister of notifications issued by the \r\nCommission under this Act. \r\n166. Liability of directors, etc. for offences by companies.— (1) Where an offence under \r\nthis Act, any rules or any regulations made under this Act, committed by a company is proved to have \r\nbeen committed with the consent or connivance of or to be attributable to any neglect on the part of an \r\nofficer of the company, that officer as well as the company shall be guilty of that offence and shall be \r\nliable to be proceeded against and punished accordingly. \r\n(2) Where the affairs of a company are managed in accordance with the instructions of any \r\nother person, not being a professional advisor sub­section (1) shall apply in relation to the acts and \r\ndefaults of a member in connection with his functions o f management as if he were a director of the \r\ncompany. \r\n(3) In this section “officer” means a director, member of the committee of management, \r\nchief executive, manager, secretary or any person who was purporting to act in any such capacity. \r\n167. Liability of licensed person for acts of representative, etc.— For the purposes of this \r\nAct, an act, omission or failure of a representative, employee or other person acting for or on behalf of \r\na licensed person within the scope of his office or employment shall be deemed to be the act, omission \r\nor failure of the licensed person as well as of the representative, employee or other person. \r\n168. Securities acquired in good faith.— (1) A person who, without fraud and for a lawful \r\nconsideration, becomes the possessor of a certificate of an equity security, scrip, debenture, debenture \r\nstock or bond and who is without notice that the title of the person from whom he derived his own title \r\nwas defective shall hold such certificate and all rights attached thereto free from any de fect of title of \r\nprior parties and free from defences available to prior parties among themselves. \r\n(2) A securities exchange may regulate the documentation, procedures and guarantees \r\nrequired to transfer property insecurities and the effects thereof on the respective rights and liabilities \r\nof the parties and such regulations, if approved by the Commission, shall constitute binding and \r\nenforceable terms and conditions of contracts effected on the exchange, shall govern the rights and \r\nliabilities of the parties thereto, and shall govern the rights and liabilities with respect to transfers of \r\nshares on its book s of the issuer of listed securities notwithstanding any provisions to the contrary \r\ncontained in the Contract Act, 1872 (IX of 1872), the Negotiable Instruments Act, 1881 (XXVI of \r\n1881), the Transfer of Property Act, 1882 (IV of 1882) or the Companies Ordi nance, 1984(XLVII of \r\n \r\nPage 101 of 108  \r\n1984), or any other law for the time being in force. \r\n169. Power of the Commission to make regulations. — (1) In addition to the powers \r\nconferred by any other provision under this Act, the Commission may make regulations for carrying \r\nout the purposes and provisions of this Act and for the due administration of this Act. \r\n(2) Without prejudice to the generality of sub­section (1), the Commission may make \r\nregulations for or with respect to — \r\n(a) applications for licences, the issue of licences and incidental matters; \r\n(b) the standards for the qualifications, experience and training of applicants for \r\nlicensing under Part V; \r\n(c) the conditions for the conduct of business on a securities market; \r\n(d) capital requirements in relation to any regula ted securities activity or other \r\nactivity licensed or authorized under this Act, with the power to the Commission \r\nto vary such capital requirements by order as the Commission deems fit; \r\n(e) securities broker's financial responsibility whether by way of min imum capital \r\nor a ratio between net capital or aggregate indebtedness, or both; \r\n(f) classification of securities brokers into different categories and conditions \r\nattached thereto; \r\n(g) the class or classes of securities that may be traded by securities broker and the \r\nterms and conditions governing trading in securities by securities broker; \r\n(h) the compulsory provision by securities exchanges of a centralized customer \r\nprotection compensation fund; \r\n(i) short selling; \r\n(j) matters pertaining to takeovers under Part IX; \r\n(k) best efforts and other levels of underwriting commitment; \r\n(l) the registration, operation and regulation of quotation and trade reporting \r\nsystems; \r\n(m) misalignment of incentives and conflict of interest between regulated persons, \r\nits employees and its clients; \r\n(n) processing and determination of customer complaints; \r\n(o) form and content of contract confirmation notes, customer agreements and risk \r\ndisclosure statements; \r\n(p) form, content, distribution, reporting and publication of written, print ed or \r\nvisual material or advertisements or prospectus with respect to any regulated \r\nsecurities activity, securities issue, securities investment or trading; \r\n \r\nPage 102 of 108  \r\n(q) persons who produce or disseminate research concerning listed securities or \r\nissuers of listed s ecurities and persons who produce or disseminate other \r\ninformation recommending or suggesting investment strategy, intended for \r\ndistribution channels or for the general public; \r\n(r) information to be contained in auditors' reports required to be lodged under this \r\nAct on the annual accounts of licensed persons; \r\n(s) appointment, remuneration and responsibilities of an auditor appointed under \r\nthis Act and the costs of an audit carried out under this Act; \r\n(t) registration, functioning and operations of qualified institutional buyers; \r\n(u) establishment and regulation of a secondary market in privately placed \r\nsecurities amongst qualified institutional buyers; \r\n(v) display of licences and the issue of duplicates; \r\n(w) making and filing of annual or other regular returns to the Commission by \r\nlicensed persons; \r\n(x) requirements and procedure for shelf registration; \r\n(y) disclose conflict of interest by directors and management of licensed persons \r\nand regulated persons; \r\n(z) appointment and conduct of directors and mana gement of licensed person and \r\nregulated person; \r\n(aa)  fit and proper criteria for director and management of licensed persons and \r\nregulated persons; \r\n(bb)  preemptive measure and actions for market monitoring and surveillance, \r\npromoting level playing field for investors and public at large; \r\n(cc)  special or general inspection and examination and investigation and audit of \r\nlicensed person or regulated person; \r\n(dd)  orderly conduct, prohibition of fraudulent activities and unfair trade practices \r\nand prevention of market abuse in securities markets; \r\n(ee)  the code of conduct for securities brokers, securities advisors and analysts; \r\n(ff)  effective surveillance and monitoring to detect and prevent insider trading and \r\nmarket abuse practices; \r\n(gg)  effective know y our customer and customer due diligence policies and \r\nprocedures and other matters ancillary to anti­money laundering; \r\n(hh)  manner of outsourcing important functions by a securities exchange, clearing \r\nhouse or a central depository; \r\n \r\nPage 103 of 108  \r\n(ii)  provide for a mechanism for conducting inspections and investigations of \r\nregulated persons in coordination with securities exchanges, clearing houses \r\nand central depositories including the establishment of a specialized entity for \r\nthis purpose; \r\n(jj)  manner and procedur e for providing applicants and holders of licence \r\nopportunity of hearing; and \r\n(kk)  all matters or things which by this Act are required or permitted to be prescribed \r\nor which are necessary or expedient to give effect to this Act. \r\n(2) For the avoidance of doubt, the powers of the Commission to make regulations under \r\nthis section are in addition to and not in derogation of any other power of the Commission to make \r\nregulations under any provision of this Act or any other Act. \r\n(3) Before any regulations are ma de or amended under this Act the Commission shall \r\npublish a draft of the regulations in the official Gazette and place it on its website, for eliciting public \r\nopinion on the draft regulations, for a period of not less than fourteen days starting from the date of its \r\nplacement on the website. \r\n(4) Every regulations made or amended by the Commission shall be published in the \r\nofficial Gazette and shall come into effect on such date as may be specified in the notification. \r\n(5) Every regulations made or amended b y the Commission shall be published in the \r\nofficial Gazette and shall come into effect on such date as may be specified in the notification. \r\n170. Power of the Commission to issue directions to a securities exchange, clearing \r\nhouse and central depositor. — (1) In addition to the powers conferred by any other section, where \r\nthe Commission considers it necessary or expedient, in the public interest or for the protection of \r\ninvestors or proper administration of securities exchanges, clearing houses and central depositories, it \r\nmay, notwithstanding anything contained in any other law for the time being in force, issue directions, \r\nby notice in writing, either of a general or specific nature. \r\n(2) Without prejudice to the generality of sub­section (1), any direction  issued under that \r\nsub­ section may cover areas, including but not limited to, — \r\n(a) the enhanced corporate Governance polices; \r\n(b) the specified structure of board of directors to ensure independence and \r\navoidance of conflict of interest; \r\n(c) stringent qualification and fit and proper criteria of directors; \r\n(d) stringent qualification and fit and proper criteria of its senior management \r\nofficers; \r\n(e) the enterprise risk evaluation and measurement and mitigation measures; \r\n(f) the segment risk evaluation and measurement and mitigation measures; \r\n(g) the risk mitigation against frauds, forgeries, etc.; \r\n \r\nPage 104 of 108  \r\n(h) the internal audit, internal controls and compliance; \r\n(i) the composition and terms of reference of committees, including, audit and \r\ncompliance, human resources, IT security, etc. \r\n(j) punitive and disciplinary actions by the Commission against the board of \r\ndirectors and management in case of non­compliances or violations of any law \r\nfor the time being in force, rules, regulations and directives issued there under; \r\n(k) the distribution of dividends, retention and reinvestments of profits towards \r\ndevelopment, protection of stakeholders and investing public, insurance against \r\nrisks and threats, etc.; and \r\n(l) any other matter as the Commission deems appropriate. \r\nand securities exchanges, clearing houses and central depositories shall comply with any such \r\ndirection. \r\n171. Forms.— The Commission may, by notice in the official Gazette, specify forms that \r\nare required to be used for any purpose under this Act or the rules or regulations made under this Act. \r\n172. Codes and guidelines, etc. — (1) The Commission may issue such codes, guidelines \r\nor regulatory or policy statements as it considers appropriate for providing guidance, in relation to — \r\n(a) any of its regulatory objectives under this Act; \r\n(b) any matter relating to any of the functions of the Commission under this Act; \r\n(c) proving guidance to licensed person; \r\n(d) the operation of any provision of this Act. \r\n(2) The Commission may publish any such code, guideline or regulatory or policy \r\nstatement in such manner as it deems fit. \r\n173. Act not to affect the powers of the State Bank of Pakistan. — Nothing in this Act \r\nshall be read or construed as diluting, interfering with or affecting the powers and functions of the \r\nState Bank of Pakistan under any law. \r\n174. Act to override other laws. — The provisions of this Act shall have effect \r\nnotwithstanding anything inconsistent therewith contained in any other law for the time being in force. \r\n175. Power to make rules. — (1) The Federal Government may, by notification in the \r\nofficial Gazette, make rules for carrying out the purposes of this Act. \r\n(2) Without prejudice to the generality of sub­section (1), the Federal Government may \r\nmake rules for or with respect to— \r\n(a) the practic e, conduct, functioning and regulation of share registrars, \r\nunderwriters, balloters, debenture trustees, banker to an issue, advisors and \r\nconsultants to the issue; \r\n \r\nPage 105 of 108  \r\n(b) the registration, functioning and operation of credit rating agencies; \r\n(c) the establish ment and operation of compensation fund arrangements for \r\ncustomers; \r\n(d) public offerings and private placement of securities; \r\n(e) for establishment of various classes of securities brokers; \r\n(f) the establishment of alternative trading platforms; \r\n(g) for es tablishment and orderly conduct of bond pricing agencies and matters \r\nrelated thereto; \r\n(h) extension of credit, lending and borrowing of securities and pledging of \r\ncustomer's securities by securities brokers; and \r\n(i) for establishment and orderly conduct of  a centralized know your customer \r\norganization and matters related thereto. \r\n(3) The power to make rules under this section shall be subject to the condition of previous \r\npublication and before making any rules the draft thereof shall be published in the official Gazette and \r\nalso be placed on the website of the Commission for soliciting public opinion thereon within the period \r\nof not less than thirty days starting from the date of its placement on the website. \r\n176. Removal of difficulties.— If any difficulty arises in giving effect to any provision of \r\nthis Act, the Federal Government may, make such order as it may deem necessary for removing the \r\ndifficulty. \r\n177. Transitional provisions .— (1) A company that, immediately prior to the \r\ncommencement of Part II of this Act, is registered as a stock exchange under section 5 of the Securities \r\nand Exchange Ordinance, 1969 (XVII of 1969), shall thereupon be deemed to be licensed under this \r\nAct as a securities exchange and shall be allowed to offer faci lities necessary for trading in futures \r\ncontracts until such time as it may be required to obtain a separate licence as a futures exchange. \r\n(2) A stock exchange, immediately prior to the commencement of this Act, registered under \r\nsection 5 of the Securities and Exchange Ordinance, 1969 (XVII of 1969), shall obtain licence under \r\nsection 3 within a period of one year from the date of commencement of this Act. \r\n(3) A person who, immediately prior to the commencement of Part V of this Act, is \r\nregistered as a bro ker under section 5A of the Securities and Exchange Ordinance, 1969 (XVII of \r\n1969), shall be deemed to be licensed under this Act as a securities broker till the time his existing \r\ncertificate of registration remains valid and shall thereupon be required to  obtain a licence under this \r\nAct and such person shall also be allowed to effect transactions in futures contracts until such time as \r\nit may be required to obtain a separate licence as a futures broker. \r\n(4) A person who, immediately prior to the commenceme nt of Part V of this Act, is \r\nregistered as an agent under section 5A of the Securities and Exchange Ordinance, 1969 (XVII of \r\n1969), shall thereupon be deemed to be licensed under this Act as a representative till the time his \r\nexisting certificate of regist ration remains valid and shall thereupon be required to obtain a licence \r\nunder this Act. \r\n \r\nPage 106 of 108  \r\n(5) A company that, immediately prior to the commencement of Part II of this Act, is \r\nregistered as a clearing house under rule 4 of the Clearing Houses (Registration and Regulation) Rules, \r\n2005, shall thereupon be deemed to be licensed under this Act as a clearing house till the time its \r\nexisting certificate of registration remains valid and shall thereupon be required to obtain a licence \r\nunder this Act. \r\n(6) A person wh o, immediately prior to the commencement of Part IV of this Act, is \r\nregistered as a central depository under rule 4 of the Central Depository Companies (Establishment \r\nand Regulation) Rules, 1996, shall thereupon be deemed to be licensed under this Act as a  central \r\ndepository till the time his existing certificate of registration remains valid and shall thereupon be \r\nrequired to obtain a licence under this Act. \r\n(7) From the commencement of this Act, rules made under the Securities and Exchange \r\nOrdinance 1969 (XVII of 1969), which are in force immediately prior to the commencement of this \r\nAct and which have not been specifically repealed by this Act shall continue to be in force and have \r\neffect as they have been made by the Federal Government under this Act. \r\n(8) From the commencement of this Act, regulations made by the Commission under the \r\nSecurities and Exchange Ordinance, 1969 (XVII of 1969), which are in force immediately prior to the \r\ncommencement of this Act shall continue to be in force and have effect as they have been made by the \r\nCommission under this Act. \r\n (9) From the commencement of this Act, regulations made by the Commission under the \r\nListed Companies (Substantial Acquisition of Voting Shares and Take­Overs) Ordinance, 2002 (CIII \r\nof 2002), which are in force immediately prior to the commencement of this Act shall continue to be \r\nin force and have effect as they have been made by the Commission under this Act. \r\n(10) From the commencement of this Act, regulations made by a stock exchange under the \r\nSecurities and Exchange Ordinance, 1969 (XVII of 1969), which are in force immediately prior to the \r\ncommencement of this Act shall continue to be in force and have effect as they have been made by the \r\nsecurities exchange under this Act. \r\n(11) From the commencement of this Act, regulations made by a clearing house under the \r\nSecurities and Exchange Ordinance, 1969 (XVII of 1969), which are in force immediately prior to the \r\ncommencement of this Act shall continue to be in force and have effect as they have been made by the \r\nclearing house under this Act. \r\n(12) Any condition that has been attached by the Commission to a person registered under \r\nthe Securities and Exchange Ordinance, 1969 (XVII of 1969), and that is in force immediately prior \r\nto the commencement of Part V of this Act, shall be treated as being attached to any licence which is \r\nregarded as subsisting by virtue of these transitional provisions. \r\n(13) Anything done, actions taken, orders passed, instruments made, notifications issued, \r\nproceedings initiated and in stituted, prosecutions filed, processes or communications issued and \r\npowers conferred, assumed or exercised by the Commission under the Securities and Exchange \r\nOrdinance, 1969 (XVII of 1969) and the Listed Companies (Substantial Acquisition of Voting Shares \r\nand Take­Overs) Ordinance, 2002 (CIII of 2002), shall, on the coming into operation of any provision \r\nof this Act, be deemed to have been validly done, made, issued, taken, initiated, conferred, assumed \r\nand exercised and every action, prosecution or proce eding instituted and every order, directive, \r\nnotification, circular, code, guidelines etc. issued by the Commission shall be deemed to have been \r\ninitiated, instituted or issued under this Act and shall be proceeded with to completion and be enforced \r\n \r\nPage 107 of 108  \r\nand have effect accordingly. \r\n(14) Every order or directive or notification, circular, code, guidelines etc. issued by the \r\nCommission which are in force on the coming into operation of any provision of this Act shall continue \r\nto be in force and have effect as they have issued by the Commission under this Act. \r\n178. Repeal and savings. — (1) The enactments specified in the Schedule to this Act are \r\nhereby repealed to the extent mentioned in the fourth column thereof. \r\n(2) Notwithstanding the repeal of any enactments by this section,— \r\n(a) any notifications, rules, regulations, bye­laws, orders or exemption issued, made \r\nor granted under any such enactment shall have effect as if had been issued, \r\nmade or granted under the corresponding provision of this Act; \r\n(b) any official appointed and anybody elected or constituted under any such law \r\nshall continue and shall be deemed to have been appointed, elected or \r\nconstituted, as the case may be, under the corresponding provision of this Act; \r\n(c) any document referring to any enactment hereby repealed shall be construed as \r\nreferring, as far as may be, to this Act, or to the corresponding provision of this \r\nAct; \r\n(d) mortgages recorded in any register book maintained at any office under any \r\nenactment hereby repealed shall be deemed to have been recorded in the register \r\nbook maintained under the corresponding provision of this Act; \r\n(e) any licence, certificate or document issued made or granted under any \r\nenactment hereby repealed shall be deemed to have been issued, made or \r\ngranted under this Act and shall, unless cancelled in pursuance of the provision \r\nof this Act, continue in force till the date specified in the certificate or document. \r\n \r\n________ \r\n  \r\n \r\nPage 108 of 108  \r\nTHE SCHEDULE \r\n[See section 178] \r\n \r\n \r\nShort title \r\n \r\n \r\nExtent of repeal \r\n \r\n(1) (2) \r\n \r\nSecurities and Exchange Ordinance,  \r\n1969 (XVII of 1969). \r\n \r\n(i) Clauses (a), (ab), (ac), (ad), (ca), (ce), \r\n(cf), (d), (dd), (de), (e), (f), (g), (h), \r\nsub­clauses (i), (ii) and (iii) of clause (1), \r\nclauses (m), (n), (o), (p) and (q) of \r\nsub­section (1) of section 2; \r\n(ii) in section 2, in sub section (1), in clause \r\n(da) the words “a Stock Exchange or”; \r\n(iii)  sections 8, 9, 10, 15A, 15B, 15C, 15D, \r\n15E, 16,17, 18A, 31, 32, 32A, 32B, \r\n32C and 32E. \r\n \r\nThe Listed Companies (Substantial \r\nAcquisition of Voting Shares and Take­Overs) \r\nOrdinance 2002 (CIII of 2002). \r\n \r\nThe whole Ordinance. \r\n \r\nCompanies Ordinance, 1984 (XLVII of 1984) Sections 52 to 66 and sections 220 to 224.",
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