Stock Exchange (Corporatisation, Demutualization and Integration) Act, 2012

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THE STOCK EXCHANGES (CORPORATISATION, 
DEMUTUALIZATION AND INTEGRATION) ACT, 2012 
 
 
 
 
 
 
    CONTENTS 
 
 
 
CHAPTER-I  
PRELIMINARY 
1.       Short title, extent and commencement 
2.       Definitions 
CHAPTER-II  
CORPORATISATION 
3.  Demutualization Committee 
4.      Submission of information by the stock exchange 
5.      Procedure upon receiving approval or determination 
6.      Procedure upon receiving memorandum of the stock exchange 
7.      Effect of corporatisation 
CHAPTER-III  
DEMUTUALIZATION 
 
8.      Demutualization 
9.      Rights attached to shares in the blocked account 
10.    Board of a stock exchange after demutualization and the election of directors 
11.    Effect of demutualization 
12.    Divestment and issue of further shares 
13.    Sale and purchase of shares by a strategic Investor and a financial institution 
14.    Powers of the Commission to require divestment 
15.    Listing of shares 

 
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16.    Trading rights 
CHAPTER-IV  
INTEGRATION 
17.    Integration without application to the Court 
18.    Power of the Commission to approve a scheme of integration 
 
CHAPTER-V 
OFFENCES AND PENALTIES 
19.    Powers of the Commission 
 
CHAPTER-VI  
MISCELLANEOUS 
 
20.    Restriction on amendments to the Memorandum and Articles and further issue of 
capital 
21.    Winding up of a stock exchange 
22.    Prohibition on sale etc. of assets of the stock exchange 
23.    Power to make regulations 
24.    Power to give directions 
25.    Act to override other laws 
26.    Savings 
27.    Removal difficulty
 
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THE STOCK EXCHANGES (CORPORATISATION, DEMUTUALIZATION 
AND INTEGRATION) ACT, 2012 
 
ACT NO. XV OF 2012 
 
[7th May, 2012] 
 
An Act to provide for the corporatisation, demutualization and integration of stock exchanges in 
Pakistan 
 
WHEREAS, it is expedient, for the development of the capital markets of the country, to provide 
for the corporatisation and demutualization of the stock exchanges in Pakistan and to facilitate the  
integration of these stock exchanges and for matters ancillary thereto; 
 
It is hereby enacted as follows: 
CHAPTER-I  
PRELIMINARY 
1. Short title, extent and commencement.—(1) This Act may be called the Stock 
Exchanges  (Corporatisation, Demutualization and Integration) Act, 2012. 
 
(2) It extends to the whole of Pakistan. 
 
(3) It shall come into force at once. 
 
2. Definitions.—(1) In this Act, unless there is anything repugnant in the context or subject,— 
 
(i) “assets” means all immovable  and movable  properties (whether actual or 
contingent, tangible or intangible) and include all land, building, machinery and 
equipment, shares, securities, deposits, cash, bank balances, profits, dividends, 
fees, commissions, receivables, claims, contracts, licenses, privileges, reserve 
funds, investments and all other rights and interests in and arising out of such 
property in the ownership, possession, power or control of a stock exchange at 
any given time; 
 
(ii) “blocked account” means a CDC account established by a stock exchange in 
accordance with clause (c) of sub-section (1) of section 5; 
 
(iii) “CDC” means the Central Depository Company established in pursuance of the 
Central Depository Companies (Establishment and Regulation) Rules, 1996; 
 
(iv) “Commission” means the Securities and Exchange Commission of Pakistan 
established under the Securities and Exchange Commission  of Pakistan Act, 
1997 (XLII of 1997); 
 
(v) “Committee” means the demutualization committee of members of the stock 
exchange ratified under section 3 by the members of the stock exchange; 
 
(vi) “Companies Ordinance” means the Companies Ordinance, 1984 (XLVII of 
1984); 
 
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(vii) “Connected Person” means in relation to a natural person, a spouse, real, step 
or half  sibling, lineal ascendant or descendant of such person, a partner, 
promoter or substantial  shareholder of an undertaking, company or body 
corporate of which such person is also a  partner, promoter or substantial 
shareholder or an undertaking, company or body corporate in which such person 
is a partner, promoter, substantial shareholder or director;  in relation to a legal 
person a Connected person means an undertaking, company or body  corporate 
which is a holding, subsidiary or associated company of such legal person; 
 
(viii) “corporatisation” means the conversion of a stock exchange from a company 
limited by guarantee to a public company limited by shares; 
 
(ix) “date of corporatisation ” means the date on which the Registrar issues a 
certificate of re-registration to the stock exchange as evidence of its change in 
status from a company  limited by guarantee to a public company limited by 
shares; 
 
(x) “date of demutualization ” means the date on which the Registrar issues a 
certificate of re -registration to the stock exchange in accordance with the 
provisions of section 6; 
 
(xi) “demutualization” means the segregation of the majority ownership of a stock 
exchange from the right to trade on such stock exchange; 
 
(xii) “financial institution” includes foreign or local commercial banks development 
financial institutions, non-banking finance companies, insurance companies, 
stock exchanges, commodity exchanges, derivative exchanges or any such other 
entity which has been notified by the Commission as a financial institution for 
the purposes of this Act; 
 
(xiii) “first directors ” mean directors of the stock exchange nominated by a stock 
exchange or  the Commission as the case may be and who take the office of 
director on the date of corporatisation and hold such office until elections of the 
directors are held in accordance  with this Act; 
 
(xiv) “initial shareholders” means the legal owners of the shares of a stock exchange 
on the date of corporatisation; 
 
(xv) “integration” means the merger of two or more stock exchanges; 
 
(xvi)  “liabilities” means all borrowings, financial obligations, debts, claims, or 
potential losses of every description (Whether actual or contingent)  of a stock 
exchange at any given date; 
 
(xvii) “member” means a member of a stock exchange prior to its corporatisation 
under this Act; 
 
(xviii) “prescribe or prescribed” means prescribed by the regulations made by the 
Commission; 
 
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(xix) “scheme of integration” means a scheme of arrangement for the integration  of 
two or more stock exchanges; 
 
(xx) “Securities Ordinance ” means the Securities and Exchange Ordinance, 1969 
(XVII of 1969); 
 
(xxi) “security” means a security as defined in clause (1) of sub-section (1) of section 
2 of the  Securities Ordinance; 
 
(xxii) “shareholders” means the legal owners of the shares of a stock exchange at any 
given time and include the initial shareholders; 
 
(xxiii) “stakeholders” means the employees of the stock exchange, the TRE certificate 
holders, the issuers of securities listed on a stock exchange, creditors, if any, of 
such stock exchange and the Government of Pakistan; 
 
(xxiv) “stock exchange ” means a stock exchange registered under section 5 of the 
Securities Ordinance at the time of commencement of this Act and includes a 
stock exchange after corporatisation, demutualization or integration as the case 
may be; 
(xxv) “strategic investor” means a stock exchange, depository company, a derivative 
exchange or a clearing house which has been approved by the Commission in 
accordance  with the prescribed criteria, for the purposes of acquiring shares of 
a stock exchange in pursuance of section 12; 
 
(xxvi) “substantial shareholder” means a person who directly or indirectly controls, 
beneficially owns or holds not less than twenty per cent of the voting rights of 
an undertaking, company or body corporate; 
 
(xxvii) “trading right entitlement certificate or TRE certificate” means a certificate 
issued by a stock exchange evidencing right of the TRE certificate holder to 
apply for registration as a broker in accordance with the Broker and Agent 
Registration Rules, 2001 as amended from time to time; 
 
(xxviii) “trading right entitlement certificate holder or TRE certificate holder” means a 
person who is issued a TRE certificate under section 5, or purchases or acquires 
such TRE  certificate under section 16 or is issued afresh TRE certificate in 
accordance with the provisions of this Act; and 
 
(xxix) “undertaking” means any trade or business of a stock exchange. 
 
(2) The words and expressions used, but not defined in this Act, but which are defined in the  
Companies Ordinance or the Securities Ordinance shall have the same meaning as are assigned to them 
in these Ordinances. 
 
 
 
CHAPTER-II 
 
CORPORATISATION 
 
3. Demutualization Committee.—(1) The members of a stock exchange shall not later than  
thirty days from the commencement of this Act, in a meeting of the stock exchange, ratify the creation 
and constitution of the demutualization committee existing at such commencement. 
 
(2) The committee shall be fully authorized to— 
 
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(a) approve the valuation of the stock exchange to be undertaken by the 
investment bank pursuant to clause (a), sub-section (I) of section 4; 
 
(b) enter into negotiations and finalize the sale of not more than forty per  cent of 
the total issued share capital out of the shares lying in the blocked account with 
any one or more strategic investors or financial institutions; 
 
(c) determine the offer price for offer for sale of shares to general public. 
 
(3) The committee shall be fully empowered and bound to accept any price offered for the sale 
of shares by the strategic investor that is equal to or greater than the valuation carried out under section 
4, and finalize and enter into an agreement for the sale of such shares to the strategic investor, and the 
members, the shareholders including the initial shareholders and the stock exchange shall be bound 
by such agreement: 
 
Provided that the decision whether to accept or reject an offer from a strategic investor, if the  
price offered is less than the approved valuation, shall be made in a meeting of the initial shareholders 
of the stock exchange through a majority vote, unless the members while constituting the committee,  
gave such authority to the committee. 
 
4. Submission of information by the stock exchange. —(1) Within forty-five days of the 
commencement of this Act, each stock exchange shall, submit to the Commission the following,  
namely:— 
 
(a) a valuation of the stock exchange approved by the committee as at any date that 
may be specified by the Commission, based on the discounted cash flow or net 
asset value of the stock exchange, or any other internationally accepted method 
of valuation undertaken by a renowned international investment bank approved 
by the Commission: 
 
Provided that the Commission may, on a reasoned request made by the 
stock exchange, extend the time for the submission of the valuation of the stock 
exchange till 120 days from the commencement of this Act; 
 
(b) a re-valuation of the assets and liabilities of the stock exchange as at 30th June, 
2008, or as at any other date as may be specified by the Commission, undertaken 
by a firm of Chartered Accountants approved by the Commission in accordance 
with the prescribed criteria based on which valuation, the number of shares of 
ten rupees par value proposed to be issued will be determined; 
 
(c) the propos ed authorized and paid -up capital of the stock exchange with the 
number of shares to be issued; 
 
(d) the names of members of the stock exchange proposed to be the initial 
shareholders of the   stock exchange and the number and value of shares to be 
allotted to each such member: 
 
Provided that the shares allotted in pursuance of this sub -section shall 
be allotted for consideration other than cash. 
 
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(e) the names of members of the stock exchange, nominated to act as the  first 
directors of the stock exchange  until such time as elections are held in 
accordance with this Act: 
 
Provided that the stock exchange shall nominate only four members to 
act as the first directors; 
 
(f) the proposed plan for the segregation of the commercial and regulatory 
functions of the stock exchange;  
 
(g) the draft memorandum and articles of association of the stock exchange; 
 
(h) a detailed five year development plan for the stock exchange together with 
the capital  expenditure estimate and the sources of finance: 
 
Provided that the items listed at clauses (b) to (h) of sub-section (1) shall 
be submitted to  the Commission after being duly  approved by the Board of 
Directors of the stock exchange. 
 
(2) Within thirty days of receipt of the information submitted by a stock exchange under sub - 
section (1), the Commission shall, subject to the provisions of sub-section (4), approve and 
communicate to the stock exchange the following namely:— 
 
(a) the revaluation of the assets and liabilities of the stock exchange; 
 
(b) the authorized and the paid up capital of the stock exchange; 
 
(c) the names of members of the  stock exchange  proposed to be  the initial 
shareholders of the  stock exchange; 
 
(d) the number of shares that may be allotted to each member of the stock 
exchange for  consideration other than cash; 
 
(e) the names of members nominated to act as first directors of the stock exchange; 
 
(f) the plan for the segregation of the commercial and regulatory functions of 
the stock  exchange; 
 
(g) the memorandum and articles of association of the stock exchange; and 
 
(h) the approved development plan. 
 
(3) At the time of communicating the items listed in sub-section (2), the Commission shall also 
communicate to the stock exchange the names of six persons to be nominated by the Commission to  
act as the first directors of the st ock exchange with a direction to elect one of these persons as the  
Chairman of the Board of Directors of the stock exchange. 
 
(4) The Commission may, if it deems necessary in the interest of the capital markets, make  
appropriate amendments in any of the matters mentioned in sub-section (2), other than the re-valuation 
 
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carried out by the firm of Chartered Accountants, before granting its approval: 
 
Provided that before making any substantive amendments, the Commission shall inform the 
stock exchange of such amendments, and if so required by the stock exchange in writing, provide an  
opportunity of hearing to the stock exchange: 
 
Provided further that any decision of the Commission under this sub-section (4) shall be 
final and binding. 
 
(5) The valuation of the stock exchange as mentioned in clause (a) of sub -section (1), shall be 
provided to the Commission in a sealed envelop and the Commission shall keep the envelop sealed till  
the sale of shares to a strategic investor, in which case it shall return the sealed envelop to the stock  
exchange. In case there is no sale of shares to a strategic investor in the manner provided in this Act,  
the Commission shall open the envelop in accordance with provisions of section 12. 
 
(6) If a stock exchange fails to comply with any or all of the requirements of sub -section (1) 
within the stipulated time or any extension thereof, the Commission shall undertake or decide as the  
case may be, the matters listed in sub-section (1) and communicate the same to the stock exchange                                                               
for further compliance. Any action taken by the Commission in pursuance of this sub-section shall be  
final and binding on the stock exchange and its members: 
 
Provided that if the Commission engages a renowned international investment bank for the  
purposes of clause (a) of sub-section (1) or a firm of Chartered Accountants for the purposes of clause 
(b) of sub-section (1), the cost of  such valuation, including all ancillary costs, shall be borne by the  
stock exchange being valued. 
 
5. Procedure upon receiving approval or determination. —(1) Within thirty days of being  
granted approval under sub-section (2) of section 4 or a determination under sub-section (6) of 
section 4, the stock exchange shall— 
 
 
(a) adopt in a meeting of its members by a special resolution the approved 
memorandum and articles of association; 
 
(b) allot shares to the members approved to be the initial shareholders in the 
approved numbers: 
 
Provided that all shares will be allotted in a dematerialized format and 
shall not, at any  time or for any reason, be convertible into physical format; 
 
(c) deposit in a blocked account sixty per cent of shares allotted to each initial 
shareholder and hold these in the blocked account until such time as these 
shares are disposed of in accordance with section 12; 
 
(d) issue a certificate to each initial shareholder certifying the number of his shares 
held in the  blocked account; and 
 
(e) issue a TRE certificate to each initial shareholder. 
 
(2) Willful failure of a stock exchange to comply with any of the requirements of this section 
 
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shall be an offence under this Act. 
 
 (3) Within seven days of the adoption of the memorandum and articles of association as 
aforesaid, the stock exchange shall deliver to the Registrar,— 
 
(a) a certified copy of the special resolution by which the memorandum and 
articles of association have been adopted; 
 
(b) a certificate from the auditors of the stock exchange certifying that all shares 
have been allotted to the initial shareholders in a dematerialized format; and 
 
(c) a certificate from CDC that sixty per cent of the shares allotted to each initial 
shareholder have been deposited in a blocked account in accordance with 
clause (c) of sub-section (1) of section 5. 
 
6. Procedure upon receiving memorandum of the stock exchange.—(1) Within seven days 
of receipt of the information mentioned in sub-section (3) of section 5 and after confirmation from the 
Commission, the Registrar shall issue a certificate of re-registration to the stock exchange as evidence 
of its change in status from a company limited by guarantee to a public company limited by shares. 
 
(2) The directors of  the stock exchange holding office  on the date of corporatisation shall 
automatically cease to hold such office on receipt of the certificate of re -registration by the stock  
exchange, and shall stand replaced by the first directors. 
 
 7. Effect of corporatisation. —(1) All assets and liabilities of  the stock exchange as at the 
date of corporatisation shall remain the assets and liabilities of the stock exchange. 
 
 (2) The corporatisation of the stock exchange shall not— 
 
(a) create a new legal entity or prejudice or affect its identity or continuity; 
 
(b) adversely affect the registration of the stock exchange under section 5 of the 
Securities Ordinance; 
 
(c) prejudice or affect the continuity of its undertakings; 
 
(d) render defective or affect any legal, disciplinary or other proceedings brought 
by or against it prior to the date of corporatisation; 
 
(e) affect the validity of any regulation made by the stock exchange or the 
Commission in pursuance of section 34 of the Securities Ordinance; 
 
(f) affect any instruction, order, approval, notification, direction, act, requirement, 
condition, consent, guideline, circular, undertaking, declaration, indemnity, 
waiver, exemption, restriction or decision or other document howsoever called, 
made, given or done by the  stock exchange or the Commission in accordance 
with or in pursuance of the Companies  Ordinance or the Securities Ordinance 
or any other law or rules and regulations made  under such law in force at the 
date of corporatisation, and such instruction, order, approval, notification, 
direction, act, requirement, condition, consent, guideline, circular, undertaking, 
 
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declaration, indemnity, waiver, exemption, restriction or decision or other  
document shall remain valid, binding and have effect in relation to the p ersons 
to whom  such instruction, order, approval, notification, direction, act, 
requirement, condition, consent, guideline, circular, undertaking, declaration, 
indemnity, waiver, exemption, restriction or decision is applied until it is 
amended, repealed or otherwise expires; 
 
 
(g) affect any right, privilege, obligation or liability acquired by or accrued to the 
stock exchange under the provisions of the Companies Ordinance or the 
Securities Ordinance or any other law or rules and regulations made under any 
such law in force at the date of  corporatisation and shall not affect any legal, 
disciplinary or other proceedings, remedy, inspection, investigation or inquiry 
in relation to such right, privilege, obligation or liability and any such legal, 
disciplinary or other proceedings, remedy, inspection, investigation or inquiry 
may be instituted, continued or enforced after the date of corporatisation; and 
 
(h) affect any action that has been taken by the stock exchange for any breach of its 
regulations. 
 
(3) Upon the  conversion of the  stock exchange  from a  company limited by guarantee  to a  
company limited by shares, the liability of each member of the stock exchange as guarantor shall be  
deemed to be extinguished immediately. 
 
 
CHAPTER-III 
 
DEMUTUALIZATION 
 
8. Demutualization. A stock exchange shall stand demutualised when the Registrar has issued 
a certificate of re-registration to the stock exchange in accordance with section 6. 
 
9. Rights attached to shares in the blocked account. —(1) All rights in respect of the sixty 
per cent shares of each initial shareholder deposited in the blocked account shall vest and be exercised 
in the following manner, namely:- 
 
(a) the right to receive di vidends, bonus shares, rights shares and the proceeds of 
sale of these shares shall vest in the initial shareholders: 
 
Provided that the bonus shares and right shares if any, shall be added to 
the blocked shares of the initial shareholder and shall be disposed of alongwith 
those blocked shares in the manner provided in this Act; 
 
(b) the right to sell these shares shall vest in the stock exchange to be exercised in 
the manner provided in section 12; and 
 
(c) the right to exercise the voting power attached to these shares shall remain 
suspended till the time of sale of these shares in accordance with section 12. 
 
(2)      The blocked account shall be operated by the board of directors in the manner prescribed 
by the Commission. 
 
 
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10. Board of a stock exchange after demutualization and the election of directors. — (1) 
At any time after the date of demutualization, TRE certificate holders or connected persons of TRE  
certificate holders shall not hold the majority on the board of directors of any stock exchange, or hold 
more than forty per cent of the total paid up capital of the stock exchange. 
 
(2) Within thirty days of the date of demutualization, the stock exchange shall hold an election 
of directors: 
 
Provided that the elections shall only  be in respect of the seats held  by the first directors 
nominated by the stock exchange. The nominees of the Commission shall continue to hold office until 
such time as they stand replaced on a directive of the Commission to allow co-option of nominees of 
the strategic investor, or in subsequent elections by shareholder interest of the strategic investor and  
financial institutions or representatives of the general public as the case may be. 
 
(3) After the date of demutualization, the chairman of the Board of any stock exchange 
shall always be from amongst those directors who do not represent the TRE certificate holders or their 
connected persons. 
 
11. Effect of demutualization. —(1) From the date of demutualization,  notwithstanding 
anything to the contrary contained in any other law for the time being in force or any agreement, award, 
judgment, decree or other instrument for the time being in force, the demutualization of the stock  
exchange shall become binding on all persons and authorities having any contractual or statutory, right, 
power, obligation or liability in connection with the stock exchange. 
 
(2) The demutualization shall not adversely affect the registration of the stock exchange under 
section 5 of the Securities Ordinance. 
 
(3) A shareholder may or may not be a TRE certificate holder of the stock exchange after  
demutualization. 
 
(4) A TRE certificate holder may or may not be a shareholder of the stock exchange after  
demutualization. 
 
12. Divestment and issue of further shares.—(1) The Commission may at any time not later 
than two years from the date of demutualization direct the stock exchange and its shareholders to do  
one or more of the following, namely:- 
 
(a) to enter into an agreement  with a strategic investor, within one year of such 
direction, for the sale of not more than forty percent of its total issued share 
capital out of the shares lying in the blocked account; 
 
(b) to sell to the general public through an offer for sale, not less than twenty percent 
of its total issued share  capital out of the shares lying in the  blocked account 
within one  hundred and eighty days of the direction in accordance with 
applicable laws; 
 
(c) to enter into agreements with and to sell to local financial institutions any shares 
remaining in the blocked account after sale of shares to the strategic investor 
and the general public, within one year of the direction: 
 
 
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Provided that the Commission may extend the period for compliance 
upon an application by the stock exchange setting out the reasons for not being 
able to comply with the said order within the specified time. 
 
(2) A stock exchange may, by special resolution issue further shares carrying extra voting rights 
to a strategic investor with the prior written approval of the Commission. 
 
(3) In case if no agreement for the sale of shares of the stock exchange is reached with any  
strategic investor within one year of the direction given by the Commission or within such time as may 
be extended by the Commission, the Commission may open the sealed envelop containing the  
valuation of the shares. 
 
(4) Upon opening the sealed envelop, the Commission may take such steps or give such 
directions as may be necessary for achieving the sale of shares, including but not limited to— 
 
(a) ordering the sale of shares to a strategic investor who had earlier made an offer 
to purchase the shares, if the price offered by such strategic investor was equal 
to or more than the valuation of the shares contained in the sealed envelop; or 
 
(b) ordering a fresh auction of the shares and selling to the highest bidding strategic 
investor or financial institutions such number of shares and in such manner as 
the Commission may specify; or 
 
(c) ordering a revaluation of the stock exchange at the cost of the stock exchange 
and in such manner as the Commission may specify. 
 
(5) Notwithstanding anything contained in sub -sections (1) to (4), if a stock exchange fails to  
comply with any or all of the directions given to the stock exchange under sub -section (1), the  
Commission may determine and conclude the matters listed in sub-section (1) in such manner as may 
be prescribed and any such determination by the Commission shall be final and binding on  the stock 
exchange, its shareholders including the initial shareholders and the CDC. 
 
(6) Refusal by any initial shareholder to accept an agreement duly entered in accordance with 
the provisions of this section 12, or failure by any person to comply with any directions given by the  
Commission, or the willful failure of the committee to sell the shares if the offer price received for  
such shares is equal to or more than the approved valuation, shall be an offence. 
 
13. Sale and purchase of shares by a strategic investor and a financial institution.—(1) A 
strategic investor or a financial institution who acquires shares under section 12 may sell its 
shareholding in a stock exchange only to another strategic investor or a financial institution as the case 
may be, with the prior written approval of the Commission. 
 
(2) A strategic investor may acquire such further shares of a stock exchange in which it is a  
strategic investor to enable it to increase its shareh olding up to fifty one percent of the total paid up  
capital, subject to the following conditions, namely:— 
 
(a) the prior approval of the Commission is obtained for such further acquisition of 
shares; 
 
(b) the further acquisition is made not less than three years after it acquires 
shares under section 12; and 
 
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(c) the shares are purchased from the market by making a public offer in a 
transparent manner. 
 
(3) No financial institution who has acquired shares under section 12 may acquire any further  
shares from the general public: 
 
Provided that a financial institution may acquire shares from another financial institution 
with prior approval of the Commission. 
 
(4) The Commission may, by order in writing and reasons to be recorded, relax any one or all 
of the restrictions provided in sub-sections (1) to (3) after four years of date of demutualization. 
 
(5) The provisions of  the Listed Companies (Substantial Acquisition  of Voting Shares and  
Takeovers) Ordinance, 2002 (CIII of 2002) shall not apply to any acquisition of voting shares of a  
stock exchange by a strategic investor. 
 
14. Powers of the Commission to require divestment .—(1) If an initial shareholder, a 
member of the general public (including a company) or a TRE certificate holder directly or indirectly 
acquires more than one percent of the shares of a stock exchange, the Commission may direct such 
person to divest these shares in a manner as may be specified by the Commission from time to time or 
on a case to case basis. 
 
Explanation.—For the purposes of this sub-section a person shall be deemed to have acquired 
shares indirectly if these shares have been acquired by a connected person of such person. 
 
(2) If a financial institution other than a financial institution who ac quire shares under 
section 12, directly or indirectly acquires more than five percent of the shares of a stock exchange, the 
Commission may direct such financial institution to divest these shares in a manner as may be specified 
by the Commission from time to time or on a case to case basis. 
 
Explanation.—For the purposes of sub-section (2) a financial institution would be deemed to 
have acquired shares indirectly if these shares have been acquired by a connected person of such  
financial institution. 
 
(3) The limits on the holding of shares by persons mentioned in sub -sections (1) and (2) may 
be amended by the Commission from time to time if deemed necessary. 
 
(4) Willful failure to comply with any provisions of this section or any directions issued by the 
Commission hereunder shall be an offence under this Act. 
 
15. Listing of shares.—(1) The shares of a stock exchange shall be listed, on any such stock  
exchange and within any such time as the Commission may prescribe in consultation with the board 
of directors of the stock exchange which is to be listed. 
 
(2) Where the shares of a stock exchange are listed on itself, the Commission shall act as the 
front line regulator of such stock exchange for such listing, and notwithstanding anything contained in 
any other law, shall have the necessary powers and authority to regulate and administer all the laws, 
rules and regulations prescribed for such matter. 
 
(3) The self-listing of the stock exchanges under this section shall be administered and managed 
 
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by the Commission in such manner as may be prescribed.  
 
(4) A stock exchange shall make an application for the listing of its shares on itself in the 
manner and form, and subject to such conditions, as the Commission may prescribe. 
 
(5) Upon receipt of an application under sub-section (4), the Commission may if it is satisfied, 
after making such inquiry and receiving such further information as it may consider necessary, that the 
application fulfils the prescribed conditions for listing, order the listing of the shares. 
 
(6) Willful failure of a stock exchange to comply with any prescribed condition or direction of 
the Commission shall be an offence under this Act. 
 
16. Trading rights.—(1) An initial shareholder who is issued a TRE certificate under section 
5 shall, if not already registered as a broker with the Commission, be entitled to be so registered not  
later than two years from the date of demutualization provided that he meets the fit and proper criteria: 
 
Provided that such TRE certificate holder shall commence business not later than six months 
from the date of registration as a broker. 
 
(2) A TRE certificate issued under section 5, may only be transferred once in a manner as may 
be prescribed: 
 
Provided that transfer of the TRE certificate by a registered broker shall result in the 
cancellation of his registration as broker. 
 
(3) Any fit and proper person who acquires a TRE certificate from an initial shareholder in  
accordance with sub-section (2), shall get himself registered as a broker not later than six months from 
the date of acquiring the TRE certificate, and shall commence business not later than twelve  months 
from the date of acquiring the TRE certificate. 
 
(4) A stock exchange shall not issue new TRE certificates to any person 1[within a period of 
four years from the commencement of this Act] unless two -third majority of TRE certificate holders 
of a stock exchange decide otherwise. 
 
(5) After 1[the expiry of period specified in sub -section (4)], a stock exchange shall offer for 
issuance 1[of] fifteen TRE certificates each year 1[for the period of nine years] in the manner prescribed 
by the Commission 
 
(6) After 1[the expiry of the period specified in sub -section (5)], no restriction shall be placed 
on the issuance of TRE certificates by the stock exchange, and any person who meets the fit and proper 
criteria for registration as a broker shall be eligible to be issued a TRE certificate. 
 
 (7) Any person who is issued a new TRE certificate shall get himself registered as a broker not 
later than six months from the date of issuance of such TRE certificate and shall commence business  
not later than three months from the date of registration as a broker. 
 
(8) After the date of demutualization, only a private company or a public company as defined 
in the Companies Ordinance, 1984 (XLVII of 1984) shall be eligible to obtain registration as a broker 
on a stock exchange: 
 
1Subs. and ins. by Act XXII of 2015, s. 3. 
 
Page 15 of 18  
 
Provided that any TRE certificate holder who is registered as a broker on a stock exchange on 
the date of commencement  of this Act shall not be required to convert in to corporate brokerage 
house till one year from the commencement of this Act. 
 
Explanation.—For the purpose of this sub-section the expression “Corporate brokerage house” 
means a private company or a public company which is registered as a broker. 
 
(9) All Corporate brokerage houses shall comply with the provisions of the Code of Corporate 
Governance issued by the Commission as amended from time to time. 
 
(10) Except as provided in sub-section (2), all TRE certificates shall be nontransferable. 
 
(11) Failure of a person, holding a TRE certificate including an initial shareholder, to get 
himself registered as a broker or commence business within the different periods specified in this 
section, or in the case of an initial shareholder, to transfer the TRE certificate within two years from 
the date of demutualization, shall result in the lapse of such TRE certificate. 
 
(12) The Commission shall prescribe the manner, form and procedures for the transfer and  
issuance of any TRE certificate in any stock exchange. 
 
                                                         CHAPTER-IV 
 
INTEGRATION 
 
17. Integration without application to the Court —(1) Any two or more stock exchanges 
may, upon filing of a scheme of integration, and after compliance with such procedures as may  be 
prescribed, be integrated by an order of the Commission, so as to transfer and vest in the successor  
stock exchange (“the successor stock exchange”) all the assets, undertakings and liabilities of any stock 
exchange which, upon such integration, is proposed to cease to exist (“the transferor stock exchange”). 
Stock exchanges desirous of integrating may also do so by creating a new legal entity to  which the 
assets, undertakings and liabilities of each of the stock exchanges may be transferred. 
 
(2) A scheme of integration may only be submitted to the Commission under sub -section (1) 
after  it has been approved by a special resolution of the shareholders of each stock exchange. 
 
(3) The successor stock exchange, if already registered as a stock exchange, shall not be 
required to apply to the Commission for fresh registration. Where however, a new legal entity is created 
as a result of integration, such entity shall apply for registration as a stock exchange under section 5 of 
the Securities Ordinance. The registration granted to any existing stock exchange which ceases to exist 
after the integration shall lapse upon such integration. 
 
18. Power of the Commission to approve a scheme of integration.—(1) On receipt of a 
scheme of integration under section 17, the Commission may approve the scheme in principle. Upon 
such approval, the stock exchanges shall publish the scheme of integration in two daily newspapers of 
national coverage, requiring the stakeholders to intimate directly to the Commission in writing, within 
the 15th day from the date of such publication, the reasons, if any, why the Commission should not  
approve the scheme of integration. Upon receipt of any written objections to the scheme of integration, 
the Commission shall provide a reasonable opportunity of being heard to such objectors. 
 
(2) The Commission may make such inquiry and obtain such further information, as it may 
deem necessary, in order to determine as to whether to finally approve the scheme of integration or 
 
Page 16 of 18  
not. 
(3) The Commission may, if satisfied that the requirements of the prescribed procedure have 
been complied with, approve the scheme of integration with such modifications, if any, as it may deem 
appropriate, and specify the effective date of integration. 
 
(4) Where a scheme of integration is approved under sub -section (3), it shall be posted on the  
website of the Commission and published in the official Gazette. In addition, the stock exchange shall 
publish the approved scheme in two daily newspapers of national circulation. 
 
(5) With effect from the date of the order of approval of the scheme of integration, 
notwithstanding anything to the contrary contained in any other law for the time being in force or any 
agreement, award, judgment or decree, the scheme of integration shall have effect and shall be binding 
on all persons interested in the transferor stock exchange or the successor stock exchange (or the new 
legal entity as the case may be) including all shareholders, stakeholders and employees of the stock 
exchanges and all persons having an interest in any asset, undertaking or liability of either the  
transferor stock exchange or the successor stock exchange (or the new legal entity as the case may be). 
 
(6) Notwithstanding anything to the contrary contained in any other law for the time being in  
force, with effect from the date of the order approving the scheme of integration, all the assets,  
undertakings and liabilities of the transferor s tock exchange shall, in accordance with the scheme of  
integration, stand transferred to, and vest in, the successor stock exchange, and the transferor stock  
exchange shall, with effect from the date of such order, cease to exist. 
 
(7) The stakeholders of the transferor stock exchange shall, with effect from the date of the 
order approving the scheme of integration, become the stakeholders of the successor stock exchange 
or the new legal entity as the case may be. 
 
(8) The Commission may make such further or consequential orders or give such directions, as 
it deems necessary, in order to effect the integration of the stock exchanges in accordance with the  
approved scheme of integration. 
 
(9) Where the Commission is satisfied that it would not  be in the interest of either the capital 
and stock markets or the general public to approve the scheme, it may by an order in writing, reject the 
scheme: 
 
Provided that the Commission shall, prior to issuance of such order, give a reasonable 
opportunity of being heard to the stock exchanges seeking integration. 
 
 
CHAPTER-V 
 
OFFENCES AND PENALTIES 
 
19. Powers of the Commission.—(1) Where the Commission is satisfied that a stock exchange, 
a director of a stock exchange, committee member, shareholder, TRE certificate holder or any other  
person, has prima facie committed an offence under this Act or has contravened any provision of this 
Act or the regulations hereunder, the Commission may provide a reasonable opportunity of hearing to 
the stock exchange, the director, a shareholder TRE certificate holder or committee member as the  
case may be. 
 
(2) If after giving a  reasonable opportunity of hearing to  the stock exchange, its directors,  
shareholders, TRE certificate holders or committee member as the case may be, the Commission is  
satisfied that any of the aforementioned persons has knowingly and wilfully committed an offence  
under this Act, it may,— 
 
Page 17 of 18  
 
(a) direct the stock exchange to pay to the Commission by way of penalty a sum 
not exceeding twenty million rupees or suspend or cancel the registration of the 
stock exchange; 
 
(b) direct each director responsible for such failure to pay to the Commission from 
his own sources by way of penalty a sum not exceeding one million rupees or 
suspend or remove such director from the Board of the stock exchange; 
 
(c) direct each shareholder guilty of an offence under this Act to pay to the 
Commission from his own sources by way of penalty a sum not exceeding one 
million rupees; 
 
(d) direct each TRE certificate holder guilty of an offence under this Act to pay to 
the Commission from his own sources by way of penalty a sum not exceeding 
one million rupees; and 
 
(e) direct each committee member guilty of an offence under this Act to pay to the 
Commission from his own sources by way of penalty a sum not exceeding one 
million rupees. 
 
(3) Any sum directed by the Commission to be paid under sub-section (2) shall be recoverable 
by the Commission as arrears of land revenue. 
 
(4) Notwithstanding anything to the contrary contained herein, the Commission may, if it is  
satisfied that a TRE certificate holder, whether or not he is a shareholder of the stock exchange, has  
wilfully and knowingly failed to comply with the provisions of this Act, su spend or cancel the TRE  
certificate. 
 
 
CHAPTER-VI  
 
MISCELLANEOUS 
 
20. Restriction on amendments to the  Memorandum and Articles and further  issue of 
capital.—(1) A stock exchange shall not make any amendments to its Memorandum and Articles of  
Association without the prior written approval of the Commission,. 
 
(2) A stock exchange shall not issue further shares without the prior written approval of the  
Commission. 
 
21. Winding up of a stock exchange. A stock exchange shall not commence any proceedings 
for winding up, whether voluntary or otherwise, without the prior written approval of the Commission: 
 
Provided that notwithstanding anything contained in any other law for the time being in force, 
the Commission shall have the power to take all necessary steps to rehabilitate a stock exchange that 
is facing financial or operational problems, in a manner as may be prescribed. 
 
22. Prohibition on sale etc of assets of the stock exchange. No stock exchange shall sell  
immovable assets owned by the stock exchange at the date of corporatisation without the prior approval 
of the Commission and shall ensure that all assets are utilized in furtherance of the business  of the 
stock exchange. 
 
Page 18 of 18  
 
23. Power to make regulations. The Commission, may, by notification in the official Gazette, 
make regulations for carrying out the purposes of this Act. 
 
24. Power to give directions. —(1) The Commission shall have the power to give such 
directions to a stock exchange, either jointly or severally, or to a shareholder, or a committee member, 
or a TRE certificate holder as the Commission deems necessary for achieving the purposes of this Act. 
 
(2) The stock exchange, shareholder, TRE certificate holder or committee member to which a 
direction is issued under this section or any other section of this Act shall be bound to comply with the 
same and failure of a stock exchange, shareholder, TRE certificate holder or committee member to 
comply with any such direction shall be an offence under this Act. 
 
25. Act to override other laws.— The provisions of this Act shall have effect notwithstanding 
anything to the contrary contained in any other law for the time being in force. 
 
26. Savings.— Save as otherwise provided in this Act, nothing in this Act shall curtail or deem 
to affect or curtail the powers of the Commission under the Securities and Exchange Commission of  
Pakistan Act, 1997 (XII of 1997), the Companies Ordinance, the Securities Ordinance or any other  
law for the time being in force. 
 
27. Removal difficulty.— If any difficulty arises in giving effect to the provisions of this Act, 
the Federal Government may, not inconsistent, with the provisions of this Act, give such directions as 
it may consider necessary for the removal of such difficulty. 
 
 
____________ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 RGN Dated 30-03-2026