New SEC Bill vests power to appoint DG in Commission, not Minister

• Analysts claim DG loses degree of independence and commission assumes certain level of executive role

In a departure from past practice, the new Securities Exchange Bill has taken away the authority of the subject minister in the appointment of the Director General and vested it in the Commission.

The Bill, which the Daily FT exclusively reported yesterday, states that the Commission shall appoint a Director General who shall be its Chief Executive Officer. Under the existing Act, the Minister shall, on the recommendation of the Commission, appoint a Director General of the Commission. The power to remove the Director General under the new Bill is also vested with the Commission as opposed to the Minister on the recommendation of the Commission.  

Analysts said the Director General position is an important function of the SEC and has always been seen as being independent from the Commission.  According to some analysts, the change proposed in the new Bill will dilute the independence of the Director General and also makes the Commission take on more of an executive role. 

“The independence of the DG is maintained by virtue of the Minister appointing the DG and also removal with the Commission having no effective role. The existing arrangement preserves the independence of the DG who is the CEO. The new Bill stating that the Commission can appoint and can sack the DG means there is a degree of loss of independence on the part of the DG.

“This also lends the Commission the character of an executive. In most other markets, the Commission is a policymaking body and the DG runs the organisation and the new Bill dilutes this and goes against the grain of capital market regulation,” said an analyst. 

The new Bill appears comprehensive on the position of the Director General. It states: “The Commission may remove from office the Director-General appointed under subsection (1) by a two-thirds majority having regard to any one of the following reasons - (a) that person’s integrity or standing; (b) the likelihood of any financial or any other conflict of interests in the affairs between the Commission and the Director-General; (c) that person becomes of unsound mind or incapable of carrying out his duties; (d) that person is guilty of serious misconduct in relation to his duties; or (e) that person is involved in any activity which may interfere with his independence in discharging his duties: provided that the Commission shall grant an opportunity to the Director-General of being heard, prior to such removal.”

Under the existing Act, the Minister may, on the recommendation of the Commission, remove from office the Director General appointed and such a removal shall not be called into question in any Court.