A regulator is only as credible as the people who run it and the rules that decide who they are. Papua New Guinea learned this the hard way between 2019 and 2021, when two men each claimed to be the lawful head of the Securities Commission. The 2023 amendment rewrote the governance rules in response.
The old model and why it failed
As originally enacted, Part II of the Securities Commission Act 2015 concentrated power in one person. The Chairman was a full-time Executive Chairman appointed for seven years, charged with the day-to-day administration of all three securities Acts and with the exclusive responsibility for “the regulation of the capital market system” (old sections 10, 12 and 15). Old section 10(2) gave the Chairman personal authority to exercise the Commission’s powers. A Board of between five and ten Commissioners set policy but little else, and both Chairman and Commissioners were appointed by the Head of State on the advice of a Securities Appointment Committee chaired by the Prime Minister (old section 18).
The weakness showed in Oil Search Ltd v Tongayu [2021] PGNC 22; N8785. Oil Search needed the Commission’s approvals and exemptions under sections 116 and 138 of the Capital Market Act 2015 for a capital raising of up to AUD 1.6 billion. It obtained them in March and April 2020 from Christopher Hnanguie, acting as Chairman. Alex Tongayu, who claimed to be the legitimate Acting Chairman, said he had never granted them and on 2 June 2020 ordered PNGX to suspend trading in Oil Search shares. The company went to the National Court, which lifted the suspension and later held that its originating summons seeking declarations was the proper form of proceeding. PNGX itself told the court of its concern over the uncertainty about who held the office. Because every regulatory power ran through a single Chairman, a contest over that office paralysed the regulator. See the Oil Search case explained.
The Board of seven
The Commission is governed by a Board of seven members: the Governor of the Bank of Papua New Guinea, the Secretary for Treasury and the Secretary for Commerce and Industry as ex officio members, and four appointed members, of whom one must be a lawyer and three must have expertise in the capital markets.
The appointed members are selected under the Regulatory Statutory Authorities (Appointment to Certain Offices) Act 2004, the merit-based process that applies to most PNG regulatory boards, and hold office for up to four years (section 12). The Minister appoints the Chairman from three nominees put forward by the Board, for a term of up to three years (section 13). The new Part II also provides for a Deputy Chairman, for the removal of members, for the Board to establish committees, for members to disclose interests in matters before the Board, and for codes of conduct. Section 15 disqualifies members of Parliament and candidates for election, bankrupts, and anyone holding more than 10 per cent of a listed company. The quorum is five (section 20), so no decision can be taken by a small faction. The Board must deliver an annual report to the Minister by the end of March each year (section 26), which the Minister tables in Parliament.
The Chief Executive Officer and staff
The Board governs; it does not run the office. Day-to-day management belongs to a Chief Executive Officer appointed for up to four years (sections 27 and 28), who performs the Commission’s functions under the Board’s direction and may delegate to a Director or officer (section 29). The Commission may have up to five Directors heading its divisions (section 30), below whom sit the officers and Investigating Officers who carry out licensing, surveillance and investigations. Until a CEO is appointed, the transitional section 121 lets the Chairman perform the CEO’s functions. Section 115, retitled “Protection of members”, gives Board members, the CEO and officers immunity from suit for acts done in good faith.
| Feature | Before 2023 amendment | After 2023 amendment |
|---|---|---|
| Head of the Commission | Full-time Executive Chairman, seven-year term | Part-time Chairman chosen by the Minister from Board nominees, up to three years |
| Board | 5 to 10 Commissioners | 7 members, 3 ex officio and 4 appointed |
| Appointment | Head of State on advice of Securities Appointment Committee | Regulatory Statutory Authorities (Appointment to Certain Offices) Act 2004 process |
| Management | Chairman | Chief Executive Officer, up to four years |
| Quorum | Five | Five |
Independence within accountability
Section 6 still declares that the Commission is not subject to direction or control by any person, and section 38(4) requires it to act independently. The Board model reconciles independence with accountability: the Minister chooses the Chairman but only from the Board’s nominees, the central bank and Treasury have seats but no majority, and the annual report goes to Parliament. For a unit trust investor the practical effect is that decisions such as revoking a trustee’s licence or approving a new scheme are now Board decisions made by a quorum, not the act of one official whose own title may be in doubt.
The consolidated text of the Securities Commission Act on PacLII and in older commentaries still shows the pre-2023 Part II with its Chairman, Commissioners and Appointment Committee, and sections 9 to 37 have been renumbered. Read the Act together with the Securities Commission (Amendment) Act 2023, certified on 16 May 2024, before relying on any section in Part II.
Sources
- Securities Commission Act 2015 — ss 6, 9–13, 15, 20, 26–30, 38(4), 115, 121 as amended by the Securities Commission (Amendment) Act 2023; old ss 9–18
- Capital Market Act 2015 — ss 116, 138
- Oil Search Ltd v Tongayu [2021] PGNC 22; N8785
Before relying on anything here, read the current text of the Capital Market Act 2015 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.