The Securities and Exchange Commission of Pakistan (SECP) has taken a significant step towards strengthening the regulatory framework for the mutual fund industry by introducing detailed regulations for “Investment Plans.”
These new requirements aim to enhance governance, streamline operations, and provide secure investment opportunities, contributing to increased retail participation in the mutual fund sector.
This initiative builds upon the provisions previously introduced through amendments to the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (NBFC Regulations). According to a press release, the new framework has been developed after extensive consultations with industry stakeholders, including the Mutual Funds Association of Pakistan (MUFAP), ensuring that the regulations align with global best practices and meet the need for compliance with established principles.
The SECP’s new regulations specify the eligible categories of Collective Investment Schemes (CIS) under which Asset Management Companies (AMCs) can offer investment plans. These include fund of funds, fixed rate/return schemes, sovereign income funds, asset allocation schemes, capital-protected funds, and exchange-traded funds (ETFs). The SECP has outlined clear operational requirements, which include guidelines on the maximum number of investment plans a company can offer, their duration, exposure limits, investment restrictions, and performance benchmarks.
Additionally, the framework promotes transparency by mandating specific disclosures for fund of fund CIS. The SECP has also introduced requirements for additional risk information to help investors make informed decisions. To further ensure transparency, the new regulations stipulate comprehensive offering guidelines, including subscription timelines, net asset value (NAV) announcements, and detailed provisions for Total Expense Ratios, formation costs, and other charges associated with investment plans.
The SECP’s emphasis on clear and structured operational protocols is designed to protect investors and build trust in the mutual fund industry. The regulations aim to foster a transparent, efficient, and investor-friendly environment, which aligns with the SECP’s broader goal of promoting ease of doing business and providing access to innovative, regulated financial products.
By introducing these updated regulations, the SECP is reinforcing its commitment to creating a robust and sustainable mutual fund industry that supports investor confidence and contributes to the overall growth of the financial sector. The SECP continues to prioritize the creation of a conducive environment for the mutual fund industry, further expanding retail penetration in the market and ensuring investor protection.