Pkrevenue.com

Tag: SECP

  • SECP proposes amendments to AML, CFT regulations to comply FATF recommendations

    SECP proposes amendments to AML, CFT regulations to comply FATF recommendations

    ISLAMABAD: Securities and Exchange Commission of Pakistan (SECP) has proposed amendments to Anti Money Laundering and Countering Financing of Terrorism Regulations, 2018 as recommended by FATF.

    The SECP on Wednesday said that the amendments had been proposed to further strengthen SECP’s AML/CFT regime.

    The proposed amendments elaborate on the Risk Based Approach requiring regulated persons (RPs) including; securities brokers, futures brokers, insurers, Takaful operators, non-banking finance companies (NBFCs) and Modarabas to conduct risk assessment that is aligned with Pakistan’s latest National Risk Assessment and ensure implementation of Targeted Financial Sanctions.

    The minimum information required for the purpose of KYC/CDD has been listed to make documentation requirements simple and clearer.

    Moreover, the draft amendments provide more clarity on verification for Beneficial Ownership, close associates and family members of PEPs. The RPs are encouraged to use technological solutions for screening and monitoring of transactions as per best practices.

    The SECP has tried to address the regulated sector’s feedback regarding gaps in the implementation of AML/CFT Framework.

  • Stock brokers express serious reservations on proposed new regime

    Stock brokers express serious reservations on proposed new regime

    KARACHI: PSX Stockbrokers Association has issued rebuttal on propaganda of Securities and Exchange Commission (SECP) through media to pass the proposed new brokers regime (NBR).

    In a press release issued on Monday, it said that firstly, the so called “Small Brokers” term do not exist.PSX Stockbrokers Association (PSA) being representative of more than 66% of the Brokers Fraternity has serious reservations on the Proposed NBR. Regulators approach to defuse the tension by using Small, Medium and Large Size Brokerage Houses is an effort to divide and rule.

    None of the objectives, used to float this NBR, can be achieved by merely increasing the Net-Worth of the Stock Brokers. Clearing and Settlement Risk, as envisaged as Primary Objective, do not exist particularly when:

    1. Pre and Post trade margins are taken

    2. PSX settles trade on T+2 basis

    3. Minimum Rs.16 million per broker is being collected as margin under Base Minimum Capital (BMC) irrespective of any trade

    4. Minimum Rs.5 million under Net Capital Balance

    5. Minimum Rs.7.5 million under Liquid Capital Balance(LCB)

    Apart from the above, a total fund of more than Rs.7 billion is accumulated under Settlement Guarantee Fund and Investor Protection Funds collected by National Clearing Company of Pakistan Ltd (NCCPL) and Pakistan Stock Exchange (PSX) respectively.

    Stock Market declined by more than 50% from May 2017, from 53,500 Index to 28,000 Level without any clearing and settlement default. This clearly reflects that Exposure Margins, acquired by Front Line Regulators, have also minimized, if not eroded the existence of Clearing and Settlement Risk.

    As far as the Custody Risk is concerned, this Proposed NBR in fact increases the said risk, rather than reducing it. A simple calculation based on the parameters provided under the scheme would reveal that Stock Brokers would now be allowed custody by more than 200% of what is allowed currently.

    The foregoing clearly reflects that none of the objective of this NBR will be achieved rather than Custody Risk will be concentrated more in few hands.

    Proposed increase in Net-Worth of Rs.65 million in the NBR cannot justify allowance of 200% increases in Custody.

    Therefore, it cannot be claimed that it “primarily aims to strengthen the Capital Market and restore Investor’s Confidence”
    Commission, while trying to aggravate using AML/CFT/FATF requirements, is unaware of the progress made by the Stock Brokerage Industry and we quote below extract from Pakistan National Risk Assessment (PNRA) Report, published in September 2019, by Ministry of Economic Affairs, wherein, clause 150 states that:

    Considering that all the transactions coming to the securities markets is through banking channel and the primary focus of investors in these markets is investment in securities of the companies, the securities markets are exposed to a lower TF threat abuse. Further, LEAs and EMU have so far not found any incident of TF having a link with the securities or commodities markets.

    Anti Money Laundering Act, 2010, was promulgated on March 27, 2010, and Stock Brokers being Sole Properties were not made part of it. Concept of Corporate Brokerage Houses was implemented after the Demutualization in 2012.

    Furthermore, the claims by SECP’s insider that 27 brokers have defaulted during last 10 years resulting in defaulting of Rs5.8 billion, is nothing but aggravating the situation as prior to demutualization Stock Broker’s Membership Card was valued at Rs150 million. Moreover, it would have been much better had the names and amount of defaulted brokerage house were also disclosed so as to give clearer picture. The average amount of Rs200 million defaults as being painted in the media is misleading.

    The hidden objective of this NBR can be visualized by Section 2.2.3 of the Concept Note on NBR issued in November 2019, which stipulates that, in order to save the compliant brokerage houses that have incurred substantial compliant cost, this NBR is being introduced and all the brokerage houses are therefore forced to adopt all the compliance requirements irrespective of the nature, size and complexity of business.

    This is to ensure that these third generation brokerage houses should be compelled to incur the same amount of expenses as incurred by the brokerage houses with research facilities. Regulators have overlooked the concept of discount brokerage houses, exist worldwide.

  • SECP extends company registration facility to transgenders

    SECP extends company registration facility to transgenders

    ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has extended facility of company registration to transgenders community.

    The regulator introduced a separate category for members of transgenders community in its online portal for company registration and compliance i.e. eServices.

    This initiative is in line with the government efforts to grant fundamental rights to transgender community, under the “the Transgender Persons (Protection of Rights) Act, 2018”.

    This Act allows individuals to mention their identity on all official documents including IDs, passport, educational certificates and driving licenses.

    Now, in eServices, a person has an option to self-identify under three classifications i.e. male, female and other. With this initiative, the transgender community is able to register a company or become shareholder or director in a company with personal identity of their choice.

  • Companies listing simplified to promote capital formation: SECP

    Companies listing simplified to promote capital formation: SECP

    ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has said amendments have been made to regulations related to Initial Public Offering (IPO) to make listing simplified for promoting capital formation through securities market.

    In a statement on Friday, the SECP said that it revamped initial public offering (IPO) regime to make the IPO process simple, cost effective and more efficient.

    The amendments in IPO Regulations 2017, have been made after thorough consultation with market participants with an objective to promote capital formation by facilitating issuers and safeguarding the interest of general public by enhancing disclosures.

    In the new set of regulations, the objective eligibility criteria for listing of companies have been simplified to promote capital formation through securities market.

    Moreover, the issuers that have a track-record of less than three years and were not making profit from last two years are allowed to raise capital from securities market.

    However, such Issuers are required to submit a business plan and provide enhanced risk disclosures in the offering document for prospective investors.

    Further, with perspective of providing ease and reducing cost of IPOs, the requirement of submitting audited accounts has been reduced from 5 to 2 years.

    In addition, the time frame relating to submission of progress report by the Issuer has been increased from quarterly to half yearly basis.

    To safeguard the interest of the general public, certain parameters for green field projects (GFPs) have been introduced.

    The said parameters include: (i) At least 51% equity contribution by the sponsors; (ii) successful business track record of the sponsors; (iii) experience and skills of the management to run GFP; (iv) mandatory financial close; (v)risk-based disclosure in the offering document etc.

    Further, an exit offer mechanism has been introduced to protect the investors in case of change in the principal purpose of the issue.

    In order to encourage foreign investment in the country, the Book Runner has been allowed to waive the margin requirement of the institutional investors including foreign investors.

    Moreover, related parties have been allowed to perform different roles in the same IPO Transaction. The new IPO regime is a shift towards disclosure-based regime.

    Disclosures pertaining to principal purpose of the issue, risk factors, share capital, financial information, management of the issuer, legal proceedings and overdue loans are made part of the prospectus.

    A new section titled summary of the Prospectus has been introduced to help investors better understand the offering document.

    Moreover, to facilitate small enterprises, startups and Greenfield companies that aspire to raise funds through capital markets, the SECP has already introduced an alternate board namely Growth Enterprise Market (GEM) at PSX.

    The GEM is in addition to PSX’s main board for listing and trading of equity securities.

  • SECP drafts framework to facilitate startups in Pakistan

    SECP drafts framework to facilitate startups in Pakistan

    ISLAMABAD: Securities and Exchange Company of Pakistan (SEC Pakistan) has issued draft regulatory framework to facilitate startups in the country.

    The SECP said that with the objective to promote growth in the startups sector of Pakistan, it is necessary to make relevant changes in Company Law to facilitate the incorporation process for the startups and provide a conducive regulatory environment.

    A) Proposed changes in the Parent legislation (Companies Act)

    i) Definition of Startups

    In the Third Schedule to the Companies Act, the following category is proposed to be added:

    An entity shall be considered as a Startup:

    a) Upto a period of 10 years from the date of incorporation/registration

    b) Turnover of the entity for any of the financial years since incorporation/registration is not greater than 100 Million Rupees

    c) Entity is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.

    Provided further that an entity formed by splitting up or reconstruction of an existing entity or a separate company with similar objects and ownership shall not be considered a “Startup Company”

    i) Amendment in the Section “83 – Further issue of capital” to offer “Employee Stock Option Scheme (ESOS)” shall help address the employee retention and reward issues being faced by startups.

    The following new proviso is proposed to be added:

    “Provided that the directors of private limited company may allot the declined or unsubscribed shares to its employees under “Employees Stock Option Scheme”, on such conditions, as may be specified.”

    ii) Amendment in the clause “88 – Power of a company to purchase its own shares” shall facilitate ESOS option and shall facilitate buy back of shares by companies, since they do not have a secondary market. It would also facilitate startups in case, any founding member needs to exit from the company by allowing return of shares to a company.

    B) Changes required in Companies (Further Issue of Shares) Regulations, 2018

    i) Amendment in the clause “7. Application to the Commission for issue of shares other than right” is a consequential change whereby no application for approval shall be required to be made to the Commission under Section 83 of the Act, by a Private Company, and shall only be required to maintain and file the documents with the Commission not later than two months from the decision to issue such shares, as specified in sub-regulation (2) below.

    ii) Conditions for issuance of shares with differential rights

    The requirement for the company not to default in filing financial statements and annual returns for three financial years immediately is being changed to preceding the financial year in which it is decided to issue such shares.

    iii) Furthermore, for a private limited company, the valuation mechanism of non-cash consideration and further conditions, if any, will be amended in Companies (Further Issues of Shares) Regulations, 2018.

    Introduction of Regulatory Sandbox

    Regulatory Sandbox is a tailored regulatory environment for conducting limited scale, live tests of innovative products, services, processes, and/ or business models in a controlled environment for a limited period of time so as to assess their viability to be launched on full-scale, and to determine the compatible and enabling regulatory environment that will be conducive for the innovative solutions. The objective of these Guidelines is to purposefully meet the above.

    The Regulatory Sandbox is primarily applicable for new products, services or business models which have not been addressed under existing laws and regulations; or these new ideas bring an innovative approach to the market and there exists considerable uncertainty in terms of unexpected adverse outcomes or existing regulatory framework does not fully address the solutions proposed to be experimented through the regulatory sandbox.

  • SECP notifies conditions for lending securities by asset management companies

    SECP notifies conditions for lending securities by asset management companies

    ISLAMABAD: Securities and Exchange Commission of Pakistan (SECP) has prescribed conditions for lending of securities by Asset Management Companies on behalf of Collective Investment Schemes.

    The SECP issued Circular No. 18 of 2019 dated December 20, 2019 and prescribed the following conditions for lending of securities by Asset Management Companies on behalf of Collective Investment Schemes:

    I. An Asset Management Company on behalf of Collective Investment Schemes namely equity, asset allocation, balanced and index schemes may lend equity securities maximum up to 10 percent of net assets of such collective investment schemes out of its equity portfolio.

    II. An asset management company on behalf of Collective Investment Scheme shall lend securities only through platform provided by an authorized intermediary for the purpose of securities lending and borrowing as per the Securities (Leveraged Markets and Pledging) Rules, 2011.

    III. An asset management company shall make necessary amendments in offering document of respective Collective Investment Scheme and given necessary notice to the unit holders as per the requirements 44(7) of Non-Banking Finance Companies (NBFC) Regulations 2008.

  • Company registration increases to 108,433: SECP

    Company registration increases to 108,433: SECP

    ISLAMABAD: The total number of registered companies increased to 108,433 by end of November 2019, said a statement issued by Securities and Exchange Commission of Pakistan (SECP).

    The regulator registered 1,389 new companies in the month of November 2019.

    The substantial increase is result of SECP’s recent reforms to simplify the registration processes and reduce incorporation and regulatory forms tariffs.

    Among new incorporations, around 72 percent companies were registered as private limited companies, while around 25 percent were registered as single member companies.

    Three percent were registered as public unlisted companies, not for profit associations, foreign companies and Limited Liability Partnership (LLP) whereas 96 percent companies were registered online. During the month 130 foreign users completed registration process from overseas.

    The trading sector took the lead with the incorporation of 237, services with 165, I.T. with 159, construction with 151, tourism with 77, real estate development with 66, education with 65, food and beverages with 51, corporate agricultural farming with 39, engineering, and pharmaceutical with 35 each, marketing & development with 33, textile with 27, transport with 25, chemical with 24, auto and allied 21, healthcare with 19, mining and quarrying with 16, electric goods, and logging with 12 each, broadcasting and telecasting, and fuel and energy with 11 each, and 96 companies were registered in other sectors.

    Foreign investment has been reported in 61 new companies. These companies have foreign investors from, Bahrain, China, Czech Republic, Egypt, Germany, Korea South, Malaysia, Philippines, Russia, Saudi Arabia, Spain, Sweden, Switzerland, Taiwan, Tajikistan, the UK and the US.

    The highest numbers of companies, i.e. 477 were registered in Islamabad, followed by 358 and 282 companies registered in Lahore and Karachi respectively. The CROs in Peshawar, Multan, Gilgit-Baltistan, Faisalabad, Quetta, and Sukkur registered, 106, 64, 48, 42, 7 and 3 companies respectively.

  • SECP, universities sign MoU to promote financial literacy

    SECP, universities sign MoU to promote financial literacy

    ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has signed Memorandums of Understanding (MOU) with five leading universities to promote financial literacy among youths.

    SECP’s Commissioner Investor Education Department, Shaukat Hussain inked the MoUs, said a statement on Tuesday.

    While universities were represented by their respective Vice Chancellors, Registrars and Directors.

    These HEC recognized universities included University of Balochistan, Mehran University of Engineering and Technology Jamshoro, University of Wah, Forman Christian University Lahore and University of Malakand. Including these five MOUs, SECP’s total number of active MOUs with various institutions under its investor education program ‘Jamapunji’ reached 51, giving it leverage of an ever increasing network of partners for spreading investor awareness.

    Talking at the occasion, Shaukat Hussain emphasized on the importance of collaborative efforts between the regulator and the educational sector to enable a more aware and responsible financial ecosystem in Pakistan.

    He mentioned SECP’s efforts leading to 28 places jump in the World Bank’s Ease of Doing Business Index, making Pakistan among the top 10 countries with the most improved business climate.

    He lauded each of these universities for their established Offices of Research, Innovation and Commercialization (ORICs), which encourage and facilitate aspiring student entrepreneurs.

    The Commissioner apprised participants of SECP’s dedicated Startup Portal and ongoing collaboration with various National Incubation Centers across Pakistan.

    He informed participants that SECP is member of HEC’s National Curriculum Revision Committees (NCRC) and providing due input in improving ‘ Economics’ and ‘ Business Administration’ tertiary level curricula.

    He was of the view that a curricula with components of capital markets, insurance sector and basics of financial literacy would help in producing astute entrepreneurs.

    The representatives appreciated SECP’s efforts for cultivating financial literacy.

    Under the MoU, SECP will be holding regular seminars at universities on a continuing basis to impart knowledge to students on the basics of savings, financial planning, investing and capital markets.

    Visiting university delegates committed to extending their full support through their vast network of colleges and campuses, radio channels, faculty resources, infrastructure and premises, information exchange etc., to make meaningful impact hand in hand with SECP.

  • SECP issues qualified capital criteria for NBFCs

    SECP issues qualified capital criteria for NBFCs

    ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) on Friday issued criteria for qualified capital and its terms and condition for Non-Banking Finance Companies (NBFCs).

    The criteria have been issued for those NBFCs which exclusively in the business of issuance of guarantees to enhance the quality debt instruments issued to finance infrastructure projects in Pakistan, namely:

    Qualified capital means the aggregate of callable capital and contingent capital (including any drawdown threunder);

    Explanation: For the purpose of this clause the expressions:

    i. Callable Capital means share capital that, in terms of written agreement entered into between the NBFC and sponsor, shareholder and/or investor, as the case may be, is agreed to be subscribed on the following terms and conditions:

    a. the shares shall be fully subscribed over a period of 24 months from the date of the written agreement;

    b. during the subscription period specified in sub-clause (a), the obligation to subscribe to shares shall be irrevocable and on demand, at the sole discretion of the NBFC; and

    c. the subscription obligation shall be secured by a bank guarantee or standby letter for credit from a commercial bank rated AAA or higher by a credit rating agency registered with the commission;

    ii. Contingent Capital means long term commitment for finance that, in terms of a written agreement entered into between the NBFC and a Qualified Financial Institution(s), is provided as a second loss facility on the following terms and conditions:

    a. at any time, the contingent capital, in aggregate, shall not exceed one and a half times of the sum of paid up share capital and callable capital of the NBFC;

    b. the commitment shall, in accordance with the terms thereof, be irrevocable, confirmed and fully committed;

    c. the long term commitment and the finance thereunder shall be available on a revolving basis;

    d. the finance under the commitment shall be callable and demand upon a capital event and the sole discretion of the NBFC or on a direction by the Commission (after giving the NBFC a reasonable opportunity of a hearing), which shall be binding on the NBFC; and

    e. the commitment shall be replaced by the NBFC if the financing entity ceases to be a qualified financial institution;

    iii. Qualified Financial Institution means a local or a international or multilateral financial institution rated AAA by a credit rating agency registered with the Commission;

    iv. Capital Event means the depletion of the equity (after the callable capital has been completely drawn down by the NBFC) of the NBFC.

    Terms and Conditions:

    i. The NBFC shall not take any exposure against the qualified capital unless it has obtained a certificate from its statutory auditor that all the requirements have been complied with;

    ii. The certificate shall be supported by a legal opinion from a reputed law firm and a copy of the certificate along with the legal opinion shall be submitted to the commission: and

    iii. With regard to its qualified capital, the NBFC, in relevant notes to its financial statements, shall make disclosures, which are necessary for the users to understand its salient features.

  • SECP, ADB organize consultation workshop on financial market development

    SECP, ADB organize consultation workshop on financial market development

    KARACHI: The Securities and Exchange Commission of Pakistan (SECP) and Asian Development Bank (ADB) jointly organized a workshop for stakeholder consultations on Financial Market Development 2020-2025, a statement said on Thursday.

    The long term roadmap will be focusing on demand and supply measures to broaden and deepen the financial system in Pakistan.

    Senior level representatives from the ADB, State Bank of Pakistan, SECP and representatives of stock exchange, central depository, national clearing company and market participants attended the brainstorming session.

    In his welcoming remarks, SECP Chairman Aamir Khan affirmed that SECP’s foremost obligation remains towards building a regulatory environment that is sound, efficient and cost-effective.

    “Yet, I am equally passionate about ensuring that it is empowering for business growth. One must not be sacrificed at the cost of the other. We need to be fiercely vigilant in the pursuit of transparency, yet be tirelessly focused on reducing regulatory barriers and cost of doing business,” said the SECP Chairman.

    Regarding the projected roadmap, Khan opinioned that supporting multi-stage financing needs of start-ups and SMEs, increasing the number of retail investors, strengthening the role of institutional investors, creating an active bond market and promoting infrastructure-financing vehicles would be core constituents of the future roadmap.

    However, he emphasized, the roadmap must entail a broad and deep consensus between the SECP, and other relevant stakeholders in the public and private sectors.

    SECP Commissioner Securities Market, Shauzab Ali, gave his views on SECP’s approach to the reform plans already being undertaken by the regulator, challenges and opportunities.

    A team of international experts facilitated the workshop with a view to consolidate market feedback on the various on the supply and demand side constraints, along with recommendations for reform.

    ADB Deputy Country Director for Pakistan, Asif Cheema, stated that the proposed Financial Markets Development Program is in line with ADB’s Strategy 2030, which prioritizes the development of the financial sector and capital markets to support the development of the private sector and enhance financial stability.

    This program will build upon ADB’s earlier support for development of Pakistan’s capital markets over the past two decades.

    Cheema also reiterated the need for government ownership for implementation of the master plan.