Tag: SECP

SECP proposes amendments to insurance laws

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has issued draft bill to amend Insurance Ordinance 2000 with aim to bridge regulatory gaps in existing laws.

The draft law has been placed on SECP’s website for stakeholders and public consultation.

The draft bill will address the regulatory gaps in existing law and provide a conducive regulatory environment to encourage market development, the SECP said.

It will facilitate use of technology, provide ease of doing business and address entity specific and systemic risks by shifting towards Risk Based Supervision (RBS) and Risk Based Capital (RBC) Regime, it added.

The amendments in law will also strengthen the regulatory framework and ensure its alignment with the Insurance Core Principles (ICP) of the International Association of Insurance Supervisors (IAIS).

The significant reforms proposed in the draft bill include introduction of dedicated micro-insurers, provisions for regulation of takaful and re-takaful, regulation of local and foreign reinsurance business for enhancement of local capacity, regulation of reinsurance brokers, flexibility for introduction of new intermediaries, insurance repository and insurance self-network platform, provisions for regulation of index based insurance and InsurTech.

Provisions for introduction of RBS and RBC regime and establishment and operation of a guarantee fund for insolvency of insurers have been included to strengthen the regulatory framework and align the law with core principles of IAIS and address systemic risk.

The amended law will also assist in enhancing compliance with AML/CFT frameworks.

The changes include requirement of appointed actuary and product filing of personal lines for non-life insurance, appointment of internal actuary for life insurers and enhancement of market conduct provisions.

The regulatory powers of the Commission for regulation and supervision of insurance companies and intermediaries, have also been streamlined in the draft bill.

July 18, 2020
NBMFCs borrowers reschedule loans worth Rs36bn: SECP

ISLAMABAD: The Non-bank Microfinance Companies (NBMFCs) have reschedule loans of worth Rs36billion of total 2,244,605 individuals and micro-enterprises as of June 30, 2020, Securities and Exchange Commission of Pakistan (SECP) said on Tuesday.

The SECP said that it had relaxed the regulatory requirements for non-bank finance sector allowing them to defer or reschedule the loan repayments of their borrowers during COVID-19 pandemic.

Out of these, 1,379,330 borrowers were facilitated through deferment of principal repayments of Rs27.778 billion by twelve NBMFCs, while 865,275 borrowers benefited through rescheduling of loans of 7.998 billion rupees by nine NBMFCs.

The SECP has already extended the time by three months for NBMFCs to accept deferment requests of borrowers till September 30, 2020.

Earlier, the SECP had urged the NBMFCs to adopt a considerate approach to accommodate their borrowers who belong to unprivileged segments of the society.

The SECP had also allowed NBMFCs to accept borrowers requests made through electronic means or phone calls. It is part of SECP’s efforts to provide relief for mitigating adverse effects of COVID-19 pandemic that has resulted in slowdown in business and livelihood activity.

July 14, 2020
SECP issues draft professional clearing members regulations

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has issued draft Professional Clearing Members (PCM) Regulations, 2020 for public consultation.

Professional clearing members denotes the concept of a third party independent institution, which will offer custodial and clearing/ settlement services to securities brokers and their customers.

PCM can be a financial institution, such as a commercial bank, Non-Banking Finance Company etc., or a specialized entity formed for this purpose. PCM will handle the custody and clearing/ settlement functions for brokers that will significantly reduce compliance burden, ensure efficiency in businesses and allow brokers to focus on their key competencies.

The new regulations will evolve a new business model, which will support ease of doing business, and reduce operational costs.

The draft PCM Regulations lay down licensing, conduct and operational requirements for PCM which include eligibility criteria, development of important policies and procedures, measures for ensuring customer asset protection and segregation, confidentiality of customer information and compliance with corporate governance requirements etc.

Earlier, SECP had introduced the concept of categorization of securities brokers and segregation of trading and custodial/ settlement functions, whereby only those brokers which fulfill the eligibility criteria can offer custodial/ clearing services.

As per the new model, Trading Only brokers can transfer their custody/clearing services to brokers which meet significantly higher eligibility criteria and licensed as Trading and Clearing brokers.

PCM framework is a crucial milestone in implementing the new broker regime and introducing international best practices. It will mitigate the market risk and further strengthen the custody protection measures to safeguard interest of the investors.

The draft PCM Regulations are available on SECP website and comments may be shared with the SECP by July 17, 2020.

July 6, 2020
NBMFCs allowed deferring loan repayment for one year

ISLAMABAD: Securities and Exchange Commission of Pakistan (SECP) has allowed non banking microfinance companies (NBMFCs) to defer loan payment of borrowers for one year.

The SECP issued circular No. 21 of 2020 on Monday and allowed that NBMFCs may, upon a written request of a borrower received before September 30, 2020, defer repayment of principal loan amount by one year, provided that the borrower will continue to service the mark-up amount as per agreed terms and conditions.

The SECP issued circular 09 of 2020 dated March 31, 2020 to allow three months’ extension in time to NBMFCs for accepting borrowers’ requests to defer repayment of principal loan amounts.

June 30, 2020
SECP extends date for AMCs to comply with investor’s suitability assessment

ISLAMABAD: Securities and Exchange Commission of Pakistan (SECP) has extended date for Asset Management Companies (AMCs) to comply with mandatory requirement of providing investor’s suitability assessment.

A statement issued on Wednesday the SEPC said that to provide mutual fund industry further relief in fulfilling regulatory compliance requirements during COVID-19 pandemic the regulator has extended the timeline for AMCs to meet investor’s suitability assessment requirements, stipulated in Circular No 2 of 2020.

The extended timeline is July 24, 2020.

SECP’s suitability assessment requirements require AMCs to classify the Collective Investment Schemes (CIS) and investment plans with regards to the risk of principle erosion, ranging from very low risk for money market funds to high risk for equity funds.

AMCs are also required to ensure suitability of CIS/Plan to the investor and assess the risk profiles of investors before his/her investment in any specific product or strategy.

Effective implementation of AMCs risk profiling mechanism will ensure that the investor makes an informed investment decision while investing in any mutual fund/plan, as per his/her risk profile.

June 24, 2020
NBMFCs reschedule over Rs17 billion loans of 0.93 million individuals

ISLAMABAD: Non-bank Microfinance Companies (NBMFCs) have rescheduled over Rs17 billion loan portfolios of 932,862 individuals in order to provide relief in the wake of coronavirus outbreak.

The Securities and Exchange Commission of Pakistan (SECP) in a statement issued on Tuesday said that its permission to NBMFCs to reschedule the loan portfolio not only helped NBFCs to adjust their portfolio at risk but also resulted in extending relief to 932,862 individuals and micro-enterprises who have borrowed over 17 billion rupees from non-bank microfinance companies (NBMFCs), as reported on May 31, 2020.

Out of these, 796,893 borrowers were facilitated through deferment of principal repayments of over 13.1 billion rupees by six NBMFCs, while 135,969 borrowers benefited through rescheduling of loans of 3.9 billion rupees by four NBMFCs.

On March 31, 2020, the SECP had relaxed the regulatory requirements for non-bank finance sector allowing them to defer or reschedule the loan repayments to their borrowers. It was part of SECP’s efforts to provide relief for mitigating adverse effects of COVID-19 pandemic and ensuing lockdowns.

The SECP had also urged the NBMFCs to adopt a considerate approach to accommodate the borrowers who belong to either unprivileged or underprivileged segments of the society.

The SECP had also allowed NBMFCs to accept borrowers requests made through electronic means or phone calls.

June 17, 2020
SECP proposes setting up oversight committee to review Shariah compliance
ISLAMABAD: Securities and Exchange Commission of Pakistan (SECP) has proposed constitution of an oversight committee to review Shariah compliance of listed companies and securities.

The SECP issued draft amendments to Shariah Governance Regulations, 2018 through SRO 510(I)/2020 dated June 03, 2020.

An amendment has been proposed in regulation 12 to form the oversight committee.

According to the draft amendment:

An Oversight Committee to conduct Shariah screening process:
There shall be an oversight committee comprising of the following members to oversee and establish the Shariah screening criteria.

(a) Chairman Shariah Advisory Committee, SECP – as head

(b) A representative of PSX;

(c) A representative of KMI;

(d) A representative of MUFAP.

The oversight committee shall conduct the Shariah screening for listed companies on the basis of criteria notified by Pakistan Stock Exchange (PSX) as per regulation 11 for the purpose of a Shariah index.
The Oversight committee shall review the Shariah compliance of companies and securities on a bi-annual basis.
The oversight committee shall exclude a company or security from the index as and when it becomes Shariah non-compliant.
To facilitate oversight committee and develop Islamic capital market products, PSX shall establish a dedicated Shariah department and appoint at least one independent Shariah Advisor.
June 11, 2020
SECP forms body to develop RBC regime for insurance sector

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has constituted a working group of actuaries for the development of Risk Based Capital (RBC) Regime in Pakistan, said a statement on Wednesday.

The group members possess local as well as diversified international experience, it added.

An insurance company during the normal course of operations is not only exposed to risk in relation to insurance contracts that it underwrites, but also to a variety of other risks including market risk, liquidity risk, credit risk, operational risk etc.

Currently, compliance based Paid up Capital requirements and solvency requirements are levied on insurance companies.

The solvency regime does take into account to some extent, liquidity risk, credit risk, market risk, insurance risk etc. in calculation of solvency through admissibility of assets test, however, it does not quantify the levels of different risks borne by the insurers and therefore does not deliberate on the adequacy of capital keeping in view the risks undertaken.

Majority of international jurisdictions have already shifted or have commenced work to move towards RBC Regime for their insurance sector, few of these jurisdictions includes, Malaysia, China, India, Sri Lanka, Hong Kong, Turkey etc.

The SECP believes that for RBC to be implemented, the most important part would be quantification of the different risks faced by the insurance companies including their correlation/ interconnectedness in relation to the size and complexity of an insurer.

Introduction of RBC would provide true reflection of risks taken by insurance companies and would result in a more disciplined and financially resilient insurance sector in Pakistan.

June 4, 2020
SECP issues guidelines for license renewal amid COVID-19

ISLAMABAD: Securities and Exchange Commission of Pakistan (SECP) has issued guidelines for license renewal in order to facilitate companies considering difficulties due to COVID-19.

The SECP issued Circular No. 19/2020 for extension in time for renewal of licenses due to COVID-19.

The regulator said that the COVID-19 (coronavirus) had affected many businesses around the globe and had been declared as pandemic.

In order to facilitate the shareholders/directors/employees during this ongoing pandemic, the SECP issued the guidelines regarding renewal of their licenses, issued in pursuance of section 42 of the Company Law.

The SECP said that the companies whose license were due for renewal before the month of February 2020, and had not applied for renewal, their license shall be revoked in accordance with the provision of Section 42(5) of the Companies Act, 2017.

The SECP further said that the companies whose license had been expired in the months of February, March, April and May 2020 but had not applied for its renewal would continue to carry on their business and their license would not be revoked till June 30, 2020. However, upon receipt of their applications, license shall be renewed from the date of expiry of their existing license.

The regulator further said that the companies, which had applied for renewal of their license either before or after February 01, 2020 and certain deficiencies were also communicated to them, were required to respond to the quarries latest by May 30, 2020, failing which their license would be revoked.

“Companies, which do not find any difficulty in complying with the requirements of the renewal of their license, may apply in a routine manner,” the SECP said.

May 19, 2020
OICCI lauds SECP for improving regulatory environment

KARACHI: The Overseas Investors Chamber of Commerce and Industry (OICCI) has praised Securities and Exchange Commission of Pakistan (SECP) for improving regulatory environment for registered entities.

In a statement on Monday the OICCI felicitated the SECP on the Companies (Amendment) Ordinance, 2020 promulgated on April 30th.

The Chamber, along with other leading business association, has in the past challenged some of the over-regulatory conditions introduced in the Companies Act 2017 without due engagement of the key stakeholders.

The amendments to the Companies Act 2017, according to OICCI members, will further improve the regulatory environment in line with regional practices.

Abdul Aleem, CE/Secretary General of the OICCI commenting on the amendments said: “foreign investors have always supported regulatory environment which are predictable, consistent and transparent.

“The recent April 30th 2020 amendments to Companies Act 2017 had been under discussion between the SECP and other stakeholders, including OICCI during a series of “Consultative session and feedback” meetings held in 2018 and 2019 and acceptance of several recommendation should be a matter of satisfaction for business entities.”

He further said ‘a few recommendations are still not part of the proposed amendments and we shall request SECP to also review these so as to attract sizeable FDI in these challenging, post COVID 19, global investment environment’.

Pakistan’s FDI for past several years has been less than one percent of the GDP against the regional norm of 3 percent and above.

Some of the key amendments in the Act which were challenged by the chamber, which have now been addressed in the amendments include; limiting the scope of the definition of “officer”, allowing a non-listed company to buy back its shares in line with the right already given to listed companies, doing away with the requirement for a ‘foreign national’ to hold National Tax Number as per the provisions of IT Ordinance, 2001, deletion of the clause where a director could be disqualified for a period up to five years if the affairs of the company have purportedly been conducted in a manner which has deprived the shareholders a reasonable return, deletion of the complete section whereby, inter-alia an independent director and a non-executive director were held liable in respect of some acts of omission or commission by a listed or a public sector company, deleting the personal liability of the Directors whereby they were required to make payments under certain circumstances including a situation where the return on the investments was not according to certain criteria, doing away with the impractical provision to deposit any unclaimed or unpaid amount to the credit of the Federal Government, introduction of a ten percent shareholding threshold in the much debated section on Companies’ Global Register of Beneficial Ownership and deletion of the section requiring security clearance before appointment of Directors.

A key matter recommended by OICCI, and other stakeholders, to delete the reference to ‘lineal ascendants and descendants’ from the ambit of related parties has not been addressed and OICCI has again requested SECP to review this important matter.

“Negative perception of Pakistan among potential foreign investors has been a key impediment in attracting sizeable FDI in the country. Pakistan’s rating in the World Bank Ease of Doing Business has only recently improved to 108 from being 147 in 2018 and needs much more business friendly measures to attract its due share of the global/regional FDI, ”Aleem concluded.

May 18, 2020