Tag Archives: SECP

Securities and Exchange Commission of Pakistan rationalized licencing regime for securities brokers

Islamabad, January 15, 2018 (PPI-OT):The Securities Exchange Commission of Pakistan with an objective to reduce regulatory burden and to promote ease of doing business, has approved rationalization of existing licensing regime for securities brokers. In order to provide ease of doing business, without compromising on regulatory objectives, the Commission has approved that a single licence would be issued to a securities broker.

A licensed securities broker would not require all other mandatory licenses including futures broker, securities advisor, futures advisor and accredited representative. As per new simplified procedure for annual renewal, a security broker will only required to provide recommendation from the Pakistan Stock Exchange (PSX) along with an undertaking from the securities broker and deposit of regulatory fee.

The SECP has also approved a single cut-off date concept for expiry of licenses for entire brokerage industry. This is to facilitate the brokerage industry as well as the front line regulator i.e. PSX. It is pertinent to mention here that in the prevalent licensing regime and the draft frameworks notified for public consultation, a securities broker has to obtain at least eight annually renewable mandatory licenses to act as a securities broker of capital markets. In case of mid-size and large brokerage houses, having more than one office, the requisite number of mandatory licenses increases even further.

The SECP believes that the securities broker activity should only be undertaken in a corporate structure and the existing concept of agents for securities brokers have become redundant and is no more desirable. Therefore, the existing regime, requiring registration of Agents with the SECP would be discontinued and the proposed draft Accredited Representatives Regulations 2017, would not be promulgated. The brokerage industry would be conveyed accordingly. Moreover, the Commission has decided to grant licenses of regulated activities to corporate entities only.

The Commission has also approved to undertake an objective review of the Advisory regime under the Securities Act, 2015 vis-a-vis Advisory regime under Non-Banking Finance Companies regulatory framework. The two different regimes for the same regulated activity with Securities and Exchange Commission of Pakistan NICL Building, 63 Jinnah Avenue, Islamabad Tel: 051-9214005 different requirements not only creates disparity and confusion but also results in regulatory arbitrage.

Both the regimes envisage independent custody of clients’ assets with regard to portfolio management. Hence, the securities brokers would not be eligible to act as securities advisor as their business model allowed to have custody of their clients’ assets and managing their own portfolio i.e. proprietary trading as well. For the time being, granting of securities adviser licence to securities brokers would be against the basic spirit of advisory regime.

However, the securities brokers would be allowed to distribute mutual funds units. Owing to the fact that there is no difference in the business model and the scope of regulated activities of proposed draft Securities Manager regime vis-a-vis Securities Advisor regime, the draft Securities Manager (Licencing and Operations) Regulations 2017 would not be promulgated.

The Commission has granted approval of reviewed rationalized licensing regime for securities brokers that would be implemented through introducing appropriate amendments in the regulatory framework. The revised regime, once implemented, would contribute in reducing regulatory burden and cost of doing business for our brokerage industry, ultimately promoting ease of doing business.

For more information, contact:
Head, Internal and External Communication
Securities and Exchange Commission of Pakistan (SECP)
NIC Building, 63 Jinnah Avenue, Islamabad
Tel: +92-51-9214005 or +92-51-9214009 (Ext. 378)
Fax: +92-51-9206459
Cell: +92-302-8552254
E-mail: shakil.chaudhary@secp.gov.pk
Website: www.secp.gov.pk

Company registration: 44 percent growth witnessed in first half of current Financial Year

Islamabad, January 09, 2018 (PPI-OT):In the first half of current financial year, the Securities and Exchange Commission of Pakistan (SECP) registered 4,954 new companies, raising the total number of companies to 83,879. As compared to the corresponding month of last financial year, it represents a growth of 44 percent. The massive increase in number of new companies is the result of the SECP’s various reform measures, i.e. simplification of incorporation procedure, reduction in fee, assistance in incorporation by facilitation wings at CROs etc.

Around 82 percent of companies were registered as private limited companies, while around 16 percent were registered as single-member companies. Two percent of the companies were registered as public unlisted, non-profit associations, trade organizations and foreign companies.

The trading sector took the lead with the incorporation of 783 companies, services with 729, construction with 625, information technology with 599, tourism with 274, food and beverages with 164, engineering with 155, education with 148, corporate agricultural farming with 126, real estate development with 106, transport with 100, pharmaceutical with 86, textile with 77, communication with 76, fuel and energy with 75, auto and allied and healthcare with 71 each, cable and electric goods with 58, broadcasting and telecasting with 57, chemical with 55, power generation with 47, paper and board with 46, mining and quarrying with 45, steel and allied with 38, cement with 9 and 334 companies were registered in other sectors. Moreover, 35 foreign companies were also registered by the CROs in Karachi, Lahore and Islamabad.

Foreign investment has been reported in 329 new companies. These companies have foreign investors from Afghanistan, Australia, Austria, Azerbaijan, Belarus, Belgium, Canada, Cayman Islands, China, Denmark, Egypt, Germany, Greece, Hong Kong, Indonesia, Iran, Ireland, Italy, Jordan, South Korea, Lebanon, Macedonia, Malaysia, Mauritius, Mexico, Netherlands, Nigeria, Norway, Philippines, Poland, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand, Turkey, UAE, the UK, Ukraine and the US.

During the month, the highest numbers of companies, i.e. 1,714 were registered at Islamabad CRO, followed by 1,442 and 987 registered at Lahore and Karachi CROs respectively. The CROs in Peshawar, Multan, Faisalabad, Quetta, Gilgit-Baltistan and Sukkur registered 311, 228, 105, 64, 79 and 24 companies respectively.

For more information, contact:
Head, Internal and External Communication
Securities and Exchange Commission of Pakistan (SECP)
NIC Building, 63 Jinnah Avenue, Islamabad
Tel: +92-51-9214005 or +92-51-9214009 (Ext. 378)
Fax: +92-51-9206459
Cell: +92-302-8552254
E-mail: shakil.chaudhary@secp.gov.pk
Website: www.secp.gov.pk

Company registration: 44 percent growth witnessed in first half of current Financial Year

Islamabad, January 09, 2018 (PPI-OT):In the first half of current financial year, the Securities and Exchange Commission of Pakistan (SECP) registered 4,954 new companies, raising the total number of companies to 83,879. As compared to the corresponding month of last financial year, it represents a growth of 44 percent. The massive increase in number of new companies is the result of the SECP’s various reform measures, i.e. simplification of incorporation procedure, reduction in fee, assistance in incorporation by facilitation wings at CROs etc.

Around 82 percent of companies were registered as private limited companies, while around 16 percent were registered as single-member companies. Two percent of the companies were registered as public unlisted, non-profit associations, trade organizations and foreign companies.

The trading sector took the lead with the incorporation of 783 companies, services with 729, construction with 625, information technology with 599, tourism with 274, food and beverages with 164, engineering with 155, education with 148, corporate agricultural farming with 126, real estate development with 106, transport with 100, pharmaceutical with 86, textile with 77, communication with 76, fuel and energy with 75, auto and allied and healthcare with 71 each, cable and electric goods with 58, broadcasting and telecasting with 57, chemical with 55, power generation with 47, paper and board with 46, mining and quarrying with 45, steel and allied with 38, cement with 9 and 334 companies were registered in other sectors. Moreover, 35 foreign companies were also registered by the CROs in Karachi, Lahore and Islamabad.

Foreign investment has been reported in 329 new companies. These companies have foreign investors from Afghanistan, Australia, Austria, Azerbaijan, Belarus, Belgium, Canada, Cayman Islands, China, Denmark, Egypt, Germany, Greece, Hong Kong, Indonesia, Iran, Ireland, Italy, Jordan, South Korea, Lebanon, Macedonia, Malaysia, Mauritius, Mexico, Netherlands, Nigeria, Norway, Philippines, Poland, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand, Turkey, UAE, the UK, Ukraine and the US.

During the month, the highest numbers of companies, i.e. 1,714 were registered at Islamabad CRO, followed by 1,442 and 987 registered at Lahore and Karachi CROs respectively. The CROs in Peshawar, Multan, Faisalabad, Quetta, Gilgit-Baltistan and Sukkur registered 311, 228, 105, 64, 79 and 24 companies respectively.

For more information, contact:
Head, Internal and External Communication
Securities and Exchange Commission of Pakistan (SECP)
NIC Building, 63 Jinnah Avenue, Islamabad
Tel: +92-51-9214005 or +92-51-9214009 (Ext. 378)
Fax: +92-51-9206459
Cell: +92-302-8552254
E-mail: shakil.chaudhary@secp.gov.pk
Website: www.secp.gov.pk

Securities and Exchange Commission of Pakistan amends Public Offering Regulations to promote quality IPOs

Islamabad, January 08, 2018 (PPI-OT):After thorough consultation and concurrence of the leading market participants, the SECP has introduced the amendments to the Public Offering Regulations, 2017, notified vide S.R.O. 7(I)/2018. The said notification and amended copy of the regulations is available on the SECP’s website. The amendments to the regulations have been introduced to promote quality listing, ensure fair price discovery through book-building process and increase investors’ base. In order to encourage quality listing and minimize the subjectivity involved in the approval process, certain specific requirements for listing have been introduced to the regulations.

The said requirements include at least 3 years operational track record of the company with two years profitability from its core business activities and the book value per share of the company shall not be less than its face value per share. Moreover, the sponsors of the company, i.e. persons holding not less than 51% of the shares, shall be same for the last two years. However, these conditions shall not apply in case of a green field project. To ensure fair price discovery for IPOs through book building mechanism, certain changes have been made to the book-building process, which include the introduction of concept of price band with the upper limit of not more than 40% of the floor price.

Floor price in case of book-building means the minimum offer price per share set by the Issuer. The concept of price band will encourage setting up a more realistic floor price by the issuers for IPOs through book-building method. In order to increase the investor base, the basis of allotment has been changed from time priority basis to proportionate basis. To ensure participation by high net worth individuals in price discovery process, the minimum bid size has been reviewed from rupees one million to rupees two million and minimum number of bids required have been increased from 40 to 100 bidders, to arrive at a more transparent bidding process.

In order to facilitate the book-building process, bidders have been allowed to revise their bid downward in terms of volume provided the total bid amount remains the same. Moreover, associated institutional investors of the issuer have been allowed to make bids in aggregate up to 10%, instead of earlier limit of 5%, of the shares allocated under the book-building portion. In addition, financial institutions and mutual funds that are associates of the consultant to the issue and the book runner have also been allowed to make investment in an IPO through book building on a par with other institutional investors.

In order to facilitate investors to make a well informed decision, additional disclosures have been prescribed with regard to peer group companies comparison encompassing Earning per share, book value per share, market value per share; P/E multiple, return on equity; return on assets and free float etc. Securities and Exchange Commission of Pakistan NICL Building, 63 Jinnah Avenue, Islamabad Tel: 051-9214005 the said amendments are expected to provide a more conducive regulatory environment for capital formation in the economy through primary market. To promote ease of doing business, the concept of e-IPO has already been implemented and the SECP has also expedited its approval processing time which has significantly reduced the time and cost associated with an IPO.

For more information, contact:
Head, Internal and External Communication
Securities and Exchange Commission of Pakistan (SECP)
NIC Building, 63 Jinnah Avenue, Islamabad
Tel: +92-51-9214005 or +92-51-9214009 (Ext. 378)
Fax: +92-51-9206459
Cell: +92-302-8552254
E-mail: shakil.chaudhary@secp.gov.pk
Website: www.secp.gov.pk

Securities and Exchange Commission of Pakistan amends Public Offering Regulations to promote quality IPOs

Islamabad, January 08, 2018 (PPI-OT):After thorough consultation and concurrence of the leading market participants, the SECP has introduced the amendments to the Public Offering Regulations, 2017, notified vide S.R.O. 7(I)/2018. The said notification and amended copy of the regulations is available on the SECP’s website. The amendments to the regulations have been introduced to promote quality listing, ensure fair price discovery through book-building process and increase investors’ base. In order to encourage quality listing and minimize the subjectivity involved in the approval process, certain specific requirements for listing have been introduced to the regulations.

The said requirements include at least 3 years operational track record of the company with two years profitability from its core business activities and the book value per share of the company shall not be less than its face value per share. Moreover, the sponsors of the company, i.e. persons holding not less than 51% of the shares, shall be same for the last two years. However, these conditions shall not apply in case of a green field project. To ensure fair price discovery for IPOs through book building mechanism, certain changes have been made to the book-building process, which include the introduction of concept of price band with the upper limit of not more than 40% of the floor price.

Floor price in case of book-building means the minimum offer price per share set by the Issuer. The concept of price band will encourage setting up a more realistic floor price by the issuers for IPOs through book-building method. In order to increase the investor base, the basis of allotment has been changed from time priority basis to proportionate basis. To ensure participation by high net worth individuals in price discovery process, the minimum bid size has been reviewed from rupees one million to rupees two million and minimum number of bids required have been increased from 40 to 100 bidders, to arrive at a more transparent bidding process.

In order to facilitate the book-building process, bidders have been allowed to revise their bid downward in terms of volume provided the total bid amount remains the same. Moreover, associated institutional investors of the issuer have been allowed to make bids in aggregate up to 10%, instead of earlier limit of 5%, of the shares allocated under the book-building portion. In addition, financial institutions and mutual funds that are associates of the consultant to the issue and the book runner have also been allowed to make investment in an IPO through book building on a par with other institutional investors.

In order to facilitate investors to make a well informed decision, additional disclosures have been prescribed with regard to peer group companies comparison encompassing Earning per share, book value per share, market value per share; P/E multiple, return on equity; return on assets and free float etc. Securities and Exchange Commission of Pakistan NICL Building, 63 Jinnah Avenue, Islamabad Tel: 051-9214005 the said amendments are expected to provide a more conducive regulatory environment for capital formation in the economy through primary market. To promote ease of doing business, the concept of e-IPO has already been implemented and the SECP has also expedited its approval processing time which has significantly reduced the time and cost associated with an IPO.

For more information, contact:
Head, Internal and External Communication
Securities and Exchange Commission of Pakistan (SECP)
NIC Building, 63 Jinnah Avenue, Islamabad
Tel: +92-51-9214005 or +92-51-9214009 (Ext. 378)
Fax: +92-51-9206459
Cell: +92-302-8552254
E-mail: shakil.chaudhary@secp.gov.pk
Website: www.secp.gov.pk

SECP tells CFOs of listed companies to authenticate financial statements

Islamabad, January 03, 2018 (PPI-OT):The Securities and Exchange Commission of Pakistan (SECP) has reminded the chief financial officers (CFOs) of listed companies to authenticate financial statements of their companies. This authentication is compulsory under section 232 of the Companies Act, 2017, for the ensuing periods to avoid any punitive action in the future. During regulatory review of listed companies, a number of instances have been highlighted where CFOs, in violation of the explicit legal requirements, have not authenticated the financial statements for the year ending June 30, 2017.

Since, it is a newly introduced requirement for listed companies, therefore, the SECP intends to raise awareness among them for future compliance. Accordingly, boards and management of listed companies must fully comply with the legal requirements of section 232 of the Act in respect of the financial statements for the ensuing periods to avoid any punitive action in future. Consistent with the requirements of section 232 of the repealed Companies Ordinance, 1984, the newly enforced Companies Act, 2017, has retained the requirement that the financial statements of companies must be approved by the board of the company and signed on behalf of the board by the chief executive and at least one director of the company.

In case of a listed company, the section further requires authentication of financial statements by the CFO. The introduction of this additional requirement intends to make the executive management of a listed company to give more thought and care to the authentication of the financial statements, by making them personally liable for authenticity of information contained therein. It is to reiterate that one of the main objectives of the Companies Act, 2017, is to align various legal requirements with the best international practices for better protection of interests of members and other stakeholders of companies.

The preparation, authentication and dissemination of financial statements is one of the most important legal requirements of the Companies Act, 2017. Financial statements of companies not only provide the most authentic financial information to the users, but also show management’s stewardship of resources entrusted to them by the shareholders. This becomes even more important in case of listed companies because they have the public’s stake. Being the corporate sector regulator, the SECP strives to improve financial reporting framework and practices to raise investors’ confidence in capital markets.

For more information, contact:
Head, Internal and External Communication
Securities and Exchange Commission of Pakistan (SECP)
NIC Building, 63 Jinnah Avenue, Islamabad
Tel: +92-51-9214005 or +92-51-9214009 (Ext. 378)
Fax: +92-51-9206459
Cell: +92-302-8552254
E-mail: shakil.chaudhary@secp.gov.pk
Website: www.secp.gov.pk