The Security and Exchange Commission of Pakistan (SECP) capital market reforms aim to ensure the provision of a desirable comprehensive ecosystem for capital formation.
According to the SECP’s annual report, the SECP continually seeks input from IOSCO member countries, in addition to independent research on international legal standards and best practices.
As part of the SECP’s digital transformation program, investors have been made easier to seamlessly open their accounts with a broker from anywhere in the country without having to physically submit paperwork or visit a broker. The report states that in order to ensure maximum investor protection, an online client verification process has been introduced for opening accounts online.
This online verification will be carried out independently by the centralized KYC organization. These measures would improve investor participation in our capital market and give investors access across the country. In line with the launch of the Non-Resident Pakistani (NRP) Rupee Value Account (NRV) under the Roshan Digital Account (RDA) initiative, NRPs can invest in listed stocks and open accounts with intermediaries of the capital market based on the KYC information submitted to the banks. . The required regulatory changes have been made and an operational system has been put in place for sharing KYC information and opening trading accounts.
As a result, NRPs can electronically open their trading accounts with brokers from anywhere in the world without submitting physical documents. This has encouraged investment in our capital market, the report adds. For opening a trading account, NRPs or foreigners were required to submit documents duly attested by the Consul General of Pakistan having jurisdiction over the applicant under the Know Your Customer Centralized Organization Regulations 2017 ( KYC) (CKO) (CKO regulations).
However, during the COVID-19 pandemic, PNRs and foreigners have encountered practical difficulties in having their documents attested for opening trading accounts. Amendments have therefore been introduced in the CKO regulations with a ‘notarization’ option to allow NRPs/foreigners to obtain certification either from a Notary Public or the Consul General of Pakistan.
This measure helped PNRs or foreign investors to comply with the regulatory framework and enabled them to invest in the Pakistani capital market. These measures would encourage NRPs and foreign investors to easily invest in our capital market, leading to increased REITs and a better investor base. The centralized CKO carries out an independent verification of the information of all new customers. The necessary changes to the respective regulatory framework have been made to resolve practical difficulties encountered by market participants and investors and to make the process more transparent, in particular by allowing the company to provide a mobile phone number for the opening of account and facilitating asset management companies, corporate groups and international brokers. Dealers using a single UIN for multiple accounts.
In addition, to improve ease of access for investors, changes were approved in the PSX Rules requiring listed companies to use the PSX general meeting schedule. This would allow companies to reduce overlap in the holding of their general meetings, thus allowing shareholders to participate in the meetings.
Required amendments have been made to the regulations of PSX and the Central Depository Company of Pakistan Limited (CDC) to allow capital market infrastructure institutions to use shares of a failing broker in its internal account. The proceeds from the sale of these shares would be available to settle the broker’s outstanding obligations, including the settlement of investor claims.
Regulatory requirements for the governance structures of market infrastructure institutions have been overhauled by reducing the size of the PSX board, aligning the number of independent directors on the board, introducing board assessment of administration and senior management, issuing guidelines for the appointment of independent directors, streamlining senior management qualification and experience requirements, etc.
Necessary changes have also been made to the PSX Rules for the delegation of operational powers from the PSX Board of Directors to its Chief Executive Officer and Chief Regulatory Officer. Necessary changes have been made to the PSX Rulebook for the launch of 90-day deliverable futures contracts with improved eligibility criteria for security selection for futures contracts. These measures aim to bring efficiency to the product, align the product with international practices and reduce systemic risk.