SECP Policy Board eases regulatory requirements

ISLAMABAD: The Securities and Exchange Commission of Pakistan's (SECP) Policy Board has granted approval for significant measures in simplifying the regulatory requirements for ease of doing business and promoting the overall growth of the capital market.

The Policy Board met in Islamabad on Thursday under the Chairmanship of Professor Khalid Mirza.

In order to remove the difficulties and impediments in the buy-back of shares by companies, the following amendments were approved in the draft Listed Companies (Buy-Back of shares) Regulations, 2019: (i) condition relaxed with respect to the company considering buyback to be enlisted as margin eligible securities; (ii) condition relaxed with respect to maintaining paid-up capital of Rs200 million after buyback; (iii) restriction removed with respect to the sale price of treasury shares to be within 10% variance to closing price of a scrip on the day preceding the day of approval of special resolution; (iv) allowing the sale of treasury shares through negotiated market deals; and (v) clarifying responsibilities of the securities broker by requiring acknowledgement of receipt of shares, ensuring timely payments and return of shares, in case of withdrawal of offer for purchase.

The board also recommended to the Commission that the Listed Companies (Code of Corporate Governance) Regulations, 2017 be based on a ‘Comply or Explain’ approach and only the requirements pertaining to the auditors, appointment of independent/executive/female directors and audit committee be mandatory. The purpose of this approach is to facilitate listed companies to decide for themselves whether a certain requirement is appropriate for its operations and leaves it to the shareholder and regulator to consider whether the company has given a cogent explanation for not fulfilling it.

A significant reduction of 8 basis point (bps) to 2 bps in the fee charged by the SECP charged on mutual fund AUMs (assets under management) and allowing mutual funds to charge sales load on subsequent investments in VPS was recommended by the Board.

Similarly, the board also approved the removal of the condition of retaining 15 pc of the enhanced paid up capital as free reserves after issuance of bonus shares which were an impediment thereby putting the distribution of a stock dividend at par with cash dividend.

Amendments to the NCCPL Regulations, 2015, which includes introduction of 44 additional margin eligible securities and the unblocking of MFS (margin financing shares) blocked shares held by brokers on behalf of clients were also approved by the board with the aim of improving the liquidity and lowering the cost of doing business for the brokers.

The board also approved a new broker custody regime. The new regime envisages reduced custody default risk; enhanced investor confidence; enables consolidation of brokerage industry at the upper levels of the industry; creating tiers in brokerage houses into three categories based on financial strength; an improved compliance regime, particularly AML; expansion in branch network and outreach; increased collaboration with distribution channels; increased demand for new issues and products as well encourages banks to provide custody services.

On the recommendation of its Regulations Committee, the board also granted approval to several proposed amendments to the PSX Rule Book; the Employees Contributory Funds Regulations, 2018 as well as the NBFC Regulations, 2008.

The SECP Policy Board, in pursuance of Section 12 of the SECP Act 1997, comprises ex-officio members of the Ministries of Finance, Commerce, and Law, SBP, SECP and persons of eminence from the private sector.