Tax reforms give capital market a level-playing field: SECP chief

ISLAMABAD/KARACHI: Securities and Exchange Commission of Pakistan (SECP) Chairman Aamir Khan Wednesday informed the stock market brokers that the tax reforms have provided a level playing field to capital market, which had resulted in the withdrawal of the advance tax and Capital Value Tax (CVT) and reformed Capital Gains Tax (CGT).

According to a presentation by the SECP chairman given to the stock market brokers at the Pakistan Stock Exchange (PSX) Limited on Wednesday, the SECP’s consistent interaction with the Ministry of Finance and the Federal Board of Revenue (FBR) to push for a level playing field for capital markets that resulted in Advance Tax and CVT removed, CGT reformed, and its alignment with real estate.

The copy of the presentation available with Business Recorder revealed that the SECP has taken a number of measures for ease of doing business of the stock market brokers.

The SECP chairman also shared the progress on the capital market development plan with the stock market brokers.

The SECP chairman has also asked the brokers to make efforts for increasing awareness of debt instruments/ETFs and creating liquidity in the debt market/ETFs, ensure strict compliance with FATF/AML requirements to get off the FATF’s grey list partnering and developing alliances with banks and telecommunication companies.

Shares buyback: SECP revises eligibility requirements for listed cos

The SECP’s initiatives included simplified regulations, efficient processing of listing applications, phased increase and extensions to meet minimum net worth for T&SC brokers, simplified broker licensing regime with minimal submission requirements, relaxed approval requirement for transfer/sale of shares among existing identified sponsors, simplified documentation requirements to act as Consultant to Issue(CTI), Underwriter and Debt Securities Trustee and relaxed net worth requirements for shareholding transfer through gift deed or inheritance.

The operational measures of the SECP included a new brokerage regime, regulatory requirements commensurate with services offered operationalisation of PCM to provide operational ease and efficiency to “TO brokers” - 35 TOs migrated successfully to PCM. The SECP has also reduced reporting burden on the stock market brokers by discontinuing requirement of a separate Limited Assurance Report and rationalised reporting requirements for Liquid Capital statements.

The SECP has also facilitated brokers through the account facilitation/customer help centers in collaboration with banks, AMCs, insurance cos, etc.

Sharing new measures for the capital market development, the SECP shared measures for improving liquidity of the stock market brokers. The measures included reforms in leverage products, ie, Murabaha Share Financing (MSF), SLB, MTS and Margin Financing; implementation of Next Day Netting mechanism; increase in eligible securities in DFC and MTS; 90 days Deliverable Futures Contracts; Exchange Traded Funds.

The SECP has introduced Shariah-compliant trading functionality on KITS in partnership with Meezan Bank.

The SECP has also introduced first fundamental equity index – Dividend 20 index that tracks the performance of top 20 dividend-paying companies. The work in progress on ESG to promote responsible investing and improve corporate performance on climate risks and introduced a dedicated property sector for better representation of sector performance, EWR Regime, issuance of maize-paddy-rice EWR and revamping of REITs framework.

The SECP has also introduced the new concepts for expanding investor outreach; digital onboarding on PSX; Centralized Gateway Portal; shared KYC Mechanism (Brokers - 37on-board, five in process; Banks - eight onboard, five in process); EMLAAK- Digital distribution platform for mutual funds; eIPOs; enhanced limits for Sahulat Account and regulatory provision made to facilitate Wallet Account implementation.

The SECP has also improved engagement with brokers’ representatives. In this regard, the SECP has also enhanced communications with brokers through periodic meetings and letters, formation of Trading Forum and Broker Group by PSX for regular interaction with the brokers’ community to discuss business and operational matters.

Pakistan Stock Exchange (PSX) hosted a visit by SECP Chairman Aamir Khan and his team, including Asif Iqbal, Head of Department PRDD-SMD, whereby they were welcomed by the PSX Chairperson Dr. Shamshad Akhtar; MD and CEO Farrukh H Khan; PSX board members and senior management.

The Chairman SECP held a meeting with the PSX team and market participants which included representatives of more than a 100 TREC Holders. CDC CEO Badiuddin Akber and NCCPL CEO Muhammad Lukman were also present at the session.

The objective of the meeting was to review all facets of capital market development, challenges, current progress, outstanding developments, and to revisit the overall vision set out for capital market development.

The meeting was well attended by the securities brokerage industry. The Karachi based brokers participated physically, brokers from Islamabad and Lahore joined the session through a video link.

In the session, senior market participants including Munir Khanani from Munir Khanani Securities, Rizwan Khan from JS Global Securities, Noman Adam from Adam Securities, Mohammad Sohail from Topline Securities and Afroze Merchant from Merchant Investments among others made valuable suggestions which were noted by the Chairman and the SECP team as well as the PSX management.

Copyright Business Recorder, 2022