The securities brokers would be required to evaluate the creditworthiness of its customers through a proper credit risk assessment methodology and assign credit limits to each customer beyond which the customer shall not be allowed to avail financing under margin financing and margin trading. According to the draft Securities (Leveraged Markets and Pledging) Rules, 2017 issued by the Securities and Exchange Commission of Pakistan (SECP) revealed new Securities Broker's obligations.
The said condition has been mentioned in Securities Broker's obligations of the draft Securities (Leveraged Markets and Pledging) Rules, 2017. The securities brokers acting on behalf of its customers in any of the leveraged markets or pledging the securities of customers shall ensure that all provisions of the Anti-Money Laundering Act, 2010 are complied with at all times, the rules said.
Under the said draft obligations of such brokers, in addition to the securities brokers' obligations under the Securities Brokers (licencing and operations) Regulations, 2016, a broker acting on behalf of its customers in any of the leveraged markets or pledging the securities of a customer shall ensure that no transaction is executed by the broker on behalf of a customer unless an appropriate agreement has been executed between the securities broker and such customer and all provisions of Anti-Money Laundering Act, 2010 and any rules and regulations made thereunder are complied with at all times.
A broker acting on behalf of its customers in any of the leveraged markets or pledging the securities of a customer shall ensure that all risks involved in the relevant transactions have been fully disclosed and the broker has obtained a written confirmation from its customers that they have understood and have the ability to bear the risks in such transactions and the options available to a customer in respect of various financing facilities in the securities markets have been fully disclosed and explained to the customers.
The broker shall evaluate the credit worthiness of its customers through a proper credit risk assessment methodology and assign credit limits to each customer beyond which the customer shall not be allowed to avail financing under margin financing and margin trading. A broker shall maintain records in respect of its compliance with the aforesaid obligations and such records shall be open to inspection by the Commission at any time.
No securities broker shall extend credit and lend, borrow or pledge customer's securities, by whatever name called or in whatsoever manner, , or purport to do so, except in accordance with and to the extent permitted by the provisions of these rules, regulations or any directives or circulars issued by the Commission, draft Securities (Leveraged Markets and Pledging) Rules, 2017 added.
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