ISLAMABAD: Securities and Exchange Commission of Pakistan (SECP) Friday decided to make it mandatory for the professional clearing members, engaged in providing professional clearing services like clearing, settlement and custody/assets of customers, to get themselves registered with the commission.
The SECP has issued S. R. O. 594 (I)/2020 to notify draft Professional Clearing Members Regulations, 2020 here on Friday.
No person shall act as or perform the functions of a professional clearing member unless such person is licensed with the Commission as a professional clearing member, SECP directed the companies.
The Commission may register a scheduled bank, a development finance institute or a non-banking finance company to perform the functions of a professional clearing member without obtaining licence, subject to compliance with the requirements of these regulations.
The fee to be paid at the time of applying for licence is Rs.500, 000 and fee for renewal of licence is Rs. 250,000, SECP prescribed.
A professional clearing member must comply with the following conditions at all times: (a) it maintains a minimum long term entity rating of (A-) or equivalent from a credit rating company licensed by the Commission and disclose such rating at all times on its website and all advertisements: Provided that a professional clearing member licensed under these regulations shall obtain and maintain a minimum long term entity rating of (A-) or equivalent within one year from the date of grant of licence under these regulations; (b) it complies with the Listed Companies (Code of Corporate Governance) Regulations, 2019, SECP said.
The Commission, while considering the application for granting a licence, shall inter-alia take into account that the applicant meets the requirements including licensing conditions. The applicant has the ability to efficiently handle its functions as a professional clearing member and fulfill its obligations and applicant has the necessary financial resources, policies, procedures, systems and controls to effectively and efficiently discharge its responsibilities as a professional clearing member. The Commission, upon being satisfied after conducting such inquiries and obtaining such further information as it deems appropriate that the applicant is eligible for a licence; the applicant is in compliance with the provisions of the Act, these regulations and any directives, guidelines or codes issued there under; and it is in the public interest and interest of capital market, may grant a licence to the applicant in Form B under the provisions of the Act, SECP said.
As per financial resources requirement, the SECP has specified that a professional clearing member shall have net-worth of not less than Rs 250million. Provided that a scheduled bank, a development finance institute or a non-banking finance company shall be required to be compliant with its financial resource requirements as applicable under the respective laws after allocating the financial resources under this regulation towards professional clearing member services.
Under the licensing conditions, a company may apply to the Commission in the manner as provided for grant of licence as professional clearing member, if it is a public company incorporated under the Companies Act. The applicant does not hold, directly or indirectly, a TRE certificate. The applicant, its sponsors, directors and senior management officers are fit and proper persons as per the criteria specified in Annexure-D and while evaluating fit and proper criteria in respect of sponsors of the applicant, the fit and proper criteria shall also be applied to the extent practical on the majority shareholders and directors of such sponsors. The applicant has financial resources, shareholding and governance structure as provided in these regulations and is in compliance with the requirements of regulations.
It is necessary that the professional clearing members have developed and put in place requisite infrastructure; human resources with sufficient education, experience and expertise; mechanisms; systems and controls, including policies and procedures, for efficient business operations, order routing, risk management, clearing and settlement, default handling, customer dispute, grievance and complaint handling in an efficient manner and within reasonable time along with maintenance of proper books and records, effective compliance with the laws, relationship with customers etc.
A professional clearing member licensed under these regulations may extend credit or provide financing to its customers under conventional or Shariah compliant manner subject to compliance with requirements of the Act or any rules or regulations made there under, SECP added.
Copyright Business Recorder, 2020
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