ISLAMABAD: Any person against whom a reference has been filed in court by the National Accountability Bureau (NAB) cannot be appointed as a director, key executive or chief executive of the Non-Banking Finance Companies (NBFCs) and Investment Companies.
In this regard, the Securities and Exchange Commission of Pakistan (SECP) has issued draft amendments to the NBFC Regulations for public consultation here on Tuesday to safeguard the interest of investors and prevent mis-selling.
Under the revised regulations, the SECP has further tightened criteria specified for fitness and propriety of directors and chief executives of the NBFCs with a focus on training, disciplining, and monitoring of its sales force.
The SECP has proposed amendment in the “fit and proper criteria” in relation to an NBFC and Investment Company which is applicable to the promoters and major shareholders of the NBFC and Investment Company; director of the NBFC and Investment Company; chief executive of the NBFC and Investment Company; key executives of the NBFC and Investment Company.
The integrity and track record of a person shall not be considered “fit and proper”, if he has entered into a plea bargain arrangement with the NAB or against whom reference has been filed in court by the NAB, as per the SECP's proposed amendment.
Moreover, the SECP may conduct an interview of the chief executive to assess his/her suitability for the position.
The proposed amendments focus on training, disciplining, and monitoring of sales force of NBFCs.
Additionally, the criteria specified for fitness and propriety of directors and chief executives of the NBFCs has been further augmented.
Further, the proposed amendments require the Asset Management Companies (AMCs) to formulate and implement a policy approved by their Board of Directors for continued training, accountability and capacity building of their sales force for accurate analysis and assessment of suitability of product for every individual investor.
The AMCs are also required to ensure regular review of the suitability assessment made at the time of investment and quarterly reporting of such review to the management or Board Committee for ensuring effectiveness of the policy, the SECP said.
According to the amendments proposed in the Non-Banking Finance Companies and Notified Entities Regulations, 2008, the NBFCs should have a board’s approved policy and mechanism in place for an effective implementation of codified processes to ensure that the sales force is trained, regularly reminded and held accountable for undertaking meaningful and accurate analysis at the time of every new investment and its roll-over. This required to establish and document product suitability in light of the investment objectives and risk tolerance of every individual investor, and put in place a mechanism for regular review and reporting of such review to a management or Board Committee, on a quarterly basis.
As per SRO 107 (I)/2021, in case of non-executive nominee directors representing institutional interest and who otherwise do not have any personal interest, the Commission may, after seeking explanation, if satisfied, for reasons to be recorded in writing, relax this requirement on case to case basis, subject to such conditions as it may deem fit.
Copyright Business Recorder, 2021
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