The Securities and Exchange Commission of Pakistan (SECP) has directed stock exchanges to establish investors' protection fund trusts for the protection of customers/claimants and maintain customer protection compensation funds in accordance with the provisions of Securities Act, 2015. Through an S.R.O. 1246(I)2015, the SECP has amended Stock Exchanges (Corporatisation, Dernutualization and Integration) Regulations, 2012 here on Monday.
According to the SRO, whereas it is expedient and necessary to provide for matters related to demutualization and integration of the stock exchanges pursuant to the Stock Exchanges (Corporatisation, Dernutualization and Integration) Act, 2012 and further measures for transitional matters arising from the integration of the stock exchanges and for other matters connected therewith or ancillary thereto.
The investors' protection fund trusts have been established by each transferor stock exchange and successor stock exchange for the protection of customers who are entitled to make claims against such TRE certificate holders / members who are declared as defaulters or who have been expelled or whose TRE Certificate / membership has been cancelled/forfeited as per regulations of the transferor stock exchanges or the successor stock exchange as the case may be.
The SRO also provides for transitional provisions under which the investors' protection fund trusts of the transferor stock exchanges and the successor stock exchange shall be maintained in order to protect the interests of the claimants and future claimants till such time that regulations and rules for the customer protection compensation fund under section 169(2)(h) and 175(2)(c) of the Securities Act, 2015 are made effective or as may otherwise be determined by the Commission.
From the date of approval of the scheme(s) of integration under section 18 of the Act and regulation 12 hereof, the transferor stock exchanges shall cease to be stock exchanges and the successor stock exchange shall be required to establish and/or maintain customer protection compensation fund in accordance with the provisions of the Securities Act, 2015.
The notification said that the commission shall appoint a Funds Committee for each transferor stock exchange comprising of three (3) independent professionals (ie, non-TRE certificate holder), one (I) non-TRE certificate holder director of the successor stock exchange and two (2) ex-TRE certificate holders of the concerned transferor stock exchange, who shall also be ex-officio trustees of the ISE IPF Trust and LSE IPF Trust, as the case may be. The Commission may substitute any member of the Funds Committee. Each Funds Committee shall, inter alia, have functions and responsibilities.
The Funds Arbitration Committee shall have the mandate to carry out arbitrations in the manner prescribed under the regulations of the successor stock exchange (as amended from time to time), with the exceptions that (i) the panel of arbitrators shall comprise of independent professionals (ie, non-TRE certificate holder); and (ii) any appeals against the decision of the arbitrators shall be filed before an appellate forum of the Commission.
The Funds Arbitration Committee shall use the facilities for arbitration proceedings provided by the successor stock exchange. The clearing and settlement protection fund trusts have been established by each transferor stock exchange and the successor stock exchange for smooth and timely settlement of all trades routed through the stock exchanges.
The stock exchanges in Pakistan are no longer performing the functions of a clearing house In terms of the Clearing Houses (Regulation and Registration) Rules, 2005 which functions are being wholly and solely being performed at the national level by the National Clearing Company of Pakistan Limited, it added.
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