Collective investment schemes of NBFCs: SECP proposes to revise disclosure requirements

The Securities and Exchange Commission of Pakistan (SECP) has proposed to revise disclosure requirements by collective investment schemes of Non-Banking Finance Companies (NBFCs) for which income statement has been modified for the NBFCs. In this regard, the SECP has issued S.R.O. 354 (1)/2017 to propose amendment in Non-Banking Finance Companies and Notified Entities Regulations, 2008 here on Monday.
According to the revised income statement under the disclosure requirements by collective investment schemes, income statement cover total investment income net of withholding tax, broken down by category; total other income, broken down by category; an itemized list of various costs which have been debited to the Collective Investment Scheme, including fees paid to the Asset Management Company; remuneration of the custodian; remuneration of trustee; amortization of formation costs; director's fee and remuneration; safe custody and bank charges, auditor's remuneration; borrowing expenses, legal and other professional fees; and any other expense borne by the Collective Investment Scheme; taxes; net income and allocation of Net income for the year: income already paid on units redeemed; and accounting income available for distribution - carried to Distribution Account: relating to Capital Gains; and excluding Capital Gains.
Distribution statement cover information of amount brought forward at the beginning of the period bifurcated into realised and unrealized gains; accounting income available for distribution for the period bifurcated between: relating to Capital Gains; and excluding Capital Gains; interim dividend, date of distribution, and dividend per unit for units entitled to full period dividend; final dividend, date of distribution, and dividend per unit for units entitled to full year/ period dividend; undistributed income carried forward bifurcated into realised and unrealized gains and amounts transferred to and from reserves.
Statement of movements in reserves or Unit holders' fund included net asset value per share or unit as at the beginning of the period; net asset value per share or unit as at the end of the period; number of units issued and the amount received upon such issue, (Le. capital value and element of income on issue of units); number of units redeemed and the amount paid on redemption (ie capital value of units redeemed and amount paid out for element of income); element of income paid on units redeemed out of income of fund; any item resulting in an increase or decrease in net asset value of the Share or unit including surplus or loss on sale of investments; exchange gain or loss; unrealized appreciation or diminution in value of investments; and accounting income for the period less distribution; amounts transferred to and from the revenue account and any refund on units as element of income.
"Element of income" represents the income composition (income earned during the year and accumulated profit carried from prior years) of the net asset value of an open end collective investment scheme that the collective investment scheme receives on issue of units and pays out on redemption.
Element of income is a transaction of capital nature and the receipt and payment of element of income is taken to unit holders' fund; however; to maintain same ex-dividend net asset value of all units outstanding on accounting date, net element of income contributed on issue of units lying in unit holders fund is refunded on units in the same proportion as dividend bears to accounting income available for distribution, SECP proposed.
It is important to mention here that the Collective Investment Scheme" means any arrangement whose sole purpose is the collective investment of funds in a portfolio of securities, or other financial assets for profits, income or other returns, and where the participants, who have pooled in the funds, do not have any day to day control over the management of the scheme, Whether or not they have the right to be consulted or to give direction in respect of such management. Provided that the following shall not be considered as a Collective Investment Scheme for the purpose of these regulations:
-(a) employee welfare trusts or gratuity trusts or employees provident funds or employees' pension funds setup for the benefit of employees by companies; and(b) any such pool of funds which is separately regulated by the Commission or which is already established under any specific law.