Every company, constituting a fund or trust, shall within one month of the close of every six months of the financial year of such fund or trust submit financial information of the fund or trust duly endorsed by the chief executive officer of the company or head of trustees in case of trust. According to the draft Employees Contributory Funds (Investment in Listed Securities) Regulations, 2018 issued by the Securities and Exchange Commission of Pakistan (SECP) under SRO 435(I)/2018 issued here on Tuesday, the SECP has issued mandatory submission regarding investments out of fund or trust.
The Employees' Provident Fund (Investment in Listed Securities) Rules, 1996, and Employees' Provident Fund (Investment in Listed Securities) Rules, 2016 would be repealed.
Every company, constituting a fund or trust, as the case may be, shall, within one month of the close of every six months of the financial year of such fund or trust, as the case may be, submit to the Commission financial information of the fund or trust as the case may be, as contained in the Annexure "A" to these regulations duly endorsed by the chief executive officer of the company, in case of fund and by the head of trustees in case of trust, it added.
Where an investment is made in equity securities of listed companies, it shall be made only where such companies,- have a minimum profitable operational record of immediate three preceding years; have paid average dividend of not less than fifteen percent to the shareholders during two out of three preceding consecutive years; the minimum free float of the Company shall not be less than fifteen percent or fifty million shares whichever is higher; and the shareholders equity of such company shall not be negative.
Where investment is made in bonds, redeemable capital, debt securities or instruments issued by a statutory body or listed debt securities of a company: such securities shall be assigned a minimum rating of "AA-" by a credit rating company licensed with the Commission and with at least a stable outlook at the time of investment, provided that the Commission may, from time to time, change the minimum rating of a security assigned in this clause.
Where investment is made in collective investment schemes which may invest in debt securities, the investment policy of such scheme shall be in line with the criteria provided in clause (b) of Regulation 4.
Where investment is made in money market collective investment schemes, it shall be made only in those money market schemes which have been assigned a minimum rating of "AA-" by a credit rating company licensed with the Commission and with at least a stable outlook at the time of investment, provided that the Commission may, from time to time, change the minimum rating of a security assigned in this clause.
Where investment is made in equity collective investment schemes, the investment policy of such schemes shall be in line with the criteria provided.
The SECP said that the investment in IPO shall be made subject to the following conditions, namely:- investment in IPO of equity securities out of the fund or trust, shall be made in companies having profitable operational record; fund or trust, shall not subscribe to an IPO of equity securities underwritten in any way by its associated companies or associated undertakings; and fund or trust, shall not subscribe to an IPO of a greenfield project.
The investment in collective investment schemes that are hybrid in nature shall follow the investment limits provided in clause (1) (ii) of Regulation 3 and hybrid funds shall comply with the condition for investments provided.
Where the aggregate investment in listed equity securities, other than equity collective investment schemes is fifty million rupees or above, the fund or trust shall appoint or seek advice from investment advisor holding a valid license from the Commission for providing investment advisory services.
Provided that where investment is made on the advice of the investment advisor, the conditions for investment criteria provided in clause (iv)(a) of Regulation 4 shall not be applicable.
Provided further that, investment advisor will be held liable under Section 282J of the repealed Companies Ordinance, 1984 in case of loss to fund or trust due to his negligence.
The investment shall not be made in a listed debt security if issuer of the security has defaulted any of its financial obligations. The fund or trust, as the case may be, shall be managed by the qualified individuals having requisite skills, knowledge and experience in the capital market in order to ensure that the investment and the interest of the employees' are protected.
The fund or trust, as the case may be, shall develop and maintain appropriate investment policies explaining investment limit, investment avenues and risk appetite including but not limited to business allocation among the brokeRs Moreover, the fund or trust, as the case may be, shall invest in liquid securities and shall refrain from activities including day trading, investment in future markets (except spread transactions) and investment in securities either through borrowing or through leverage.
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