Head of the Securities and Exchange Policy Board, Prof Khalid Mirza Friday that the latest decisions taken by the policy board would increase ease of doing business in capital market, reduce fee on mutual funds assets and facilitate the stock brokers.
Talking to Business Recorder, Khalid Mirza said, "In my opinion, decisions taken by the Policy Board in this meeting will have far-reaching positive consequences for the capital market and by extension the economy. These decisions would greatly facilitate and bring about considerable ease of doing business in capital market and, in particular greatly simplified rules prepared for 'By Back of Shares", big reduction in fee charged by the SECP on mutual funds assets and facilitation provided to the stock brokers. This is in addition to the tax policy proposals prepared by the SECP, which the commission is dealing with the Federal Board of Revenue (FBR), Khalid Mirza added.
Meanwhile a press release of the SECP issued here on Friday said: The Securities and Exchange (SECP) Policy Board met in Islamabad at the SECP Headquarters on Thursday last under the chairmanship of Professor Khalid Mirza. The Board gave its approval to significant measures in simplifying the regulatory requirements for ease of doing business and promoting the overall growth of the capital market.
In order to remove the difficulties/impediments in the buyback of shares by companies, the following amendments were approved in the draft Listed Companies (Buy-Back of shares) Regulations, 2019: (i) condition relaxed with respect to the company considering buyback to be enlisted as margin eligible securities; (ii) condition relaxed with respect to maintaining paid-up capital of Rs 200 million after buyback; (iii) restriction removed with respect to the sale price of treasury shares to be within 10% variance to closing price of a scrip on the day preceding the day of approval of special resolution; (iv) allowing the sale of treasury shares through negotiated market deals; and (v) clarifying responsibilities of the securities broker by requiring acknowledgement of receipt of shares, ensuring timely payments and return of shares, in case of withdrawal of offer for purchase.
The Board also recommended to the Commission that the Listed Companies (Code of Corporate Governance) Regulations, 2017 be based on a 'Comply or Explain' approach and only the requirements pertaining to the auditors, appointment of independent/executive/female directors and audit committee be mandatory. The purpose of this approach is to facilitate listed companies to decide for themselves whether a certain requirement is appropriate for its operations and leaves it to the shareholder and regulator to consider whether the company has given a cogent explanation for not fulfilling it.
A significant reduction from 8 bps to 2 bps in the fee charged by the SECP charged on mutual fund AUMs (assets under management) and allowing mutual funds to charge sales load on subsequent investments in VPS was recommended by the Board.
Similarly, the Board also approved the removal of the conditionality of retaining 15% of the enhanced paid-up capital as free reserves after issuance of bonus shares which were an impediment thereby putting the distribution of a stock dividend at par with cash dividend.
Amendments to the NCCPL Regulations, 2015, which include introduction of 44 additional margin eligible securities and the unblocking of MFS (margin financing shares) blocked shares held by brokers on behalf of clients were also approved by the Board with the aim of improving the liquidity and lowering the cost of doing business for the brokers.
The Board also approved a new broker custody regime. The new regime envisages reduced custody default risk; enhanced investor confidence; enables consolidation of brokerage industry at the upper levels of the industry; tiering brokerage houses into three categories based on financial strength; an improved compliance regime, particularly AML; expansion in branch network and outreach; increased collaboration with distribution channels; increased demand for new issues and products as well as encourages banks to provide custody services.
On the recommendation of its Regulations Committee, the Board also gave approval to several proposed amendments to the PSX Rule Book; the Employees Contributory Funds Regulations, 2018 as well as the NBFC Regulations, 2008.
The SECP Policy Board, in pursuance of Section 12 of the SECP Act 1997, comprises ex officio members of the Ministries of Finance, Commerce, and Law, SBP, SECP and persons of eminence from the private sector.
Khalid Mirza said that SECP Policy Board has approved new broker custody regime that will divide the stock brokers into three categories where the last one will not be allowed to trade on behalf of any investor.
The new regime is expected to be placed for public consultation by the SECP next week.
Professor Khalid Mirza said that the top tier broker with more than Rs500 million in the brokerage account will be allowed to trade shares for itself and the investors along with completing the formalities of clearing and holding the shares of the investors.
The brokers in second category need to have between Rs250- Rs500 in the account, they will have limited rights related to trading on behalf of the investors while the third category of brokers can only trade shares for themselves and cannot provide any service to clients.
Chairman of policy board Khalid Mirza talking to media said that there was need to reduced custody default risk, "All defaults are related to custody services, as some brokers get overstretched leading to the collapse."
He also added that the new regime will lead to enhanced investor confidence and support an improved compliance regime -particularly anti-money laundering.
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