SECP amends 'Central Depositories (Licensing and Operations) Regulations 2016'

Securities and Exchange Commission of Pakistan (SECP) has allowed the central depository to have an arrangement with the securities exchange for outsourcing its compliance function relating to Trading Rights Entitlement (TRE) certificate holders.

The SECP has issued SRO 1304 (I)/2019 here on Monday to amend Central Depositories (Licensing and Operations) Regulations, 2016.

Under the revised regulations, a central depository may enter into an arrangement with a securities exchange, with prior approval of the Commission, for outsourcing its compliance function with respect to its Central Depository System (CDS) elements which are TRE certificate holders in the laid down manner:

Firstly, the central depository shall enter into a service level agreement with the securities exchange for outsourcing the compliance function after obtaining approval of its board of directors with respect to shifting of employees and defining the role, responsibilities, duties, obligations of securities exchange, scope of services, remuneration of shifting compliance function, indemnification to the central depository and any other important matter.

Secondly, upon signing the service level agreement and from the effective date provided in the agreement, the securities exchange shall, on the behalf of central depository, supervise or conduct any investigation, inspection or enquiry, in accordance with the service level agreement and the regulations of the securities exchange and central depository, required to be conducted by a central depository in respect of CDS elements which are TRE certificate holders.

Thirdly, the central depository shall maintain liaison with the chief regulatory officer of the securities exchange and jointly develop procedures for enabling the securities exchange in performing functions relating to monitoring compliance through inspections, investigation or enquiry in respect of CDS elements which are TRE certificate holders and for regular updating with respect to changes in the regulations.

The central depository shall be fully liable and accountable for the compliance functions that are being outsourced to the same extent as if the functions were performed in-house. The central depository may outsource its compliance function subject to compliance with the conditions specified in regulation 11A, the SECP added.