The Securities and Exchange Commission of Pakistan (SECP) has directed all Asset Management Companies (AMCs) to provide a right to the unit holders to obtain a refund of their first time investment (cooling-off right) in a collective investment scheme (CIS) managed by the AMC. In this regard, the SECP has issued direction number 31 of 2016 to the AMCs on Thursday.
According to the SECP, the Commission in exercise of the powers conferred under Section 2820 of the Companies Ordinance, 1984 hereby directs all Asset Management Companies (AMCs) to provide a right to the unit holders to obtain a refund of their first time investment (cooling-off right) in a Collective Investment Scheme (CIS) managed by the AMC, if the unit holder so requests within the stipulated time period (cooling-off period).
In this respect, the AMC shall comply with the laid down conditions. Firstly, the cooling-off right, cooling-off period and procedure to exercise such right shall be adequately disclosed in the investment form signed by the unit holder at the time of purchase of units. Secondly, the cooling-off right shall be available to individual unit holders only. Thirdly, the cooling-off right shall be available only for first time investment by an individual unit holder in a particular CIS. Fourthly, the cooling-off period shall comprise of three business days commencing from the date of issuance of investment report to the unit holder as per Circular 26 of 2015. Fifthly, the cooling-off right shall be exercised by the unit holder upon written request to the AMC within specified cooling-off period. Sixthly, the refund for every unit held by the unit holder pursuant to the exercise of a cooling-off right should be an amount equal to NAV per unit applicable on the date the cooling-off right is exercised. Seventh, the AMC shall also refund any sales load paid by the unit holder. Eight, the contingent load shall be payable by the unit holder on exit from the CIS where such load is admissible as per the constitutive document of the CIS.
For the purpose of the direction, contingent load means the load charged upon redemption and which forms part of the CIS property. The refund pursuant to the exercise of a cooling-off right shall be paid to the unit holder within six business days of receipt of written request from the unit holder, the SECP maintained.
The AMC shall also ensure that before signing of investment form the investor is provided, the latest Fund Manager Report (FMR) in case of investment in an existing CIS whereas for a new CIS, the AMC shall provide a fact sheet of the CIS containing information as per Section 1 (Basic Fund Information) of FMR prescribed by MUFAP excluding Net Assets of CIS, NAV per unit, Fund Stability Rating and leveraging done by the CIS. The direction shall come into force with immediate effect. Any non-compliance will be dealt in accordance with the prevalent regulatory framework, the SECP added.