The Securities and Exchange Commission of Pakistan (SECP) has decided to direct professional clearing members of stock exchange that customer money shall not form part of the assets of the professional clearing member for any purpose and shall not be available in any circumstances for payment of their debt or liability. It is learnt that the SECP has issued draft of the Professional Clearing Members (Licensing and Operations) Regulations, 2017 through a recently issued notification.
According to the proposed regulations, customer money shall not form part of the assets of the professional clearing member for any purpose and shall not be available in any circumstances for payment of any debt or liability of the professional clearing member. A professional clearing member shall not use customer money for any purpose other than as allowed under the Act or any rules or regulations made thereunder.
The professional clearing member" means a company licensed under these regulations to provide professional clearing services, ie, services for clearing, settlement and custody of securities for customers. The SECP said that a professional clearing member who receives or holds customer money shall open separate designated bank accounts. A designated customer bank account shall be kept segregated from any account holding money belonging to the professional clearing member.
A professional clearing member shall make arrangements to facilitate direct deposit of money by its customer into a designated bank account. A professional clearing member shall keep records of all amounts deposited into the designated bank account(s), specifying the customers on whose behalf the amounts are held and the dates on which the amounts were received and all payments from the designated bank account(s), the dates of those payments, and the names of the customers on whose behalf the payments are made; and such other particulars as may be specified by the Commission.
No amount from customer bank account(s) shall be withdrawn in cash and all payments shall be made through cross cheques or other banking channels and where payment is made through cross cheques, the professional clearing member shall keep copy of the cheques issued for the purposes of record.
The SECP has proposed that a professional clearing member shall properly account for customer money and ensure that customer money is not mixed with other money; a professional clearing member can at all times calculate how much customer money stands to the credit of each customer; and money belonging to one customer is not used for another customer.
A professional clearing member shall not withdraw money received and deposited in the designated bank account otherwise than for the purpose of making a payment to a person entitled to the money; meeting obligations emanating from dealing in securities effected by the professional clearing member on the instructions of a customer; defraying fee, charges or levies incurred in respect of dealing in securities effected by the professional clearing member on the instructions of a customer; or making a payment that is otherwise authorized by law.
The SECP said that all customer assets (other than customer money) held or received by a professional clearing member on account of a customer shall be segregated and separately accounted for. A professional clearing member shall at all times keep such books as is necessary to show all handling of a customer's assets including relevant dates; and to distinguish such customer assets held or received by it on account of each separate customer and to distinguish such customer assets from its own assets and other assets held or received by the professional clearing member.
A professional clearing member shall maintain a separate sub-account under its participant account in the CDS for each of its customers to maintain the custody of all securities belonging to the customer including margins deposited by the customer. A complete audit trail of the transactions pertaining to customer's assets is to be maintained by the professional clearing member, draft regulations added.