The Securities and Exchange Commission of Pakistan (SECP) has decided to regulate provident funds, contributory pension funds or any other contributory retirement funds constituted by companies or trusts of companies to manage such funds pertaining to investments made in bonds, redeemable capital, debt securities, etc.
The SECP on Wednesday issued SRO 34 (I)/2018 to propose draft Employees Contributory Funds (Investment in Listed Securities) Regulations, 2018. The SECP will repeal Employees' Provident Fund (Investment in Listed Securities) Rules, 1996, Employees' Provident Fund (Investment in Listed Securities) Rules, 2016, notification No SRO 261(I)/2002 dated May 10, 2002 and notification No SRO 537(I)/2004.
Under draft Employees Contributory Funds (Investment in Listed Securities) Regulations, 2018, the regulations shall apply to all provident funds, contributory pension funds or any other contributory retirement funds constituted by a company or where a trust has been created by a company to manage such funds in respect of all the investments made by company or trust, as the case may be, in bonds, redeemable capital, debt securities or instruments issued by a statutory body, units of collective investment schemes registered as notified entities with the Commission, and in listed securities including shares of companies, bonds, redeemable capital, debt securities and equity securities.
Within one year from the date of commencement of notification of these Regulations, all investments from the provident fund, contributory pension fund or any other contributory retirement fund constituted by a company or where a trust created by a company with respect to provident fund, contributory pension fund or any other contributory retirement fund, as the case may be, shall be brought in conformity with the provisions of these Regulations, the SECP said.
The draft regulations specified limit for investment in listed securities. Where the company or trust decides to make an investment out of the fund or trust, as the case may be: (i) bonds, redeemable capital, debt securities or instruments issued by a statutory body or; (ii) securities listed on Pakistan Stock Exchange, including shares of companies, bonds, redeemable capital, debt securities, equity securities and listed collective investment schemes registered as notified entity with the Commission under Non-Banking Finance Companies and Notified Entities Regulations, 2008; such investments shall not exceed fifty per cent of the size of the fund or Trust, as the case may be, SECP proposed.
This is subject to the condition that total investment in bonds, redeemable capital, debt securities or instruments issued by a statutory body or listed debt securities, listed debt collective investment schemes and money market collective investment schemes registered as notified entity with the Commission under Non-Banking Finance Companies and Notified Entities Regulations, 2008, shall not exceed fifty per cent of the size of the fund or trust, as the case may be and total investment in listed equity securities and listed equity collective investment schemes, registered as notified entity with the Commission under Non-Banking Finance Companies and Notified Entities Regulations, 2008, shall not exceed thirty percent of the size of the fund or trust, as the case may be.
Conditions for investment in listed securities: Where the company or trust decides to make, out of fund or trust, as the case may be, investment in (i) equity securities of companies listed on Pakistan Stock Exchange; (ii) bonds, redeemable capital, debt securities, collective investment schemes or similar instruments listed on Pakistan Stock Exchange or; (iii) bonds, redeemable capital, debt securities or instruments issued by a statutory body; such investment shall be subject to the specified conditions: where an investment is made in equity securities of listed companies, it shall be made only where such companies, have a minimum operational record of three years; and have exhibited average total return on investment, not less than prevailing risk free rate defined.
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, 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, the SECP added.