The Securities and Exchange Commission of Pakistan (SECP) has prescribed new limits and conditions for employees' contributory funds, provident funds or any other contributory retirement funds intended to make investment in listed securities.
Through SRO 731 (I)/2018 issued here on Tuesday, the SECP has issued Employees Contributory Funds (Investment in Listed Securities) Regulations, 2018. However, the regulations shall not apply to a pension fund governed under Voluntary Pension Systems Rules, 2005. The Employees' Provident Fund (Investment in Listed Securities) Rules, 2016, SRO 261(I)/2002 dated the May10, 2002 and SRO 537(I)/2004, hereinafter referred to as repealed instruments, are hereby repealed.
According to the regulations, the regulations shall apply to all provident 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 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 or any other contributory retirement fund constituted by a company or where a trust created by a company with respect to provident fund or any other contributory retirement fund, as the case may be, which are beyond the investment limits provided in these regulations shall be reduced gradually and brought in conformity with the provisions of these regulations, the SECP said.
The fund or trust shall amend the trust deed and include a clause providing one time option to the new employees for either allowing or not allowing the fund or the trust to make any investment out of their contributory fund or trust under these regulations.
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, in bonds, redeemable capital, debt securities or instruments issued by a statutory body or; securities listed on Pakistan Stock Exchange, including shares of companies, bonds, redeemable capital, debt securities, equity securities and 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 fund or trust, as the case may be.
The SECP said that the total investment, at the time of making investment in bonds, redeemable capital, debt securities or instruments issued by a statutory body or listed debt securities, of a particular sector, as per the sector classification made by the Pakistan Stock Exchange, shall not exceed twenty percent of investment limit provided.
Total investment, at the time of making investment in bonds, redeemable capital, debts securities or instruments issued by a particular statutory body or in listed debt securities of a particular company shall not exceed ten percent of the investment limit provided or five percent of that issue, whichever is lower;
Total investment, at the time of making investment in bonds, redeemable capital, debt securities or instruments issued by a constituting statutory body or listed debt securities of constituting company or its associated companies, as the case may be, shall not exceed ten percent of the investment limit provided, SECP added.
Total investment, at the time of making investment in listed equity securities of a particular sector, as per the sector classification made by the Pakistan Stock Exchange, shall not exceed twenty percent of the investment limit provided, the SECP added.
The conditions for investment in listed securities revealed that where the Fund or Trust decide to make investment in equity securities of companies listed on Pakistan Stock Exchange; or bonds, redeemable capital, debt securities or similar instruments listed on Pakistan Stock Exchange; or collective investment schemes registered as notified entity with the Commission under Non-Banking Finance Companies and Notified Entities Regulations, 2008; or bonds, redeemable capital, debt securities or instruments issued by a statutory body. Such investment shall be subject to the laid down conditions.
Where investment is made in bonds, redeemable capital, debt securities or instruments issued by a statutory body or listed debt securities of a company such securities shall be assigned a minimum rating of "A" by a credit rating company licensed with the Commission and with at least a stable outlook at the time of investment: Provided that the Commission may, from time to time, change the minimum rating of a security assigned.
Where investment is made in debt collective investment schemes, it shall be made only in those debt collective investment schemes which have been assigned stability rating of "A" by a credit rating company licensed with the Commission at the time of investment, the SECP said.
Mandatory submission regarding investments out of Fund or Trust; 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 be, 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.