An applicant seeking license of central depository from the Securities and Exchange Commission of Pakistan (SECP) shall have an initial paid-up capital and net worth of not less than Rs 1 billion under the financial resource requirements. In this regard, the SECP has issued amended Central Depositories (Licensing and Operations) Regulations, 2016 on August 10, 2018. The updated regulations, as on August 10, 2018, incorporated all amendments made in the past through different notifications.
Under the financial resource requirements of the SECP, an applicant seeking license under regulation 4 shall have an initial paid-up capital and net worth of not less than rupees one billion; Provided that the Commission may require the applicant to achieve and maintain, as a licensing condition, a higher paid-up capital and net-worth in a progressive manner; Provided further that a central depository registered with the Commission prior to commencement of these regulations shall be required to maintain minimum paid-up capital and net-worth within the time commencing from the date of grant of licence under the Act and these regulations.
For the purpose of these regulations, net worth shall be calculated as total assets less total liabilities, SECP said. As per conditions of licensing, the SECP said that a central depository shall comply with the conditions on an ongoing basis or within such time as the Commission may direct to ensure availability and maintenance of necessary infrastructure for the establishment and operation of book-entry systems for the transfer of securities.
The SECP may direct the central depository to make adequate arrangements, including insurance cover for indemnifying the beneficial owners of the securities for any loss that may be caused to such beneficial owners by the wrongful act, negligence or default of the depository or any of its employees for a minimum amount as may be annually determined by the central depository based on predetermined criteria as approved by the Commission from time to time;
The SECP may direct the central depository to put in place adequate systems, procedures and necessary capacity to have a wide network of CDS elements, put in place adequate monitoring, inspection and enforcement mechanism for CDS elements and establish and maintain connectivity with the clearing house(s) and CDS elements and enter into service level agreement(s) with the securities exchange(s) and clearing houses.
The SECP may direct the central depository to have a documented business continuity plan, including a disaster recovery site; continuously improve the quality and efficiency of its systems and procedures, and attain relevant internationally recognized certifications and put in place necessary controls and safeguards to ensure cyber security, access to confidential information and alteration, destruction, disclosure or dissemination of records and data.
The SECP may direct the central depository to put in place necessary arrangements, for resolving disputes and redressal of grievances of CDS elements, beneficial owners of securities, customers or any other person; comply with the code of corporate governance for listed companies to the extent consistent with the provisions of the Act, rules and regulations made thereunder and ensure that its memorandum and articles of association contain no provision inconsistent with the provisions of the Act and these regulations and that no change is made in its memorandum and articles of association except with the prior written approval of the Commission.
The SECP may direct the central depository to ensure that its directors shall not register [or allow] the transfer of any of its shares without prior written approval of the Commission; shall facilitate access to its depository function by securities exchange, clearing house or other central depository and shall not carry on any activity other than that of a central depository unless the activity is incidental to the functions of the central depository.
Provided that a central depository [directly or by forming subsidiaries may carry-out such activity which is not incidental to functions of a central depository, as may be allowed by the Commission and subject to such conditions as may be imposed, SECP added.