SOHAIL SARFRAZ

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has that no person shall act as or perform the functions of a securities adviser or futures adviser unless such person is licensed with the Commission as a securities adviser or futures adviser under the Securities Act or Futures Act.

The SECP has issued draft amendments to the Securities and Futures Advisers (Licensing and Operations) Regulations, 2017 through an SRO 78(I)/2018.

Under the draft regulations, no person shall act as or perform the functions of a securities adviser or futures adviser unless such person is licensed with the Commission as a securities adviser or futures adviser under the Securities Act or Futures Act and these regulations and a person performing distribution of Collective Investment Schemes (CIS) and/or Voluntary Pension Fund (VPF) units of multiple AMCs by entering into contracts with such AMCs shall also be required to obtain license as a securities adviser under these regulations, in order to perform functions of a distributor.

Provided that a securities broker duly licensed by the Commission and providing custodial services as integral part of brokerage business model, shall not be eligible to obtain license for securities adviser or futures adviser.

Provided further that a securities broker duly licensed by the Commission to undertake securities broker activity may provide securities and future advisory to its brokerage customers being incidental to the conduct of his business as a securities broker without receiving any separate compensation thereof and may distribute CIS and/or VPF units of multiple AMCs by entering into contracts with such AMCs. This is subject to laid down conditions as specified in SRO 78(I)/2018.

A futures broker duly licensed by the Commission to undertake future’s broker activity for futures contract based on commodities and/or financial instruments may provide futures advisory to the extent of futures contract based on commodities and/or financial instruments to its customers being incidental to the conduct of his business as a futures broker without receiving any separate compensation thereof. Provided further that an NBFC duly licensed by the Commission for Investment Advisory Services under Part-VIIIA of the Companies Ordinance, 1984 may undertake securities advisory and future advisory subject to: (a) maintaining membership of an association of securities advisers and/or futures advisers, as the case may be, or any other association or self-regulatory organization, which is approved by the Commission for the purpose, and abides by the code of conduct specified by such association at all times.

The SECP explained licensing conditions for securities adviser and futures adviser. A person may apply to the Commission for securities adviser and/or future adviser license under these Regulations if such person is a company registered under the Companies Act for the purpose of providing advisory including distribution of CIS and/or VPF units of multiple AMCs by entering into contracts with such AMCs; or a banking company eligible for obtaining securities adviser license for distribution of units of CIS and/or VPS; or such other company as may be notified by the Commission.

A person referred may apply to the Commission for license as a securities adviser and/or futures adviser, subject to fulfillment of the following conditions:

a) It has a place of business in Pakistan.

b) Its memorandum and articles of association allow it to apply for grant of licence under the Act.

c) It, its sponsors, directors and senior management officers shall fulfill the fit and proper criteria specified in Annexure A.

d) The sponsors shall collectively hold not less than fifty one percent shares and not less than twenty five percent shares in the case of a listed company. The change in sponsors shall not be affected without the prior written approval of the Commission.

e) The relevant employees of the company shall have the requisite qualification and/or experience and certification as specified in Annexure A.

f) It meets the financial resource requirements as specified in these regulations, where applicable.

g) It maintains membership of an association of securities advisers and/or futures advisers, as the case may be, or any other association or self-regulatory organization, which is approved by the Commission for the purpose, and abides by the code of conduct specified by such association at all times, SECP added.