ISLAMABAD, June 6: Securities and Exchange Commission of Pakistan has notified draft rules for the non-banking financial institutions (NBFI’s), which would be regulated by it from next month.

The decision to transfer the control of NBFIs from the State Bank of Pakistan to the SECP was announced last January.

Under the procedure devised by the SECP, all NBFIs to be established in future would be incorporated as Non-banking Financial Companies (NBFC). As regards the existing NBFIs, these would be automatically converted into NBFCs and governed by the rules and regulations framed and notified by the SECP.

This decision would not, however, apply to the Modarabas and Development Finance Institutions.

The main objective of implementation of the NBFC concept, an official source explained, was to consolidate the activities relating to the non-banking financial sector under one umbrella and promote these activities by strengthening the capital base and reducing the operational costs.

A major outcome of the decision would be the elimination of existing overlap in the regulatory jurisdiction over NBFIs by the SECP and SBP, he added.

The notification of the draft Non-Banking Finance Companies (Establishment and Regulation) Rules 2002 has been published in the official gazette of May 11, 2002 to elicit public opinion and is being circulated to all concerned. Besides, the rules are also available at the SECP website www.secp.gov.pk. Any objections/suggestions, which may be received from any person in respect of the draft rules before June 20, 2002 would be considered by the SECP before finalization of the rules.

The Rules would be promulgated after these have been approved by the Ministry of Finance.

As per the notified rules, a Non-Banking Finance Company duly licensed by the SECP would carry out any one or all of the following functions/activity, which may be specified by the SECP from time to time:

Investment finance services; leasing; housing finance services; venture capital investment; discounting services; investment advisory services (management company for open-end mutual funds); asset management services (management company for open-end mutual funds); and export finance guarantee services.

The Rules have prescribed separate tiers of minimum paid-up capital for different functions/activities proposed to be undertaken by the NBFC which is as follows:

Investment finance services: Rs100 million;

Leasing: Rs200 million; Venture capital investment: Rs5 million each for a venture capital company and a venture capital fund;

Discounting services: Rs200 million;

Investment advisory services (management company for a closed- end mutual fund): Rs20 million;

Asset management services (management company for an open-end mutual fund): Rs30 million; and Housing finance companies: Rs100 million.