ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has finally decided to enforce Research Analysts Regulations 2015, which were notified two years ago.

The regulator aims to enhance the quality standards of research analysts operating in the capital market of the country.

The regulation highlights the qualifications of research analysts and in this regard a directive has been issued recently for all the analysts to obtain the ‘Research Analysts Certification’ from the Institute of Financial Markets of Pakistan.

The SECP said all existing research analysts have been given six months to obtain the said certification, while new entrants will be required to obtain such certification within six months of intimation to the SECP as a research analyst/research entity.

The commission maintains the objective of mandatory certification for the analysts is to inculcate good governance practices, promote investor protection and groom skilled personnel providing recommendation to investors in capital market.

The certification requirement will also be applicable to chief executive or head of research function of the entities involved in research report publication.

Besides, the commission maintains the certification will bring Pakistani the capital market on a par with global jurisdiction. There are currently more financial market social media analysts operating in the country compared to the research analysts registered with the SECP.

Real researchers in trouble

A research analyst told Dawn the SECP was tightening the noose around registered and qualified persons operating as analysts.

“There seems to be no way that the regulator can trace and manage the activities of these investment gurus on social media. They have a significant following,” the source said.

The SECP is also planning to further amend the Research Analysts Regulation 2015.

The capital market regulator plans to clarify the definition of research reports too from its existing pattern.

“There have been several concerns by the SECP that research reports should not be giving the pricing without any research based argument,” another research analyst said.

“The proposed amendments to the 2015 regulation would restrict the brokerages from issuing sector reports and guidelines for any single scrip,” he added.

The new proposal says that if the brokerage would issue guidelines — buy/sell/hold regarding any scrip — then the research report should be specific about that entity and not for the whole sector, to bring clarity to the investors.

At the same time the SECP will take counter measures to determine if the brokerage is not involved in manipulation.

“There have been complaints against many brokerage houses who want to offload their own holdings and issue recommendations for buying in their research reports,” the analyst said.

“The positive side is that if implemented in true letter and spirit, the Research Analysts Regulation 2015 could lead to development of independent research analysts.”

Currently almost all the research reports are formulated and released by the brokerage houses and majority of them are related to shares only, leaving other sectors like the debt market, etc untouched.

Meanwhile, an official of SECP said that the Commission was actively pursuing the case against unauthorised investments analysts on social media and several such pages have been reported to the FIA.

“The commission has also directed the companies to keep an eye on rumours related to them circulating in the market and clarify them as much as possible, but this will take time as tracing these investment guides operating on social media is not easy,” the official added.

Published in Dawn, April 30th, 2017