ISLAMABAD: The Securities and Ex­­change Commission of Pakistan (SECP) on Monday notified the Employees Contributory Funds (Investment in Listed Securities) Regulations 2018, which apply to all provident funds and other contributory retirement funds constituted by a company.

However, the regulations do not apply to a pension funds which are governed under Voluntary Pension Systems Rules 2005.

Under the Employees Contributory Funds (Investment in Listed Securities) Regulations, a company creates trusts to manage funds in respect of all the investments made by the company or trust, in bonds, redeemable capital, debt securities or instruments issued by a statutory body.

The investments can be made in 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.

Under the regulations, “fund” means a provident fund or any other contributory retirement fund constituted by a company for its employees or any class of its employees.

There is a limit to investments in such funds and 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, cannot exceed 30 per cent of the size of the fund or trust.

While the total investment, at the time of making investment in debt collective investment schemes registered as notified entity with the Commission under Non-Banking Finance Companies and Notified Entities Regulations, 2008, shall not exceed 50pc of the size of the fund or trust.

There are conditions for investment in listed securities; if investment is made inequity securities of listed companies, it can only be in a company that has the minimum profitable operational record of immediate three preceding years, has paid average dividend of not less than 15pc to the shareholders during two out of three preceding consecutive years, and the minimum free float of the company was not less than 15pc or 50 million shares whichever is higher.

While the investment in IPO can be made in companies having profitable operational record, and the fund or trust cannot subscribe to an IPO of equity securities under written in any way by its associated companies or associated undertakings and the fund or trust, cannot subscribe to an IPO of a greenfield project.

The regulations have also said that the fund or trust, has to develop and maintain its own investment policies while explaining investment limits.

Published in Dawn, August 20th, 2019

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