KARACHI: A single licence would be issued to a securities broker, dispelling the need to acquire all other mandatory licences including futures broker, securities advisor, futures adviser and accredited representative, the Securities Exchange Commission of Pakistan (SECP) announced on Monday.
The apex regulator said the step was taken to rationalise the existing licensing regime for brokers, which in turn is meant to ‘reduce regulatory burden and to promote ease of doing business’.
Under the simplified procedure for annual renewal, a security broker would only be required to provide recommendation from the Pakistan Stock Exchange (PSX) along with an undertaking from the broker and deposit of regulatory fee. The SECP has also approved a single cut-off date concept for expiry of licences for entire brokerage industry. The regulation would replace the prevalent cumbersome licensing regime under which a broker has to obtain at least eight annually renewable mandatory licences.
“The SECP believes the securities broker activity should only be undertaken in a corporate structure and the existing concept of agents for securities brokers have become redundant and is no more desirable,” SECP said. The regulator added that the existing regime – requiring registration of Agents with the SECP – would be discontinued and the proposed draft Accredited Representatives Regulations 2017, would not be promulgated.
Moreover, the commission has decided to grant licences of regulated activities to corporate entities only. The commission has also approved to undertake a review of the Advisory Regime Under the Securities Act, 2015 vis-à-vis Advisory Regime under Non-Banking Finance Companies regulatory framework.
“The two different regimes for the same regulated activity with different requirements not only creates disparity and confusion but also results in regulatory arbitrage,” SECP said.
Both the regimes envisage independent custody of clients’ assets with regard to portfolio management. Hence, the brokers would not be eligible to act as securities advisor as their business model allows custody of their clients’ assets and managing their own portfolio i.e. proprietary trading as well.
It observed that granting of securities adviser licence to securities brokers would be against the basic spirit of advisory regime. However, the securities brokers would be allowed to distribute mutual funds units.
Published in Dawn, January 16th, 2018