ISLAMABAD, Sept 30: The Securities and Exchange Commission of Pakistan (SECP) on Friday reviewed and proposed amendments to the Employees’ Provident Fund (EPF) Rules, 1996, to allow EPFs to invest in index funds, said a press release.

This has been done keeping in view features of index funds, international practices as well as advantages and risks associated with investment in index funds.

The revised rules stipulated that for the purpose of investment by a provident fund in listed securities, the company should have exhibited return on equity 25 per cent higher than last auction cut-off rate of 5-year Pakistan Investment Bonds (PIB).

This condition would replace the existing condition for making investment in listed securities that the company had paid not less than 15 per cent dividend to its shareholders during the last three consecutive years.

Maximum investment cap of an EPF in unit trust was kept at 50 per cent, including the maximum limit of 30 per cent for investment in listed securities.

In addition, closed-end index fund had been defined and explained. The total investment in index funds had been restricted to 10 per cent of the provident fund.

Moreover, investment in index fund by an EPF had also been restricted up to 5 per cent of the fund size. EPF could be invested only in those index funds and/or unit trusts, which had been issued “A” grade credit rating by a credit rating company.

Under the proposed, revised rules, closed-end funds had been required to provide information regarding investment of provident fund to the SECP, as prescribed by the regulator from time to time.