PSX seeks public opinion on changes to regulations
Segregation of client assets is critical as brokers have been penalised for using client money illegally
Segregation of client assets is critical as brokers have been penalised for using client money illegally. PHOTO: AFP
KARACHI:
The Pakistan Stock Exchange (PSX) has solicited feedback from the general public on proposed amendments to market regulations relating to extension in the time for submission of the verified annual client assets segregation statement.
The segregation of client assets is a critical issue, as the regulator has caught and penalised a number of brokers for using their client money illegally in recent years.
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According to existing regulations, every stock broker must submit a client asset segregation statement to the exchange within 15 days of the end of a financial year. In case of non-compliance by a broker, the regulations state the exchange has the power to switch off its trading terminals. A broker uses idle funds of its clients for either proprietary trading or leverage financing, which is forbidden under the PSX rules. Brokers must keep the assets belonging to their clients separate from their own assets by maintaining separate bank accounts with the word “clients” in the title.
As per the proposed change, stock brokers will have 45 days after the close of the financial year to submit the annual client assets segregation statement verified by their statutory auditors.
The rationale of the proposed change is to ensure the quality of reporting and avoid practical difficulties that brokers face while submitting the annual statement in a short period of time.
In addition, the proposed changes in the PSX regulations also stipulate that the electronic data processing system that brokers use for trading, risk management, clearing and settlement, and preparation and maintenance of books and accounts must meet the bare minimum standards prescribed by the PSX.
By ensuring that only the PSX-certified software is installed on the trading terminals, the PSX aims to make the trading process standardised and transparent.
The PSX selects brokers for an audit through biannual random balloting. In this regard, the PSX has proposed that the brokers selected under the Joint Inspection Regulations in the two years preceding a balloting data should not be included in that ballot.
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Separately, the PSX has proposed that a listed company should ensure that, instead of all members of its board of directors, at least half must obtain certification from the directors’ training programme latest by June 30, 2018, in place of June 30, 2016.
Additionally, proposed amendments suggest any newly appointed director following June 30, 2018, must acquire the certification within a period of six months from the date of appointment in order to comply with the requirement of having at least half of the board members certified at all times.
Published in The Express Tribune, May 10th, 2016.
The Pakistan Stock Exchange (PSX) has solicited feedback from the general public on proposed amendments to market regulations relating to extension in the time for submission of the verified annual client assets segregation statement.
The segregation of client assets is a critical issue, as the regulator has caught and penalised a number of brokers for using their client money illegally in recent years.
Weekly review: Bourse soars 1,254 points over likely inclusion in MSCI EM Index
According to existing regulations, every stock broker must submit a client asset segregation statement to the exchange within 15 days of the end of a financial year. In case of non-compliance by a broker, the regulations state the exchange has the power to switch off its trading terminals. A broker uses idle funds of its clients for either proprietary trading or leverage financing, which is forbidden under the PSX rules. Brokers must keep the assets belonging to their clients separate from their own assets by maintaining separate bank accounts with the word “clients” in the title.
As per the proposed change, stock brokers will have 45 days after the close of the financial year to submit the annual client assets segregation statement verified by their statutory auditors.
The rationale of the proposed change is to ensure the quality of reporting and avoid practical difficulties that brokers face while submitting the annual statement in a short period of time.
In addition, the proposed changes in the PSX regulations also stipulate that the electronic data processing system that brokers use for trading, risk management, clearing and settlement, and preparation and maintenance of books and accounts must meet the bare minimum standards prescribed by the PSX.
By ensuring that only the PSX-certified software is installed on the trading terminals, the PSX aims to make the trading process standardised and transparent.
The PSX selects brokers for an audit through biannual random balloting. In this regard, the PSX has proposed that the brokers selected under the Joint Inspection Regulations in the two years preceding a balloting data should not be included in that ballot.
'Pakistan to receive up to $500 million post MSCI re-classification'
Separately, the PSX has proposed that a listed company should ensure that, instead of all members of its board of directors, at least half must obtain certification from the directors’ training programme latest by June 30, 2018, in place of June 30, 2016.
Additionally, proposed amendments suggest any newly appointed director following June 30, 2018, must acquire the certification within a period of six months from the date of appointment in order to comply with the requirement of having at least half of the board members certified at all times.
Published in The Express Tribune, May 10th, 2016.