PSX relaxes investor eligibility criteria

Amendment likely to increase investor participation in GEM board companies


Our Correspondent April 13, 2022
PSX CEO said that the new system carried built-in surveillance software, which the existing trading platform (KATS) lacked. Photo: file

KARACHI:

The Pakistan Stock Exchange, with the approval of the Securities and Exchange Commission of Pakistan (SECP), has significantly eased the requirements for the eligibility of accredited individuals investing in companies on the Growth Enterprise Market (GEM) board.

“As per the new definition, accredited investors include those individuals who have assets of at least Rs5 million, which include (but are not limited to) value of securities held by these investors in respective Central Depository Company (CDC) investor account or sub-account,” said a statement issued by the bourse on Tuesday.

Under the revised eligibility criteria, total assets of investors are to be considered to assess their eligibility to invest in GEM board companies.

Real estate properties, vehicles and other assets could also be included to define the assets of the accredited investors, the statement said.

“By virtue of this amendment, more investors will be able to participate in the pre-listing process of companies to be listed on the GEM board,” it added. The amendment would also broaden the investor base in trading of shares of GEM board companies, thus generating increased liquidity and higher share volumes.

“Accredited investors will now self-declare to the securities’ brokers that they hold assets of at least Rs5 million in order to be eligible to participate in listing of GEM board companies or in their post-listing trading activity and also understand the risks associated with GEM board and GEM companies.”

Apart from the regulatory change, the bourse has also notified the modes of acceptance of self-declaration by the securities’ brokers.

Auto-marking of individual investors taking part through e-IPO (electronic initial public offering) in the GEM primary market has been announced as well.

Individual investors having securities worth at least 40% higher than the minimum requirement of Rs5 million will be auto-marked as accredited individual investors in the National Clearing and Settlement System (NCSS) of the National Clearing Company of Pakistan Limited (NCCPL).

Moreover, the securities’ brokers can unmark an investor in NCSS “if they have reason to believe that the investor is ineligible to trade on GEM, based on their KYC/ CDD checks”.

The brokers would allow such ineligible investors to liquidate their GEM shares with no bearing on the securities’ brokers, the statement said, adding that these steps would lead to convenience in terms of operational practices.

“With this amendment, it is expected that advisers will now take the lead and facilitate issuers and investors towards increased listings and investments in the GEM board.”

In that regard, Pakistan Stock Exchange Managing Director and Chief Executive Officer Farrukh H Khan underlined that the amendment in the eligibility criteria for accredited individual investors would help to significantly improve participation in GEM board companies.

“The GEM board is an important innovation for SMEs (small and medium enterprises) to raise debt and equity capital from the market,” he said, adding that it also “provides exciting investment opportunities for accredited investors”.

The self-declaration process would further simplify the operational management of securities’ brokers, he said.

“Accredited investors must take this as an opportunity towards increased participation in the growth story of GEM board companies in the pre-listing phase,” he emphasised.

Published in The Express Tribune, April 13th, 2022.

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