The Securities and Exchange Commission of Pakistan (SECP) has replaced the requirement of seed capital with minimum fund size of Rs100 million in a bid to offer flexibility in launching new mutual funds.
In an announcement on Tuesday, SECP notified amendments to the Non-banking Finance Companies (NBFC) and Notified Entities Regulations, 2008. Previously, the commission held detailed consultative sessions, especially with the Mutual Funds Association of Pakistan (Mufap) and trustees of mutual funds as key stakeholders.
SECP said as part of its efforts for the development of capital markets, particularly the mutual funds, the amendments were aimed at strengthening the existing regulatory framework as well as extending operational flexibility to fund managers. “It is an important step forward for a more conducive regulatory framework to fuel growth of the mutual fund industry,” it said.
The amendments include enhancement of unit-holder rights in case of any material change impacting fund’s category and investment objective or other key aspects such as management fee or back-end load, etc. Suspension of redemption of units has been restricted to a maximum of 15 working days coupled with empowerment of unit holders to decide future of the fund including change of fund manager.
The commission has also introduced a detailed procedure for winding up of an open-end fund. Other amendments include registration of trustees of open-end mutual funds by the SECP and enhancement of their role to better safeguard unit-holder interests. Distributors of mutual funds will be registered with Mufap and existing distributors have been offered a flexible time period until February 2012 to comply.
The limit of annual equity brokerage commission, payable by a mutual fund to a single broker, has been reduced from 30 per cent to 15 per cent to promote competition in brokerage services.
Published in The Express Tribune, September 7th, 2011.