SECP tightens rules for investment plans

Regulations ensure transparency in mutual funds industry

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ISLAMABAD:

The Securities and Exchange Commission of Pakistan (SECP) has further strengthened the regulatory framework for the mutual fund industry by specifying detailed requirements for "investment plans."

This initiative builds upon the enabling provisions previously introduced via amendments to the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (NBFC Regulations), said a press release.

The framework aims to enhance governance, streamline operations, and ensure secure investment horizons, thus fostering retail penetration into the mutual fund industry.

"The new requirements have been developed after extensive consultation with stakeholders, including the Mutual Funds Association of Pakistan (Mufap), to align with best practices and ensure compliance with defined principles," the SECP said.

These requirements specify the eligible categories of Collective Investment Schemes (CIS), under which asset management companies (AMCs) can offer investment plans, including the fund of funds, fixed rate/return, sovereign income, asset allocation schemes, capital-protected and exchange-traded funds.

Operational requirements provide clear guidelines on the maximum number of investment plans, their duration, exposure limits, investment restrictions, and performance benchmarks. "To promote transparency, the framework mandates specific disclosures for the fund of fund CIS and additional risk information," it added.

It also outlines essential offering guidelines, including subscription timelines and net asset value (NAV) announcements, and establishes detailed provisions for total expense ratios, formation costs, and other charges.

By requiring comprehensive disclosures and instituting structured operational protocols, according to the SECP, the framework seeks to provide protection for investors, and these measures reinforce the commission's commitment to fostering a transparent, efficient, and investor-friendly environment in the mutual fund industry.