Regulations for stock brokers being revised

Corporate regulator prepares concept paper, seeks feedback from bourses.

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has said it is revamping the regulatory regime for brokers of stock exchanges to bring it in line with best practices, standards and principles.

A concept paper has been prepared and sent to stock exchanges for their feedback, which would lead to a new regulatory framework in light of the comments received from the bourses, the SECP said in an announcement on Tuesday.

According to the corporate regulator, the regime reinforces the reforms undertaken in recent times aimed at strengthening the procedures and processes at stock exchanges, sound reporting system at brokerage houses and risk-based exposure by brokers to bring in more protection for investors as well as the brokerage community.

Over the last one decade, the capital markets of the country have adopted various best international practices, standards and policies to align themselves with other regional markets. However, the broker regime could not be amended to give effect to these developments.

“The SECP has, therefore, decided to amend the regime to incorporate different legal and regulatory changes made over the past few years,” it said.

According to the concept paper, prepared by the regulator, the revised regime will provide for adequate regulatory framework for corporate brokerage houses, having a strong organisational structure with clear lines of responsibility and authority.

It also provides for the framework where only qualified, experienced, sustainable, technically and financially strong market participants can operate as brokers.

Capital adequacy will be aligned with the risk the brokers are exposed to. Accordingly, different capital requirements will be introduced for different market activities.

The regime also provides enabling clauses for introduction of fit and proper criteria for sponsors, board of directors and management of brokerage houses to determine their fitness in line with the criteria laid down in this regard for non-banking financial companies.

Published in The Express Tribune, November 16^th,  2011.