The Securities and Exchange Commission of Pakistan (SECP) has notified amendments to the Non Banking Financial Company (NBFC) and Notified Entities Regulations, 2008. The Commission held detailed consultative sessions with the Mutual Funds Association of Pakistan (MUFAP) and trustees of the mutual funds as key stakeholders. As part of its continuous efforts to develop capital markets, and mutual funds in particular, the amendments aim at strengthening the existing regulatory framework as well as extend operational flexibility to fund managers.
It is an important step forward for a more conducive regulatory framework to fuel growth of the mutual funds industry, said in a press release issued by the SECP. The more significant amendments encompass the replacement of seed capital requirements with minimum fund size of Rs100 million to offer flexibility in launching new mutual funds. The amendment also includes suspension of redemption of units restricted to a maximum of 15 working days, coupled with empowerment of unit holders to decide the future of the fund including change of manager and introduction of a detailed procedure for winding up of an open-end fund.
It also incorporates registration of trustees of open-end mutual funds by the SECP and enhancement of their role to better safeguard unit holder interests and registration of distributors of mutual funds with the MUFAP and existing distributors offered flexible time period (until Feb 2012) to comply.
Exemption has been granted to index funds, fund of funds and capital protected funds from group company investment limits. In addition, exemption provided to fund of funds from per party investment limit and passive funds have also been excluded from the per fund manager limit of three funds.
There is also reduction in limit of annual equity brokerage commission (payable by a mutual fund to a single broker) from 30 per cent to 15 per cent to promote competition in brokerage services and restriction on mutual funds to subscribe to an issue underwritten, co-underwritten/sub-underwritten by group companies of its Asset Management Company.
In addition, the SECP has removed the minimum period for any lease to provide operational flexibility to leasing companies. The amendments are in line with international practices and are expected to strengthen the existing regulatory framework in the larger interest of the mutual funds industry and for better investor protection, said in the press release.
