In line with its efforts to strengthen the capital market and as part of subsidiary legislation under the Securities Act, 2015, the Securities and Exchange Commission of Pakistan (SECP) has accorded its approval to the Securities Brokers (Licensing and Operations) Regulations, 2016. The regulations, which have been published in the official gazette and placed at the SECP website, will take effect upon notification of commencement of Part V of the Act by the federal government.
While the regulations introduce various new requirements and strengthen existing requirements for the securities brokers to help achieve the objectives of risk management and enhanced investor protection, the same ensure continuity of business of the existing securities brokers through phased implementation of certain new requirements. The new regime also takes into account the effect of integration of the stock exchanges and facilitates transition of brokers from the earlier regime to the new regime over an extended period of time.
A key aspect of the new regulations is categorisation of brokers into trading and clearing categories, in line with global best practices, to allow custodial functions with financially sound brokerage houses only. Such brokers will also be subjected to additional control, reporting, compliance and other requirements to ensure risk management. To achieve the said segregation, the concept of professional or general clearing member is also in the pipeline to facilitate clearing and settlement of trading only brokers. Also, brokers not involved in custody and clearing functions will be subjected to fewer requirements as opposed to brokers undertaking such functions. Additionally, due considerations have been made in order to facilitate the securities brokers by keeping the cost of doing business at a minimum.
