The Securities and Exchange Commission of Pakistan (SECP) has proposed that any person working as securities adviser or futures adviser would be bound to obtain licence from the SECP and must have a minimum net worth of Rs 5 million. Through an SRO 1039/2016 issued by the SECP here Saturday, the SECP has issued draft Securities and Futures Advisers (Licensing and Operations) Regulations, 2016 to be applicable on securities adviser or futures adviser.
According to the regulations, no person shall act as or perform the functions of a securities adviser or futures adviser unless such a person is licensed with the Commission as a securities adviser or futures adviser under the Securities Act or Futures Act and these regulations. Provided that it will be mandatory for a securities broker or a futures broker licensed with the Commission to obtain licence as a securities adviser or a futures adviser under these regulations.
However, a non-banking financial company (NBFC) holding the licence for Investment Advisory Services shall be exempt from the requirement of obtaining licence as a securities adviser or futures adviser subject to the specified terms and conditions. A person applying for a licence under these regulations shall maintain a minimum net worth of Rs 5 million at all times. For the purpose of these regulations, the net worth of a company shall be calculated as total assets less total liabilities, less surplus created on revaluation affixed assets. Provided that till Commission may issue clarification in respect of treatment of any item of assets and/or liabilities for the purpose of calculating the net worth, the SECP said.
A person may apply to the Commission for licence as a securities adviser and/or futures adviser, subject to fulfilment of the following conditions: It is a company and has a place of business in Pakistan. Its memorandum and articles of association allow it to apply for grant of licence. It, its sponsors, directors and senior management officers shall fulfil the fit and proper criteria specified. Its relevant employees shall have the requisite qualification and/or experience and certification as specified. It meets the financial resource requirements as specified in these regulations and it maintains membership of an association of securities advisers and/or futures advisers, as the case may be, or any other association or self-regulatory organisation, which is approved by the Commission for the purpose, and abides by the code of conduct specified by such association at all times, the SECP’s proposed conditions added.
About the general responsibility of the said advisers, the regulations said that a securities adviser or futures adviser shall on introduction to a prospective customer, disclose that the person is licensed with the Commission and prominently display the licence granted by the Commission. These advisers shall maintain high standards of integrity, promptitude and fairness, and act with due skill, care and diligence in conduct of its business.
Any dispute between the securities adviser or futures adviser and its customer may he resolved through arbitration or through a mediator authorised or appointed for the purpose by any regulatory authority, as applicable, regulations said.
Under the proposed regulations, the securities adviser or futures adviser shall take necessary steps to ensure that the customer’s interest is kept at the forefront and protected. The securities adviser or futures adviser shall take all reasonable steps including the framing of appropriate policies and procedures to minimise conflict of interest between such securities adviser or futures adviser and its customers including in its capacity as performing any other regulated securities activity.
Where any conflict of interest arises between the securities adviser or futures adviser and customer, the securities adviser or futures adviser shall immediately inform the customer through verifiable means and does not gain any direct or indirect advantage from the situation and shall act in the best interests of the customer, it said.
A securities adviser or futures adviser shall disclose to the customer any actual or potential conflicts of interest arising from any connection to or association with any issuer of securities, including any material information or facts that might compromise its objectivity or independence in the carrying on the securities or futures advisory services.