Amid the deteriorating condition of the equities market of Pakistan, the Security and Exchange Commission of Pakistan (SECP) has allowed the investors to take loan from banks for a period of 6 months to invest in stocks. The SECP in a statement said that, “In addition to borrowing allowed for meeting redemption, requirements have been permitted to borrow from financial institutions for investment purposes for a period of 180 days from the date of notification.” They further added that, “The reforms undertaken by apex regulator aim to bring stability to the market, attract liquidity, facilitate ease of doing business, revitalize development of the market and restore investor confidence without compromising on the principles of sound risk management and investor protection.”
The changes made by the SECP and approved by the National Clearing Company of Pakistan (NCCPL), are as follows:
- SECP replaced Circular 20 of 2017 by Circular 12 of 2019, which has enabled brokers who comply with certain rules of SECP to pay interest on loans from directors, sponsors or shareholders.
- Brokers will not be charged 10% additional margins.
- Brokers won’t be charged 10% on margin eligible securities by the NCCPL.
- Liquidity margin slabs have been revised and would now apply only to large exposure brokers
- While keeping in view the revised margin slabs, a credit rating list has been developed to minimize credit risk.
- Murabaha Share Financing has been approved to allow leverage financing in shriah-compliant securities.
- Biometric issues have been resolved through coordination between Nadra and SECP.
- SECP considering to shift from rules based corporate governance framework to ‘comply or explain approach’.
SECP exempted government due debts from International Financial Reporting Standards-9 (IFRS) standards.