Securities and Exchange Commission of Pakistan enhanced compliance with global securities regulatory standards

Islamabad, October 13, 2016 (PPI-OT):The SECP being firmly committed to implementing review recommendations of IOSCO Assessment Committee as its top priority agenda is pleased to say that significant progress has been achieved to implement reforms in Pakistan’s legal, regulatory and supervisory architecture, endorsing our pledge to bring Pakistan’s markets in line with international standards. The Pakistani capital markets have achieved several key milestones after the last assessment.

The key milestones which will contribute towards improved assessment rating in upcoming IOSCO assessment includes. SECP Amendment Act, 2016: The amendments to the SECP Act, the foremost of the actionable areas which involved changes to the powers and functions of the SECP has been enacted. This is a remarkable achievement as all amendments, including changes to the composition of policy board, SECP’s role in addressing systemic risk, fast track disposal of cases, enhancing powers of the SECP to help foreign regulators’ requests and establishment of Audit Oversight Board of Pakistan have been addressed.

Introduction of new regime for securities brokers: One of the most recurring assessment recommendations was the overhauling of the brokers regime and specifically calling for enhanced requirements for brokers to address the recommendations regarding Principle 29-32. These requirements have been incorporated in the Securities Brokers (Licensing and Operations) Regulations 2016, notified on 24th June, 2016.

The criteria include risk based capital adequacy requirements and standards for capacity, governance, internal controls and infrastructure etc. in line with the IOSCO principles. The revised regime also provides for enhanced requirements for brokers at the time of registration, increased audit and compliance standards, measures to curtail misuse of client assets and provisions for curtailing misalignment of incentives.

Establishment of Central Counterparty: The National Clearing Company of Pakistan Limited (NCCPL) has successfully commenced functioning as a CCP effective May 2, 2016. The reform entailed introduction of the concept of novation, transfer of risk management from the stock exchange to NCCPL, development of requisite operational capacity and system requirements, establishment of a consolidated settlement guarantee fund, changes to the default management procedures and major regulatory restructuring to cater for all of the above.

Establishment of a CCP in Pakistan is aimed at minimizing counterparty risk for trades guaranteed by the CCP, enabling the CCP to assume default risk thereby reducing contagion effect, better management of market risk through a well-capitalized entity with sufficient governance and infrastructural arrangements and stronger monitoring of credit risks throughout the day.

The SECP has successfully implemented a comprehensive risk-based inspection plan covering brokers and CIS supplemented by offsite surveillance having 100% coverage. In addition, the scope of surveillance and inspections has been extended to cover SROs and CRAs.

The SECP has been rigorously pursuing to implement the AC review recommendations aimed at further improving SECP’s compliance with IOSCO Principles and has requested for a follow-up review to validate the reforms implemented. After implementation of these reforms it is explained that the overall rating in the follow up assessment of IOSCO would significantly be improved to at least 80% from the existing 62%. Compliance with the IOSCO principles is significant to safeguard the integrity and credibility of financial system; strengthen legal and regulatory framework; and develop capital markets as a preferred investment choice for both local and foreign investors.

Created in 2012, the IOSCO Assessment Committee conducts Country Reviews of IOSCO member jurisdictions to assess their compliance against IOSCO Principles. The aim of these Reviews is to assess implementation of the IOSCO principles and standards and to help identify gaps in implementation. Pakistan was the first country review undertaken by the IOSCO Assessment Committee.

For more information, contact:
Shakil Ahmad Chaudhary
Head, Internal and External Communication
Securities and Exchange Commission of Pakistan (SECP)
NIC Building, 63 Jinnah Avenue, Islamabad
Tel: +92-51-9214005 or +92-51-9214009 (Ext. 378)
Fax: +92-51-9206459
Cell: +92-302-8552254