SECP approves GEM listing rules for SMEs, non-profits

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has approved the Growth Enterprise Market (GEM) listing regulations to enable small and medium enterprises (SMEs), greenfield projects, not for profit and other companies to raise capital through the capital markets conveniently.

SECP has advised Pakistan Stock Exchange (PSX) to arrange publication of new regulations in the official Gazette of Pakistan to replace PSX’s existing regulations governing listing and trading of equity securities of SMEs, a statement of the SECP said on Tuesday.

The GEM regulations have been designed especially to facilitate small enterprises, startups and greenfield companies that aspire to raise funds through capital markets, but could not fulfil the cumbersome conditions for listing on the main board of the PSX.

Hence, in addition to the main board of PSX, the GEM would be a second board at PSX for listing and trading of equity securities. “However, the trading screen for both boards will be same,” the statement said.

The new board provides a more conducive regulatory environment as compared to the main board. “For listing on GEM board, any public limited company having audited accounts for the last two financial years and post issue paid up capital of at least Rs25 million is eligible,” the SECP said. The minimal fee for listing on GEM board is Rs50,000, that is significantly low as compared to listing on PSX main board, where minimum listing fee is Rs200,000.

Moreover, to facilitate the issuers, any person licensed with the SECP as securities broker or consultant to the issue can act as advisor. The issuer may offer, by way of information memorandum, only 10 percent of the post issue paid up capital to the eligible investors.

The said board also allows greenfield project and non-profitable companies to raise funds. Moreover, the companies listed on GEM board might graduate to the main board subject to the fulfilment of prescribed criteria. However, reverse migration was not allowed.

In order to create liquidity on the GEM board, the concept of eligible investor has been introduced and minimum lot size has been linked with the main board of the PSX, which was currently 500 shares. Eligible investor includes all institutional investors and eligible individual investors registered with NCCPL that have financial strength or expertise.

The post listing requirements of GEM board have also been relaxed as compared to the main board such as non-applicability of code of corporate governance, submission of half yearly progress report as compared to quarterly progress report.