SECP urged to revisit new brokers regime

KARACHI: Stakeholders on Tuesday criticised the draft New Stockbrokers Regime proposed by Securities and Exchange Commission of Pakistan (SECP), demanding of the regulator to revisit certain conditions in broader interest of the capital market.

Brokers are unhappy over the newly proposed regime as it comes with some tough conditions aimed to ensure some key compliances, especially Financial Action Task Force’s, in order to steer clear of the black list of the anti terror financing watchdog and exiting the grey one.

The new regime has been drafted to ensure that the custody of customer assets is only allowed to brokers with sufficient capacity to meet the requisite level of compliance, particularly related to anti-money laundering/combating financing of terror (AML CFT).

PSX (Pakistan Stock Exchange) Stockbrokers Association (PSA) in a statement said the SECP, in the proposed regime, had divided the brokers into three categories without considering some important facts.

The brokers body said, “If the objective of the regulator is to safeguard the assets of the clients only, the same could be achieved without putting 70 percent of the brokers out of business and simply by making opening of an investor account mandatory by the clients and letting the client’s have their sales proceeds through direct payment system”.

“Stockbrokers are fully documented and so are their clients, whereas clients’ assets in the custody of a broker stay segregated from the brokers’ own assets 24/7,” the PSA said in the handout.

“Majority of the stock brokerage houses are family-owned “private limited companies”. Some are even third generation brokers. The relationship of brokers with their clients is based on long standing mutual trust.”

The regulator seemed to have ignored the fact that if a Big Broker, who was authorised to hold custody of clients of other brokers and also to settle their trades, defaulted, he would take with him many others, creating a huge crisis for the market, the statement claimed.

According to the regulator, one of the objectives of this new regime is creating a structure in line with best international practices, which will improve governance standards, transparency and also enhance investor protection.