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Business

November 11, 2015

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SECP sets capital balance, net worth limits for brokers

KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has made it mandatory for all categories of securities brokers to meet certain limits of paid-up capital, net worth and minimum capital balance.
According to the draft Securities Brokers Regulations 2015, a paid-up capital of Rs35 million is mandatory for a Trading Only securities brokers; Rs70 million for Trading & Self-clearing broker and Rs100 million for a broker undertaking trading and clearing activities.
Similarly, net worth of a Trading Only broker should not go below Rs16 million; the floor is Rs25 million for Trading & Self-clearing broker and Rs40 million for a broker undertaking trading and clearing activities.
Further, Trading Only broker will have to maintain a minimum net capital balance of Rs2.5 million; the floor is Rs5.0 million for Trading & Self-clearing broker and Rs10 million for a broker undertaking trading and clearing activities.
However, brokers already registered with the Commission are required to meet the liquid balance requirements within the time to be specified by the Commission.
In case of any shortfall in the net capital balance or liquid capital, the exchange shall immediately restrict the trading facility of such broker and only allow it to close out the open position in a controlled environment.
Moreover, each broker/applicant should identify sponsors which should collectively hold not less than 51 percent shares of the applicant/broker.
According to the draft Regulations, the Commission, after giving a reasonable opportunity of hearing to the applicant, may refuse to grant or renew a licence if in the opinion of the Commission such applicant does not fulfill the requirements specified under the Act and these regulations and where the Commission after taking into account the facts, is of the view that it is not in the public interest or in the interest of the capital market to grant or renew a licence.
The Draft Regulations

restricts securities broker from advertising their business publically unless allowed by the securities exchange in writing and would keep record of such approval for a period of at least ten years.
Brokers are also barred from publishing, circulating or distributing misleading or deceptive information.
The draft regulations have also notified procedure of licensing and renewal of licenses of securities brokers.

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