SECP seeks input on asset-backed securities

ISLAMABAD: Securities and Exchange Commission of Pakistan (SECP) has invited public consultation on draft amendments on asset-back securities, which are aimed at enabling companies to raise funds from the capital market through public offering and private placement, a statement said.

The regulator notified draft for Asset Backed Securitisation Regulations, 2022, the regulations which provide mechanism and cover all aspects of securitisation process in the country.

“Proposed regulations will enable companies to raise funds from the capital market in timely and cost-effective manner through issuance of asset backed securities through two modes; public offering and private placement,” SECP said.

Under the regulations, real estate assets, which have cash generating ability and actionable claims, could also be securitised, it added.

The regulator said companies could issue asset backed securities by creating a special purpose vehicle (SPV) registered with SECP under the rules where they could create 100 percent owned SPV.

The format of application for registration of SPV, Fit and Proper Criteria and prospectus is provided as Schedule-I, Schedule-II and Schedule-III to the Regulations respectively.

Currently, asset backed securitisation is governed by Asset Backed Securitisation Rules, 1999 and the subsequent regulations are drafted to provide holistic regulatory framework under the rules.

According to SECP, it has designed the regulatory framework in line with disclosure-based regime being followed by the regulator and global practices. Process flow for issuance of asset backed securities is covered in detail in draft regulations available at SECP’s website.

The regulator also initiated a 14-day public consultation period on draft amendments to the Securities and Futures Advisers (Licensing and Operations) Regulations, 2017.

“The proposed regulations provide licensing and operational requirements for securities advisers, futures advisers and distributors of units of collective investment schemes (CIS), and voluntary pension funds (VPF) managers,” SECP said.

The amendments introduced a dedicated framework for securities advisors wanting to only undertake distribution of CIS/VPF units, without offering any advisory services, in addition to creating exemptions for microfinance banks, electronic money institutions and non-bank microfinance companies engaging in distribution of CIS/VPF units, SECP stated.

To encourage existing players, draft amendments clarified that securities’ advisors might inherently carry out distribution function without any separate fees.