Staff Reporter
Islamabad
The SECP has notified the New Broker Regime for stock market. This step was long overdue to improve industry standards.
The Securities and Exchange Commission of Pakistan (SECP) had formed a Stock Market Reforms Committee in September 2019. The objective of this Committee was to review and improve the current situation of the stock market. The SECP formed the Committee with senior market professionals from securities brokers, PSX, NCCPL, CDC, banks and mutual fund industry.
After in-depth analysis and scrutiny, the Committee submitted a number of recommendations to the SECP including revising the novel concept of a ‘New Broker Regime’ which was undertaken by SECP some years back but was not pursued.
Key objectives of the new regime are addressing the protection of equity market participants and improving transparency and compliance regarding custody of client assets. The new regime aims to improve compliance standards in the industry and bring Pakistan in line with best international practices and specially with reference to anti money laundering laws as custody of client assets would only be retained by financially sound brokers and clearing members. Pakistan’s market capitalization to GDP currently stands at a paltry 17%, significantly lower than regional players such as India (90%) and Malaysia (135%). One reason for lower penetration in Pakistan’s equity market is quite clearly the fact that the general public is often suspicious of the stock market due to the actions of a few that often receive undue spotlight. Then the same paintbrush is used to smear the entire brokerage industry. The stock market crises of the last twenty years have also cemented the view of a highly speculative market with inadequate safeguards for retail investors.
