Stockbrokers Can Give Advice on Stocks But Cannot Charge for It: SECP

The Secur­ities and Exchange Commission of Pakistan (SECP) has allowed the stockbrokers to provide advisory services without obtaining any licence, but forbade them to receive any charges for this service.

The regulator on Friday notified the amendments to the Securities and Futures Advisers (Licensing and Operations) Regulations, 2017 by accepting the demands of the stockbrokers to make the advisory regulatory regime practicable and conducive.

With this move, the mandatory advisory licensing requirement for securities brokers have been withdrawn.

The securities brokers have been allowed to provide securities advisory to their brokerage customers,  being incidental to the conduct of their business without receiving any separate compensation thereof.

Moreover, the stock brokers have also been allowed to distribute units of mutual funds and voluntary pension funds of multiple assets management companies (AMCs).

The advisory regime has been segregated into two segments, i.e. advisory with portfolio management  to be governed under the non-bank finance companies (NBFC) regime whereas advisory with  distribution of units of mutual funds and voluntary pension funds of multiple AMCs to be dealt under the amended Securities and Futures Advisers (Licensing and Operations) Regulations, 2017.

The SECP, whilst considering the dynamics of local capital markets, has decided to grant licenses only to corporate entities for undertaking any regulated activity in the capital markets and not to any individuals.

In order to help broaden the investor base, banks have been allowed to distribute units of mutual funds and voluntary pension funds of multiple AMCs, subject to certain regulatory requirements.

The rationalized licensing regime for securities brokers coupled with the SECP’s other measures would definitely contribute to reducing regulatory burden and cost of doing business for capital markets, ultimately promoting ease of doing business.

In order to facilitate the existing distributors, the deadline to obtain license has been extended to June 30, 2018.


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