The State Bank of Pakistan (SBP) has allowed general permission to Authorized Dealers (ADs) for remitting the share of the commission to International Brokers Dealers (IBD) through Local Broker-Dealers (LBD) in order to facilitate foreign portfolio investment in the country.
Accordingly, the banking regulator has made amendments in Chapter 14 of the Foreign Exchange Manual.
Payment of commission to International Broker-Dealers:
Authorized Dealers (ADs) may allow remittance of due share of commission by Local Broker-Dealer (LBD) to International Broker-Dealers (IBD) against all those settled trades of securities, which have been initiated by IBD for direct execution through LBD, on behalf of their non-resident investors (SCRA holders).
The SBP laid out terms and conditions for LBDs and IBDs:
The LBD shall be a Securities Broker in terms of Securities Brokers (Licensing and Operations) Regulations of the Securities and Exchange Commission of Pakistan (SECP).
IBD shall be a foreign entity engaged in the brokerage business that has entered into an agreement with LBD for sharing of brokerage commission arising from buying/ selling of securities in Pakistan on behalf of non-resident clients of IBD.
The LBD shall submit an application for remittance duly signed by CFO along with an undertaking that amount requested has not been remitted abroad from Pakistan earlier and duly filled Form-M.
The LBD shall provide a copy of the valid underlying contract. The contract shall include the name of IBD, the applicable rate of commission, periodicity of payment, etc.
The LBD shall provide the detail of deals, against which commission is being remitted. The detail shall include the name of the foreign investor & UIN, IBD Name & No., Custodian/Settlement Bank Name & No., trade (sale/purchase), name and quantity of security, price, commission earned, applicable Taxes and Net share of commission due for remittance, etc. The details should be verified by the CFO of the LBD and counter verified by National Clearing Company Pakistan Limited (NCCPL) and Settlement Bank/AD with respective authorized Signatures and Stamps.
The amount of commission (net of applicable taxes) to be remitted, shall not exceed the amount determined as per rate prescribed by Pakistan Stock Exchange (PSX) or the rate agreed in the agreement, whichever is lower.
Earlier, Overseas Employment Promoters (OEP) holding a valid license from the Bureau of Emigration and Overseas Employment could apply to Authorized Dealers for remittance of funds to replenish their overseas bank accounts maintained with banks in Saudi Arabia, for the purpose of payment of Work Visa Application Processing Fee and Medical Examination Report Online Fee of prospective emigrants.
Authorized Dealers may allow remittance up to $10,000 to replenish such accounts. However, further replenishment would only be allowed if 70 percent of funds remitted earlier have been utilized by the concerned OEP.