The Securities and Exchange Commission of Pakistan (SECP) has directed Asset Management Companies to formulate a Corporate Governance and Proxy Voting policy approved by its Board of Directors.
The SECP has issued an S.R.O. 592(I)/2023 to amend the Non-Banking Finance Companies and Notified Entities Regulations, 2008 on Wednesday.
According to the amended regulations, an Asset Management Company shall formulate a Corporate Governance and Proxy Voting policy approved by its Board of Directors which covers the minimum aspects and areas as provided in the regulations.
An Asset Management Company shall put in place, appropriate policies and procedures, approved by its board of directors, which govern trading or investment in securities, investment through investment advisory portfolios under the management of the AMC by:
- AMC employees, their spouses, and dependent children
- directors and their spouse(s) and dependent children if such directors are privy to investment committee consultations or decisions, and such policies and procedures shall, at the minimum, cover requirements/principles as specified and the AMC may take enforcement action in accordance with the relevant policy duly approved by its board.
To the extent that a violation pertaining to trading restriction occurs, all such cases and enforcement actions taken, by the AMC shall be reported to the Commission within 30 days of AMC becoming aware of such violation and to the Board of Directors of AMC in the forthcoming board meeting, SECP added.
The SECP has also explained the financial indicators of the Borrowers. At the time of allowing fresh exposure/ enhancement/renewal, the NBFC shall ensure that the current assets to current liabilities ratio of the borrower and linkage between the borrower’s equity and its total financing from all financial institutions is not lower than such benchmarks as may be set under the credit policy of the NBFC approved by its Board.
NBFCs shall prescribe the minimum current ratio under the credit policy keeping in view the quality of the current assets, the nature of the current liabilities, the nature of the industry to which the borrower belongs, the average size of the current ratio of that industry, appropriateness of risk mitigates available to the NBFCs, etc.
It is expected that NBFCs’ credit policy duly approved by the Board of Directors, shall emphasize higher credit standards and provide full guidance to the management about the current ratio requirements for various categories of clients and corresponding risk mitigates, etc. acceptable to the NBFCs, it added.
