SECP Allows Securities Brokers to Offer Shariah-Compliant Services

The Securities and Exchange Commission of Pakistan (SECP) has decided to allow securities brokers to offer completely Shariah-compliant brokerage services.

The SECP has issued S.R.O. 427(I)/2024 to notify draft amendments to the Securities Brokers (Licensing and Operations) Regulations, 2016 on Thursday.

According to the SECP’s regulations, the Commission may allow the establishment of a wholly owned subsidiary to provide Shariah-compliant brokerage services subject to the specified terms and conditions:

1. It shall obtain a certificate of Shariah-compliant company in terms of sub[1]section (1) of Section 451 of the Companies Act, 2017 read with the Shariah Governance Regulations, 2023, and adhere to the Guidelines for Offering Islamic Financial Services issued by the Commission.
2. Proprietary trading shall only be allowed to any one of the parent or the subsidiary company.
3. The subsidiary company shall appoint a dedicated compliance officer.
4. The parent and subsidiary shall implement appropriate controls to prevent any sharing of information between the parent and subsidiary company, which can compromise customer interest or result in unfair trade practices.
5. There shall be full disclosure of the relationship between the parent company and its subsidiary to the clients.
6. There shall be a policy in place to identify and address any conflict of interest arising due to parent and subsidiary relationships.
7. The subsidiary shall be a Trading-only or online-only broker.
8. The establishment of a Trading and Self Clearing category subsidiary for offering Shariah-compliant brokerage services may be allowed only if there is a plan to merge both companies to transit towards a Shariah-compliant Broker within a period of not more than three years
9. Any other conditions as the Commission may deem fit.

The Securities Broker may offer completely Shariah-compliant brokerage services subject to the condition that it shall obtain a certificate of Shariah[1]compliant company and adhere to the Guidelines for Offering Islamic Financial Services issued by the Commission.

The Securities Broker may establish a window to provide Shariah[1]compliant services subject to compliance with the Guidelines for Offering Islamic Financial Services issued by the SECP and approval of Shariah-compliant brokerage services model from SECP, SECP added.