PSX tightens rules: No cash withdrawals allowed by brokers from client accounts

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By MG News | June 24, 2024 at 11:47 AM GMT+05:00

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June 24, 2024 (MLN): To strengthen investor protection measures, the Pakistan Stock Exchange (PSX) has amended its regulations, prohibiting securities brokers from making cash withdrawals from client-titled bank accounts and ensuring all payments to customers must now be made through banking channels.

In addition to the aforementioned amendment under Section 7 of the Securities Act, 2015, the local bourse has introduced several other changes as well.

Accordingly, PSX shall inform the SECP and the relevant banks of the TRE Certificate Holder regarding suspension, cancellation or forfeiture of TRE Certificate of such TRE Certificate Holder.

Further, in case of cancellation, forfeiture or declaration of a securities broker as defaulter, PSX, while referring the case to the SECP, shall request it to take further appropriate action(s).

Moreover, PSX is empowered to obtain account balance confirmation of any one or more of the client-titled bank accounts maintained by the securities broker with its written authority.

For this purpose, PSX may require the securities broker to authorize on its letterhead the relevant officials of PSX for obtaining such information from the relevant branch of the concerned bank.

The securities brokers are further authorized to submit to PSX the details of all business bank account(s) opened for holding funds as and when required by PSX.

The securities broker shall be required to inform PSX within five (05) working days of opening of new bank account or closure of existing bank account. Such information shall be submitted in the manner to be notified by the PSX.

Another change stipulates that the funds available in the proprietary and client-titled bank accounts of a defaulted securities broker shall vest with the PSX for the settlement of verified claims against the concerned defaulted broker.

In addition to the above, PSX has also introduced a new Clause 4.9A in PSX Regulations which stipulates that a TRE Certificate Holder may pass members' resolution for voluntary winding-up subject to mandatory compliance with the procedures prescribed therein.

Where a TRE Certificate Holder passes members' resolution for voluntary winding-up without complying with the prescribed procedures, PSX shall suspend the trading terminals of such TRE Certificate Holder until further notice.

Consequently, the earlier abrupt action of declaring such a non-compliant TRE Certificate Holder as a defaulter ipso facto under Clause 21.4 has been removed.

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