SECP approves regulations for licensing and operations of securities and futures advisers

In line with its objective of fostering the growth of a capital market based on fairness and investor protection, and promoting transparency, standardization and improved controls for the advisory business, the Securities and Exchange Commission of Pakistan (SECP) has approved Securities and Futures Advisers (Licensing and Operations) Regulations, 2017. The regulations have been published in the official Gazette and have also been placed on the SECP’s website.
 
In order to achieve the goals of financial inclusion and facilitating capital market investors in obtaining targeted advice, the new regulatory formwork allows both companies and individuals with a clean track record and necessary qualifications and skill set have to act as a securities or futures adviser. Also, distributors of units of mutual funds having contracts with multiple asset management companies will be required to obtain license as securities adviser with the SECP for performing the distribution activity.

The regulations provide for matters relating to licensing, financial resources, duties and obligations, conduct, audit and accounts, and fit and proper for persons and companies engaged in providing investment advice or recommendation to customers on securities and futures contracts. Further, advisers will be required to perform risk profiling of each client, ensure suitability of investment advice given to clients and put in place necessary policies, procedures and controls to eliminate conflict of interest and ensure protection of clients’ interests.
 
Existing entities/individuals already providing advisory/distribution services will be given six months from the date of commencement of the regulations or commencement of Part IV of the Futures Act to obtain license as a securities/futures adviser for continuation of their business. It is expected that with the introduction of the new framework, the business of capital market advisory will flourish under proper checks and balances and the same will also assist in increasing capital market outreach throughout the country.