The Securities and Exchange Commission of Pakistan (SECP) has formulated Collateral Management Companies (Establishment & Operations) Regulations, 2017, under the Companies Ordinance, 1984. In devising the framework, the SECP carried out consultative sessions with the major stakeholders, including provincial departments of agriculture, State Bank of Pakistan, CDC, Pakistan Agriculture Coalition, Pakistan Mercantile Exchange, and others.
The statement of SECP said that collateral management, one of the core areas in the National Financial Inclusion Strategy, is envisaged to remove distortions, reduce market imperfections, avoid waste and help farmers get the best possible price for their produce while enabling banks to confidently lend against agricultural produce that is professionally graded, stored and preserved.
The SECP is endeavoring to promote electronic trading and warehouse receipt financing of agricultural commodities through the platform of Pakistan Mercantile Exchange to enable the growers to get a fair price for their produce, avail financing facilities and promote an efficient payment system.
The salient features of the regulations are licensing conditions and financial resource requirements for collateral management company, duties of a collateral management company and the warehouse operator, and powers of the SECP to conduct inspection of collateral management company, its accredited warehouses and any matter connected with the warehousing business, as well as issue directives to a collateral management company or its accredited warehouse in the public interest.