SECP issues consultation paper on industry self-regulation

May 12, 2025 (MLN): The Securities and Exchange Commission of Pakistan (SECP) has issued a Consultation Paper on Standard Principles for Recognition and Conduct of Industry Associations, outlining a comprehensive framework designed to enhance self-regulation and strengthen Pakistan’s financial sector.

As regulatory environments evolve, industry associations worldwide are expanding their role beyond advocacy to actively contribute to economic development.

These associations are increasingly involved in policy dialogue, regulatory compliance support, and the promotion of responsible industry practices.

The SECP's proposed framework provides a structured pathway for qualified industry associations to transition into Self-Regulatory Organizations (SROs) within the next three years.

These SROs will hold the authority to establish ethical standards, monitor industry behavior, enforce regulatory compliance, and initiate sector-specific programs, all in alignment with SECP’s broader regulatory goals.

A central element of the proposal includes the mandatory transformation of trade associations into Section 42 companies under the Companies Act, 2017.

This shift is intended to ensure that such entities operate as not-for-profit organizations, thereby promoting financial transparency, robust governance, and accountability.

The framework integrates global best practices by emphasizing diverse and merit-based membership, effective governance structures, and mechanisms to manage conflicts of interest.

It also highlights stakeholder participation, fair dispute resolution processes, comprehensive codes of conduct, and continued investment in professional development and investor education.

To strengthen targeted advocacy efforts, the SECP also encourages the formation of specialized associations within regulated sectors.

These bodies would focus on the unique needs, challenges, and compliance demands of specific sub-sectors, according to the press release issued today.

This initiative reflects SECP’s commitment to fostering a transparent, accountable, and competitive financial environment.

By guiding the transformation of industry associations into effective SROs, the Commission aims to enhance market discipline, bolster investor trust, and support long-term, sustainable growth across Pakistan’s financial landscape.

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