SECP notifies amendments to NBFC regulations, revises TER & Shariah framework

April 15, 2025 (MLN): The Securities and Exchange Commission of Pakistan (SECP) has notified the final amendments to the Non-Banking Finance Companies and Notified Entities Regulations, 2008.

These reforms primarily focus on revising the Total Expense Regime (TER) for mutual funds and pension funds while introducing significant measures to enhance the Shariah compliance framework within the mutual fund industry.

As part of the amendments, the existing Total Expense Ratio (TER) capping regime will be replaced with caps on management fees, effective July 1, 2025, as per the press release issued today.

This transition period provides Asset Management Companies (AMCs) and Pension Fund Managers (PFMs) with adequate time to adjust their business strategies.

To improve transparency and aid investor decision-making, AMCs and PFMs must also provide detailed TER disclosures for mutual funds and pension funds.

To strengthen Shariah compliance in the industry, the amendments introduce a relaxation for obtaining a Shariah Compliance Certificate for Collective Investment Schemes (CIS) that share a similar structure and strategy with an existing Shariah-compliant scheme.

Additionally, all CIS lacking a Shariah Compliance Certificate must obtain one by September 30, 2025.

Furthermore, an Annual Shariah Advisor’s Report will now be included in the financial statements distributed to unit holders and Voluntary Pension System (VPS) participants.

The amendments were finalized following extensive stakeholder consultations, including engagements with AMCs, PFMs, and the Mutual Funds Association of Pakistan (MUFAP).

Through this collaborative process, consensus was reached on amendments aimed at promoting transparency, cost efficiency, and alignment with international best practices in the mutual fund and pension fund sectors.

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