SECP reforms broker regulations for Shariah compliance

April 09, 2024 (MLN): The Securities and Exchange Commission of Pakistan (SECP) has approved amendments in the Securities Brokers (Licensing and Operations) Regulations, 2016 for facilitating Shariah-compliant brokerage services for the securities market of Pakistan.

According to a press release issued today, the new Regulations are aimed at providing the brokerage house, intending to offer Shariah Compliant brokerage services, various options that include establishment of separate subsidiaries, offering these services through window operations or converting to a fully Shariah Compliant brokerage house.

"Such securities brokers shall obtain certificate of Shariah-compliant company in compliance with the Shariah Governance Regulations, 2023, and adhering to the Guidelines for Offering Islamic Financial Services issued by the SECP," it said.

The Regulations also require such brokers to implement appropriate internal controls and adopt policies to address any conflict of interest and protect customer interest.

In continuation of the aforementioned regulatory amendments, the SECP has granted a license to ZLK Islamic Financial Services (Private) Limited, marking it as the first fully Shariah-compliant brokerage house.

It is anticipated that the new regulations will streamline entry process for new entrants in the brokerage industry and facilitate existing brokers desiring to offer Islamic Financial Services.

This will be instrumental in promoting sustainable growth in the market, encouraging long-term investments in key economic sectors and bolstering financial inclusion in the country.

The notification of amendments to in the Securities Brokers (Licensing and Operations) Regulations, 2016 is available at SECP's website.

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