SECP unveils regulatory framework for mutual fund investment plans

January 06, 2024 (MLN): The Securities and Exchange Commission of Pakistan (SECP) has further strengthened the regulatory framework for the mutual fund industry by specifying detailed requirements for "Investment Plans."

This initiative builds upon the enabling provisions previously introduced through amendments to the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (NBFC Regulations), as per the press release issued today.

The framework aims to enhance governance, streamline operations, and ensure secure investment horizons, thus fostering retail penetration in the mutual fund industry. 

The new requirements have been developed after extensive consultation with stakeholders, including the Mutual Funds Association of Pakistan (MUFAP).

This aims to align with best practices and ensure compliance with defined principles.

These requirements specify the eligible categories of Collective Investment Schemes (CIS) under which Asset Management Companies (AMCs) can offer Investment Plans.

These categories include Fund of Funds, Fixed Rate/Return, Sovereign Income, Asset Allocation Schemes, Capital Protected, and Exchange Traded Funds.

Operational requirements provide clear guidelines on the maximum number of Investment Plans, their duration, exposure limits, investment restrictions, and performance benchmarks.

To promote transparency, the framework mandates specific disclosures for Fund of Fund CIS and additional risk information.

Furthermore, the framework also obligates the AMCs for issuance of a separate Investment Plan report within the Fund Manager Report (FMR).

It also outlines essential offering guidelines, including subscription timelines and NAV announcements, and establishes detailed provisions for Total Expense Ratio, formation costs, and other charges.

By requiring comprehensive disclosures and instituting structured operational protocols, the framework seeks to protect investors.

These measures reinforce the SECP's commitment to fostering a transparent, efficient, and investor-friendly environment in the mutual fund industry. 

The SECP remains committed to fostering a conducive environment for the mutual fund industry, promoting ease of doing business, and broadening access to innovative and regulated financial products.

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