Capital market: Resident, non-resident investors can open online accounts: SECP

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) Thursday approved a ground-breaking initiative to enable all Pakistani resident and non-resident investors to open online accounts in the capital market which would bring revolution in the stock market investment.

The details released by the SECP revealed that the new regime, that is part of SECP's digital transformation agenda, allows investors to seamlessly open his or her account with a broker from anywhere in the country without requiring to submit any documents physically or visit a broker. The new hassle-free process shall enable investors to commence trading swiftly.

However, to ensure maximum investor protection, an alternate online Customer Verification process has been introduced for opening of online accounts. The online verification will be conducted independently by the Centralized KYC Organization. In addition, the account opening process has been made simpler by reducing the number of pages to be signed by the investors.

The new account opening system is a continuation of SECP's reform agenda that aims at enhancing investor outreach, introducing digitization and ensures robust growth of the capital markets. A sizeable investor base is a crucial stepping stone for development of any capital market and is therefore part of the major objectives of the SECP. It is expected that the new regime would revolutionize Pakistan's capital markets and contribute significantly towards economic growth in the country by channeling investments and savings through the market.

SECP officials told Business Recorder that the investor base of the Pakistani capital market has remained low in comparison with other jurisdictions. This has hindered growth of the market and creates inefficiencies in channeling savings and investments through the capital markets. Further, investors in far flung areas have had limited access to the market despite efforts to increase presence of securities brokers across the country. Hence, the SECP has been striving to enhance digitalization in the capital markets in order to provide ease of access to investors.

Presently, investors are required to physically visit offices of brokers and submit hard copies of account opening forms and supporting documents in order to open their accounts. Brokers then submit this information to the relevant infrastructure institutions for verification and account opening. This process may be cumbersome and might discourage investors. It also makes it difficult for investors residing in areas where brokers have limited presence to travel in order to open their accounts.

Accordingly, the new regime has been introduced with the following seamless process for efficient hassle-free account opening:

Firstly, the customer shall access the website of securities broker with which the customer is willing to open its trading account and select online account opening option.

Secondly, the customers shall provide basic information including name, CNIC number, mobile number, email address and IBAN.

Thirdly, the information submitted by customer shall be forwarded to the National Clearing Company of Pakistan Limited (NCCPL) through API. The

NCCPL shall initiate necessary verification process i.e. CNIC verification, IBAN verification and mobile verification and upon successful validation, NCCPL shall send 'One Time Password' - OTP on mobile number of customer.

Fourthly, the said OTP shall be used by the customer to access electronic Customer Relationship Form and KYC Application Form through online account opening facility of broker and complete the online account opening process.

Fifthly, the customer shall fill in the required details and attach scanned copies of the documents prescribed on the online form and provide digital/online consent and acceptance of Terms; Conditions for the account.

Sixthly, once customer has provided the details, the broker shall perform its diligence and proceed to open trading account. Signature and/or physical documents will not be required to be submitted by the customer to the broker including KYC form.

The new regime aims to revolutionize the Pakistani capital markets and have a deep long run impact on growth of the investor base. It is expected that the digitization process shall help investors across the country especially from far flung areas to connect with the market. Since capital markets serve as a channel to route savings and investments, it is hoped that this initiative shall contribute significantly towards economic growth in the country, SECP officials added.

Copyright Business Recorder, 2020