Investment in securities by directors, employees: AMCs must put in place policies and procedures: SECP

ISLAMABAD: The Securities And Exchange Commission of Pakistan (SECP) has made it mandatory for the Asset Management Companies (AMCs) to put in place appropriate policies and procedures which govern trading or investment in securities by AMC employees, directors, sponsors their spouses and dependent children.

Through a notification issued on Tuesday, the SECP has issued draft amendments to the Non-Banking Finance Companies and Notified Entities Regulations, 2008.

According to the revised regulations, an Asset Management Company shall put in place, appropriate policies and procedures which govern trading or investment in securities by AMC employees, director(s), sponsor(s) their spouse and dependent children and also empowers AMC to take necessary enforcement action against such employee(s)/directo r(s)/sponsor(s). Such policies shall at the minimum cover following requirements/prin-ciples,-(i) disclosure by an AMC employee, within 10 days of his appointment, of any securities held by him or her, his or her spouse and/or dependent children along with details of their broker accounts. Such reporting of information shall be done to the Compliance Function of the AMC; (ii) Criteria for approving or rejecting an application seeking trading or investment in securities by AMC employees; (iii) Periodic disclosure of securities held by the AMC employees, their spouses and dependent children, at least on a quarterly basis. However, reporting of actual transactions, including volume, date and price, on a same day basis.

Modes of communication with investors: SECP directs AMCs to place additional disclaimer

Restriction on AMC employees from deriving any benefit or personal advantage from information which is generally not available and which is obtained by reason of or in the course of their employment with AMC; (v) Prescribing minimum holding period and discourage trading for speculative purposes; (vi) Retention, for a period of at least three years, of complete record of all applications including the date of the request, the name of the applicant, details of the proposed transaction and whether the request was approved or denied and waivers given, if any, and its reasons; (vii) Restricting personnel involved in the investment decision making process from initiating trades in a security within twenty-four hours of a pending buy or sell order in the same security by the AMC and until such order is executed or cancelled; (viii) Prescribe trading windows and blackout periods to restrict the misuse of confidential information.

This includes explicitly prohibiting all such employees (including CEO), involved in investment decision-making and its execution, from investing in the same securities as the CIS either directly or through the portfolio under their management at least three days prior to or subsequent to the transaction by the CISs under management. This prohibition also extends to the portfolios of sponsors/directors being managed by the AMC.

Copyright Business Recorder, 2022