Stock brokers can submit feedback by 27th: SECP decides to move towards single rating regime

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has decided to move towards a single rating regime for the stock market brokers to further rationalize the rating requirements for such brokers.

According to the SECP’s consultation paper on amendments to the Securities Brokers’ Ratings Regime, the last date for submission of feedback by brokers is December 27, 2022. The SECP will amend the Securities Brokers’ Ratings Regime keeping in view the feedback of brokers by the said deadline.

Under the existing regulatory framework, securities brokers may be required to obtain multiple ratings such as the Entity Credit Rating (ECR) and Broker Management Rating (BMR) to perform various activities. The concept of Broker Fiduciary Rating (BFR) was introduced with the aim of having a single rating regime for securities brokers through the phase-wise implementation of the BFR. The purpose of the current amendments is to give effect to the planned regime by abolishing the requirement for securities brokers to maintain a specific ECR or BMR rating, and prescribing the minimum BFR to be maintained, where applicable. This requires introducing amendments in the Securities Brokers (Licensing and Operations) Regulations, 2016 (“Brokers Licensing Regulations”) and the Public Offering (Regulated Securities Activities Licensing) Regulations, 2017 (“Public Offering Licensing Regulations”).

Issued by unlisted public, private cos: SECP issues procedure for purchase of shares

As per proposed amendments, the minimum rating requirement for Trading & Clearing (TC) brokers under Brokers Licensing Regulations shall be changed from ECR of A- to BFR 2.

The minimum BFR required to be maintained by Trading & Self-Clearing (TSC) brokers under Brokers Licensing Regulations shall be specified as BFR 3.

The BFR required to be maintained by brokers applying for the license of Consultant to Issue (CTI) under Public Offering Licensing Regulations shall be specified as BFR 3+.

The brokers applying for the license of Underwriter are presently required to obtain a minimum ECR of A- or A2 under Public Offering Licensing Regulations. They may alternatively maintain a minimum of BFR 3++.

All requirements for brokers to obtain BMR shall be abolished, SECP maintained.

In order to further rationalize the rating requirements for securities brokers, it is proposed to move towards a single rating regime, as planned, based on BFR. The brokers shall be required to obtain the prescribed BFR upon expiration of their existing ECR or BMR rating as appropriate, or within six months from the date of implementation of these amendments, whichever comes later. Hence, their existing ECR and BMR ratings shall remain valid until expiration, the SECP added.

Copyright Business Recorder, 2022