KARACHI: The State Bank of Pakistan (SBP) on Friday revised the regulatory guidelines for exchange companies and unveiled consolidated and updated Regulatory Framework for Exchange Companies (RFEC).
The SBP has undertaken a comprehensive review of the existing regulatory instructions and after detailed revision developed a consolidated and updated RFEC.
This updated framework consolidates and modernizes the regulatory instructions, aiming to enhance corporate governance, improve internal controls, and bolster the supervisory and enforcement mechanisms within the sector.
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The framework elaborates corporate governance structures, sets forth internal controls & IT systems requirements, and strengthens the supervisory & enforcement regime. Further, it updates reporting requirements and provides a single, unified source of regulatory guidance for the ECs.
By consolidating all relevant regulatory guidance into a single source, the RFEC replaces the existing Exchange Companies Manual and aims to simplify compliance processes while providing clarity to stakeholders.
The new framework will become effective from January 01, 2025. Exchange companies are required to update and align their internal policies, procedures, and systems to fully comply with the RFEC by June 30, 2025.
The framework described all the process for licensing and other protocols. A company desirous of obtaining an authorization in terms of section 3AA of FERA, to operate as an Exchange Company, may approach SBP for the purpose.
The process of authorization would consist No Objection Certificate for formation of a Company, in-principle approval for operationalisation of a Company and issuance of an authorization for commencement of business.
The SBP has reserves the right to reject an application by an applicant at any stage of the application review process and in case of refusal, the SBP would intimate to the applicant the reasons for such rejection.
The SBP may suspend/cancel or allow revocation of an authorization of the Company or any of its outlets or limit the scope of business activity of the Company or any of its outlets after following the procedure provided in the Framework. Further, any Company intending to close its business operations voluntarily may apply for revocation of authorization to the SBP.
The minimum paid-up capital of the Company shall be PKR one (01) billion. A capital deficient Company is required to meet the shortfall PKR 600 million by December 31, 2025, PKR 800 million by December 31, 2026 and PKR one (01) billion by December 31, 2027.
The Company shall maintain fifteen (15) percent of its paid-up Capital as Regulatory Reserve (RR) with SBP in the form of cash and/or unencumbered approved government securities.
The Company will be required to develop policies, plans and procedures to ensure operational efficiency, accurate financial reporting and compliance of applicable laws and regulations.
As per the framework, the Company shall comply with the Anti-Money Laundering, Combating the Financing of Terrorism & Countering Proliferation Financing (AML/CFT/CPF) Regulations.
Copyright Business Recorder, 2024
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