SECP issues consultation paper on ‘industry self-regulation’

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) on Monday issued a strategic framework sets out a clear roadmap for eligible industry associations to transition into Self-Regulatory Organizations (SROs) over the next three years.

The SECP has been working closely with the prominent industry bodies within its regulatory ambit, wherein, some associations are licensed as Section 42 companies and others are registered with Directorate General of Trade Organizations (DGTO) i.e. Pakistan Stock Broker Association (PSBA); Insurance Association of Pakistan (IAP); Mutual Fund Association of Pakistan (MUFAP); NBFI and Modaraba Association of Pakistan; Pakistan Microfinance Network (PMN) and Pakistan Fintech Network (PFN).

In this regard, the SECP has issued Consultation Paper on Standard Principles for Recognition and Conduct of Industry Associations, introducing a strategic framework aimed at strengthening Pakistan’s financial sector through enhanced self-regulation.

The Commission further intends to facilitate the establishment of multiple industry associations to represent specialized sub-sectors within one regulated sector. This approach will enable more focused representation for distinct business categories such as leasing companies, modarabas, microfinance companies, as well as fintech firms operating within these sectors. Each association will operate within clearly defined mandates based on their respective sub-sector’s characteristics and regulatory requirements.

These SROs will be vested with the authority to set ethical standards, monitor industry conduct, enforce compliance, and drive sector-specific initiatives, all in alignment with SECP’s overarching regulatory objectives.

Key features of the proposal include the mandatory conversion of trade associations into Section 42 companies under the Companies Act, 2017, ensuring they operate as not-for-profit entities. This aims to enhance transparency, strengthen governance, and uphold financial integrity. The framework also aligns with international best practices, emphasizing diverse and merit-based membership, strong governance, conflict-of-interest safeguards, stakeholder engagement, fair dispute resolution, a robust code of conduct, and ongoing investment in training of members and investor education. To enhance sector-specific advocacy, the Commission encourages the establishment of specialized associations within regulated sectors, each focusing on distinct sub-sectors. This targeted approach enables tailored representation that addresses the unique operational dynamics, challenges, and compliance requirements of each segment.

This initiative underscores SECP’s commitment to nurturing a transparent, accountable, and competitive financial ecosystem. By enabling the evolution of industry associations into functional SROs, the Commission aims to elevate market integrity, build investor confidence, and foster sustainable sectoral growth, the SECP added.

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