Securities exchanges: Rs one billion initial paid-up capital and net-worth mandatory: SECP

The Securities and Exchange Commission of Pakistan (SECP) has specified that an applicant seeking licence as a securities exchange shall have an initial paid-up capital and net-worth of not less than Rs 1 billion.
The SECP has issued Securities Exchanges (licensing and Operations) Regulations, 2016 through a recently issued SRO.1007(1)/2016. Sources said that the existing securities exchange would also have to comply with the said regulations. The obligations and requirements of the
Securities Exchanges (Licensing and Operations) Regulations, 2016 has to be complied by the existing exchange, they added.
According to the financial resource requirements specified in the SECP's regulations, an applicant seeking licence including an existing securities exchange shall have an initial paid-up capital and net-worth of not less than rupees one billion provided that the Commission may require the applicant to achieve and maintain, as a licensing condition, a higher paid-up capital and net-worth in a progressive manner. The net-worth shall be calculated as total assets less total liabilities less surplus on revaluation, if any, created upon revaluation of fixed assets.
The SECP said that an application for grant of licence as a securities exchange shall be submitted to the Commission in Form-A along with receipt evidencing payment of fee of Rs 5 million along with specified documents.
The commission, while considering the application shall inter-alia take into account the eligibility requirements and the applicant has demonstrated its ability to perform its duties in accordance with the provisions of the Act and any rules and regulations made or codes, guidelines, directions and circulars issued thereunder.
The SECP will consider that the applicant has the necessary infrastructure including but not limited to adequate office space, equipment, experienced human resources and technical capabilities, financial resources, policies, procedures, systems and controls to effectively and efficiently discharge its responsibilities as a securities exchange.
The Commission may inspect the premises of the applicant to determine whether it fulfils the eligibility criteria and may also require the applicant to submit reports from experts at the expense of the applicant in the manner specified by the Commission to confirm compliance with the Act and these regulations including the existence of adequate infrastructure, technical capacity, financial standing and other requisite benchmarks.
A securities exchange shall comply with the laid down conditions on an ongoing basis or within such time as the Commission may direct while granting licence under these regulations. The securities exchange shall ensure availability and maintenance of necessary infrastructure for listing and trading of securities; put in place adequate trading and listing procedures and necessary capacity to have a wide network of TRE certificate holders and issuers of listed securities and put in place adequate monitoring, inspection and enforcement mechanism in respect of TRE certificate holders and listed securities.
The securities exchange shall establish and maintain connectivity with clearing house(s), central depository(ies), TRE certificate holders, issuers of listed securities etc. and enter into service level agreements with the clearing house(s) and central depository(ies); have documented business continuity plan including a disaster recovery site; continuously improve the quality and efficiency of its systems and procedures, and attain relevant internationally recognised certifications and put in place necessary controls and safeguards to ensure cyber security, access to confidential information and alteration, destruction, disclosure or dissemination of records and data and submit a plan for segregation of commercial and regulatory functions of the securities exchange for approval of the Commission, If such plan is not already approved by the Commission, and ensure compliance with such approved plan which may be further amended only with prior approval of the Commission.
The applicant and its promoters, strategic investor, anchor investor, financial institution(s) holding five percent or more of its shares, directors and senior management officers shall at all times be fit and proper persons as per the criteria specified. Provided that while evaluating fit and proper criteria in respect of promoters, strategic investor, anchor investor or financial institution(s) holding five percent or more shares, the fit and proper criteria shall be applied to the extent practical on the majority shareholders and directors of such entities, regulations added.