Compliance functions: Securities exchange allowed to enter into arrangements

After approval of the Securities and Exchange Commission of Pakistan (SECP), the securities exchange has been allowed to enter into arrangements with a central depository and clearing house for performing the compliance functions.
The SECP has issued SRO 1119 (I)/2019 to issue draft amendments to the Securities Exchanges (Licensing and Operations) Regulations, 2016 here on Monday.
The SECP has introduced a new rule, 'compliance functions of central depository and clearing house,' in the Securities Exchanges (Licensing and Operations) Regulations.
Under the new rule, a securities exchange may enter into arrangements with a central depository and clearing house, with the prior approval of the Commission, for performing compliance functions of the central depository and clearing house with respect to clearing members and CDS elements which are TRE certificate holders of the securities exchange in the laid down manner.
The securities exchange shall enter into a service level agreement with the clearing house and the central depository for performing their compliance function after obtaining approval of its board of directors with respect to shifting of employees of central depository and clearing house and defining the role, responsibilities, duties, obligations of securities exchange, scope of services, remuneration of shifting compliance function, indemnification to the clearing house and central depository and any other important matter.
Upon signing the service level agreement and from the effective date provided in the agreement, the securities exchange shall monitor compliance of the clearing members and CDS elements which are TRE certificate holders with applicable legal and regulatory framework, policies and procedures of the central depository and clearing house, the SECP said.
Upon signing the service level agreement and from the effective date provided in the agreement, the securities exchange shall supervise or conduct any investigation, inspection or enquiry required to be conducted by a clearing house or central depository in respect of clearing members and CDS elements which are the TRE certificate holders.
After signing of the service level agreement, the securities exchange shall be fully responsible for effectively discharging all the obligations under the legal and regulatory framework and policies and procedures applicable on the clearing house and central depository, relating to monitoring compliance, inspections and investigation in respect of clearing members and CDS elements.
The chief regulatory officer of the securities exchange shall maintain liaison with the central depository and clearing house for monitoring compliance, inspections and investigation in respect of clearing members and CDS elements which are TRE certificate holders and the securities exchange shall perform these activities in accordance with the procedures finalized with the central depository and clearing house, the SECP said.