ISLAMABAD: The modaraba companies are required to seek prior approval of the Securities and Exchange Commission of Pakistan (SECP) for any invitation for investment in the Certificate of Musharakah (COM) either through advertisement by print, electronic or social media outlets or any other form or channel.

According to the recently issued Modaraba Regulations, 2021, by the SECP, the “Certificate of Musharakah (COM)” means an instrument to raise funds through the modes and instruments approved by the Religious Board but does not include redeemable capital issued under Section 66 of the Companies Act; funds obtained from a financial institution; advance or application or subscription money for certificates of the modaraba; cash margin or security deposit received in respect of funds provided by the modaraba; subordinated funds and funds obtained from major shareholders, sponsors and associated companies.

The “Certificates of Musharakah (COM) raising Modaraba” means a financial services modaraba with a valid permission to raise funds through issuance of COM or any other modes or instruments approved by the Religious Board or have outstanding COM on its books.

Under the new regulations, the modaraba shall seek prior approval of the Commission for any invitation for investment in COM either through advertisement by print, electronic or social media outlets or any other form or channel: Provided that the application for seeking approval of the Registrar shall have deemed to be approved, if no reply is received from the Commission within 10 working days from the date of receipt of complete application.

All advertisements for inviting persons to participate in a modaraba’s COM scheme shall at the minimum contain the information including credit rating of the modaraba, the name of the rating agency, the date on which the credit rating was issued; minimum and maximum tenor of the COM; and expected profit rate to be paid on the COM.

Copyright Business Recorder, 2021