The Securities and Exchange Commission of Pakistan (SECP) has made a significant decision. They’ve decided that securities brokers can now offer services that comply entirely with Shariah law. This decision comes with certain rules and conditions, as outlined in the SECP’s S.R.O. 427(I)/2024, which they issued on Thursday.
Here’s what the regulations say:
- Establishment of Subsidiary: The SECP might allow setting up a wholly-owned subsidiary to provide Shariah-compliant brokerage services. But there are conditions:
- The subsidiary must get a certificate confirming it complies with Shariah principles.
- It should adhere to specific guidelines set by the SECP.
- Only the parent company or the subsidiary can engage in proprietary trading.
- A compliance officer must be appointed by the subsidiary.
- The parent and subsidiary companies must have measures to prevent sharing of information that could harm customer interests or lead to unfair trading practices.
- Clients should be fully informed about the relationship between the parent and subsidiary companies.
- There must be a policy to address any conflicts of interest arising from the parent-subsidiary relationship.
- The subsidiary can operate as a trading-only or online-only broker.
- If a subsidiary plans to offer Shariah-compliant services and self-clearing, it must have a strategy to merge with the parent company within three years.
- Other conditions may be imposed by the SECP as deemed necessary.
- Direct Shariah-Compliant Services: Securities brokers can offer completely Shariah-compliant brokerage services, provided they obtain the necessary certification and follow the SECP guidelines.
- Establishing a Shariah-Compliant Window: Securities brokers can also establish a separate window to offer Shariah-compliant services, subject to approval from the SECP and compliance with their guidelines.
These decisions aim to facilitate Shariah-compliant investment opportunities while ensuring regulatory compliance and customer protection.
