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SECP Asked to Revise the New Brokers’ Regime

Stakeholders have criticized the draft New Stockbrokers Regime proposed by the Securities and Exchange Commission of Pakistan (SECP), demanding the regulator to revisit certain conditions in the broader interest of the capital market.

PSX (Pakistan Stock Exchange) Stockbrokers Association (PSA), in a statement, said that the SECP, in the proposed regime, had divided the brokers into three categories without considering some important facts.

The association stated that the Constitutional Right of businesses is being trampled. “Stockbrokers are fully documented and so are their clients, whereas clients’ assets in the custody of a broker stay segregated from the brokers’ own assets 24/7,” the PSA said in the handout.


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Majority of the stock brokerage houses are family-owned “private limited companies”. Some are even third-generation brokers. The relationship of brokers with their clients is based on long-standing mutual trust, claimed the statement.

They also claimed that concentration of risk in a few hands is against the golden principle of risk management: “Keep your risk as much widespread, as possible. Eventually, only one category will prevail. Due to the risk in a few hands, the Stock Market will be on the verge of collapse. Thousands of peoples will be unemployed. A sizeable number of investors will also be moved out and ultimately, the size of the market will be squeezed, it added.

The investors/clients will be subjected to deal with a handful of brokers. It will create a monopolistic environment in the Stock Market, claimed the association. ‘

Clients are being served with the different levels of services in the present situation as per their comfort level with their brokers. The new regime will ultimately kill the investor base due to the monopolistic environment.

”If the object of the Regulator is to safeguard the assets of the clients only, the same could be achieved without putting 90% of the brokers out of business and simply by making the opening of an investor account mandatory by the clients and letting the clients have their sale proceeds through DPS.” It further claimed, ”The proposed Broker Regime if implemented as it is, without any meaningful consultation with the actual stakeholders the Capital Market may suffer an irreparable loss which all of us may later, regret.”


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”To ask stockbrokers, operating as a family-owned “private limited companies” to have 2 outside directors is totally unacceptable, said the statement. The stress and weight be given to experience and track record of the brokers. Particularly, when section 153(k) of Companies Act, 2017, restricts any broker to serve as a director on any listed company, then how on earth will a broker find an Independent Director.

To direct stockbrokers to have their accounts audited by Category “A” auditors of SBP Panel, (being very small in number) not only reduces the options of the broker but also would add to their cost and give rise to monopolies.

The brokers, unlike banks, do not solicit deposits from clients which the banks put to their own use. On the other hand, the assets of the clients cannot be used by the broker but for the benefit of the client. The onerous conditions proposed to be imposed by the SECP, especially on “Trading & Self Clearing” and “Trading Only” Brokers, deserve to be made humane, claimed the statement.

According to the regulator, one of the objectives of this new regime is creating a structure in line with best international practices, which will improve governance standards, transparency and also enhance investor protection.

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