Policy and commitment of SECP for financial inclusion

Despite the Covid-19 prevails in Pakistan since 2020, the Securities and Exchange Commission of Pakistan (SECP) recorded in its report that SECP continued to build momentum by launching facilitative measures for stakeholders, strengthening enforcement function and enable innovations. While some regional markets faced challenges of operability, the capital market in the country stayed completely operational in 2020 inspite of extreme volatility, mainly in March last year. Improvements in the risk management framework by introduction of market halts and phased widening of circuit breakers from 5 percent to 7.5 percent initiated in December, 2019 proved to be a timely initiate. Simultaneously, the rationalization of margining regime and the removal of numerous operational bottlenecks related to the futures market, enhanced the market volumes manifolds on yearly basis. The market also recorded the launch of two first-ever exchange traded funds and increasing of Rs.200 billion through the government by the first of its kind cataloged Sukuk. Present statistics show that SECP recorded 39.0 percent growth in incorporation of firms during the 3.0 quarters of FY2020-21.

The Commission recorded 19,251 companies, showing an annual growth of 39 percent when compared with 16,945 companies recorded in FY2019-20. SECP recorded 14,493 companies in FY2018-19. A total of 139,620 have now been registered with the SECP. Of these, 118,280 companies were active, which means 85 percent of the total companies were filing their annual returns. In March 2021, despite the challenges of Covid-19, the SECP recorded 72 percent growth in registration of latest companies. It recorded 2,513 new companies, compared to March 2020, which was the highest in a single month. Furthermore, foreign investment has been recorded in 43 new companies.

Statistics also show that the highest numbers of companies, i.e. 850 were recorded in Islamabad, followed by 751 and 385 companies recorded in Lahore and Karachi, respectively. Presently, sources recorded that SECP has instituted many reforms to develop an inclusive and coherent industrial strategy to share regulatory thinking and promote a conducive FinTech environment in the country. It is said that the FinTech industry is growing considerably in the country and can play a major role in enlarging financial inclusion. Under the regulator’s oversight, SECP also has launched the idea of the regulatory sandbox, which offers a tailored regulatory environment to conduct limited-scale live tests of innovative products, services, and business models.

According to the Economic Survey of Pakistan FY2020, SECP completed integration of its eServices with FBR and EOBI at the Federal level and with business registration portals of Punjab and Sindh at the provincial level, in the first half of FY2019. Consequently, the SECP’s eServices have become a One Stop Shop (OSS) for registration of a company with the SECP, FBR, EOBI, PESSI, SESSI, Excise & Taxation Department and Labor Department of Punjab and Excise, Taxation & Narcotics Control Department and Labor Department of Sindh. The Management of SECP took the measure through conducting plot project of linking the SECP’s database (CRCS) with the Anti Money Laundering software (goAML). The Shariah Advisory Committee of the SECP has approved the Shariah Compliant Exchange Traded Fund (ETF) product subject to certain scenarios. SECP released the guidelines on cyber-security framework for Insurance sector, 2020 which stipulates various risk management initiatives to ensure safe and robust information technology systems of insurance firms. The Commission has launched financial reporting requirements for life insurance companies carrying on window Takaful operations under the Takaful rules, 2012. The Requirements are aimed at rising transparency and clarity regarding the Takaful operation of the family Takaful operators. The Commission has taken up the issue of imposition of sales tax on life and health insurance with the provincial revenue authorities. The Commission has implemented phased expansion of applicable circuit breakers on individual scrips from existing 5 percent to 7.5 percent for enhancing price discovery and enabling easy exit from the market for the investors. Further, commission launched market halts in the stock market whereby movement of 5 percent in KSE-30 index either way would trigger temporary suspension of trading at stock exchange to prevent irrational price fluctuations and to give the market a cooling-off period and offer facility to brokers to deposit their margins. The SECP approved amendments in the NCCPL Regulations to remove practical difficulties and introduce reforms in margin financing system.

The Commission made necessary regulatory amendments in PSX (Pakistan Stock Exchange) regulations to streamline claim verification process in case of defaulted brokers. SECP has also withdrawn discretionary trading option of PMEX brokers in order to safeguard investors’ interests. The Management of SECP in order to improve investor outreach implemented a framework to enable online account opening. Further, to raise the retail base, a simplified account opening process has been launched for low risk investors whereby maximum limit of Sahulat account has been improved from Rs 500,000 to Rs 800,000.