PSX introduces amendments to enhance investor protection measures M Haris

The Pakistan Stock Exchange (PSX) has implemented a series of amendments to its regulations to enhance investor protection measures. 

These changes, approved by the Securities and Exchange Commission of Pakistan (SECP), are designed to strengthen oversight and accountability among securities brokers.

According to a notice issued by the PSX, the amendments, effective from June 12, 2024, include several key provisions:

1. Notification of Regulatory Actions: As per PSX Regulation 3.7.1A, the PSX shall inform the SECP and the relevant banks of the TRE Certificate Holder regarding suspension, cancellation or forfeiture of the TRE Certificate of such TRE Certificate Holder. Further, in case of cancellation, forfeiture or declaration of a securities broker as a defaulter, PSX, while referring the case to the SECP, shall request it to take further appropriate action(s).
2. Account Balance Confirmation: As per PSX Regulation 3.16.8, PSX is empowered to obtain account balance confirmation of any one or more of the client-titled bank accounts maintained by the securities broker with its written authority. For this purpose, PSX may require the securities broker to authorize on its letterhead the relevant officials of PSX to obtain such information from the relevant branch of the concerned bank.
3. Disclosure of Business Bank Accounts: As per PSX Regulation 4.17.1A, the securities brokers shall be required to submit to PSX the details of all business bank account(s) opened for holding funds as and when required by PSX. The securities broker shall be required to inform PSX within five (05) working days of the opening of a new bank account or closure of existing bank account. Such information shall be submitted in the manner to be notified by the PSX.
4. Prohibition of Cash Withdrawals: As per PSX Regulation 4.23.3, cash withdrawals from the client-titled bank accounts maintained by the securities brokers shall be prohibited and all payments to customers must be made through the banking channels.
5. Settlement of Claims: As per PSX Regulation 20.16.6 (d) and 21.6.1 (e), the funds available in the proprietary and client-titled bank account(s) of the defaulted securities broker shall be with PSX for settlement of verified claims against the concerned defaulter broker.

Additionally, PSX has also introduced a new Clause 4.9A in PSX Regulations which stipulates that the TRE Certificate Holder may pass members’ resolution for voluntary winding-up subject to mandatory compliance with the procedures prescribed therein. Where a TRE Certificate Holder passes members’ resolution for voluntary winding-up without complying with the prescribed procedures, PSX shall suspend the trading terminals of such TRE Certificate Holder until further notice. 

Consequent to the above, PSX has also been empowered to take action against non-compliant TRE Certificate Holder as Gateway Issuer Clause 21.6A has been removed.