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PSX is introducing changes aimed at strengthening investor protection measures

Posted on by darion

The Pakistan Stock Exchange (PSX) has introduced a number of amendments to its regulations to strengthen investor protection measures.

These changes, approved by the Securities and Exchange Commission of Pakistan (SECP), are aimed at strengthening supervision and accountability among stockbrokers.

According to the notification issued by PSX, the changes effective from June 12, 2024 include several key provisions:

  1. Notice of Regulatory Action: Pursuant to PSX Regulation 3.7.1A, PSX will notify the SECP and the relevant banks of a TRE Certificate Holder of the suspension, revocation or loss of such TRE Certificate Holder. Furthermore, in the event of cancellation, forfeiture or declaration of default of a securities broker, PSX, by referring the matter to SECP, will request it to take further appropriate action.
  2. Account balance confirmation: Pursuant to PSX Regulation 3.16.8, PSX is entitled to obtain confirmation of the balance of any one or more customer-owned bank accounts held by a securities broker with his written authorization. For this purpose, PSX may require the securities dealer to authorize on the letterhead of the relevant PSX officers to obtain such information from the relevant branch of the bank concerned.
  3. Disclosure of company bank accounts: Under PSX Regulation 4.17.1A, stockbrokers are required to provide PSX with details of all company bank accounts opened to hold funds in accordance with PSX requirements. The stockbroker must inform PSX within five (05) business days of opening a new bank account or closing an existing bank account. This information shall be provided in a manner notified by PSX.
  4. Cash withdrawal ban: Pursuant to PSX Regulation 4.23.3, cash withdrawals from customer bank accounts maintained by securities dealers are prohibited and all payments to customers must be made through banking channels.
  5. Satisfaction of claims: Pursuant to PSX Regulations 20.16.6(d) and 21.6.1(e), funds available in the Proprietary Bank Account and the Defaulting Securities Dealer’s Bank Account(s) will be transferred to PSX to settle verified claims against the defaulting broker.

Additionally, PSX has also introduced a new clause 4.9A in the PSX Regulations, which states that a TRE Certificate Holder may adopt a member’s resolution on voluntary liquidation, subject to mandatory compliance with the procedures specified therein. If a TRE Certificate Holder adopts a member resolution for voluntary liquidation without following the prescribed procedures, PSX will suspend such TRE Certificate Holder’s trading terminals until further notice.

Accordingly, PSX has also been authorized to take action against the non-compliant TRE Certificate Holder as clause 21.6A of the Gateway Issuer has been deleted.