Summit Capital > Rules and Regulation

Rules & Regulations

Regulatory Framework

The Stock Exchange are governed under the Securities and Exchange Ordinance 1969 Framework. The ordinance prohibits dealing in listed securities outside the Stock Exchange by any person and transaction in securities listed in the Stock Exchange. The Capital market has a triangular foundation in Pakistan comprising of the Stock Exchange, Central Depository Company (CDC) and National Clearing Company Pakistan Limited (NCCPL).

1. SECP

The Securities and Exchange Commission of Pakistan (SECP) was set up in accordance to the Securities and Exchange Commission of Pakistan Act, 1997. The main purpose of the Securities and Exchange Commission of Pakistan (SECP) is to develop a smooth functioning and efficient corporate sector and a capital market based on sound regulatory principles, so as to promote sustained economic growth in the economy.

Download Investor Guide SECP:
Investor Guide SECP I
Investor Guide SECP II

The SECP covers the following entities in their laws and regulations:

  • Corporate Sector (Private and Public Companies)
  • Capital Market (Equity Market, Debt Market, Derivatives Market)
  • Insurance
  • Non-Banking Financial Institutions (NBFIs)
  • Pensions
  • Professional Service Provider

SECP's role is to develop corporate sector and capital market based on the sound regulatory principals to foster economic growth. SECP provides guidance to the new market entrants and safe guards their rights. SECP acts as a regulatory body and monitors all economic activities. For more details

2. NCCPL

In the capital market development program, Asian Development bank gave recommendations to have a separate individual and centralized system for all three Stock Exchanges. So in replacement of the old system, a complete automated electronic settlement system was developed called the National Clearing & Settlement System (NCSS).Any security which becomes live in Central Depository System, on ready status, is inducted accordingly into the National Clearing & Settlement System (NCSS).

The main purpose of the NCSS system is to act as clearing house for all capital market transactions. The system provides clearing and settlement services for all markets including Ready, Future, CFS, IPO, etc. The system caters and facilitates brokers, non brokers, and banks. For more details

3. Central Depository Company(CDC)

The three Stock Exchanges are linked to the Central Depository System (CDS) of the Central Depository Company. The company was developed to remove physical securities management. The current prevailing system helps in transferring shares from one client account to another through an electronic book entry system (CDS). The main aim of the CDC is to act as a central depository of securities on behalf of all the financial institutions and investors. For more details

It has solved investor problems related to stock handling on the settlement date, registration of shares, and exercise of corporate action benefits. This system has resolved issues like Physical Shares Handling, unproductive physical shares settlement, risk management and pledge procedures. This has helped in quicker settlement and increased stock market performance. About 97% trades settled by the Stock Exchange are now handled through the CDS. Other benefits may include:

  • Instantaneous transfer of ownership (electronically)
  • Elimination of fake certificates
  • Convenience / Savings to investors
  • Confidence building of foreign & local investors by reducing the transaction risk
  • Greater transparency of transactions
  • Substantial savings in stamp duty

a. CDC Account Types

There are generally two options that an investor or broker has, to open an account with the CDC. These are:

i. Sub Accounts:

Investors open client accounts (sub accounts) with the participants (brokers and financial institutions) without direct access to CDC. This option had the disadvantage of complaints by investors of mishandling of shares by brokers.

ii. Investor Account Services:

Investors open account services giving direct access to the CDC.

The second option of account opening has an advantage over the first, due to the following reasons.

Greater Security:

Investors have direct access to their securities through the CDC and have the opportunity to give instructions to the CDC on the handling of their securities. Also the CDC is regulated by the SECP, ensuring transactions are executed in a fair and secure manner.

Greater Control:

Investors need not be bothered by the physical holding of their securities. That task has been transferred to the CDC and even though brokers are involved in the trade, the transactions take place according to the specific instructions given by the investors to the CDC.

Value Added Services:

Investors are able to get enhanced services from the CDC on request. Hence investors are constantly updated on the progress of the securities they hold. For more Details

Investor Rights

The investor has the option of taking the following steps incase they want to lodge a complaint against a member of the Stock Exchange.

Amicable Settlement- I

It is sometimes faster and more effective for investors to try and resolve their problems directly. If however, no amicable agreement can be reached, then they can seek arbitration.

Arbitration Committees of Stock Exchange:

The investor also has the alternative of lodging their complaint with the management of the concerned Stock Exchange. They have their own Arbitration Committees that look into the grievances/disputes between the Investor and the Members. The Arbitration Committees after perusing the documents and providing the parties an opportunity of being heard passes an Arbitration Award in accordance with the relevant Rules and Regulations of the Exchange.

SECP:

The client has the option to lodge his/her complaint with the Vigilance Cell which has been setup at SECP to ensure that grievances/complaints of the general public are heard and appropriately handled, in a quick and efficient manner.

Civil Courts:

The investor can also file his/her complaint with the Civil Courts.
The SECP's Role in Complaint Handling

The SECP helps protect investors rights by providing them with an opportunity to lodge complaints against Stock Exchange Members. The SECP, with the help of the complaint information, can identify the weak areas or lack of compliance with existing regulations and can take the necessary action to correct any wrong-doing against investors.
There are certain malpractices against which a client can lodge a complaint. They are:

  • Non-supply of statements of account
  • Unauthorized trading (Sale/Purchase)
  • Non-supply of trade confirmations within 24 hours
  • Unauthorized transfer/movement of shares
  • Overcharged Commission
  • Failure to execute investors instructions/orders
  • Suspension of payment
  • Non-Delivery of Securities

The complaint can first be taken up with the member directly and if no settlement can be reached, the investor has the option of filing the complaint with the Vigilance Cell of the SECP on the prescribed Complaint Registration Form ("CRF") which is available, free of cost, in the offices of Stock Exchanges and the Commission, including the Company Registration offices ("CROs").

All the complaints are then forwarded to the relevant Stock Exchanges for resolution. In case a dispute cannot be resolved through the Stock Exchange, they are then forwarded to the Investor Complaint Wing ("ICW") of the Securities Market Division ("SMD") for further processing. After carefully perusing the documents and giving the parties an opportunity of being heard, they can pass an Order according to the relevant Rules and Regulations.