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020116
The Gazette of Pakistan
PART II
Statutory Notification (S. R. O.)
Government of Pakistan
Securities and Exchange Commission of Pakistan
Islamabad the, 16 Jan, 2002
NOTIFICATION
SRO.30(I)/ 2002. __ The following draft of the amendments in the Investment Companies and Investment Advisers Rules 1971, which are proposed to be made in exercise of the powers conferred by section 32 and 33 of the Securities and Exchange Ordinance, 1969 (XVII of 1969) read with section 43 (b) of the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997), is hereby published for the information of all persons likely to be affected thereby and notice is hereby given that the draft will be taken into consideration after thirty days of its publication in the Official Gazette.
Any objection or suggestion, which may be received from any person in respect of the said draft before the expiry of the said date will be considered by the Securities and Exchange Commission of Pakistan.
DRAFT AMENDMENTS
In the aforesaid Rules, -
1) in rule 2, in sub-rule (1), after clause (a), following new clause shall be inserted, namely:-
“(aa) Commission” means the Securities and Exchange Commission of Pakistan”.
2) in rule 5, -
(i) in sub-rule (1), after the words “these rules” and before the full stop(.) the words “alongwith an undertaking that no change in the directors shall be made without prior authorization by the Commission and that more than fifty per cent of the directors of the investment company shall be independent of the investment advisor” shall be inserted.
(ii) in sub-rule (2), after the proviso, the following further proviso
shall be added.-
“Provided further that investment advisor of an investment company (closed-end fund), which is already in issue, shall comply with the sub-rule (2) within six months of the registration of such company with the Commission.”
(iii) after sub-rule (3) the following new sub-rule shall be added, namely. –
“(4) In case an investment company fails to commence business within six months from the date of registration under these rules, unless the period has been extended by the Commission on receipt of application from its directors, or it is de-listed from stock exchange (s) with prior approval of the Commission, its registration shall be liable to be cancelled.”
3) in rule 6, the following new sub-rule shall be inserted, namely, –
“(4) No investment company shall invest more than twenty per cent of its net
assets or an amount sufficient to acquire twenty per cent of any class of
securities of its associated companies, whichever is less.
Provided that an investment company (closed-end fund), which is already in issue and is not compliant with the rule, shall bring its investments in line with the rule within two years of its registration as an investment company.”
4) in rule 7, after sub rule (5), the following new proviso shall be added. -
“Provided that the investment advisor of an investment company (closed-end fund), which is already in issue, shall not be entitled for reimbursement of any other expenses except those incurred in connection with the incorporation and registration of the investment company.”
5) in rule 8,-
(i) in clause (k) the words “or connected person” appearing after the word “employee” and before the words “of the investment company” shall be deleted and after the words “or connected person thereof” appearing after the word “employee” appearing for the second time and before the semi colon (;) shall be replaced with the words “and enter into transactions with any single connected broker, which shall equal or exceed thirty percent or more of the transactions of investment company in any one accounting year of that company:
Provided that the Commission may, in each case on merits, permit the thirty percent to be exceeded if the connected broker offers advantages to the company not available elsewhere;”
(ii) for the full-stop, at the end of clause (l), a semi colon (;) shall be substituted and thereafter following new clauses shall be inserted, namely:-
“(m) transfer any shares to majority shareholders acquired from minority shareholders as a consequence of an offer price for which prior approval of the Commission has not been obtained by the majority shareholders.”
“(n) apply for delisting from stock exchange, unless it has obtained prior approval of the Commission in writing to the scheme of delisting.”
6) for rule 11, the following shall be substituted:-
(i) “The investment adviser of an investment company shall be entitled to be paid annually, after the accounts of the investment company have been audited, a remuneration during the first five years of a company’s existence, of an amount not exceeding three per cent of the average annual net assets of the company and thereafter of an amount equal to two per cent of such assets.”
(ii) clause (a) and (b) shall be deleted.
7) in rule 15, in sub rule (1),- after the word “maintain” and before the word “owned ” the words “the securities” shall be substituted with the words “all assets”
8) after rule 17, the following new rules shall be inserted, namely:-
(i) “17(A). Appointment of auditor.-
(1) The investment company shall appoint the auditor, who is a chartered accountant provided that the auditor:-
a) is not the auditor of the investment advisor appointed by the investment company; and
b) shall not be appointed more than three consecutive years.
(2) The Commission shall monitor the general financial condition of an investment company, and, at its discretion, may order special audit and appoint an auditor to carry out detailed scrutiny of the affairs of the company, or appoint both an auditor and an inspector, provided that the Commission may, during the course of the scrutiny, pass such interim orders and directions as may be deemed appropriate.
(3) On receipt of the special audit report or report from the inspector, the Commission may direct the company to do or to abstain from doing certain acts and issue directives for immediate compliance which shall be complied forthwith.”
(ii) “17(B). Reports to be submitted by investment company.--
(1) Every investment company shall furnish report(s) as may be specified by the Commission, on matters specified in rule 6, 7, 8, 9, 14 and 15 or any other matter(s) explaining therein any violation of the rules and the reasons thereof.
(2) Every investment company shall submit such periodical returns, to such authorities, members of the company and any other person as may be prescribed and directed by the Commission from time to time.”
(iii) “17(C). Penalty -
(1) If an investment company makes a default in complying with the requirement of the rules and directions of the Commission, the company and every director who is knowingly and willfully in default shall be liable to a fine prescribed in section 22 of the Ordinance.
9) in rule 19,
(i) the word “and” at the end of clause (d) shall be deleted
(ii) the “full stop (.)” at the end of clause (e) shall be substituted with “semi-colon(;) and”, and the following new clause (f) shall be inserted, namely. -
“(f) that such a person is not registered as a broker or agent with the Commission or any stock exchange.”
10) in rule 20,- in sub-rule (1), after the word “registration” appearing the second time and before the words “under these rules” the words “alongwith an undertaking that no change in the Memorandum of Association and in the directors shall be made without prior authorization of the Commission” shall be inserted.
11) after rule 20, the following new rule shall be added, namely.-
“20-A. Renewal of registration.
(1) Certificate of registration of an investment adviser company shall be valid for one year and shall be renewable on receipt of an application on Form-III-A, to be filed within validity period of registration and on payment of ten thousand rupees as renewal fee.
Provided that the investment advisors already registered with the Commission shall submit application for renewal of registration with effect from the due date falling after 30 June 2002.
(2) The investment advisors may file application for renewal of registration alongwith late filing fee of one thousand rupees within three months of expiry of the registration.
(3) The Commission may, after making such enquiry and after obtaining such further information as it may consider necessary, renew the registration of investment adviser company for an other term on such terms and conditions as it deems necessary in Form-III-B.
(4) In case a company fails to submit application for renewal as provided in sub rule (1) and (2), the Commission may proceed in terms of rule 24, against the investment advisor.”
12) after rule 22, the following new rule shall be inserted, namely:-
“22(A). Powers to give directions. The Commission may, if it is satisfied that it is necessary and expedient so to do in the public interest or in the interest of capital market, by an order in writing, give such directions to the investment companies, investment advisors and custodians which are essential to enforce the rules including but not limited to making arrangements for safe custody of securities, submission of reports and disclosure of information.
13) in rule 24,-
i) after the words “ Cancellation of registration” the words “and penalty” shall be inserted
ii) in sub rule (1), before the word “Authority” appearing for the second time the words “or the conditions of the investment advisory contract or the terms of the custodian agreement” shall be inserted.
iii) in sub rule (1), after clause (b) the “colon (:)” shall be substituted by “semi colon(;) or” and the following new clauses shall be added:
(a) suspend the registration; or
(b) issue cease and desist orders to the company; or
(c) order compensation to be paid to the investors; or
(d) ban defaulters to be employed within securities market temporarily or permanently; or
(e) impose fine in terms of section 22 of the Ordinance; or
(f) take any combination of the above actions.”
14) after rule 24, the following new rule shall be inserted, namely:-
“25. Relaxation of Rules Where, the Commission is satisfied that it is not practicable to comply with any requirements of these rules, in a particular case, or class of cases, or it would be in the interest of capital market to do so, the Commission may, with the approval of federal government, for reasons to be recorded, relax such requirements subject to such conditions as it may deem fit. ”
[No. SC/MF-RS/IC&IA/2001] Mohammad Hayat Jasra
Executive Director (Law)