Securities Brokers (Licensing and Operations) Regulations 2016

PART II
Statutory Notifications (S. R. O)
Government of Pakistan
Securities and Exchange Commission of Pakistan NOTIFICATION Islamabad, the 24 th June, 2016 S. R. O. 569 (I) /2016 [1] . -

• In exercise of powers conferred by

sub-section (1) of section 169 read with sections 68, 69, 75, 76, 77, 78, 79, 80, 82, 84 and 151 of the Securities Act, 2015 [2] [(III of 2015) and sub-section (1) of section 114 read with sections 51, 52, 58, 63, 64, 66, 68 and 95 of the Futures Market Act, 2016 (XIV of 2016)], the Securities and Exchange Commission of Pakistan hereby makes the following regulations, the same being previously published in the official Gazette vide S.R.O. 1087(I)/2015 dated November 5, 2015 and also placed on its website as required under sub-section (4) of section 169 of the said Act, namely:
CHAPTER I
PRELIMINARY

1. Short title and commencement. -
   (1) These regulations shall be called the Securities Brokers (Licensing and Operations) Regulations, 2016.
   (2) They shall come into force on the date of commencement of Part V of the Act.
   [3]
   [(3) Any person licenced by the Commission under these regulations to act as securities broker shall be permitted to undertake futures contracts based on securities and financial instruments in terms of sub-section (5) of section 52 of the Futures Market Act, 2016 (XIV 2016).; and (4) These regulations shall not apply to the futures brokers to offer for trade futures contracts based on commodities and financial instruments in terms of sub-section 4 of section 52 of the Futures Market Act, 2016 (XIV 2016). A separate set of regulations shall be applicable to the licencing and operations of futures brokers to undertake futures contracts based on commodities and financial instruments.]
2. Definitions
   . - (1) In these regulations, unless there is anything repugnant in the subject or context, – (a) “Act” means the Securities Act, 2015 (III of 2015); (b) “advertisement” means dissemination or conveyance of information, or an invitation or solicitation, in respect of the services that the securities broker is licensed to carry on, by any means or in any form, including by means of, — (i) publication in a newspaper, magazine, journal or other periodical; (ii) display of posters, notices, billboards, hoardings etc.; (iii) circulars, handbills, brochures, pamphlets, books or other documents; (iv) letters addressed to individuals or bodies; (v) photographs or cinematograph films; (vi) sound broadcasting, television, the Internet or other media; or (vii) tele-marketing and SMS marketing; (c) “blank sale” means sale by a securities broker on its proprietary account or on customer’s account when the securities broker or customer does not own shares respectively, or the sale does not constitute a sale with pre-existing interest or is a sale without entering into an SLB contract to meet delivery obligations on the settlement date; (d) “customer bank account” means the bank account opened by the securities broker with a scheduled bank in Pakistan wherein all customer money is deposited and maintained; [4] [(e) “Companies Act” means Companies Act, 2017 (XIX of 2017);] [5] [(ea) “financial instrument” includes any currency, currency index, interest rate, interest rate instrument, interest rate index, commodity index bond index and such other financial instruments as may be notified by the Commission in the official Gazette; (eb) “Futures Act” means the Futures Market Act, 2016 (XIV of 2016); (ec) “futures broker” means a person who, by way of business, whether as principal or agent, - (i) makes or offers to make with any person, or induces or attempts to induce any person to enter into or to offer to enter into any agreement for or with a view to purchase or sale of a futures contract; or (ii) solicits or accepts any order for, or otherwise dealing in, or effects transactions in a futures contract for its customer or on its own account; (ed) “futures contract” means- (i) an arrangement where one party agrees to enter into a contract to deliver a specified quantity of a specified commodity or securities or financial instruments, to another party at a specified future time and at a specified price payable at that time; or (ii) where the parties agree to discharge their obligations under the contract by settling the difference between the value of a specified quantity of a specified commodity or securities or financial instruments agreed at the time of the making of the contract and at a specified future time; or (iii) such other futures contract or class of futures contracts or derivative contracts as prescribed by the Commission, and includes options on contracts of the kind described in paragraph (i), (ii) or (iii); (ef) “regulated activity” means any
   activity, required to be licensed, under section 46 of the Futures Act; (eg) “regulated securities activity” means a regulated securities activity as specified in section 63 of the Act; (eh) “sale with pre-existing interest” shall mean the squaring up of:
   (i) an earlier purchase in the same settlement or in a different settlement which will settle prior to the settlement of the sale; and (ii) an open position in margin trading or margin financing as a financee on account of same UIN of same security.] (f) “scheduled bank” has the same meaning as defined in clause (m) of Section 2 of the State Bank of Pakistan Act, 1956 (XXXII of 1956); [6] [(g) “Securities broker” for the purpose of these regulations means a broker licensed to undertake securities broker activity under Securities Act, 2015 and permitted to undertake future’s broker activity for futures contracts based on securities and financial instruments in terms of section 52 of the Futures Market Act, 2016; (ga) “securities lending and borrowing (SLB) contract” means the securities lending and borrowing contract executed through the system provided by an authorized intermediary as per the requirements of the applicable rules; (gb) “senior management officer” as defined in the Act for the purposes of these regulations, in addition to the persons mentioned in clause (lviii) of section (2) of the Act and, includes the compliance officer;] (h) “short sale” means a sale by a securities broker, on its proprietary account or on customer’s account, where the securities broker or customer does not own shares respectively, or the sale does not constitute a sale with pre-existing interest, but the securities broker or the customer, as the case may be, has an SLB contract to meet delivery obligations on the settlement date; [7] [(i) “sponsor” means:
   (a) a person who has contributed initial capital in the company or has the right to appoint majority of the directors on the board of the company directly or indirectly; and (b) a person who replaces the person referred to in clause (a) above; and (c) a person or group of persons who has control of the company whether directly or indirectly;] (j) “unique identification number (UIN)” means the unique identification number issued by a clearing house to a person for trading on the securities exchange. (2) Words and expressions used but not defined in these regulations shall have the same meaning as assigned to them in the Act, the [8] [Companies Act, the Futures Act], the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997), Central Depositories Act, 1997 (XIX of 1997), and any rules or regulations made thereunder.
   Chapter II
   LICENSING REQUIREMENTS FOR SECURITIES BROKER
3. Prohibition.
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