GOVERNMENT OF PAKISTAN
SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN -.-.-.-

NOTIFICATION

Islamabad, the 23rd February, 2021

S. R. O. 261 (I)/2021.- The following draft amendments to the Share Registrars and Ballotters Regulations, 2017, proposed to be made by the Securities and Exchange Commission of Pakistan, in exercise of powers conferred by section 169 of the Securities Act, 2015 (III of 2015),are hereby published for the information of all persons likely to be affected thereby and, as required by sub-section (4) of the said section 169 and 114 , notice is hereby given that objections or suggestions , if any, received within fourteen days from the date of placement of this notification on the website of the Commission, may be taken into consideration, namely:-

DRAFT AMENDMENTS

In the aforesaid regulations, -

(1) in regulation 2,-

(a) in sub-regulation (1),-

    (i) after clause (b), following new clause shall be inserted, namely:-

“(ba) “Companies Act” means the Companies Act, 2017 (XIX of 2017);”

    (ii) clause (d) shall be omitted; and

    (iii) in clause (f), after the words “these regulations” the words “for listed companies.” shall be inserted.

(b) in sub-regulation (2), for the word “Ordinance” the words “Companies Act” shall be substituted.

(2) in regulation 3,-

(a) after the words “share registrar and balloter” appearing for the first time, the words “for a listed company” shall be inserted;

(b) in the second proviso, for the full stop a colon shall be substituted and thereafter the following new proviso shall be inserted, namely: -

“Provided further that a share registrar registered under these regulations shall only provide services to listed companies.”

(3) in regulation 4,-

(a) for clause (c), following shall be substituted, namely:-

“(c) it shall has have a minimum net worth of Rs. 10 million:”;

(b) for the proviso, the following shall be substituted, namely:-

“Provided that the persons who are already licensed under these Regulations, shall enhance, if required, their net worth to Rs. 10 million as per following schedule,-

Net Worth (Rs. in million)	Effective date for compliance
05	June 30, 2021
07	June 30, 2022
10	June 30, 2023

The net worth shall be calculated as total assets less total liabilities less surplus on revaluation, if any, created upon revaluation of fixed assets.

Provided further that the Commission may issue clarification in respect of treatment of any item of assets and/or liabilities for the purpose of calculating the net worth.”;

(c) clause (d) shall be omitted;

(4) in regulation 5, in sub-regulation (1), for the words “fifty thousand” the words “two hundred thousand” shall be substituted;

(5) in regulation 6,-

(a) in sub-regulation (1),-

    (i) for clause (e), following shall be substituted, namely:-

“(e) compliance with the fit and proper criteria provided in these regulations;”;

    (ii) clauses (f), (g) and (h) shall be omitted;

(6) in regulation 7, in sub-regulation (1),-

(a) for the word “two” the word “one” shall be substituted; and

(b) for the words “all the documents as specified in Annexure III” the words “an undertaking that it is compliant with all the regulatory requirements” shall be substituted;

(7) in regulation 10, in sub regulation (1),-

(a) for clause (i), following shall be substituted:-

    “(i) develop and implement complaint redressal policy and take adequate steps for redressal of the complaints, inquiries of the investors received directly or through its customers, the securities exchange or the Commission in a timely and appropriate manner;” ;

(b) in clause (w), the word “and”, at the end, shall be omitted;

(c) after clause (x) the following new clauses shall be inserted, namely:-

    “(y) have at least 1 or one third members of its board, whichever is higher, as independent director:

Provided that existing share registrars and balloters shall comply with the above requirement by June 30, 2021;

    (z) undergo a mandatory audit of its operations, internal control and compliance function, IT systems and any other systems of functions as specified by the Commission, once in every two years, by independent auditor from category A or B panel of auditors maintained by the State Bank of Pakistan in accordance with the terms of reference specified by the Commission;

    (za) take adequate and necessary steps to ensure confidentiality of data and effective backup procedures; and

    (zb) develop and implement an effective business continuity plan.”;

(8) after regulation 15, following new regulation shall be inserted namely:-

“15A. Relaxation from the requirement of Regulation.- The Commission on the application of the company may, if satisfied that it is not practical to comply with any of the requirements of these regulation, after reasons to be recorded in writing, relax any requirement of this regulations subject to such conditions as it may deem fit.”; and

(9) for Annexure-I, following shall be substituted, namely:-

“Annexure-I
[regulation 4 and 10(1)]

FIT AND PROPER CRITERIA

FIT AND PROPER CRITERIA FOR APPLICANT, SPONSORS, DIRECTORS AND SENIOR MANAGEMENT OFFICERS OF SHARE REGISTRAR AND BALLOTERS

This Fit and Proper Criteria is perpetual in nature and its compliance is mandatory.

All persons subject to Fit and Proper Criteria must submit any change in the submitted information, including financial soundness to the company secretary of Share Registrar and Balloters within three business days and the Share Registrar and Balloters shall within a period of seven business days report the same to the Commission.

In addition to the Applicant and the sponsors of the Applicant, eligibility of any person desiring to act as a director on the board of directors or senior management officer of a Share Registrar and Balloters shall be judged on the basis of following criteria, which in the case of directors, shall be in addition to meeting requirements of the Companies Act, 2017 relating to eligibility of a director:

(a) Financial Soundness and Integrity

(1) The person should not have been adjudged as an insolvent or he should not have suspended payment of debts or compounded liabilities with its/his creditors.

(2) The person should not have been convicted by a court of competent jurisdiction as a defaulter in payment of any loan to a financial institution including banking company, a Development Financial Institution or a Non- Banking Financial Company.

(3) The person and companies, firms, sole proprietorship etc. where the person is a chief executive, director (other than nominee director), owner or partner etc., has/have no overdue payment to any customer, financial institution, securities exchange, clearing house, central depository and / or defaulted in payment of any taxes in the individual capacity or as a proprietary concern or any partnership firm or as director in any private unlisted and listed company.

Explanation: In case of overdue payment to any financial institution, CIB reports from the State Bank of Pakistan shall be examined and if there is any overdue/past due payment to a financial institution, irrespective of amount, in overdue column of latest CIB report of the person and of the companies, firms, sole proprietorship etc. where such person is a chief executive, director (other than nominee director), owner or partner or sponsor etc., such person shall not be considered fit and proper person except:

(a) in case where such overdue amount is under litigation and the same is also appearing as amount under litigation in CIB report; or

(b) No overdue payment is appearing in the overdue column in the subsequent latest CIB report; or

(c) such person provides the documentary evidence of having no directorship in companies, firms, sole proprietorship etc., showing overdue status in their CIB reports.

In case of overdue amount in CIB report, no rejection shall be made unless the person has been provided an opportunity of making a representation before the Commission.

(4) The person should not have been a director and/or chief executive of any company or body corporate which has defaulted in payment of Government duties/taxes/cess or has misused customer securities.

(5) The person should be a tax payer and his name should be borne on the Active Tax Payers List regularly published by Federal Board of Revenue.

Provided that this requirement shall not be applicable in the case of foreign nationals.

(b) Educational or other Qualification or Experience

(1) In case of directors, at least one director should:

(i) possesses membership of any recognized professional accounting body; the institute of corporate secretaries of Pakistan or holds sixteen years of education preferably in law, business administration, public administration, commerce, economics, statistics, mathematics or information technology from a university or institute recognized by the Higher Education Commission of Pakistan (HEC) or a foreign degree recognized by HEC as equivalent to bachelor degree; and (ii) have an experience of at least five years in activities relating to capital market or financial market.

(2) In case of chief executive officer, the person should:

a) be a member of a recognized body of professional accountants or possess a post-graduate degree in finance, accountancy, business management, commerce, economics, law, capital market, financial services or related disciplines from a university recognized by the Higher Education Commission of Pakistan, or equivalent; and

b) have a minimum experience of seven years in a senior management position, preferably in the regulated financial services sector.

(3) In case of compliance officer, the person should

a) be a member of a recognized body of professional accountants, or possess a graduate degree in finance, accountancy, business management, commerce, economics, capital market, financial services or related disciplines from a university recognized by the Higher Education Commission of Pakistan, or equivalent; and

b) have a minimum experience of three years in audit, finance or compliance functions or any other managerial position in a company in the financial sector:

Provided that for all of the above persons, where a person possesses seven years of relevant experience of the capital markets, the minimum qualification requirement shall be relaxed.

(4) The directors and senior management officers must be fully conversant with the duties of director or senior management officer, as the case may be, as specified under the statutes, rules and regulations, memorandum and articles of association and the Corporate Governance Code.

(c) Competency

(1) Membership or licence of the person or any company in which the person was a director during the last three years has not been suspended/cancelled by the Commission, any other regulatory authority, any professional body, association or relevant entity e.g. the securities exchange, central depository or clearing house.

Provided that eligibility of a person may be considered on the basis of prior clearance obtained from any such organization that suspended/ cancelled the membership or licence.

(2) No proceedings are pending with respect to the applicant’s winding up, insolvency or analogous relief.

(3) The person should not have been disqualified/ removed from the post of a key executive position of a company by the Commission or any other regulatory authority.

(d) Integrity, Honesty and Reputation

(1) The person should not have been convicted in any criminal offence, fraud/forgery, financial crime etc. in Pakistan or elsewhere, or is not being subject to any pending proceeding in any court of law leading to such a conviction and/ or it has not been concluded by any regulatory authority that the person has been associated with any unauthorized financial activity including illegal brokerage business.

(2) No investigation/enquiry/inspection, conducted under Section 138 & Section139 of the Securities Act, 2015, Section 83 of the Futures Market Act, 2016, Section 29 of the Securities and Exchange Commission of Pakistan Act, 1997, Section 21 of the Securities and Exchange Ordinance, 1969, Section 256 or Section 257 of the Companies Act, 2017, has been concluded and disposal thereof against the person by the Commission with material adverse findings or any settlement in civil/criminal proceedings particularly with regard to investments, financial matters/business, misconduct, fraud, formation or management of a corporate body etc. by any regulatory authorities (within or outside Pakistan), professional bodies or government bodies/agencies.

(3) The person has not defaulted on settlement of a customer complaint where such complaint has been adjudicated by the Commission.

(4) An order restraining, prohibiting or debarring the sponsors, director or senior management officer of the Share Registrar and Ballotters from dealing in the capital market or from accessing the capital market has not been passed; or penalty of Rs.500,000/- or more has not been imposed on sponsors, director or senior management officer of the Share Registrar and Ballotters by the Commission in the last three years, in respect of any laws administered by the Commission:

Provided that sponsors, director or senior management officer may be considered eligible in case a period of at least three years from the date of expiry of the period specified in the order for which such persons have been restrained/prohibited/debarred has elapsed.

(5) The sponsors, director or senior management officer of the Share Registrar and Balloters should not have been penalized for provided false or misleading information either to the Commission or to any of the regulatory body, securities exchange, central depository or a clearing house during the past three years.

(6) The persons should not have been actively involved in the management of a company whose registration or licence has been revoked or cancelled or which has gone into liquidation or other similar proceedings due to financial irregularities or malpractices.

(7) The person must not be ineligible, under the Companies Act, 2017 or any other legislation from acting as a director.

(8) The sponsors, directors and CEO of share registrar and ballotters should not have entered into a plea bargain arrangement with the National Accountability Bureau

In case of any ambiguity in determination of fitness and propriety of a person in terms of this criteria, the decision of the Commission shall be final and binding upon the share registrar and balloters

(10) In Form C, the text “The information and documents mentioned at Annexure III to these Regulations and the document evidencing payment of the renewal fee are attached herewith.” shall be omitted.

(11) Annexure-III shall be omitted.

(12) Annexure-V, in clause 6, in sub clause (a), the expression “e.g. part V to VIII of the Securities Act, 2015 and section 19 and 20 thereof; Part V and Part VI of the Companies Ordinance, 1984 the rules relating to the issue of securities” shall be omitted.”.

_____________________________________________________________________ [File No. SMD/SE/2(312)/2021]

( Bilal Rasul )
Secretary to the Commission