The Securities and Exchange Commission of Pakistan (SECP) is making amendments to the 2015 Issue of Sukuk Regulations to facilitate the issuers, reducing the cost of issue and easing the regulatory burden, it was informed on Monday.
The proposed amendments include waiving mandatory underwriting where the purpose of the issue is to repay its existing debts, reducing the minimum number of underwriters from two to one. The amendments also include specifying the fit and proper standards for a Shariah adviser and essential elements of a Shariah pronouncement, and disclosing expenses specific to Shariah compliance and audit.
The amendments will also include emphasising issuance of sukuk using the SPV structure, and aligning the definition of sukuk with the definition given by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), it added.
The amendments were initiated by the SECP following the discussion in the Islamic Capital Market Subcommittee, chaired by Zafar Hijazi, chairman of the commission. The committee, together with three other committees on awareness, policymaking and taxation, is working on developing Islamic finance in Pakistan.
Based on the recommendations of the Islamic Capital Market Subcommittee, the SECP organised a detailed consultation session with sukuk issuers and intermediaries, leading to these amendments.
Representatives of the State Bank of Pakistan (SBP) and Pakistan Stock Exchange (PSX) also participated in the discussion, which was held in Karachi in February.
The SECP also advised the PSX to submit proposals to reduce the cost of market maker for sukuk, rationalise the minimum size of public offer portion to reduce the cost of issue, and organise a seminar with potential issuers to widen awareness regarding sukuk.
These measures will further facilitate the issuers, reducing their cost and hassle.
In Pakistan, the sukuk market has been performing below its potential, while the demand is substantial, supply remains short.
Sukuk are issued as a Sharia-compliant instrument under the Sukuk Regulations read with Section 120 of the 1984 Companies Ordinance, through public offer and private placements.The sukuk issued through public offerings are listed on the PSX for trading and quotation of their market prices.
The major investors in sukuk comprise of  mutual and pension funds, banks, commercial banks, NBFCs however the retail individuals too invest in the sukuk bonds.
