SECP revamps regulatory framework for mutual funds

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ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has revamped the regulatory framework for the mutual funds’ industry with an aim to meet the changing industry dynamics, implement best international practices, safeguard investors’ interests and provide ease of doing business.

“After a detailed consultative process with the Mutual Fund Association of Pakistan (MUFAP), a number of measures have been introduced recently, which include replacing the seed capital requirements of Rs200 million with a minimum fund size of Rs100 million to offer flexibility in launching new mutual funds,” a statement issued by the commission read.

The SECP also allowed charging the selling and marketing expense to the fund, charging of back office accounting expenses and granting permission for charging sales load on direct investment and online investment which was earlier restricted.

In order to promote ease of doing business, the commission has also approved further amendments to the NBFC Regulations 2008, to provide for operational flexibility to asset management companies (AMCs). This includes enhancing the expense ratio cap for equity funds from 4pc to 4.5pc of the net assets, removing all sub-caps particularly regulatory caps imposed earlier on the management fee, excluding all government levies/charges from the expense ratio.

Moreover, to facilitate the expansion of outreach of mutual funds, AMCs have been allowed to charge selling and marketing expenses, including alternative delivery channels expenses to all categories of funds without any time and sub-limit.

Further, to reduce the operational burden on the AMCs, the commission has also removed different requirements of regulatory approvals for mutual funds. AMCs have been allowed to make changes to constitutive documents (other than changes to the fundamental attributes of the fund) including the changes with respect to change of regulatory requirements without the approval of the commission.

A separate requirement for approval of the commission for the appointment of trustee of each new CIS has also been withdrawn. The validity of the commission’s approval for constitutive documents has been extended from 60 days to 120 days.

The above measures have been introduced to facilitate the growth of the mutual funds’ industry and to provide a more facilitative and robust environment for the sector.

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