SECP issues draft rules for collateral management companies

ISLAMABAD: With an aim to promote electronic trading and

warehouse receipt financing of agricultural commodities, the Security Exchange
Commission of Pakistan (SECP) on Wednesday formulated the draft Collateral
Management Companies Regulations, 2019, under the Companies Act, 2017.

According to a statement issued by the

financial regulator, “Any public limited company with an equity of Rs200
million or higher will be eligible to seek the permission of SECP to register
as a collateral management company.”

As per details, collateral management companies

will provide storage and preservation services for a range of agricultural
commodities and will issue credible warehouse receipts for agricultural
commodity financing.

Additionally, these companies will carry out

stock audits, as well as accreditations and inspections of warehouses. Such
accreditations will be based on an evaluation of relevant documents including,
but not limited to, an evidence of ownership/lease documents of warehouse,
certificate of compliance of warehouse with the applicable local laws, security
and insurance arrangements, and presence of all necessary equipment for
loading/unloading, weighing, drying and handling commodities.

Benefits of a well-designed collateral

management system include access to credit for farmers, reduced post-harvest
losses thereby leading to improved profitability for farmers, and reduced risks
for creditors through secured collateral.

The commission has invited the stakeholders for

feedback on the draft regulations by July 17, 2019.