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.

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