SECP Introduces regulatory framework for investment plans to facilitate mutual fund industry

The Securities and Exchange Commission of Pakistan (SECP) has further strengthened the regulatory framework for the mutual fund industry by specifying detailed requirements for “Investment Plans.”

Building on the enabling provisions introduced through amendments to the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (NBFC Regulations), this initiative aims to enhance the regulatory framework. By refining existing guidelines and incorporating new measures, the initiative seeks to foster greater efficiency and resilience within the non-banking financial sector. These efforts underscore a commitment to promoting transparency, stability, and growth, ultimately benefiting all stakeholders involved.

The framework aims to enhance governance, streamline operations, and ensure secure investment horizons, thus fostering retail penetration in the mutual fund industry.

The new requirements have been developed after extensive consultation with stakeholders, including the Mutual Funds Association of Pakistan (MUFAP), to align with best practices and ensure compliance with defined principles.

These requirements specify the eligible categories of Collective Investment Schemes (CIS) under which Asset Management Companies (AMCs) can offer investment plans, including fund of funds, fixed rate/return, sovereign income, asset allocation schemes, capital protected and exchange traded funds.

Operational requirements provide clear guidelines on the maximum number of investment plans, their duration, exposure limits, investment restrictions, and performance benchmarks. To promote transparency, the framework mandates specific disclosures for fund of fund CIS and additional risk information, it added.

It also outlines essential offering guidelines, including subscription time-lines and NAV announcements, and establishes detailed provisions for Total Expense Ratio, formation costs, and other charges.

By requiring comprehensive disclosures and instituting structured operational protocols, the framework seeks to provide protection for investors and these measures reinforce the SECP’s commitment to fostering a transparent, efficient, and investor-friendly environment in the mutual fund industry.

The SECP remains committed to fostering a conducive environment for the mutual fund industry, promoting ease of doing business, and broadening access to innovative and regulated financial products.