Panic prevails among investors with new SECP proposed broker regime.

Islamabad -- The new proposed Broker Regime by the SECP has panicked all stake holders of the Capital Market.

Under the proposed new regime the SECP intends to increase the Capital and Networth requirements of brokers many folds, which is unprecedented.

The existing capital requirement of Rs.10 million is being increased to Rs.125 million.

Contrary to the governments objective of ease of doing business, the already over complied Brokers are being asked to increase the compliance level to that of listed companies.

The Brokers are being divided into different categories, which would create difficulties for investors and Brokers.

In the proposed new regime by the SECP intends to transfer the total custody of shares to only a handful of brokers.

One big broker would be able to keep custody of 17.5 billion rupee of shares or even more as relaxation could be provided by the SECP.

Brokers who are in business for three generations would be wiped out as they would be forced to route their business through one of the big brokers which is not practically possible.

SECP has totally ignored the concept of the concentration risk, which would increase the chances of mega debacles in future.

The question is that if SECP has calculated that if one big broker fails under the new regime, how much damage would it do to the invertors and the capital market.

In the past many years due to strong risk management, practically there had been no Clearing House default.

In 2019 KSE100 index came as low as 28600 and all Brokers fulfilled their obligations and there has been no default to investors.

At present it is impossible for the Brokers to transfer or misappropriate shares held under custody of their clients.

The only issue is of the cash held by the Brokers of their investors, which is payable on demand at any time.

Brokers are required to keep the custody of cash of the clients in a separate bank account and cannot use this for any other purpose.

The SECP developed a model to further safeguard the cash of the clients. This new system is called Direct Payment System.

Through this the payment of the shares sold by the broker clients could only be credited to the respective clients account through National Clearing Company and cannot be misused.

Even the payment of one client cannot be made to any other client. This model has been successfully implemented internationally and in the Pakistan Mercantile Exchange as well.

As per Directive of the SECP, this model was...