January 27, 2023

The Securities and Exchange Commission of Pakistan (SECP) has decided to take away major conditions for the stock market brokers. The requirements of maintaining the specific Entity Credit Rating (ECR) and Broker Management Rating (BMR) have been abolished in a move towards a single rating regime.

Brokers will no longer be required to obtain the prescribed BFR upon expiration of their existing ECR or BMR rating as appropriate, or within six months from the date of implementation of these amendments. The proposal revealed that since Entity Credit Rating is no longer required to be maintained by securities brokers, it is being removed from the list of documents to be submitted along with the licensing application.

Minimum BFR to be maintained by TC brokers is being prescribed as BFR 2. The requirement to maintain a minimum ECR of A- is being deleted in order to implement the single rating regime. The aim of these amendments is to simplify the rating requirements for securities brokers.

The concept of Broker Fiduciary Rating (BFR) was introduced with the aim of having a single rating regime for securities brokers. This requires introducing amendments in the Securities Brokers (Licensing and Operations) Regulations, 2016 and Public Offering Licensing Regulations, 2017.

Minimum rating requirement for Trading & Clearing brokers under Brokers Licensing Regulations shall be changed from ECR of A- to BFR 2. The minimum BFR required to be maintained by Trading & Self-Clearing (TSC) brokers shall be specified as BFR 3.

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