SECP Notifies Employees Provident Fund (Investment In Listed Securities) Rules, 2016

Muhammad Rameez Published August 18, 2016 | 07:28 PM

ISLAMABAD, (UrduPoint / Pakistan Point News - 18th August, 2016) : The Securities and Exchange Commission of Pakistan (SECP) has achieved another milestone by introducing a new regime for safety of the hard-earned money of the employees contributing to the provident funds by notifying the Employees Provident Fund (Investment in Listed Securities) Rules, 2016.

The SECP undertook an extensive consultative process before finalizing the rules. Three conferences were held in this regard in April 2016, with relevant stakeholders such as the ICAP, ICMAP and MUFAP, a statement of the Commission issued here said. The Companies Ordinance, 1984, mandates the maintaining of provident funds by companies.

Owing to market dynamics and in order to encourage provident funds to make investments in listed securities to earn better returns, Employees Provident Fund (Investment in Listed Securities) Rules were introduced in 1996.

With continuous innovation in equity markets and development of new products introduced by non-banking finance companies for better returns, provident funds got better choices in, the market.

As risk and return go together, therefore, in order to protect savings of employees of the companies, the SECP has drafted new rules for the purpose.

The investment criteria have been tightened where investment is made out of the provident fund.

The aggregate investment in constituting company or its associated undertakings has been restricted to 5 percent of the size of the fund. Investment in IPO has been allowed subject to the stringent conditions and the submission of reports regarding investments out of provident fund/trust after every six months has been made mandatory.

The provident funds can invest in securities listed on the Pakistan Stock Exchange in Pakistan, but such investments shall not exceed 50 percent of the size of the employees' provident fund, provided total investment in listed debt securities, listed debt collective investment schemes and money market collective investment schemes registered as notified entity with the SECP shall not exceed fifty per cent of the size of the employees' provident fund; and the total investment in listed equity securities and listed equity collective investment schemes, registered as notified entity with the SECP, shall not exceed 30 percent of the size of the employees' provident fund.