Table of Contents
What are Capital Market Intermediaries?
Capital Market Intermediaries are individuals or institutions that act as a bridge between investors and the securities market, helping companies raise capital and assisting investors in making informed financial decisions. These intermediaries must be licensed by SECP to perform their functions legally.
Types of Licensed Capital Market Intermediaries
1. Consultant to the Issue
A Consultant to the Issue advises companies during a public offering of securities, ensuring compliance with regulations, preparing the prospectus, and assisting with SECP and PSX requirements.
- License Type: Consultant to the Issue
- Regulations: Public Offering (Regulated Securities Activities Licensing) Regulations, 2017
- Forms Used: Form A (Application), Form B (License)
1. Banker to the Issue
This is a scheduled bank authorized to receive applications and funds from investors during an IPO. It plays a vital role in managing the fund flows and refunds.
- Role: Receives subscription money and handles refunds
- Requirement: Must be approved by SECP and compliant with SBP regulations
3. Underwriter
An Underwriter guarantees that a public offering will raise a specified amount of capital by agreeing to purchase unsubscribed shares.
- Types: Firm commitment or best-effort basis
- SECP License Required: Yes
- Key Function: Financial assurance for issuers and confidence for investors
4. Debt Securities Trustee
This entity protects the interests of debt security holders (such as TFC or Sukuk investors) by ensuring that the issuer abides by the terms and conditions.
- Legal Framework: Debt Securities Trustee Regulations, 2017
- Role: Covenant monitoring, investor representation, and enforcement on defaults
5. Securities Broker
Securities brokers facilitate buying and selling of securities on the stock exchange.
- License: Issued under Brokers and Agents Registration Rules, 2001
- Duties: Maintain client accounts, ensure trade transparency, and comply with PSX/SECP regulations
6. Investment Adviser
Investment advisers offer professional guidance to investors on their portfolios, risks, and securities-related strategies.
- License: Required under the Securities Act, 2015
- Regulations: Investment Advisers Regulations, 2002
7. Asset Management Companies (AMCs)
AMCs manage mutual funds and investment schemes, pooling investor money into diversified portfolios.
- Legal Framework: NBFC Rules, 2003 and NBFC Regulations
- Licensing Authority: SECP
8. Trustees of Collective Investment Schemes
Trustees are responsible for protecting mutual fund investors by monitoring AMC operations and holding fund assets in trust.
- Function: Ensures safekeeping of investor interests and assets
- Requirement: License from SECP and compliance with NBFC regulations
SECP Licensing Process
Step 1: Application – Submit Form A with documents and processing fee to SECP.
Step 2: Evaluation – SECP evaluates financial soundness, HR capabilities, infrastructure, and regulatory history.
Step 3: License Issuance – SECP issues a license in Form B, valid for one year, renewable annually.
Step 4: Renewal – Apply 30 days before expiry using Form C.
Voluntary Surrender & Cancellation
- Voluntary Surrender: Allowed after obligations and SECP approval.
- Cancellation Grounds: Misstatement, non-compliance, or public interest concerns.
- Due Process: Right to show cause and hearing before cancellation.
Penalties for Unlicensed Activities
Any entity acting as an intermediary without a valid SECP license may face prosecution, fines, and legal action under the Securities Act, 2015.
Conclusion
Licensed Capital Market Intermediaries are essential for a transparent and investor-friendly financial system in Pakistan. Their roles in IPOs, advisory, and trading support the integrity of capital markets.
Engage only with SECP-licensed entities to ensure legal compliance and protect investments.
Need Help?
Whether you’re planning an IPO or aiming for SECP registration, our legal team at Legal Synergy is here to assist with licensing, compliance, and regulatory support.
Contact us today!