(SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN)
Islamabad,
the 1st June, 2005
NOTIFICATION
S.R.O.
504 (I)/2005. ___ In exercise of the powers conferred by section 39 of the
Securities and Exchange Commission of Pakistan Act, 1997
(XLII of 1997), read with clause (f) of section 2 and clause (b) of section
43 thereof, the Securities and Exchange
Commission of Pakistan, with the approval of the Federal Government, hereby
makes the following rules, namely:-
1. Short title, commencement and
application. – (1) These rules may be called the
Clearing Houses (Registration and
Regulation) Rules, 2005.
(2)
They shall come into force at once.
(3)
These rules shall apply to a clearing house as are
required by the Commission to be registered under these rules from time to
time.
(4)
Nothing contained in these rules shall apply to a
clearing house established by a stock exchange providing in-house facilities to
the stock exchange for settlement of securities.
2. Definitions. - (1) In these rules
unless there is anything repugnant in the subject or
context, -
(a) “Act”
means the Securities and Exchange Commission of Pakistan Act, 1997
(XLII of
1997);
(b) “CD
Act” means the Central Depositories Act, 1997 (XIX of 1997);
(c) “clearing
and settlement fund” means the fund created pursuant to rule 12;
(d) “clearing
fund contribution” means the contribution required to be made by a clearing
member to the clearing and settlement fund;
(e)
“clearing house” means a clearing house as defined in
clause (f) of section 2 of the Act;
(f)
“clearing member” means a person who is admitted as a
clearing member for clearing and settlement on his own behalf as well as on
behalf of other brokers, under the regulations;
(g) “Commission”
means the Securities and Exchange Commission of Pakistan established under
section 3 of the Act;
(h) “Ordinance
of 1969” means the Securities and Exchange Ordinance, 1969
(XVII of
1969); and
(i) “Ordinance
of 1984” means the Companies Ordinance, 1984 (XLVII of
1984).
(2) The words
and expressions used but not defined in these rules shall have the same meaning
as are assigned to them in the Act, Ordinance of 1969, Ordinance of 1984, and
the CD Act, as the case may be.
3.
Eligibility
for registration. – A person desirous of commencing business as a clearing
house shall be eligible for registration under these rules subject to
fulfillment of the following conditions, namely: -
(a)
That such person is incorporated as a public limited
company under the
Ordinance of
1984;
(b)
that at least one stock exchange in Pakistan is a
shareholder of such house;
(c)
that no promoter, director, officer or employee of such
house,- (i) has been convicted of fraud, breach of trust or an offence
involving moral turpitude or
removed from service for misconduct or has been adjudicated as insolvent;
(ii)
has been associated with any illegal banking business,
deposit
taking or financial dealings;
(iii)
has been a sponsor, director, chief executive or a
senior
management officer of a
defaulting co-operative finance society or finance company; or
(iv)
has been a defaulter of any commercial bank or
financial
institution or non-banking
financial institution or has suspended payment or has compounded with his
creditors;
(d)
that the promoters of such house are persons of means
and
integrity and have special
knowledge of matters which the house may have to deal with as a clearing house;
and
(e)
that such person
has complied with such other conditions as may
be required by the Commission in
the interest of the capital market.
4.
Registration.
– (1) A person, eligible for registration under rule 3 may make an application
to the Commission in such manner as the Commission may, from time to time
prescribe.
(2)
An application under sub-rule (1) shall be accompanied
by a fee as may be specified by the Commission with the approval of the Board.
(3)
The Commission if it is satisfied, after such inquiry
and after obtaining such further information as it may consider necessary,
that, -
a)
the applicant is eligible for registration; and
b)
it would be in the interest of the capital market so to
do,
grant a certificate of
registration under its seal to such house.
5. Refusal to grant registration. - (1) No application for registration made
under rule 4 shall be refused except after giving the applicant an opportunity
of being heard.
(2) In case the
Commission refuses to grant registration to an applicant, the decision shall be
communicated to the applicant stating therein the reasons for such refusal and
the fee collected from the applicant shall be refunded.
6. Registration of existing clearing houses:
– (1) Notwithstanding anything to the contrary contained in these rules, a
clearing house by whatever name or designation already in existence at the time
of commencement of these rules, except in-house clearing houses as referred in
sub-rule (4) of rule 1, shall apply in writing to the Commission for grant of
registration under rule 4, before the expiry of six months from the
commencement of these rules.
(2) The
Commission, if it is satisfied that such clearing house has fulfilled the
conditions of eligibility for registration as specified under rule 3, may
register such clearing house subject to such limitations as it may impose on
the scope of its functions as a clearing house, as deemed fit by the
Commission.
7. Renewal
of registration. - (1) The certificate of registration granted under rule 4
shall be valid for one year and shall be renewable on payment of fee as may be
specified by the Commission with the approval of the Board.
(2) The
Commission shall, on receipt of payment of renewal fee and after making such
inquiries and after obtaining further information as it may consider necessary,
within thirty days of the receipt of the application, renew the registration of
such house. However, the Commission may impose such further conditions, upon
the renewal of registration of a clearing house, as it deems appropriate.
8. Refusal to grant renewal of
registration. - (1) No application made under rule 7 shall be refused
except after giving the applicant an opportunity of being heard.
(2) In case the
Commission refuses to grant renewal of registration to an applicant, the
decision shall be communicated to the applicant stating therein the reasons for
such refusal and the renewal fee collected from the applicant shall be
refunded.
9.
Power to
suspend or cancel registration, etc. - Without prejudice to the powers of
the Commission under the Act, the Ordinance of 1969, or the Ordinance of 1984,
upon being satisfied that a clearing house is not discharging its functions in
accordance with the law, or neglects to so act, or otherwise fails to carry on
its business in the interests of the capital market, the Commission may, after
providing an opportunity to show cause, take such measures as it deems
expedient including but not limited to suspension or cancellation of
registration under these rules and take such other action as may be necessary
to safeguard the interests of all stakeholders concerned.
10. Submission of annual report, etc. - (1)
A clearing house shall file its annual report and accounts within four months
of the close of the accounting period along with the following information and
documents, namely: -
(a)
Names of the persons admitted or readmitted as clearing
members of the clearing house and any change therein;
(b) list
of shareholders of the clearing house indicating change in the shareholdings,
if any;
(c)
names of the senior management staff of the clearing
house with their respective qualifications and experience;
(d) names
of brokers defaulting during the year along with nature and amounts of default;
(e) disciplinary
action taken against clearing members;
(f)
name wise details (nature and amount) of penalties
imposed on the clearing members; and
(g) action
taken to combat any emergency in settlement of securities.
(2) Without
prejudice to the provisions of sub-rule (1), a clearing house shall furnish to
the Commission such other documents, information or explanation relating to its
affairs as the Commission may, from time to time, require in writing.
11. Obligation of clearing members towards
clearing house. – (1) A clearing house shall have the power to call for
information, undertake inspections, conduct inquiries and audits of its
clearing members in relation to the performance of its functions, under the
regulations.
(2) A clearing
member shall submit all information and records to the clearing house in
respect of inspections, investigations, inquiries and audits whether undertaken
at the initiative of the clearing house or on the direction of the Commission
and shall respond to all requests by the clearing house for information on a
regular or exceptional basis.
12. Establishment of clearing and
settlement fund. – (1) A clearing house shall establish a clearing and
settlement fund from which a clearing member’s obligation to clearing house may
be satisfied, in case of default of such member, and every clearing member
shall make his clearing fund contribution to the clearing and settlement
fund.
(2)
The clearing and settlement fund shall have an initial
contribution of rupees one hundred million by the clearing house and shall be
funded thereon by a part of clearing and settlement fee paid by the members.
(3)
The clearing and settlement fund may be divided into
sub-funds, each of which can be utilized to discharge obligations for any
particular service for which the clearing house has assumed
responsibility.
13. Duty to maintain confidentiality. – (1) No clearing house or any officer or
member
of a clearing house, whether
during the tenure of his office or thereafter, or any other person who has by
any means knowledge of any information or document relating to the affairs of
any of the clearing member and in particular relating to their accounts, shall
give, divulge, reveal or otherwise disclose such information or document to any
other person.
(2)
A person who has any information or document which to
his knowledge has been disclosed in contravention of sub-rule (1) shall not in
any manner, howsoever, disclose it to any other person.
(3)
Notwithstanding anything contained in this rule, the
provision of confidentiality shall
not entitle
any person to refuse disclosure of any information or document, -
(a) which
a clearing member has himself authorized in writing to disclose;
(b) in
case where a clearing member is declared bankrupt or in case where the clearing
member is a company or body corporate and is being, or has been, wound up
within or outside Pakistan;
(c)
in pursuance of any summons or notice issued by any
Court, Tribunal or Authority having competent jurisdiction requiring production
of such information or document;
(d) to
any person duly authorized by a competent Court, the Commission or the State
Bank of Pakistan to investigate into any offence under any law;
(e) for
the purpose of enabling or assisting the Commission or the State Bank of
Pakistan to exercise any power conferred on it by any
law;
(f)
for the purpose of enabling or assisting a stock
exchange or to discharge its functions;
and
(g) any
such disclosure which may be required under the law.
14.
Power of the Commission to give directions. - (1) The Commission
may, if
satisfied that it is necessary or expedient so to do in the
public interest or in the interest of the capital market, by order in writing
give directions to a clearing house.
(2) The
Commission may, on representation made to it or on its own motion modify or
cancel any direction issued under sub-rule (1), and in so modifying or
canceling any direction may impose such conditions as it thinks fit.
15. Power to require information. - The Commission may, at any time, by notice in
writing require any director, officer and member of a clearing house, generally
or in particular to furnish it within the time specified therein or such
further time as the Commission may allow, with any statement or information or
document relating to the business or affairs of such clearing house and without
prejudice to the generality of the foregoing power, may call for information,
at such intervals as the Commission may deem necessary.
16. Penalty for failure, refusal to comply
with, or contravention with any provision of the rules. – If any person
fails or refuses to comply with, or contravenes any of the provisions of these
rules or any direction or order passed by the Commission under these rules or knowingly
or willfully authorizes or permit such failure, refusal or contravention, he
shall in addition to any other liability under the Act, the Ordinance of 1969,
and the Ordinance of 1984, be punishable with a fine as may be specified by the
Commission with the approval of the Board.
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