Pakistan Stock Exchange: Eligibility requirements eased for investors in GEM Board companies – Markets

KARACHI: With the approval of the Securities and Exchange Commission of Pakistan (SECP), the Stock Exchange of Pakistan (PSX) has significantly relaxed the eligibility requirements for accredited individual investors investing in companies on the GEM Board .

According to the new definition, accredited investors include individual investors who have assets of at least Rs 5 million, which includes but is not limited to the value of securities held by them in accounts or sub-accounts. of CDC’s respective investors.

With the revised eligibility criteria, investors’ total assets must be considered when assessing their eligibility to invest in GEM Board companies.

Real estate, vehicles and other assets may also be included to define accredited investor assets. After these changes to the eligibility criteria for accredited individual investors, more investors will be able to participate in the pre-registration process for companies to be listed on the GEM Board. This amendment will also lead to a broadening of the investor base vis-à-vis the trading of shares of GEM Board companies at PSX, generating increased liquidity and higher share volumes.

Accredited investors will now self-declare to stockbrokers that they hold assets of at least Rs 5 million in order to participate in the listing of GEM Board companies or their post-listing trading activity, and will also understand the risks associated with the GEM Board and GEM companies. In addition to the regulatory change, PSX also notified the terms of acceptance of self-declaration by securities dealers.

The automatic marking of individual investors participating via e-IPO in the GEM primary market was also announced. Individual investors with securities worth at least 40% above the minimum requirement of Rs 5 million will automatically be marked as Accredited Individual Investors in NCCPL’s NCSS. Additionally, stockbrokers may remove an investor’s mark in NCSS from NCCPL if they have reason to believe that the investor is not eligible to trade on GEM, based on their KYC/ CDD. Stockbrokers will allow such ineligible investors to liquidate their GEM shares without any impact on the stockbrokers.

These steps will lead to convenience in terms of brokers’ operational practices. With this amendment, advisors are now expected to take the lead in helping issuers and investors increase GEM Board listings and investments.

Speaking on changes to accredited investor eligibility criteria, PSX Managing Director and CEO Farrukh H. Khan said the GEM Board is an important innovation for SMEs to to raise debt and equity in the market. It also offers attractive investment opportunities for accredited investors.

Changes to the eligibility criteria for accredited individual investors would significantly improve participation in GEM Board companies, he said. Furthermore, the self-declaration process has further simplified the operational management of securities brokers. “I am confident that these measures will increase the number of accredited individual investors and improve liquidity and price discovery in the GEM Board secondary market,” Mr. Khan said.

He said that as a front-line regulator, the Pakistan Stock Exchange has always given due attention to feedback from market participants and supported positive changes in its regulatory framework to encourage the growth of capital markets. in the country.

Accredited investors should view the changes as an opportunity to further participate in the growth story of GEM Board companies in the pre-listing phase. At the same time, in the post-listing trading phase, they should make full use of this opportunity and benefit from investing in GEM Board companies, which, in turn, will lead to greater liquidity within GEM. Board,” Mr. Khan said.

Copyright Business Recorder, 2022

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