Capital Market

Until 1990, membership of stock exchanges was only allowed to a sole proprietor or a partnership. However, Corporate membership was also allowed through an amendment

In the Rules and Regulations of the stock exchanges.

The principal security traded on the stock exchanges is the ordinary shares. However, other securities such as ICP mutual fund certificates, Modaraba certificates, redeemable Convertible Certificates, Term Finance Certificates, Corporate bonds, Government debt Instruments, etc. are also being traded on these exchanges.

The stock exchanges are government under the Securities and Exchange Ordinance, 1996

The member are prohibited to:

Investment Companies (Closed End Mutual Funds)

The concept of closed-end mutual Fund known as an investment Company was introduced in Pakistan in the later part of the sixties, by the Investment Corporation of Pakistan (ICP). A Government sponsored investment advisor. The ICP has todate floated twenty six closed end Mutual funds. Development of the Capital Markets over past seven year encouraged the private sector to introduce closed-end Multi funds.

Registration

An Investment Company is required to be registered with the Corporate Law Authority. The Rules provides the criteria for registration as an Investment Company, which cover provisions relating to minimum capital, directors experience and qualification, etc.

Investment Policy and Diversification

The rules provide that the investment company shall be clearly stated in its memorandum and Articles of Association and public offer documents.

Amount Distributable to Shareholders

Rules provide that not less than ninety percent of the profits of the investment company shall be distributed by way of dividends to the shareholders.

The Federal Government, vide its notification enacted Asset Management Companies Rules, 1995, to regulate the business of asset management companies and to facilitate private sector companies to float open-end mutual funds.

Regulation of Business of Asset Management Companies

An asset management company is required to get registered with the Corporate Law Authority (CLA) before commencement of its business.

Restriction on the Business of Asset Management Company

An asset management company is prohibited from certain activities, such as merger with, or take over of other asset management company, pledge securities owned by scheme, accept deposits from a scheme, make a loan or advance money to any person, participate in a joint account with others in any transaction, apply any part of its asset real estate, employ as a broker any of its director, officer or a member of family of such person.

Obligations of Asset Management company

An asset management company is among other matters obliged to manage the asset of the scheme in the interest of the unit holders, responsible for all acts and omissions of its officers.

Remuneration Payable to the Asset Management Company

The Rules prescribes for remuneration entitlement of an asset management company based on the net asset of the scheme.

Investment Policy of the Scheme

Investment policy of scheme is required to be clearly stated in public offering document for sale of securities of such scheme.

Limitations and prohibition on a Scheme

The scheme is among other matters, prohibited to lend or become directly or contingently liable for or in connection with any obligation or indebtedness of any person and its borrowing shall not exceed twenty-five percent of its total net asset value.

Appointment of Trustees

Every investment scheme is required to appoint a trustee, from amongst the specified entities, with the approval of the CLA.

Pricing, Issue and Redemption of Units

The Significant matters covered by the Rules include pricing, issue and redemption of units.

A "Venture Capital Company is defined as a company which is engaged principally in financing through direct equity investment in another company and by providing managerial expertise thereto.

Regulation of the Business of Venture Capital Companies

Application for establishment of a Venture Capital company shall be made to the corporate law Authority (CLA) on the prescribed form.

Terms and Conditions of Operation

A Venture Capital Company is required to observe certain conditions of operations which among other matters specify that its exposure to a single group shall not exceed prescribed limits, limits exposure to its directors and associated companies and such companies in which its directors are interested etc.

Restrictions

The Rules provides for certain significant restrictions on Venture Capital Companies i.e. merger with or take over of other Venture Capital Companies will be subject to CLA approval.

Investment Policy and Diversification

Investment Policy of the Venture Capital Company is required to be clearly and concisely stated in the Memorandum and Articles of Association and the offer document.

Regulation of the Business of Fund Managers

Fund Managers, prior to commencement of business, are required to be registered with the CLA.

Remuneration of Fund Manager

The Fund Manager is entitled to a remuneration at prescribed rates on the net asset of the Venture Capital company, unrealized capital gains and dividends distributed by the Venture Capital Company.