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For business information, annual reports, laws, ordinances, regulations and articles. |
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INVESTMENT COMPANIES AND
INVESTMENT ADVISERS RULES, 1971
[Gazette of Pakistan, Extraordinary, 12th March 1971]
S.R.O. 78 (1)/71---In
exercise of the powers conferred by section 32 of the Securities and Exchange Ordinance,
1969 (XVII of 1%9), the Federal Government is pleased to make the following rules to regulate the
business of investment advisers and investment companies, namely:
CHAPTER I
PRELIMINARY
1. Short title and
commencement.--- (1) These rules may be called the Investment Companies and
Investment Advisers Rules, 1971.
(2) They shall come into force at once.
2. Definitions.--- In these rules, unless there is anything repugnant in the
subject or context,-
(a) "Authority" means the Corportate Law Authority of Pakistan;
(b) "closed-end company", in relation to an investment company, means a company
which does not continuously offer for sale a security. which entitles the holder to such
security on demand to receive his proportionate share of the net assets of the company;
(c) "custodian" means a banking company within the meaning of the Banking
Companies Ordinance, 1962 (LVII of 1962), which is appointed to be a custodian under these
rules;
(d) "Form" means a form set out in the Schedule:
(e) "net Assets", in relation to an investment company, means the excess of
assets over liabilities of the company, such excess being computed in the manner specified
hereunder:
(i) A security. listed on a stock exchange shall be valued at its last sale price on such
exchange on the date as of which it is valued, or if such exchange is not open on such
date, then at its last sale price on the next preceding date on which such exchange was
open and if no sale is reported for such date, the security shall be valued at an amount
not higher than the closing asked price nor lower than the closing bid price.
(ii) An investment purchased and awaiting payment against delivery shall be included for
valuation purposes as a security. held, and the cash account of the company shall be
adjusted to reflect the purchase price, including brokers. commissions and other expenses
incurred in the purchase thereof but not disbursed as of the valuation date.
(iii) An investment sold but not delivered pending receipt of proceeds shall be valued at
the net sale price.
(iv) the value of any dividends, bonus, shares, or rights which may have have declared on
securities in file portfolio but not received by the company as of the close of business
on the valuation date shall be included as assets of the company, if the security., upon
which such dividends, bonuses or rights were declared is include in the assets and is
valued ex-dividend, ex-bonus or ex-rights as the case may be
(v) Interest accrued on any interest-bearing security in the portfolio shall be included
as an asset of the company if such accrued interest is not otherwise included in the
valuation of the security.
(vi) Any other income accrued up to the date on which computation was made shall also be
included in the assets.
(vii) All liabilities, expenses, taxes and other charges due or accrued up to the date of
computation which are chargable under these rules, other than the paid-up capital of the
company, shall be deducted from the value of the assets.
(viii) The remuneration accrued up to the date of computation payable to the investment
adviser for providing management and other services shall be included as an expense:
(f) "net capital" in relation to an investment adviser, means an amount by which
the current assets, namely cash in hand or in bank, money receivable within a period of
twelve months from the date of the balance-sheet and such other assets, not being the
value of securities referred to in sub-rule (2) of rules 5, as are so classified under
generally accepted accounting principles, exceed the current liabilities. namely. money
payable within a period of twelve months for the date of the balance-sheet and such other
liabilities as are so classified under generally accepted accounting principles.
(g) "Ordinance" means the Securities and Exchange Ordinance, 1969 (XVII of
1969).
CHAPTER 11
REGULATION OF THE BUSINESS OF INVESTMENT COMPANIES
3. No investment company
to commence business without registration.--- No company shall commence business as an
investment company unless it is registered with the Authority . under these rules.
4. Eligibility for registration.--- A company proposing to commence business as an
investment company shall be eligible for registration under these rules if it fulfils or
complies with the following conditions or requirements namely:
(a) that such company is registered as a public limited company under the Companies Act,
1913 (VII of 1913);
(b) that it is to function as a closed-end investment company with a capital
of not less than twenty million rupees;
(c) that no directors officer of employee of such company has been convicted of fraud or
breach of trust:
(d) that no director, officer or employee of such company has been adjudicated an
insolvent or has suspended payment or has compounded with his creditors;
(e) that the promoters of such company are, in the opinion of the Authority persons of
means and integerity and have special knowledge of matters which the company may have to
deal with as an investment company.
5. Registration.---(1) Any company which is eligible for
registration under rule 4 as an investment company may make an application ht Form 1 to
the Authority, for registration under these rules.
(2) An application under sub-rule (I) shall, besides the other decuments referred to in
Form I, accompanied by an undertaking by the investment adviser of the company that the
investment adviser will at all times hold or beneficially own equity . securities of the
company of an amount which is neither less
than ten per cent. nor more than twenty. percent. of the paid-up
value of such securities.
(3) The Authority if it is satisfied after such enquiry and after obtaining such further
information as it it may consider necessary,
(i) that the applicant is eligible for registration; and
(ii) that it would be in the interest of the capital market so to do, may grant a
certificate of registration to such company in Form II.
6. Investment policy and diversification.---(1) The
investment policy of an investment company shall be clearly and concisely stated in its
Memorandum and Articles of Association and file public offer for the sale of its
securities.
(2) An investment company shall not enter into any transaction in any security other than
a security which is listed on a stock exchange or for the listing of which an application
has been made to a stock exchange.
(3) The investment of an investment company in any other company shall not, at any time.
exceed an amount equal to ten per cent. of the paid-up capital of the investment company or an amount
sufficient to acquire ten per cent. of any class of the securities of that other company.
7. Sale of securities and cost thereof---(1) Securities
representing [****] the capital of an investment company shall be offered to the public at
par: but no such offer shall be made
(a) until the investment adviser of the investment company has made an investment of the
amount referred to in sub-rule (2) of rule 5: or
(b) unless the offer has been underwritten by an underwriter appointed by the investment
company with the prior approval in writing of the Authority.
(2) An investment company shall not sell any securities for any consideration other than
cash.
(3) All expenses incurred in connection with the incorporation of an investment company
and the offer for sale of the securities of the company and the distribution of such
securities. including commission payable to the underwriters, shall be born by the
investment adviser and shall be reimbursable to him by the company in equal amounts paid
annually over a period of not less than five years.
(4) No interest shall be payable by the company in respect of the expenses referred to
in sub-rule (3).
(5) The expenses referred to in sub-role (3) shall be reported to the Authority giving
their break-up under separate heads. as soon as the distribution of the securities is
completed.
8. Prohibitions.---No investment company shall--
(a) merge with. acquire or take over any other investment company. unless it has obtained
the prior approval of the Authority. in writing to the scheme of such merger, acquisition
or takeover:
(b) pledge any
of the securities held or beneficially owned by it;
(c) make a loan or advance of money to any person except in connection with the normal
business of the investment company:
(d) effect a short sale in any security:
(e) purchase any security in a forward contract;
(f) purchase any security on margin:
(g) participate in a joint account with other in any transaction:
(h) apply any part of its assets to real estate, commodities or commodities contracts;
(i) acquire any security of which another investment company is the issuer; make an
investment in a company which has the effect of vesting the management. or control over
the affairs. of such company in the investment company:
(k) employ as a broker, directly or indirectly, any director, officer or employee of the
investment company or its investment adviser or any director. officer or employee thereof:
(l) issue at any time. without the prior approval of the Authority in writing, a senior
security which is either stock or represents indebtedness.
9. Transactions with directors, etc.--- No investment company shall. without
the prior approval of the Authority in writing, purchase from, or sell to any director,
officer or employee of the investment company or of the investment adviser thereof or a
person who beneficially owns ten per cent.. or more of the equity securities of the
company or of its investment adviser.
10. Appointment of investment adviser.---(1) No .investment
company shall appoint any person as an investment adviser except by a contract in writing
the terms of which have been previously approved by the Authority in writing.
(2) The contract shall. initially or on renewal. be valid for a period not exceeding five
years and shall not be renewed or modified unless such renewal or modification has been
authorised by the share-holders of the investment company in general meeting and approved
by the Authority.
(3) The contract shall. among other things provide that the investment adviser shall bear
all expenditure in respect of the secretariat and office space of the company and
professional management. including all administrative, accounting and legal services. and
that the fee payable to the auditors and the custodian, taxes on income of the company
brokerage. stamp duty. and any other duties or taxes connected with the sale or purchase
of securities shall be payable by the investment company.
11 Remuneration payable to investment adviser.---The investment
adviser of an investment company shall be entitled to be paid annually, after the accounts
of the investment company have been audited, a remuneration of---
(a) an amount not exceeding one per cent. of the net assets of the investment company as
at the end of its year of account; and
(b) an amount not exceeding one-half of the amount by which the dividend distributed by
the investment company exceeds six percent.
12. Power of the Authority to give certain directions.--- The Authority,
if it is satisfied that it is necessary or expedient so to do in the public interest or of
the capital market in Pakistan, may by order in writing, direct an investment company,
within such time as may be specified in the order,-
(a) to disinvest the whole or such part of its investment portfolio as may be so
specified;
(b) to refrain from investing in or disinvesting such securities as may be so specified;
(c) to co-opt one or more persons nominated by the Authority as members of the board of
directors of the company with the same status, powers and rights as the other members of
the board.
13. Amount distributable to shareholders.---An investment company
shall distribute by way of dividend to its shareholders not less than ninety, percent.. of
its income derived from interest, dividends received and capital gains arising from the
acquisition and disposal of securities as reduced by such expenses as arc chargeable to
the company under these rules, including the remuneration payable to the investment
adviser.
14. Publication protfolio securities.---Every investment company shall cause to be
published, in the Bulletin or other such publication of the stock exchange on which its
securities are listed, the names and the value of its portfolio securities as at the end
of each half-year.
15. Custody of Securities.---(1) Every investment company shall
place and maintain the securities owned or held by the company with a custodian appointed
by it with the prior approval in writing of the Authority..
(2) The investment company shall settle with the custodian a scheme for the custody of
securities which shall, among other matters, provide for the circumstances in which the
securities may be released from custody.
(3) The custodian shall, if it feels that the nature of any release of a security from
custody is contrary to the provisions of these rules, report the matter to the Authority
forthwith.
16. Maintenance of books of account and other documents.---(I) Every,
investment company shall maintain such books of accounts and other records as shall depict
a true and fair picture of its state of affairs, including---
(a) journals, cash book and other records of original entry forming the basis of entry, in
any ledger;
(b) ledgers (or ,other comparable record) reflecting assets, liability, incomeand expense:
(c) ledgers (or other comparable record) showing at any time securities which are
receivable or deliverable;
(d) record of transactions with the bank:
(e) register of transactions in securities: and
(f) record or the meeting of the board of directors.
(2) The books of account and other records to be maintained under sub-rule (1), shall be
preserved for a period of not less than five years.
17. Periodical reports to shareholders, etc.---( 1 ) Every. investment
company shall transmit to its sham-holders
(a) an"annual report, together with a copy of the balance-sheet and income and
expenditure account and the auditor's report, not less than fourteen days before the date
of the general meeting at which it is to be laid before the share-holders; and
(b) a six-month report, within two months of the end of each half year.
(2) Such report. so far as may be applicable. shall be in accordance with the provisions
of the Securities and Exchange Rules, 1971, and shall contain a statement showing the
securities owned at the beginning of the relevant period, securities purchased or sold
during such period, and the securities held at the end of such period together with the
value (at cost and at market), [xxx] and the percentage in relation to its own assets and the paid-up capital
of the company whose securities are owned.
(3) The statement of income and expenditure of the investment company shall include a
statement of income and expenditure of the investment adviser in relation to the
investment company.
(4) A copy of the annual report referred to in sub-Tale (1) shall, within the time
specified therein, be furnished to the Authority together with a statement containing the
following information in respect of the investment company as at the end of the year
(a) Total number of security-holders.
(b) Particulars of persons holding five per cent. or more of the securities of the company
at any time during the year.
(c) Names and number of securities held by directors and officers of the company,
(d) Any security of an5 other issue sold and then bought during any six-month period.
(e) Particulars of the personnel (executive. research and other) of the investment
company.
(f) Remuneration paid to the investment adviser.
(g) Particulars of the personnel (executive, research and others) of the investment
adviser.
(h) Fee paid to the auditors.
(i) The date. names of persons attending and minutes of each meeting of the board of
directors.
(j) Omitted.
(k) Omitted.
(5) Every investment company shall. as and when required by
the Authority. by order in writing and within such time as may be specified therein
furnish to the Authority. the following information regarding the sale price and the
capital gain or loss in respect of each security. purchase and sold.
CHAPTER IlI
REGULATION OF THE BUSINESS OF INVESTMENT ADVISERS
18. No person to commence business
without registration.---No person shall commence business as an investment
adviser unless such. person is registered with the Authority)., under these rules.
19. Eligibility. v for registration.---Any person proposing to
commence business as an investment adviser shall be eligible for registration under these
rules if it fulfils or complies with following conditions or requirement. namely:
(a) that such person is registered as a company under the Companies Act, 1913 (VII or
1913);
(b) that no director, officer or employee of such company has been convicted of fraud or
breach of trust;
(e) that no director, officer of employee of such company has been adjudicated an
insolvent or has suspended payment or has compounded with his creditor;
(d) that the directors of such company are. to the satisfaction of the Authority persons
of means and integrity and have special knowledge of the matters which the company may
have to deal with as an investment adviser.
20. Registration.---(1) Any person who is eligible for registration under
rule 19 as an investment adviser may make an application in Form III to the Authority. for
registration under these rules,
(2) An application under sub-rule (I) shall, besides the other documents referred to in
Form III, be accompanied by an undertaking theft the company will at all times maintain a
net capital balance in the capital account of an amount which is not less than one lac
rupees.
(3) The Authority, If it is satisfied after such enquiry and after obtaining such further
information as it may consider necessary,
(i) that the applicant is eligible for registration: and
(ii) that it would be in the interest of the capital market so to do, may grant a
certificate of registration to such person in Form IV.
21. Maintenance of books of accounts, etc.---(1) Every investment adviser
shall maintain such books of accounts and other records as shall depict a true and fair
picture or its state of affairs, including
(a) journals, cash books and other records of original entry forming the basis of entry in
any ledger:
(b) ledgers (or other comparable record) reflecting asset, liability, income and expense;
(c) ledgers (or other comparable record) showing securities in the portfolio:
(d) record of transactions with banks
(e) record of the meetings of the board of directors: and
(f) original record of all reports, analysis and memoranda containing investment
advice distributed.
(2) Such books or accounts and other records shall be preserved for a period of not less
than five years.
22. Submission of annual report to Authority--- Every investment
adviser shall submit to the Authority an Annual report, together with a balance-sheet and
income and expenditure account and the auditor's report, within six months of the close of
its year of account.
23. Enquiry.--(1) The Authority may cause an enquiry to be made by
any person appointed in this behalf into the affairs of any investment adviser registered
under these rules or any of its directors, managers or other officers.
(2) Where an equiry under sub-rule (1) has been undertaken every director, manager or
other officer of the investment adviser to which or to whose director, manager or other
officer the enquiry relates and every, other person who has had any dealing with such
investment company, investment adviser, director, partner, manager or officer shall
furnish such information in his custody or power or within his knowledge relating to or
having bearing on the subject-matter of the enquiry as the person conducting the enquiry
may by notice in writing require.
(3) The person conducting an enquiry under sub-rule ( I ) may call for, inspect and seize
books of account and documents in possession of any such investment adviser or person.
24. Cancellation of registration.---(1) Where the Authority is of
the opinion that an investment adviser has contravened any provision, or has otherwise
failed comply with any
requirement. of the Ordinance or of any rule or direction made or given thereunder, the
Authority may. if it considers necessary. in the public interest so to do by order in
writing,
(a) cancel the registration of the investment adviser: or
(b) remove the investment adviser from the office of investment adviser of an investment
company:
Provided that no such order shall be made except after giving the investment adviser an
opportunity of being heard.
(2) An investment adviser removed from office under clause (b) of sub-rule (1) shall not
be entitled to or be paid any compensation or damages for loss or termination of office.
(3) An investment adviser or an investment company who is removed from office under clause
(b) of sub-rule (1) shall not be appointed to such office of that company until after the
expiration of a period of five years from the date of such removal.
(4) Where the investment adviser of an investment company is removed from that office
under clause (b) of sub-rule (1) no director or officer of the investment adviser shall
hold the office of director of the investment company or any other office connected with
the conduct or management of the affairs of the investment company, until ,after the
expiration of a period of five years from the date of such removal.
(5) Where the investment adviser is removed from office under clause (b) of sub-rule (1),
the Authority may, by order in writing. appoint a person, hereinafter referred to as the
Administrator, to manage the affairs of the investment company subject to such terms and
conditions as may, be specified in the order.
(6) The Administrator shall receive such remuneration from the investment company as the
Authority may determine.
(7) The management of the affairs of the investment company shall on and from the date of
appointment of the Administrator. vest in him.
(8) If at any time it appears to the Authority that the purpose of the order appointing
the Administrator has been fulfilled. it may permit the investment company to appoint
another person to the office of investment adviser: and on the appointment of such
investment adviser, the Administration shall cease to hold office.
THE SCHEDULE
[See reule 5(1)]
FORM OF APPLICATION REGISTRATION AS AN INVESTMENT COMPANY
To
The Corporate Law Authority, Government of
Pakistan.
Islamabad.
Dear Sir
We hereby apply for the registration of.
....................................................................
(Name of the Investment Company)
under role 5 of the Investment Companies and Investment Advisers Rules, 1971.
2. An undertaking (in original) from the investment adviser in terms of rule 5(2) of the
aforesaid Rules and four copies of each of the following documents are enclosed:--
(i) Memorandum and Articles of Association.
(ii) investment Advisory. Contract,
(iii) Custodial Agreement.
(iv) Underwriting Agreement.
3. We hereby undertake to take all steps necessary to have the securities issued by us
listed on a stock exchange.
4. Necessary information required in the annex to this form is furnished. We undertake to
keep the information up-to-date at all times.
Yours faithfully.
Signature of the Secretary or a Director of the applicant. company
|
Annex to Form 1 |
| 1.Name,
address and telephone number (s) of the company) |
--------------------- |
| 2. Date
and place of incorporation |
--------------------- |
| 3.
Names and addresses of directors, distinguishing between promoter directors and other
directors |
--------------------- |
| 4.Whether
any director has been convicted of fraud or breach of trust |
--------------------- |
| 5.
Whether any director has been adjudicated an insolvent or has suspended payment or has
compounded with his creditors |
--------------------- |
| 6.
Names and addresses of officers and employees |
--------------------- |
| 7.Whether
any officer or employee has been convicted for fraud or breach of trust |
--------------------- |
| 8.
Whether any officer or employee has been adjudicated an insolvent or has suspended payment
or has compounded with his creditors |
--------------------- |
| 9.
Names of the directors, officers and employees of the investment company and these of the
investment adviser thereof who are members of a stock exchange |
--------------------- |
| 10.
Directors' interest, direct or indirect, in any other investment company |
--------------------- |
| 11.
Previous experience of the promoters / directors in the investment field |
--------------------- |
| 12.The
financial standing of the promoters/ directors (Attach proof. if any) |
--------------------- |
13.(a)
Authorised capital of the company.
(b) Part of such capital proposed to be raised through public offer |
---------------------
--------------------- |
| 14
Name, address and telephone number of the investment adviser |
--------------------- |
| 15.
Name and address of the custodian |
--------------------- |
| 16.
Name and address of the underwriter |
--------------------- |
| 17.
Financial standing and resources of the underwriter |
--------------------- |
FORM II
[See rule 5 (3)]
CERTIFICATE OF REGISTRATION AS AN INVESTMENT COMPANY
Corporate Law Authority,
Government of Pakistan
Islamabad, the 197
The Corporate Law Authority, Government
of Pakistan having considered the application for registration under rule 5 of the
Investment Companies and investment Advisers Rules, 1971, by and being satisfied that the
said ..........................................
(Name of the investment company)
is eligible for registration and that it would be in the interest of the capital market so
to do, hereby Advisers Rules, 1971, registration to
.....................................................subject.
(Name of the Investment company.
to the conditions stated'hereinbelow or as may be prescribed or imposed hereafter.
2. The draft agreement between
........................................................................
(Name of the investment company)
and.......................................................is approved subject to the
following conditions:--
(Name of the investment adviser)
3. The appointment
……………………..................................is
hereby
(Name of Custodian)
approve subject to the following conditions:---
4.The appointment of
................................................................is hereby
(Name of underwriter)
approved subject to the following conditions:---
|
_______________________
Signature of the Officer. |
FORM III
[Section rule 20 (1)
FORM OF APPLICATION FOR REGISTRATION AS INVESTMENT ADVISER
To
The Corporate Law Authority,
Government of Pakistan
Islamabad.
Dear Sir,
We hereby apply for the grant of registration of.
..............................................
(Name of the investment adviser)
under rule 20 of the Investment Companies and Investment Advisers Rules, 1971.
2. Four copies of the Memorandurn and Articles of Association are enclosed.
3. We hereby undertake to maintain at all times a net capital balance in the capital
account of an amount which is not less than one lac rupees.
4. Necessary. information required in the annex to this form is furnished. We undertake to
keep this information up-to-date at all times
|
Yours faithfully. |
|
_____________________
Signature of the Secretary or a Director of the applicant |
ANNEX TO FORM II
| 1.
Name, address and telephone number(s) of applicant |
------------------ |
| 2.
Names and addresses of directors |
------------------ |
| 3.
Whether any director has been convicted of fraud or breach of trust |
------------------ |
| 4.
Whether any director has been adjudicated an insolvent or has suspended payment or has
compounded with his creditors |
------------------ |
| 5.
Whether any officer of employee has been convicted for fraud or breach of trust... |
------------------ |
| 7.
Whether any officer or employee has been adjudicated an insolvent or has suspended payment
or 11as compounded with his creditors |
------------------ |
| 8.
Whether any director or officer has any interest in any investment company |
------------------ |
| 9. What
is the financial standing of the directors |
------------------ |
| 10.
give a brief description of the kind of investment advisory services proposed to be
provided. the organizational set up, previous professional experience of directors /
officers etc. |
------------------ |
FORM IV
[See rule 20 (3)]
CERTIFICATE OF REGISTRATION AS AN INVESTMENT ADVISER
The Corporate Law Authority,
Government of Pakistan,
Islamabad. the ...................................197
The Securities and Exchange Authority. of Pakistan, having considered the application for
registration under rule 20 of the Investment Companies and Investment Advisers Rules,
1971, by ................(Name of adviser) and being satisfied that the said
..........…...........
(Name of adviser)
it would be in the interest of the capital market so to do, hereby grants, in exercise of
the powers conferred by rule 20 of the Investment Companies and Investment Advisers Rules,
1971, registration to ............................................ subject to the
conditions stated
(Name of the adviser)
hereinbelow or as may be prescribed or imposed hereafter.
|
___________________
Signature of the Officer. |
