ISLAMABAD, April 28: The Securities and Exchange Commission of Pakistan (SECP) has proposed amendments to the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003.

The aim is to update the legal framework for establishment, operation and conduct of NBFCs in accordance with the changing environment of this sector, stated an official announcement here on Friday.

The amendments have been made after an extensive in-house exercise. The NBFCs sector as a whole has grown over the last year due to regulatory reforms aimed at development of the sector and enhanced supervision by the SECP.

The amendments read: “An NBFC may be established, if each of its sponsors, proposed directors, chief executive and chairman of the board of directors fulfil the terms and conditions specified by the SECP from time to time.

“A person desirous of forming an NBFC shall make an application to the commission as set out in Form-1 providing information, as given in Annexure, along with all the relevant documents and receipt evidencing the payment of non-refundable processing fee amounting to Rs100,000.

“If satisfied, the commission may permit by an order in writing such person to establish an NBFC. The permission granted under sub-rule (2) shall be valid for a period of six months unless extended for a maximum period of three months. During the validity of this permission, the promoters of the NBFC shall get the NBFC incorporated as a public limited company under the ordinance.

“An NBFC shall make separate applications to the commission for grant of licences for carrying on different forms of business, as specified in section 282 A of the ordinance.

“An NBFC shall commence or continue its business and operations only after it has been issued a licence in terms of rule 5 for forms of business as mentioned in section 282A of the ordinance and all conditions contained in rule 5 have been complied with.

“Without prejudice to the terms and conditions prescribed in rule 7, the commission may, subsequent to the grant of licence to the NBFC, impose any other condition, as it may deem necessary in the public interest.

“If an NBFC fails to commence business within one year of the issuance of licence in terms of rule 5, then the licence shall be treated as cancelled. An NBFC shall maintain such books of accounts and other records, as prescribed under Companies Ordinance, 1984, as shall depict a true and fair picture of its state of affairs, including journals, cash book and other records of original entry forming the basis of entry in any ledger. It should also possess record of transactions with banks, meetings of the board of directors and original record of all reports, analysis and memoranda containing investment advice distributed.

“It should appoint its financial or chief accounting officer who is a chartered accountant or a cost and management accountant or a member of a recognised foreign accountancy organisation or a person having Masters degree in commerce or business administration with finance specialisation and senior management level experience of at least five years in financial institutions.”