2. Religious Board in
Mudarba Ordinance
Federal
Government
Casual
Vacancy in
Board filled
by Federal
Govt
Grants
Certificate to
ROC
Tenure of
Members
3 Years
Is, has been qualified to
be Judge of High Court;
Appoints
‘3’
Members
‘1’ Member
Chairman of
Religious Board
‘2’ Members
Religious Scholars
Then ROC
grants
permission to
Modarba
Company to
float Mudarba
6. Mudarba Company
Mudarba -1 Mudarba -4Mudarba -2 Mudarba -3
Charge Fee
0% to 10% of the Profit
Mudarba
If Mudarba earn losses then no fees is
charged by Mudarba Company
7. Profit of
Mudarba
Rs. 100,000
0% to 10%
Fees
Charge by Mudarba
Company
Maximum 10,000 only
because profit of
Mudara is just 100,000
10. Board of Directors
Mudarba
Company has
BOARD
Does not have
Board
Mudabra
Members of
Company
elect/appoint Board of Mudarba
Company work as
Board of Mudabra
12. Meeting
Directors Calls
EOGM if they
hold 10% or
more Voting
Rights
Members Call
Statutory Meeting
In case of Public
Company
AGM in all
Companies
EOGM in all
Companies
13. Meeting
Directors Calls
EOGM if they
hold 10% or
more Voting
Rights
Members Call
Statutory Meeting
In case of Public
Company
AGM in all
Companies
EOGM in all
Companies
SECP has
power to call
14. Meeting
Quorum not met
If meeting is
Called by
Directors
Meeting is
dissolved
If Meeting is
called by
Members
Meeting is
adjourned
15. Stock Exchange
Gets Registration
from Commission
Commission, if
satisfied
Grant
registration
Provides &
Maintains
If it is in the
interest of
Trade & Public
Market Place
Facilities for
bringing together
BUYER & SELLER
for Securities
Services
To form set up
& starts
activities
17. Stock Exchange
(Organized Market for Shares & Debentures
Private Company
Unlisted
Company
Listed Company
Trade on
Does not Trade On
Shares of Following
Companies
18. Disclosure of Interest to avoid
Conflict of Interest
Exercising a
power
As a Delegate of
Commission
Assisting AdvisingEmployee
To The Commission, Board, Any Committee or any Delegate of the Commission
Any Person during Performing a function
Shall forthwith give to
Commission
Or servicing in capacity of
Written Notice stating
his interest in the
transaction/ matter
Set out
particulars of his
interest
SECP Act
Section
17
19. Sponsors, Proposed Directors,
CEO, Chairman of Board OF
NBFC
He has not been Associated
Illegal
SPOSNSOR
DIRECTOR
CEO
CONVICTED
ADJUDGED
DEFAULTING
FINANCING
COMPANY
COPERATIVE
FINANCING
SOCIETY
20. Sponsors, Proposed Directors,
CEO, Chairman of Board OF
NBFC
He has not been Associated
Illegal
SPOSNSOR
DIRECTOR
CEO
CONVICTED
ADJUDGED
BANKING
BUSINESS
FINANCIAL
DEALINGS
DESPOSITS
TAKING
21. Sponsors, Proposed Directors,
CEO, Chairman of Board OF
NBFC
He has not been Associated
Illegal
SPOSNSOR
DIRECTOR
CEO
CONVICTED
ADJUDGED
Fraud
Offense Of
Involving Moral
Turpitude
Breach Of Trust
From Misconduct
& be Removed
from his Services
22. Sponsors, Proposed Directors,
CEO, Chairman of Board OF
NBFC
He has not been Associated
Illegal
SPOSNSOR
DIRECTOR
CEO
CONVICTED
ADJUDGED
As Insolvent
Has
compounded
with his
creditors
Suspended
payment of
Debt
or
or
23. Sponsors, Proposed Directors, CEO,
Chairman of Board OF NBFC
Has not been Company where he is
Director/ Major
Share Holder
His wealth
submitted at
tax
Authorities
Double to the
amount Subscribed
by him In NBFC
Tax defaulter or
Loan Defaulter
Such Company shall not be
tax defaulter or
Loan Defaulter or
have over due Loan payment
24. Composition of
SECP Policy Board
Appointed by FG
5 Members 4 Members
Ex- Officio
Secretary to the
Government of
Pakistan
Commerce
Division
Law
Division
Finance
Division
The Chairman
of the SECP
Deputy
Governor
nominated by
Governor SBP
25. Composition of
SECP Policy Board
appointed by FG
5 Members 4 Members Well know
People in
Integrity
Expertise
Experience
Corporate
Law
AccountancyFinancial
Service
Insurance
Investment
Academia
relevant
field
Commerce &
Industry
Code :IF CAR CIA
In the following Field
26. Disqualification of
Members & Commissioners
• No person shall be appointed or continue as a
Member or Commissioner if
– Has been convicted of an offense involving moral
turpitude
– Has been or is adjudged insolvent
– Is incapable of discharging his duties by reasons of
Physical, Physiological or mental unfitness and has
been so declared by registered medical
practitioner appointed by the Federal government
27. Disqualification of
Members & Commissioners
• Being member, absent himself from 3
consecutive meetings of the Board, without leave
of the Board and in the case of a member ex-
officio, or fails to appoint another person to act
• Fails to disclose any conflict of interest at or
within the time provided for such disclosure by or
under this Act or contravenes any of the
provisions of this Act pertaining t unauthorized
disclosure of information.
28. BOARD OF SECP
After
Consultation to
Commission
Advise Federal
Government in followings
Securities Industries/
Insurance Industries
Regulation
Corporate
Sector
Insurance
Sector
Protection
of interest
Investors
Insurance
Policy
holder
29. BOARD OF SECP
After
Consultation to
Commission
Advise Federal
Government in followings
Measures
Encourage
Promote
The development of &
to regulate the securities
Market & Insurance
Market
By Self regulation of Stock
Exchange,
Insurers,
Insurance intermediaries,
Insurance Surveyors & NBFIs
by specifying the standards for
such self regulations
30. BOARD OF SECP
Express its opinion in writing
on any policy matter to it
by Federal Govt
By Commision
31. Board of SECP
• Consider and approve any regulations with
respect to implement of policy decisions,
proposed to be made by the commission
• Consider and approve the budget for each
financial year of the Commission prepared
and submitted to it pursuant to the provisions
of law
32. Board of SECP
• Exercise all such powers and performs all such
function as are conferred or assigned to it as
per law.
• Oversee the performance of the Commission
to the extent that the purpose of law.
• Specify fees, penalties, and other chargeable
by the commission for carrying out the
purpose law.
33. Board of SECP
• All policy decisions, including any change in
previously established policy, in respect of all
and any matters within jurisdiction of the
commission shall be made only by the Board.
• The Board may make policy decisions suo
moto or adopt such policy recommendations
of the Commission, with or without
modification, as the Board may deem fit in its
sole discretion.
34. What are NBFCs?
• Same license Under section 282 A (a) of Co.
Ordinance 1984
– Housing Finance
– Asset Management
– Leasing
– Discounting Services
– Investment Finance
– Investment Advisory Services
– Venture Capital
– Code – HALDI-VI
35. Permission from SECP taken for NBFC
• SECP grants permission to public company to carry on NBFC
activities.
• Period 6 months which can be extended for 3 further
months under special circumstances.
• Commission issues license after satisfaction.
• A company may get license for engaging more than one
business by paying fees.
• Minimum equity is required to inject in company as capital
which commission decides time to time.
36. Only Public Limited
company
Allowed to
carrying business
of following
Banking NBFC
Housing Finance
Asset Management
Leasing
Discounting Services
Investment Finance
Investment Advisory
Services
Venture Capital
37. Public Company
Requires
License
From Commission
To carry
on NBFC
One form of
Business
Multiple forms
of Business
1. Housing Finance
2. Asset Management
3. Leasing
4. Discounting Services
5. Investment Finance
6. Investment Advisory
Services
7. Venture Capital
38.
39. CFO in NBFC
• 3 years experience in the relevant field
• CA/ICMA
• Member of Professional body
• Master degree in Commerce / Business
administration (Specialization in Finance)
40. Investment Finance Schemes
• Includes
– Money Market
– Capital Market
– Project Finance activities
– General services as specified by Commission in
the Official Gazette
41. House Financing Schemes
• Loans provided to Individuals for Purchase of
Residential House, Apartment, or Land
including facilities availed for the purpose of
making improvement in house or apartment
or land
42. Investment Advisory Schemes
• The services provided for managing
discretionary or nondiscretionary portfolios
for both individual & institutional clients and
include the business of advising others as to
the value of securities or as to the advisability
of investment in purchase or selling of
securities for remuneration.
43. VENTURE CAPITAL
• Money provided by investors to startup firms
and small businesses with perceived long-
term growth potential.
• This is a very important source of funding for
startups that do not have access to capital
markets. It typically entails high risk for the
investor, but it has the potential for above-
average returns.
44. VENTURE CAPITAL
• Venture capital can also include managerial and technical expertise.
• Most venture capital comes from a group of wealthy investors,
investment banks and other financial institutions that pool such
investments or partnerships.
• This form of raising capital is popular among new companies or
ventures with limited operating history, which cannot raise funds by
issuing debt.
• The downside for entrepreneurs is that venture capitalists usually
get a say in company decisions, in addition to a portion of the
equity.
45. Lease
• legal document outlining the terms under which
one party agrees to rent property from another
party.
• A lease guarantees the lessee (the renter) use of
an asset and guarantees the lessor (the property
owner) regular payments from the lessee for a
specified number of months or years.
• Both the lessee and the lessor must uphold the
terms of the contract for the lease to remain
valid.
46. DISCOUNT HOUSE
• A discount house is a money dealer that
participates in the buying and discounting of
bills of exchange and other financial products
such as money markets, certain government
bonds and banker's acceptances.
47. Asset Management
• A company that invests its clients' pooled fund
into securities that match its declared financial
objectives.
• Asset management companies provide
investors with more diversification and
investing options than they would have by
themselves.
48. Asset Management
• Mutual funds, hedge funds and pension plans are all run by asset
management companies.
• These companies earn income by charging service fees to their
clients.
• AMCs offer their clients more diversification because they have a
larger pool of resources than the individual investor.
• Pooling assets together and paying out proportional returns allows
investors to avoid minimum investment requirements often
required when purchasing securities on their own, as well as the
ability to invest in a larger set of securities with a smaller
investment.
49. Close end Scheme
Constituted by way of trust
To raise Funds
through Issue of
Certificate to Public
Of definite
Period
Securities
of indefinite
Period
Securities
Shares
Debenture
or Money
Market
instrument
Does not include
continuously offer
certificate
50. Closed End Schemes
– When an investor wishes to buy or sell shares of a closed-end fund, another
investor must be located who wishes to sell or buy these shares.
Normally, an investor approaches a broker who places the order on an exchange
in which the CEF is traded, and waits until the order is executed.
The pool of money collected by the CEF for investment remains constant after
the initial public offering.
Open Ended Schemes
In contrast, the number of outstanding shares of an open-end fund changes due
to issuances and redemptions.
When an investor wishes to buy shares in an open-end fund, the fund issues the
investor new shares.
Similarly, when an investor wishes to sell shares in an open-end fund, the fund
redeems these shares.
Buying and selling shares
51. Closed End Schemes
The price at which an investor buys or sells shares of a CEF is the market price, as
determined by demand and supply market principles.
For example, if many investors wish to buy shares of a CEF and few shares are
available for sale, an investor may be able to sell the CEF at a premium to the net
asset value (NAV).
Open Ended Schemes
In contrast, the price at which an investor buys or sells shares of a mutual fund is the
NAV of the assets under management at the close of a given business day.
SHARE PRICE –
52. Diversification – Like open-end mutual funds, CEFs may minimize risk of an
individual investment through diversification, because CEFs invest in many
companies, industries, and markets. For individual investors, achieving similar
asset allocation would involve building a portfolio of many different investments.
Professional management – Both open- and closed-end funds are managed by
portfolio managers who are assisted by a team of analysts. Together, they research
the companies, industries, and markets in which the funds invest. Few individual
investors can match the time and effort put in by professionals whose full-time job
is to track investments and seek new opportunities.
Economies of scale – By pooling money from investors and buying and selling
securities in large quantities, fund costs may be considerably lower than they
might be for an individual investor. In addition, bookkeeping, tax calculations, and
other activities can be simplified for the individual investor.
Open End and Close End Schemes
53. Open-end fund
• An open-end fund is equitably divided into shares
which vary in price in direct proportion to the variation
in value of the fund's net asset value.
• Each time money is invested, new shares or units are
created to match the prevailing share price; each time
shares are redeemed, the assets sold match the
prevailing share price.
• In this way there is no supply or demand created for
shares and they remain a direct reflection of the
underlying assets.
54. Closed-end fund
• A closed-end fund issues a limited number of shares (or units) in an
initial public offering (or IPO) or through private placement.
• If shares are issued through an IPO they are then traded on an
exchange or directly through the fund manager to create a
secondary market subject to market forces.
• If demand for the shares is high, they may trade at a premium to
net asset value.
• If demand is low they may trade at a discount to net asset value.
• Further share (or unit) offerings may be made by the vehicle if
demand is high although this may affect the share price.
55. IPO (Initial Public Offer)
• The first sale of stock by a private company to the
public.
• IPOs are often issued by smaller, younger companies
seeking the capital to expand, but can also be done by
large privately owned companies looking to become
publicly traded.
• In an IPO, the issuer obtains the assistance of an
underwriting firm, which helps it determine what type
of security to issue (common or preferred), the best
offering price and the time to bring it to market.
56. Connected Person
• A person in relation to an NBFC or a Collective Investment Scheme
(Mutual Funds) mean
• Any person / trust beneficially owing, directly or indirectly, 10% or
more of capital of the NBFC or the collective investment scheme
• Any person able to exercise, directly or indirectly, 10% or more of
the total voting power in that NBFC or the collective investment
scheme
• A collective investment scheme being managed by an NBFC
• The NBFC managing a collective investment Scheme
57. Connected Person
• A trustee / custodian of the collective investment
scheme
• Any person / trust controlled by a person who or
which meets the description given above
• Any director / officer of that NBFC or the
investment company being managed by that
NBFC or of any of their connected persons as
specified above.
58. The buying or selling of a security by someone who has access to material,
nonpublic information about the security.
Insider trading can be illegal or legal depending on when the insider makes the
trade: it is illegal when the material information is still nonpublic--trading while
having special knowledge is unfair to other investors who don't have access to such
knowledge.
Illegal insider trading therefore includes tipping others when you have any sort of
nonpublic information.
Directors are not the only ones who have the potential to be convicted of insider
trading.
People such as brokers and even family members can be guilty
Inside Trading
59. Clearing House
• A house by whatever name or designation
established or arranged to be established by
Stock Exchange for registration of dealing in
Securities or settlement of trading in future
contracts.
60. Underwriters
• Underwriters generally receive underwriting fees from
their issuing clients (Public Company), but they also
usually earn profits when selling the underwritten
shares to investors.
• However, underwriters assume the responsibility of
distributing a securities issue to the public.
• If they can't sell all of the securities at the specified
offering price, they may be forced to sell the securities
for less than they paid for them, or retain the securities
themselves
61. World COM
Listed at NASDAK USA Stock
Exchange
Took over
60
Companies
$7 Billion
expenses
not
recorded
Paid
$37 Billion
& bought
60
Companies
$2 Billion
additional
income
shown
Default
declared in
2002
$41 billion
AT & T is number 1,
W. Com was No. 2
Now W. Com is being
run under
Business Horizon
World largest
Bankruptcy
Use of Corporate
Governance is now Must