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SECP Alert! The Release of Stewardship Framework for Institutional Investors By SECP

On Monday 16th May at the SECP headquarters, the media professionals had witnessed a piece of power-breaking news. The Securities and Exchange Commission of Pakistan (SECP) declared an interminable, responsible, and value creation engagement of Institutional investors with the investee businesses. The SECP announces a healthy long-term value creation Stewardship framework. Underlying the basic guidelines and policies for both the investors and its beneficiaries.
The SECP Guidelines got launched with rigorous research under section 40B, Act 1997 of The Securities and Exchange Commission of Pakistan.
It incorporates a bundle of highly effective stewardship principles and procedures that is pre-determined to assist institutional investors in the constructive exercise of their newborn stewardship responsibilities with their due consideration both towards investee businesses and investors.
As per the reports, the framework will be appurtenant to the following:

  • Pension Fund Managers
  • Asset Management Companies
  • Life Insurers
  • Private Fund Management Companies

Along with the Employees’ Contributory Funds handled companies listed in equity holding companies by the Investment Advisors.
Institutional investors must ensure that they are accountable to their long-term clients and beneficiaries, including clarifying their policy regarding voting, monitoring, engagement, conflicts of interest, and sustainability. Additionally, the rest of the document provides instructions on how each principle can get implemented and what outcome can get expected by applying it.
In accordance with their policy, the institutional investors shall compile a report (the “Report”) which details, in an easy-to-understand format, how they have fulfilled their stewardship responsibilities and upload this report to their website annually. To raise awareness of Stewardship Principles within the institutional investors’ community, the SECP plans to conduct orientation sessions organized with key stakeholders. An analysis of regulatory impact gets conducted in the future to assess the success of Stewardship Guidelines implementation.
Investing Institutions will devise a comprehensive stewardship policy that covers all principles on how they intend to fulfill their stewardship role, and the policy will get disclosed on their website. It is necessary for Institutional Investors to review and regularly update their stewardship policies to ensure effective stewardship and to demonstrate that the reviews have resulted in improvements in the stewardship policy gets into account the larger economic, social, and environmental concerns of the country.
According to the new framework and guidelines, the SECP states that the investors shall vigilantly analyze and record voting rights. They get advised to vote for or against as per the voting policies. Additionally, institutional investors shall reveal a summary report regarding voting activities including proxy voting as it gives the investor a great clarity on the casting of votes.
The SECP beholds the conduction of the orientation sessions related to Stewardship Principles in collaboration with the vital stakeholders to raise awareness among the institutional investor’s community.

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