INP-WealthPk

SECP’s Digital Onboarding Mechanism Facilitates Investors

December 07, 2021

By Omer Bilal ISLAMABAD, Dec 07 (INP-WealthPK): A simplified and swift onboarding framework introduced by the Securities and Exchange Commission of Pakistan (SECP) is proving more than helpful to customers of the Asset Management Companies (AMCs) and Pension Fund Managers (PFM). The simplified account opening process doesn’t need physical presence or the signing of different forms and declarations by investors. Under the new framework, the AMCs and PFM can conduct customer verification and authentication through a digital process. Digital platforms will act like a one-stop shop that allows investors, financial advisers and wealth managers to select a single point of contact in a timely, efficient and transparent manner. According to a statement of the SECP, the new framework classifies three categories of investment accounts on the basis of investment and transaction limits, and the respective documentation/verifications, which are Sehl Sarmayakari Account, Sahulat Sarmayakari Account and Sarmayakari Account. Under this new framework, digital joint account opening is also allowed. Through Sehl Sarmayakari Account, users can be onboarded through digital wallets without providing any additional information or documents to AMCs. Sahulat Sarmayakari Account requires additional documentation, but does not necessitate customer risk profiling for investments (in money-market and low-risk-income schemes). Sarmayakari Account does not have any investment or transaction limit. Therefore, it requires additional legal documentation/information. Furthermore, customers of all these accounts have the option of upgrading their accounts by fulfilling respective account requirements in due course. Earlier, the SECP through its circular No. 35 of 2020 had introduced the Digital Onboarding Mechanism (DOM) for investors of AMCs. The mechanism offers investors a combined account opening process for investments in mutual funds and eliminates the requirement of physical presence and submission of documents. The AMCs are now allowed to conduct the customer verification process for account opening online, while ensuring investor protection and full compliance with an applicable, relevant legal and regulatory framework. The virtual onboarding of investors in Pakistan is expected to boost innovation and competition in the mutual fund industry, encouraging the use of financial technology and fostering financial inclusion. A mutual fund is a collective investment scheme that pools money from many investors. An AMC duly licenced by the SECP invests the money on investors’ behalf in securities or other financial assets for profits/gains and income. Under the regulations, an independent trustee registered with the SECP has custody of all mutual fund assets. The trustee is obligated to ensure that AMC invests the fund’s assets in accordance with the approved investment policy, and authorised investments of the mutual fund, and that all mutual fund property including cash is registered in the name of, or to the order of, the trustee.