By Omer Bilal ISLAMABAD, Jan 31 (INP-WealthPK): The securitisation of pools of loans and receivables into multiple securities provides economies and financial markets with several avenues. It provides portfolio diversification for investors looking to invest in other markets, and also gives them direct access to liquid investments and payment streams. The Security and Exchange Commission of Pakistan’s Special Purpose Vehicle (SPV), which is an asset-backed securitisation, is a healthy induction for capital market, potentially enabling the investors to minimise risky loans as they are securitised. By selling the assets through asset-backed securities, investors are able to gain a new source of funding that can be used to issue more loans or for other business purposes. An SPV supports an alternative means of funding operations that can be considered alongside bond, preferred equity, and common equity issuance. Securitisation is often less costly than a corporate bond issue secured by the same collateral. Since 2002, the SECP has granted eight SPV licences to facilitate securitisation in the capital market. The ‘First Securitisation Trust’ or SPV was registered under the Securitization Rules of 1999. Its purpose was to conduct securitisation of lease receivables of Pakistan Industrial Leasing Corporation Limited. Aqeel Karim Dhedhi Securities Private Limited and Orix Investment Bank Limited were the advisers and arrangers of the transactions as well as co-trustee of the SPV. SPVs are commonly utilised as asset securitisation, joint ventures, property deals, or to isolate parent company assets, operations, or risks. SPV is a separate legal entity created by an organisation. It is a distinct company with its own assets and liabilities, as well as its own legal status. Usually, SPVs are created for a specific objective, often to isolate financial risk. As SPV is a separate legal entity, if the parent company goes bankrupt, it can carry on. An SPV raises funds by issuing Term Finance Certificates or any other instruments with the approval of the SECP, and uses such funds by making payment to the originator, and through such process, acquires the title, property or right in the receivables or other assets.  Compliance and Cancellation A person eligible for registration as SPV may file an application to the SECP for registration under Companies (Asset-Backed Securitisation) Rules 1999, in such form and with such documents as the commission may notify. A registered company must have a paid-up capital of not less than Rs100,000. If a company starts business as an SPV without being registered with the commission it will have no legal worth. And if an SPV fails to make a public offering within such time frame and in such manner as may be specified by the commission while granting the certificate of registration, it will be wound up and have to pay a penalty. When an SPV liquidates or winds up as per the requirements of the Companies Act 2017, it has to pay all its compulsions , including the redemption amount. It is necessary for an SPV to file reports, documents and information to the SECP or to the investors, as specified by the commission from time to time.