Pakistan Stock Exchange (PSX), with the approval of the Securities and Exchange Commission of Pakistan, has significantly eased the requirements for eligibility of accredited individual investors investing in companies on the GEM Board. As per the new definition, accredited investors include those individual investors who have assets of atleast Rs 5 million which include but are not limited to value of securities held by these investors in respective CDC investor account or sub-account.
With the revised eligibility criterion, total assets of investors are to be considered to assess their eligibility to invest on GEM Board companies. To elaborate, real estate properties, vehicles and other assets can also be included to define the assets of the accredited investors. By virtue of this amendment in the eligibility requirement of accredited individual investors, more investors will be able to participate in the pre-listing process of companies to be listed on the GEM Board. This amendment will also lead to broaden the investor base in trading of shares of GEM Board companies at PSX, generating increased liquidity and higher share volumes.
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Accredited investors will now self-declare to the Securities Brokers that they hold assets of atleast Rs 5 million in order to be eligible to participate in listing of GEM Board companies or in their post-listing trading activity and also understand the risks associated with GEM Board and GEM companies. Apart from the regulatory change, PSX has also notified the modes of acceptance of self-declaration by the Securities Brokers.
Auto-marking of individual investors taking part through e-IPO in GEM primary market has been announced as well. Individual investors having securities worth atleast 40% higher than the minimum requirement of Rs 5 million will be auto marked as accredited individual investors in NCSS of NCCPL. Moreover, the Securities Brokers can unmark an investor in NCSS of NCCPL if they have reason to believe that the investor is ineligible to trade on GEM, based on their KYC/ CDD checks. The Securities Brokers will allow such ineligible investors to liquidate their GEM shares with no bearing on the Securities Brokers. These steps will lead to convenience in terms of operational practices of Securities Brokers. With this amendment, it is expected that Advisors will now take the lead and facilitate issuers and investors towards increased listings and investments in the GEM Board.
Speaking about this amendment in the eligibility criteria of accredited investors, the MD & CEO PSX, Mr. Farrukh H. Khan, stated, “The GEM Board is an important innovation for SMEs to raise debt and equity capital from the market. It also provides exciting investment opportunities for accredited investors. The amendment in the eligibility of accredited individual investors will help to significantly improve participation in GEM Board companies. Moreover, the self-declaration process further simplifies the operational management for Securities Brokers. I am confident that these steps will increase the number of accredited individual investors and enhance liquidity and price discovery in the GEM Board secondary market.”
Mr. Khan further stated, “Pakistan Stock Exchange, as a frontline regulator, always gives due attention to feedback from market participants and supports positive changes in its regulatory framework to ease and enhance them in order to encourage growth of the capital markets in Pakistan. Accredited investors must take this as an opportunity towards increased participation in the growth story of the GEM Board companies in the pre-listing phase. At the same time, in the post-listing trading phase, they must fully utilise this opportunity and benefit from investing on GEM Board companies which, in turn, will lead to greater liquidity on the GEM Board.”