The Securities and Exchange Commission of Pakistan (SECP) has officially announced key amendments to the Non-Banking Finance Companies and Notified Entities Regulations, 2008, with a strong focus on reforming the mutual fund and pension fund landscape in the country. These regulatory changes aim to revise the Total Expense Regime (TER) and reinforce the Shariah compliance framework across the industry, fostering a more transparent and investor-friendly environment.
Under the new amendments, the traditional Total Expense Ratio (TER) capping mechanism will be phased out and replaced by a management fee cap. This new structure will come into effect from July 1, 2025, offering ample time for Asset Management Companies (AMCs) and Pension Fund Managers (PFMs) to adapt their operations and investment strategies accordingly. A crucial part of the revised framework is the mandatory disclosure of detailed TERs by AMCs and PFMs for all mutual funds and pension funds, thereby enhancing transparency and helping investors make informed decisions.
In a significant move to improve Shariah compliance, the SECP has introduced a provision allowing Collective Investment Schemes (CIS) that mirror the structure and strategy of an existing Shariah-compliant scheme to bypass the need for a separate Shariah Compliance Certificate. However, all CIS currently without such certification must obtain one by September 30, 2025. The updated regulations also require the inclusion of an Annual Shariah Advisor’s Report in the financial statements provided to unit holders and Voluntary Pension System (VPS) participants, ensuring ongoing compliance and awareness.
These amendments were developed through extensive consultations with stakeholders, including AMCs, PFMs, and the Mutual Funds Association of Pakistan (MUFAP). The collaborative process ensured that the regulatory updates are aligned with international best practices and are designed to enhance transparency, cost-efficiency, and investor confidence within Pakistan’s mutual fund and pension fund sectors.
