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Religious Board in Mudarba Ordinance

Federal Government

Casual Vacancy in Board filled by Federal

Govt

Grants Certificate to

ROC

Tenure of Members

3 Years

Is, has been qualified to be Judge of High Court;

Appoints ‘3’

Members

‘1’ Member Chairman of

Religious Board

‘2’ Members Religious Scholars

Then ROC grants

permission to Modarba

Company to float Mudarba

Mudarba Company

Mudarba -1 Mudarba -4Mudarba -2 Mudarba -3

Floats

Mudarba Company

Mudarba -1 Mudarba -4Mudarba -2 Mudarba -3

Control

Mudabra Capital

500,000

Investment by Mudarba

Company 10% or More

Mudarba Company must

Investment 50,000 or plus

Capital of Mudarba is 500,000 so Mudarba Company must invest 10% or more

Mudarba Company

Mudarba -1 Mudarba -4Mudarba -2 Mudarba -3

Charge Fee 0% to 10% of the Profit

Mudarba

If Mudarba earn losses then no fees is charged by Mudarba Company

Profit of Mudarba

Rs. 100,000

0% to 10%Fees

Charge by Mudarba Company

Maximum 10,000 only because profit of

Mudara is just 100,000

Mudarba Company

Mudraba -1Surplus

Transfer to another

Mudarba-2

Not Allowed

Mudarba CompanyShall not engage

Mudaraba -1 Restaurant

Compete

Mudarba-2Restaurant

Not Allowed

Board of Directors

Mudarba Company has

BOARD

Does not have Board

Mudabra

Members of Company

elect/appoint Board of Mudarba Company work as Board of Mudabra

Appoint of Auditor

Mudarba Company

Certificate Holders does not

appoint

Mudabra

Members of Company appoint

Board of Mudarba appoint with the

permission of ROC

Meeting

Directors Calls

EOGM if they hold 10% or more Voting

Rights

Members Call

Statutory MeetingIn case of Public

Company

AGM in all Companies

EOGM in all Companies

Meeting

Directors Calls

EOGM if they hold 10% or more Voting

Rights

Members Call

Statutory MeetingIn case of Public

Company

AGM in all Companies

EOGM in all Companies

SECP has power to call

MeetingQuorum not met

If meeting is Called by Directors

Meeting is dissolved

If Meeting is called by Members

Meeting is adjourned

Stock Exchange

Gets Registration from Commission

Commission, if satisfied

Grant registration

Provides & Maintains

If it is in the interest of

Trade & Public

Market Place

Facilities for bringing together BUYER & SELLER

for Securities

Services

To form set up & starts activities

Stock Exchange

Establish Arrange

Clearing House for

Designate

Registration of dealing in Securities

Settlement of trading in Future

Stock Exchange(Organized Market for Shares & Debentures

Private Company Unlisted Company

Listed Company

Trade on Does not Trade On

Shares of Following Companies

Disclosure of Interest to avoid Conflict of Interest

Exercising a power

As a Delegate of Commission

Assisting AdvisingEmployee

To The Commission, Board, Any Committee or any Delegate of the Commission

Any Person during Performing a function

Shall forthwith give to Commission

Or servicing in capacity of

Written Notice stating his interest in the

transaction/ matter

Set out particulars of his

interest

SECP Act Section

17

Sponsors, Proposed Directors, CEO, Chairman of Board OF

NBFC

He has not been AssociatedIllegal

SPOSNSOR

DIRECTOR

CEO

CONVICTED

ADJUDGED

DEFAULTING

FINANCING COMPANY

COPERATIVE FINANCING

SOCIETY

Sponsors, Proposed Directors, CEO, Chairman of Board OF

NBFC

He has not been AssociatedIllegal

SPOSNSOR

DIRECTOR

CEO

CONVICTED

ADJUDGED

BANKING BUSINESS

FINANCIALDEALINGS

DESPOSITS TAKING

Sponsors, Proposed Directors, CEO, Chairman of Board OF

NBFC

He has not been AssociatedIllegal

SPOSNSOR

DIRECTOR

CEO

CONVICTED

ADJUDGED

Fraud

Offense Of Involving Moral

Turpitude

Breach Of Trust

From Misconduct & be Removed

from his Services

Sponsors, Proposed Directors, CEO, Chairman of Board OF

NBFC

He has not been AssociatedIllegal

SPOSNSOR

DIRECTOR

CEO

CONVICTED

ADJUDGED

As Insolvent

Has compounded

with his creditors

Suspended payment of

Debt

or

or

Sponsors, Proposed Directors, CEO, Chairman of Board OF NBFC

Has not been Company where he is Director/ Major

Share Holder

His wealth submitted at

tax Authorities

Double to the amount Subscribed

by him In NBFC

Tax defaulter or Loan Defaulter

Such Company shall not be tax defaulter or

Loan Defaulter or have over due Loan payment

Composition of SECP Policy BoardAppointed by FG

5 Members 4 Members

Ex- Officio

Secretary to the Government of

Pakistan

Commerce Division

Law Division

Finance Division

The Chairman of the SECP

Deputy Governor

nominated by Governor SBP

Composition of SECP Policy Board appointed by FG

5 Members 4 Members Well know People in

Integrity

Expertise

Experience

Corporate Law

Accountancy Financial Service

Insurance

Investment

Academia relevant field

Commerce & Industry

Code :IF CAR CIA

In the following Field

Disqualification of Members & Commissioners

• No person shall be appointed or continue as a Member or Commissioner if– Has been convicted of an offense involving moral

turpitude– Has been or is adjudged insolvent– Is incapable of discharging his duties by reasons of

Physical, Physiological or mental unfitness and has been so declared by registered medical practitioner appointed by the Federal government

Disqualification of Members & Commissioners

• Being member, absent himself from 3 consecutive meetings of the Board, without leave of the Board and in the case of a member ex-officio, or fails to appoint another person to act

• Fails to disclose any conflict of interest at or within the time provided for such disclosure by or under this Act or contravenes any of the provisions of this Act pertaining t unauthorized disclosure of information.

BOARD OF SECP

After Consultation to

Commission

Advise Federal Government in followings

Securities Industries/Insurance Industries

Regulation

Corporate Sector

Insurance Sector

Protection of interest

Investors

Insurance Policy

holder

BOARD OF SECP

After Consultation to

Commission

Advise Federal Government in followings

Measures

Encourage Promote

The development of & to regulate the securities

Market & Insurance Market

By Self regulation of Stock Exchange,Insurers,

Insurance intermediaries, Insurance Surveyors & NBFIs

by specifying the standards for such self regulations

BOARD OF SECP

Express its opinion in writing on any policy matter to it

by Federal Govt

By Commision

Board of SECP

• Consider and approve any regulations with respect to implement of policy decisions, proposed to be made by the commission

• Consider and approve the budget for each financial year of the Commission prepared and submitted to it pursuant to the provisions of law

Board of SECP

• Exercise all such powers and performs all such function as are conferred or assigned to it as per law.

• Oversee the performance of the Commission to the extent that the purpose of law.

• Specify fees, penalties, and other chargeable by the commission for carrying out the purpose law.

Board of SECP

• All policy decisions, including any change in previously established policy, in respect of all and any matters within jurisdiction of the commission shall be made only by the Board.

• The Board may make policy decisions suo moto or adopt such policy recommendations of the Commission, with or without modification, as the Board may deem fit in its sole discretion.

What are NBFCs?

• Same license Under section 282 A (a) of Co. Ordinance 1984 – Housing Finance – Asset Management – Leasing – Discounting Services– Investment Finance – Investment Advisory Services – Venture Capital – Code – HALDI-VI

Permission from SECP taken for NBFC• SECP grants permission to public company to carry on NBFC

activities.

• Period 6 months which can be extended for 3 further months under special circumstances.

• Commission issues license after satisfaction.

• A company may get license for engaging more than one business by paying fees.

• Minimum equity is required to inject in company as capital which commission decides time to time.

Only Public Limited company

Allowed to carrying business

of following

Banking NBFC

Housing Finance Asset Management Leasing Discounting ServicesInvestment Finance Investment Advisory Services Venture Capital

Public Company

Requires License

From Commission

To carry on NBFC

One form of Business

Multiple forms of Business

1. Housing Finance 2. Asset Management 3. Leasing 4. Discounting Services5. Investment Finance 6. Investment Advisory

Services 7. Venture Capital

CFO in NBFC• 3 years experience in the relevant field• CA/ICMA• Member of Professional body• Master degree in Commerce / Business

administration (Specialization in Finance)

Investment Finance Schemes

• Includes– Money Market– Capital Market– Project Finance activities– General services as specified by Commission in the

Official Gazette

House Financing Schemes

• Loans provided to Individuals for Purchase of Residential House, Apartment, or Land including facilities availed for the purpose of making improvement in house or apartment or land

Investment Advisory Schemes• The services provided for managing

discretionary or nondiscretionary portfolios for both individual & institutional clients and include the business of advising others as to the value of securities or as to the advisability of investment in purchase or selling of securities for remuneration.

VENTURE CAPITAL

• Money provided by investors to startup firms and small businesses with perceived long-term growth potential.

• This is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns.

VENTURE CAPITAL• Venture capital can also include managerial and technical expertise.

• Most venture capital comes from a group of wealthy investors, investment banks and other financial institutions that pool such investments or partnerships.

• This form of raising capital is popular among new companies or ventures with limited operating history, which cannot raise funds by issuing debt.

• The downside for entrepreneurs is that venture capitalists usually get a say in company decisions, in addition to a portion of the equity.

Lease

• legal document outlining the terms under which one party agrees to rent property from another party.

• A lease guarantees the lessee (the renter) use of an asset and guarantees the lessor (the property owner) regular payments from the lessee for a specified number of months or years.

• Both the lessee and the lessor must uphold the terms of the contract for the lease to remain valid.

DISCOUNT HOUSE

• A discount house is a money dealer that participates in the buying and discounting of bills of exchange and other financial products such as money markets, certain government bonds and banker's acceptances.

Asset Management

• A company that invests its clients' pooled fund into securities that match its declared financial objectives.

• Asset management companies provide investors with more diversification and investing options than they would have by themselves.

Asset Management• Mutual funds, hedge funds and pension plans are all run by asset

management companies.

• These companies earn income by charging service fees to their clients.

• AMCs offer their clients more diversification because they have a larger pool of resources than the individual investor.

• Pooling assets together and paying out proportional returns allows investors to avoid minimum investment requirements often required when purchasing securities on their own, as well as the ability to invest in a larger set of securities with a smaller investment.

Close end Scheme

Constituted by way of trust

To raise Funds through Issue of

Certificate to Public Of definite

Period Securities

of indefinite Period

Securities

Shares

Debenture or Money

Market instrument

Does not include continuously offer

certificate

Closed End Schemes– When an investor wishes to buy or sell shares of a closed-end fund, another investor must be located who wishes to sell or buy these shares. Normally, an investor approaches a broker who places the order on an exchange in which the CEF is traded, and waits until the order is executed.

The pool of money collected by the CEF for investment remains constant after the initial public offering.

Open Ended SchemesIn contrast, the number of outstanding shares of an open-end fund changes due to issuances and redemptions.

When an investor wishes to buy shares in an open-end fund, the fund issues the investor new shares.

Similarly, when an investor wishes to sell shares in an open-end fund, the fund redeems these shares.

Buying and selling shares

Closed End SchemesThe price at which an investor buys or sells shares of a CEF is the market price, as determined by demand and supply market principles.

For example, if many investors wish to buy shares of a CEF and few shares are available for sale, an investor may be able to sell the CEF at a premium to the net asset value (NAV).

Open Ended SchemesIn contrast, the price at which an investor buys or sells shares of a mutual fund is the NAV of the assets under management at the close of a given business day.

SHARE PRICE –

Diversification – Like open-end mutual funds, CEFs may minimize risk of an individual investment through diversification, because CEFs invest in many companies, industries, and markets. For individual investors, achieving similar asset allocation would involve building a portfolio of many different investments.

Professional management – Both open- and closed-end funds are managed by portfolio managers who are assisted by a team of analysts. Together, they research the companies, industries, and markets in which the funds invest. Few individual investors can match the time and effort put in by professionals whose full-time job is to track investments and seek new opportunities.

Economies of scale – By pooling money from investors and buying and selling securities in large quantities, fund costs may be considerably lower than they might be for an individual investor. In addition, bookkeeping, tax calculations, and other activities can be simplified for the individual investor.

Open End and Close End Schemes

Open-end fund

• An open-end fund is equitably divided into shares which vary in price in direct proportion to the variation in value of the fund's net asset value.

• Each time money is invested, new shares or units are created to match the prevailing share price; each time shares are redeemed, the assets sold match the prevailing share price.

• In this way there is no supply or demand created for shares and they remain a direct reflection of the underlying assets.

Closed-end fund• A closed-end fund issues a limited number of shares (or units) in an

initial public offering (or IPO) or through private placement.

• If shares are issued through an IPO they are then traded on an exchange or directly through the fund manager to create a secondary market subject to market forces.

• If demand for the shares is high, they may trade at a premium to net asset value.

• If demand is low they may trade at a discount to net asset value.

• Further share (or unit) offerings may be made by the vehicle if demand is high although this may affect the share price.

IPO (Initial Public Offer)

• The first sale of stock by a private company to the public.

• IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded.

• In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), the best offering price and the time to bring it to market.

Connected Person• A person in relation to an NBFC or a Collective Investment Scheme

(Mutual Funds) mean

• Any person / trust beneficially owing, directly or indirectly, 10% or more of capital of the NBFC or the collective investment scheme

• Any person able to exercise, directly or indirectly, 10% or more of the total voting power in that NBFC or the collective investment scheme

• A collective investment scheme being managed by an NBFC

• The NBFC managing a collective investment Scheme

Connected Person

• A trustee / custodian of the collective investment scheme

• Any person / trust controlled by a person who or which meets the description given above

• Any director / officer of that NBFC or the investment company being managed by that NBFC or of any of their connected persons as specified above.

The buying or selling of a security by someone who has access to material, nonpublic information about the security.

Insider trading can be illegal or legal depending on when the insider makes the trade: it is illegal when the material information is still nonpublic--trading while having special knowledge is unfair to other investors who don't have access to such knowledge.

Illegal insider trading therefore includes tipping others when you have any sort of nonpublic information.

Directors are not the only ones who have the potential to be convicted of insider trading.

People such as brokers and even family members can be guilty

Inside Trading

Clearing House

• A house by whatever name or designation established or arranged to be established by Stock Exchange for registration of dealing in Securities or settlement of trading in future contracts.

Underwriters

• Underwriters generally receive underwriting fees from their issuing clients (Public Company), but they also usually earn profits when selling the underwritten shares to investors.

• However, underwriters assume the responsibility of distributing a securities issue to the public.

• If they can't sell all of the securities at the specified offering price, they may be forced to sell the securities for less than they paid for them, or retain the securities themselves

World COM Listed at NASDAK USA Stock

Exchange

Took over 60

Companies

$7 Billion expenses

not recorded

Paid $37 Billion & bought

60 Companies

$2 Billion additional

income shown

Default declared in

2002 $41 billion

AT & T is number 1, W. Com was No. 2

Now W. Com is being run under

Business Horizon

World largest Bankruptcy

Use of Corporate Governance is now Must