CDC introduces Limit on Assets under Custody Regime
Establishment of CDC was a defining moment in the history of Pakistan Capital Market. Our inception brought operational transparency and reduced the risk of human error in capital market transactions by introducing various procedures and solutions, ultimately nurturing a protective environment for investors. Time and again we have been taking steps to widen the scope of protection provided to the investors.
Recently, CDC and SECP have taken a joint initiative to introduce a security protocol that poses Limit on Assets under Custody that can be held by Trading Right Entitlement Certificate (TREC holder) Participants (Brokers). The introduction of this protocol is a revolutionary step in Investor protection which will reduce the extent of loss in case of adverse circumstances and also aims at enhancing the level of operational compliance.
“Limit on Assets under Custody” prescribes a limit to the extent of which a TREC holder (Broker) may have custody of securities under their control. As per the advice of SECP, the Maximum Custody Limit is 25 times of the reported Capital Adequacy Level. The method of calculating Capital Adequacy Level has been identified beforehand. This initiative would act as a damage control protocol when such situation arise.
This regime is applicable to all TREC holders and compliance is mandatory. CDC has also devised a set of periodic actions which will be taken against a TREC holders in case of non-compliance of these procedures.