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Investment rules for provident fund notified

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) on Thursday notified the Employees Provident Fund (Investment in Listed Securities) Rules, 2016 aimed at securing the hard-earned money of workers contributing to such funds.
The SECP undertook an extensive consultative process before finalising the rules and three conferences were held in this regard in April 2016 with relevant stakeholders such as the ICAP, ICMAP and MUFAP.
The Companies Ordinance, 1984, mandates the maintaining of provident funds by companies. Owing to market dynamics and in order to encourage provident funds to make investments in listed securities to earn better returns, Employees Provident Fund (Investment in Listed Securities) Rules were introduced in 1996.
With continuous innovation in equity markets and development of new products introduced by non-banking finance companies for better returns, provident funds got better choices in, the market.
As risk and return go together, therefore, in order to protect savings of employees of the companies, the SECP drafted new rules for the purpose.
The investment criteria have been tightened where investment is made out of the provident fund. The aggregate investment in constituting company or its associated undertakings has been restricted to five per cent of the size of the fund.
Investment in IPO has been allowed subject to the stringent conditions and the submission of reports regarding investments out of provident fund/trust after every six months has been made mandatory.
The provident funds can invest in securities listed on the Pakistan Stock Exchange in Pakistan, but such investments cannot be 50pc of the size of the employees’ provident fund.
The rules also say that the provided total investment in listed debt securities, listed debt collective investment schemes and money market collective investment schemes registered as notified entity with the SECP cannot exceed fifty per cent of the size of the employees’ provident fund.
The total investment in listed equity securities and listed equity collective investment schemes, registered as notified entity with the SECP, shall not exceed 30pc of the size of the employees’ provident fund.



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