The Securities and Exchange Commission of Pakistan (SECP) has released a detailed consultation paper proposing a comprehensive framework designed to elevate the role of industry associations and promote self-regulation within the country’s financial ecosystem. Titled Standard Principles for Recognition and Conduct of Industry Associations, the paper outlines strategic guidelines aimed at strengthening market discipline, enhancing governance, and boosting compliance across various sectors.
In response to the evolving demands of today’s regulatory environment, SECP’s initiative marks a shift in how industry associations are expected to function. Traditionally viewed as advocacy or representative bodies, industry associations are now recognized globally as vital contributors to economic policy development, regulatory compliance, and ethical industry conduct. SECP’s proposed framework seeks to institutionalize this expanded role, enabling associations to serve as credible and responsible Self-Regulatory Organizations (SROs).
A central feature of the proposal is the conversion of all recognized trade and industry associations into Section 42 not-for-profit companies under the Companies Act, 2017. This structural change is aimed at ensuring operational transparency, accountability, and alignment with international standards of financial integrity. SECP is mandating a transition period of three years, during which eligible associations will be expected to evolve into functioning SROs capable of setting sector-specific ethical standards, monitoring conduct, ensuring compliance, and leading education and awareness initiatives.
The framework outlines a robust set of conditions and governance principles that associations must fulfill to qualify as SROs. These include a merit-based and diverse membership structure, clearly defined governance roles, effective safeguards against conflicts of interest, transparent dispute resolution mechanisms, and a strong internal code of conduct. Associations will also be required to invest in member training and investor education to ensure their long-term relevance and capability.
To facilitate focused representation and sector-specific advocacy, SECP is encouraging the creation of specialized associations within its regulated domains. Each of these associations would cater to the unique operational, regulatory, and compliance needs of their respective sub-sectors. This move is expected to foster deeper engagement between industry players and regulators, enabling a more agile and responsive policy environment.
By enabling industry associations to function as SROs, SECP aims to introduce a tier of co-regulation that complements its own oversight. Such an approach is widely acknowledged to build a culture of voluntary compliance, reduce enforcement costs, and encourage the proactive identification and resolution of industry-specific issues.
The broader goal of this framework is to cultivate a transparent, responsible, and competitive financial environment in Pakistan. With the right checks and balances in place, SECP believes that well-governed and empowered industry associations can significantly contribute to market integrity, investor confidence, and economic stability.
Stakeholders, including existing industry associations, market intermediaries, and investors, are invited to review the consultation paper and submit feedback, as SECP remains committed to refining the framework based on inclusive and constructive dialogue. This initiative stands as a testament to SECP’s forward-looking approach in building a modern regulatory ecosystem that supports sustainable growth and self-regulation.