Pakistan’s Securities and Exchange Commission (SECP) is proposing the introduction of referral incentive programs designed to encourage greater participation in the country’s capital market by allowing existing investors to refer new clients to licensed securities brokers. The proposal forms part of a broader regulatory update aimed at modernizing market practices and expanding the investor base within Pakistan’s financial ecosystem.
The initiative has been outlined in a concept paper released by SECP as part of proposed amendments to the Securities Brokers (Licensing and Operations) Regulations, 2016. According to the regulator, the proposed framework is intended to establish a structured mechanism through which securities brokers can engage their existing clients as referrers who introduce potential investors to brokerage services.
Under the suggested framework, brokers would be permitted to operate formal referral programs that enable their current clients to recommend new investors. These programs would function under clearly defined rules and conditions developed by SECP to ensure transparency, maintain regulatory oversight, and safeguard investor interests. The move reflects an effort by the regulator to adopt outreach strategies that have already been implemented in several major financial markets worldwide.
The proposal specifies that incentives offered under the referral programs will be non-cash in nature. Instead of direct monetary payments, participating investors may receive benefits such as commission discounts, trading credits, or other similar advantages related to brokerage services. The incentives will also be subject to caps and limited timeframes to prevent misuse or excessive promotion that could potentially undermine regulatory standards.
Both the referring client and the newly onboarded investor would be eligible for these incentives under the framework. However, the benefits would only apply within the limits defined by the regulator. By introducing these restrictions, SECP intends to balance investor engagement efforts with responsible market conduct.
In addition to offering incentives, securities brokers participating in referral programs will be required to maintain clear communication with clients regarding the terms of the scheme. Brokers must explicitly outline the responsibilities, benefits, and conditions associated with the referral program to ensure participants fully understand how the initiative operates. Transparency will be a key requirement within the proposed structure.
Furthermore, brokerage firms will remain responsible for addressing and resolving any disputes that arise from referral arrangements. This obligation ensures that accountability remains with licensed market participants rather than being shifted to individual investors who act as referrers. The concept of referral incentive programs is already widely used across several international financial markets. In jurisdictions such as the United States, United Kingdom, Switzerland, Hong Kong, Malaysia, and Singapore, brokerage firms commonly use referral-based strategies to attract new investors. Incentives in these markets often include trading coupons, commission waivers, reward points, and similar non-cash benefits that encourage existing clients to promote brokerage platforms among their networks.
SECP believes that introducing a regulated referral system in Pakistan can help align the country’s capital market practices with these global standards while maintaining adequate investor protection. The regulator emphasized that the initiative is intended to support easier client onboarding processes and ultimately broaden the investor base participating in Pakistan’s stock market.
Expanding investor participation has long been a key priority for regulators seeking to deepen Pakistan’s capital markets. By leveraging the networks of existing investors, referral programs may provide brokers with an additional channel for attracting new market participants while operating within a structured regulatory framework. The concept paper detailing the proposed amendments and referral program structure has been made publicly available on the SECP website. The commission has invited stakeholders, including brokerage firms, investors, and other market participants, to submit their feedback on the proposal. Interested parties have been given a fifteen-day window from the date of publication to provide comments through email as part of the consultation process.
Through this consultation phase, SECP aims to gather industry input before finalizing any regulatory changes, ensuring that the proposed referral system operates effectively while maintaining market integrity and investor protection.
Follow the PakBanker Whatsapp Channel for updates across Pakistan’s banking ecosystem