The Securities and Exchange Commission of Pakistan (SECP) has introduced a forward-looking regulatory development with the release of its Consultation Paper on Standard Principles for Recognition and Conduct of Industry Associations. This paper outlines a structured framework aimed at transforming Pakistan’s financial landscape by gradually enabling the financial sector to regulate itself through qualified industry associations.
This new framework represents a strategic shift in how regulation is approached in Pakistan. Traditionally, industry associations have played limited roles as advocacy groups or facilitators of dialogue between private sector stakeholders and regulatory authorities. However, the SECP now envisions a model in which these associations evolve into key players in governance by becoming Self-Regulatory Organizations (SROs). In doing so, the Commission aligns Pakistan’s financial oversight with global trends where industry associations increasingly contribute to regulatory compliance, ethical enforcement, and long-term sectoral development.
According to the proposal, eligible industry associations will be guided through a phased transition over a period of three years, during which they will assume the functions typically performed by regulatory authorities. These functions include setting ethical benchmarks, monitoring member conduct, enforcing compliance within the sector, and leading initiatives tailored to the unique needs of specific market segments. These new responsibilities will be carried out under the SECP’s broader regulatory vision and supervision.
A major aspect of the plan involves the mandatory restructuring of all trade associations into Section 42 companies under the Companies Act, 2017. This legal transition ensures that such associations will operate as not-for-profit entities, with enhanced transparency and robust internal governance structures. The SECP believes this approach will strengthen institutional accountability and promote financial integrity within the system.
The framework further mirrors international best practices by encouraging diverse and merit-based membership within associations. It places strong emphasis on governance standards, implementing safeguards against conflicts of interest, fostering stakeholder engagement, and establishing fair and impartial dispute resolution mechanisms. Additionally, the associations will be expected to invest consistently in the training of their members and provide education to investors, reinforcing the development of a responsible and informed financial community.
To ensure that representation and regulatory functions are tailored to each segment of the financial industry, the SECP also supports the creation of specialized associations within regulated sectors. These sub-sector-specific bodies will better address the nuances and operational realities of their respective domains. By focusing on the particular challenges and compliance requirements of each segment, the Commission hopes to foster more relevant, effective, and actionable regulatory frameworks.
This initiative signals SECP’s commitment to modernizing the regulatory environment by reducing dependency on central oversight and empowering credible industry-led governance. As the financial sector continues to evolve, particularly in response to growing digitization and innovation, the need for adaptable and collaborative regulatory models has become more pronounced. By enabling industry associations to self-regulate within a well-defined structure, the SECP aims to boost investor confidence, strengthen ethical standards, and encourage sustainable growth across all financial sectors.
This move positions Pakistan closer to international norms in financial regulation and reinforces SECP’s role as a progressive and responsive regulator. Through this transition to self-regulation, the Commission seeks to build a more resilient, transparent, and efficient financial system that can better serve both industry stakeholders and the public at large.