SECP Moves Forward with Major Reforms for Mutual Fund Industry

The Securities and Exchange Commission of Pakistan (SECP) hosted a crucial consultation with representatives from the Mutual Funds Association of Pakistan (MUFAP), senior officials from Asset Management Companies (AMCs), and Pension Fund Managers. The meeting's focus was on upcoming amendments to the Non-Banking Finance Companies and Notified Entities Regulations, 2008, particularly in streamlining costs for retail investors.

The session, led by SECP Chairman and key commissioners, culminated in a pivotal agreement to replace the existing Total Expense Ratio (TER) Capping regime with a more investor-friendly Management Fee Capping model. This move is aimed at reducing the cost burden on retail investors. In addition, the reimbursement of indirect expenses by mutual funds will be prohibited, with clear disclosure on the total expenses involved.

These new regulations will come into effect on July 1, 2025, marking a transformative shift in mutual fund strategies, prioritizing retail investors. Alongside the cost reforms, discussions included the establishment of a Market Development Fund to boost investor education and financial literacy, fostering a savings culture within households and businesses.

A digital transformation is also on the horizon, with the SECP planning a comprehensive roadmap to modernize the mutual fund industry. This will leverage fintech advancements, streamline payment systems, and enhance distribution models to ensure greater financial inclusion. Progress in digital onboarding, KYC sharing, and customer experience improvements was acknowledged, but further advancements are still planned to simplify processes for users.

Moreover, a renewed emphasis on Shariah compliance for mutual and pension funds was outlined, aligning the industry with Shariah Governance Regulations. The SECP has already sought feedback on this through public consultation and released draft amendments in January 2025 to stimulate further industry dialogue.

In conclusion, the meeting reaffirmed the SECP's commitment to creating a more transparent, efficient, and retail-focused mutual fund industry, which will play a pivotal role in the growth of Pakistan's capital markets and contribute to a stronger financial ecosystem