Author: Raja Ali

CDC collaborates with various Banks for Efficient Payment Mechanism for its Mutual Fund and Discretionary Portfolio clients

In continuation of its efforts to help increase ease of doing business in the country, CDC has recently collaborated with various banks for their cash management services for the arrangement of Efficient Payment Mechanism (EPM) for CDC’s Mutual Fund and Discretionary Portfolio clients. The EPM is designed to carry out seamless execution of transactions through the integration of CDC’s Fund Management System with the banks’ systems.

This solution has been developed to transfer payments instantly into the beneficiaries’ bank accounts over a secure VPN connection and aims to bring efficiency by eliminating the need of any physical instrument for execution of payments. By using EPM, Asset Management Companies (AMCs) are able to make transactions of mutual funds under their management through the modes of Interbank Fund Transfers (IBFT), Online transfers, Bankers Cheques and / or Real Time Gross Settlements (RTGS). Currently, this solution is available for redemption and conversion of units, dividend payments, vendor payments and transfer of funds. In the second phase, the EPM solution will aim to automate payments against brokerage, sales load & equity instruction, etc. The complete launch of all these types of payments through EPM will soon enable AMCs to shift their payments from traditional modes to this innovative feature.

In the fourth quarter (Oct–Dec 2019), CDC has signed MoUs with Bank Islami Pakistan Limited, Dubai Islamic Bank Limited and Faysal Bank Limited, making it a total of four banks collaborating with CDC for EPM arrangement with the following statuses:

  1. MCB Bank Limited – Live operations
  2. Bank Islamic Pakistan Limited – Live operations started
  3. Dubai Islamic Bank Pakistan Limited – Live operations started
  4. Faysal Bank Limited – Live operations to commence soon

CDC will soon be finalizing the same arrangement with Bank Alfalah Limited, JS Bank Limited and Allied Bank Limited.

Following AMCs are on board with CDC for EPM and are reaping the benefits of the solution:

  1. MCB – Arif Habib Savings and Investments Limited
  2. NBP Fund Management Limited
  3. UBL Fund Managers
  4. Atlas Asset Management Limited
  5. AKD Investment Management Limited
  6. Habib Asset Management Limited
  7. National Investment Trust Limited
  8. HBL Asset Management Limited
  9. AWT Investment Limited
  10. Alfalah GHP Asset Management Company

CDC launches Zakat Repository System to help increase Ease of Doing Business

In pursuance to Zakat and Ushr Ordinance, 1980 (the “Zakat Law”), Zakat is inter alia, payable on cash dividends declared by Companies. Under the Zakat Law, shareholders may claim exemption from compulsory deduction of Zakat from dividend payments by filing a copy of Zakat Declaration Form on a prescribed format (commonly known as “CZ-50”) duly attested by the notary public OR Solemn Affirmation Letter (the “Letter”) (in case of Non-Muslims) with the Zakat deducting agency (i.e. Issuer or its R/TA).

Ever since the launch of Central Depository System (CDS), those Individual Shareholders who opted for Zakat Status marked as “Muslim Zakat Non-Deductible or Not Applicable” at the time of CDS Account opening / updation are required to submit CZ-50 (in original or attested copy) or the Letter, as the case may be, to CDS Participants. All physical records of CZ-50 or the Letter are preserved by CDS Participants. Issuers/R/TAs may obtain copies of CZ-50 or the Letter from CDS Participants for Zakat Audit purposes in light of Circular dated April 06, 2001.

Since inception, CDC always strives to facilitate the capital market investors in their respective businesses. This strive has taken a faster pace with CDC’s initiatives to increase Ease of Doing Business in the Capital Market in the past few years. In line to this resolve, CDC took an initiative and proposed the concept of Zakat Declaration Repository to the relevant ministry of Government of Pakistan to convert physical forms into electronic form. This step was taken to address the following issues being faced by CDS Participants and Issuers / Share Registrars:

  • Participants perform manual activity of locating the forms for every security within their record at the time of Zakat Audit and then provide the same as and when required by the Issuers or their Registrar.
  • Issuers / R/TAs find it a hassle to obtain CZ-50 / the Letter (as applicable) from the CDS Participants and to undertake various follow-ups in order to retrieve the requisite format.

Through the Zakat Repository System / functionality, Zakat Forms (CZ-50) and Solemn Affirmation Letters of Sub-Account holders who have opted for “Muslim Zakat Non-Deductible” and “Not Applicable” status respectively, will be uploaded and maintained in electronic form by the CDS Participants and the same will be available to the respective Issuers / their Share Registrars.

Benefits of the Zakat Repository System:

  • Reduced labor and hassle on the part of CDS Participants to locate CZ-50 / the Letter at the time of Zakat Audit.
  • Electronic availability of record with easy access and search options.
  • R/TA & Zakat Auditor will be able to access the forms directly from CDS and there will be no need to request the CDS Participants for the same.
  • Increased transparency through proper maintenance of record.

Awareness sessions

In line with its vision to promote awareness and increase the capital market investor base, CDC organized the following awareness sessions in this quarter (July – Sept 2019) in different cities of Pakistan:

City

Venue

Islamabad

ISE Towers

Lahore

LSE Auditorium

Karachi

CDC House

Rawalpindi

Blue Lagoon

Faisalabad

Hotel One

Karachi

ICMA Pakistan

Awareness sessions for students of Bahria University, Karachi

In accordance with its continuous resolve to educate students – the financial leaders and partakers of the future – about Pakistan Capital Market, CDC conducted an awareness session for the students of BBA and BS Computer Sciences, Bahria University, Karachi. Representatives from PD and Marketing Department led an interactive presentation on the dynamics of stock market and CDC’s role in its workings. CDC’s landmark achievements including CDS, Investor Protection and Awareness measures and Digitalization initiatives were highlighted. The prospects of investing in the stock market, internship and job opportunities and possibilities of research projects were discussed. The session was well-appreciated by the faculty and students of Bahria University.

Exchange Traded Funds (ETF) and CDC’s role

An exchange-traded fund (ETF) is a collection of securities—such as stocks—that tracks an underlying index. An ETF can contain many types of investments including stocks, commodities, bonds, and a mixture of investment types. An ETF is a marketable security, meaning it has an associated price that allows it to be easily bought and sold.

The convenience provided by ETFs as well as the low-cost structure of these products are key benefits which have played a vital role in the popularity of ETFs globally during the last few years. The SECP has recently approved the necessary regulatory changes required in the PSX Rule book to facilitate the operations of the ETF product in Pakistan. As always, CDC is at the forefront of facilitating the Implementation of this important project and is working closely with all the stakeholders for the launching of ETFs for which it will provide both Depository and Trustee Services.

CDC’s role as a Depository will be to facilitate the smooth processing of ETFs in the Central Depository System (CDS), which include the following functions:

  1. Efficient and timely Induction of ETF Units in CDS as a Eligible Securities;
  2. Hassle free and automated Issuance and Redemption of ETF Units for investors;
  3. Facilitating market participants in converting underlying securities into ETF units and vice versa.

CDC’s role as a Trustee will largely be in-line with the trustee function that it performs while being a trustee of open-ended funds / schemes which include the following functions:

  1. Ensuring that the creation, issuance and redemption process of ETF units is accordance with Constitutive Documents;
  2. Smooth and efficient handling of all transactions initiated by AMCs,
  3. Providing sound and secure Custody of securities / assets under the control of trustee, on behalf of the Fund.

In line with its vision to play an active role in market development projects, CDC has ensured that it is completely ready on its part for both the Depository & Trustee Operations to facilitate the launch of ETFs by any AMC in Pakistan. This readiness is part of CDC’s commitment to continually strive for the creation of an efficiently functional market place by making a remarkable difference to how it operates while empowering the people and safekeeping their assets.

ITMinds offering of its Back Office Accounting Software as a Service

CDC’s subsidiary, ITMinds Limited, has launched the offering of its custom-made comprehensive fund administration solution, the Back Office Accounting Software (BOAS), as a service to Asset Management Companies (AMCs). BOAS, being state of the art software, has been developed by an in house IT Team and has gained the attention of AMCs who have shown interest in acquiring this software on a rental model. Considering the challenges being faced by AMCs with reference to tailor made fund administration software available in the market with regard to both cost and the required support, many AMCs agree that BOAS is both an efficient & viable solution for them at the most competitive rates. ITMinds’ Back Office Accounting Software will enable AMCs to achieve new heights of efficiency, quality and innovation in all aspects of their fund administration operations.

CDC embarks on the conceptualization & development of a Digital Land Repository/ Registry along with Association of Builders & Developers of Pakistan (ABAD)

The Association of Builders and Developers of Pakistan (ABAD) and Central Depository Company of Pakistan (CDC) have signed a historic Memorandum of Understanding (MoU), on the 12th of Sept 2019, for the digitalization of land records through a Land Repository System, which will be the first ever system of its kind in the country envisioned to cater to the need for Electronic Registration of Land and Land Titles.

The signing ceremony was held at ABAD House, Karachi. Vice Chairman ABAD Abdul Kareem Adhia and CEO-CDC Badiuddin Akber signed the MoU witnessed by Chairman ABAD Muhammad Hassan Bakshi, Chairman CDC Moin M Fudda, Senior Vice Chairman ABAD Anwar Dawood, Chairman Southern Region Ibrahim Habib, senior officials of CDC and members of ABAD who were also present on this occasion.

Through this MoU, both CDC and ABAD will work on the legal & operational assessment, pilot project implementation and system advocacy for the establishment of the Land repository system which is aimed to facilitate transparent transfer of ownership settlements of sale/purchase and leasing/rentals. The Repository is envisaged to act as a custodian of land/property titles by converting the same into digital (paperless) form, thereby functioning as the operational office for the maintenance of land/property titles. It will also facilitate the credit lending process by allowing lenders to gain comfort as to the quality of collateral in case of land/property, thus leading to greater transparency in the property market. The improvements brought about in the land records and administration process as a result of the proposed project will lead to an environment where mortgages will be regarded as an attractive asset, and this–together with a strong legal infrastructure supporting the registration, enforcement and eventual pledging and sale of mortgage loans–will lead to the development of a strong secondary market.

Addressing the ceremony, Mr. Moin M Fudda congratulated ABAD for initiating such a momentous task. He said that the electronic registration of land documents will help abolish possibilities of fraud and corruption. Chairman ABAD, Mr. Muhammad Hassan Bakshi, said that ABAD is working for the promotion of legal and bona fide construction activities in Pakistan and is eager to establish a transparent and fair system for the benefit of all stakeholders and the nation at large.

Addressing the ceremony, Mr. Badiuddin Akber, CEO-CDC, highlighted the proposed objectives of Land Repository System and CDC’s competence to handle projects of such a magnitude. Mr. Zaigham Rizvi, Chairman Prime Minister’s Task Force for Housing, also spoke on this occasion and stressed on the importance of this project for overcoming the constraints in the development of real estate and housing finance markets. Vice Chairman ABAD, Mr. Abdul Kareem Adhia, thanked all guests and acknowledged their support of the initiative.