Calculation, reporting of NCB – SECP issues guidebook for Brokerage Houses

The Securities and Exchange Commission of Pakistan (SECP) has issued a guidebook for all brokerage houses of the stock exchanges and their auditors for compliance on calculation and reporting of Net Capital Balance (NCB) of brokerage houses of Pakistan Stock Exchange (PSX).

According to the recently issued SECP guidebook, Net Capital Balance (NCB) as prescribed in Third Schedule read with Rule 2(d) of the Securities and Exchange (SEC) Rules 1971 is a measure of financial soundness of a broker and determines the capacity of brokers to take exposure in capital markets: hence holds a great significance in the capital market industry. Therefore, it is imperative that consistent methods and treatment for computation of NCB are followed while computing and auditing the NCB Certificate.

The Commission has issued various clarifications to stakeholders including auditors/brokerage houses from lime to time for proper computation of NCB in accordance with the requirements of Third Schedule read with Rule 2(d) of the SEC Rules, 1971. However, pursuant to promulgation of Securities Brokers (Licensing and Operations) Regulations 2016, the brokers shall submit an audited statement of NCB on half yearly basis till the lime a notification is issued by the Commission after which the requirement of submission of liquid capital shall be applicable.

For this purpose, the Commission has considered it appropriate to compile and issue a guidebook in respect of various clarifications previously issued either individually, collectively or through feedback of stakeholders and has also included certain new clarifications to facilitate users to obtain necessary guidance and clarity in matters relevant to NCB. Any clarifications issued in the future will also be made part of the book.

In view of this, all brokerage houses of the stock exchanges and their auditors appointed for audit of NCB are hereby directed to ensure compliance of the clarifications in letter and spirit. Any violation or circumvention in calculation of NCB shall be dealt with under the provisions of the applicable laws. The stock exchanges, ICAP and ICMAP are requested to disseminate the information under intimation to the Commission to all their members for compliance and record and the same shall also be placed on their respective website, the SECP added.