The Securities and Exchange Commission of Pakistan (SECP) initiated the concept of Digital Asset Management Companies (AMCs) to encourage financial inclusion and streamline investment in AMCs.
The concept paper has been posted on the commission’s website for public consultation, according to a press release.
Digital AMCs have the capability to provide ease to the investors and increase the investor base, by decreasing paperwork, offering services remotely, and leveraging customer data.
These companies will give all AMC services, like introducing allowed Collective Investment Schemes (CIS), online account opening to issuance and redemption of units, and inter-CIS conversions via digital ways, thus the investor will no longer be required to visit any distribution point physically.
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Moreover, the concept note focuses on areas like challenges faced by brick-and-mortar AMCs, key goals underlying the development of digital asset management companies, the potential of digital AMCs in Pakistan, and critical regulatory challenges. It also offers a platform for addressing these identified gaps.
Being internet-based, a Digital AMC will have the potential to overcome some of the challenges identified above and would also lead in increasing investor penetration in the mutual fund sector. Digital AMC would also stimulate innovation and competition in this area of the capital markets, consequently supporting sector development.
Since the Digital AMC will be able to allocate units of mutual funds online, this should also help in the development of a wider range of digital mutual fund distribution platforms.
At the same time through the publication of this Concept Paper, the SECP is also intending to test the Digital AMC model in a sandbox testing environment.
Currently, there are 21 AMCs in Pakistan with assets under management of Rs 1.2 trillion. The mutual fund industry in Pakistan has almost 320,000 investors, 0.14 percent of the total population, showing that this segment of capital markets is under-penetrated against other international jurisdictions.
