ISE INVESTORS PROTECTION FUND REGULATIONS

PREAMBLE

WHEREAS the Management of Islamabad Stock Exchange considers that the investors’ confidence in the fair dealings at the Exchange is the key to rapid development of the market;

AND WHEREAS to ensure effective risk management in secondary market trading and to protect investors’ interest in the case of a default by a member of the Exchange there is need to have necessary regulations;

NOW, THEREFORE, The Islamabad Stock Exchange (Guarantee) Limited in exercise of the powers conferred by sub-section (1) of section 34 of the Securities and Exchange Ordinance, 1969 makes, with the prior approval of the Federal Government, the following regulations, namely: -

1. Short title and commencement

i. These regulations may be called “ The ISE Investors Protection Fund Regulations.”

ii. These regulations shall take effect upon their publication in the official Gazette of Pakistan.

2. Definitions

In these regulations, unless the subject or context otherwise requires: -

(a) “ Authority “ means the Corporate Law Authority;

(b) “ Board “ means the Board of Directors of the Exchange;

(d) “ Fund “ means the ISE Investors Protection Fund;

(e) “ Investors “ means a person, not being Member, his agent or representative, who has purchased or sold any of the securities listed at the Exchange;

3. Establishment of Fund

The fund shall be established by the Board with contributions as follows: -

(a) There shall be an initial contribution of rupees one million by the Exchange.

(b) 1/3^rd or 33.33% of the clearing house trading fee paid by the members of Exchange would be allocated to the Fund every year until the total amount in the Fund is raised to rupees 100/- million.

Provided that on the direction of the Authority or through a Board resolution, the Fund shall cease to exist upon the creation of a national fund for the protection of investors through appropriate legislation.

4. Eligibility of Claims

All claims of an investor arising out of transactions entered into as per Rules and Regulations of the Exchange and approved by the Arbitration and Advisory Committee of the Exchange would be eligible to be considered under these regulations.

5. Procedure for Settlement of Claims

In the event of default of a Member, in addition to any surplus after distribution of losses as per Members’ Default and Procedure for Recovery of Losses Regulations 1996 of the Exchange, an amount may be set aside out of the Fund to satisfy the claims of investors against that defaulting Member in the manner provided hereunder:

In case the eligible claims of investors determined against the defaulting member exceed the amount available for settlement of such claims of investors and the claims are to be satisfied on prorata basis, a contribution shall be made out of the Fund in accordance with the following allocations:

Prorate Distribution Contribution Amount

Above 40% & Upto 50% Rs. 250,000/-

Above 30% & Upto 40% Rs. 500,000/-

Above 20% & Upto 30% Rs. 750,000/-

Below 20% Rs.1,000,000/-

Provided that no allocation shall be made out of the Fund in case the amount available for settlement is more than 50% of eligible claims of the investors determined against the defaulting member.

Provided further that the Board may alter any of the above slabs or allocate the contribution amount in its sole discretion if need so arises.

6. Management of the Fund

The Management of the Fund shall vest in the Board who may regulate the same through a Committee to be constituted under these regulations to process the claims and their settlements. The Committee shall include two outside directors who shall not be members of the Exchange.