DSS PROCEDURES Page 1

PROCEDURES FOR

DIRECT SETTLEMENT SERVICE

FOR

NON-RESIDENT PAKISTANI

(EXTERNAL)

June 23, 2021

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Table of Contents

1. INTRODUCTION 3

2. MARKETS COVERED .................................................................................................................... 3

3. ACCOUNT OPENING PROCESSES IN CAPITAL MARKET WITHIN NRVA FRAMEWORK .................. 4

4. CDC IAS ACCOUNT UPDATE ........................................................................................................ 5

5. TRADING VIA DSS SUBSCRIBED IAS ACCOUNT............................................................................ 6

6. CAPITAL GAINS TAX .................................................................................................................... 8

8. CORPORATE ACTION TREATMENT .............................................................................................. 8

9. TREC HOLDER COMMISSION & OTHER CHARGES ....................................................................... 9

10. ALERTS & NOTIFICATIONS .......................................................................................................... 9

11. DISPUTE HANDLING TRANSACTIONS .......................................................................................... 9

12. REPORTS & ACTIVITIES ............................................................................................................... 9

13. REPORTING TO BANKS ............................................................................................................... 9

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1. INTRODUCTION

In order to broaden the investor base in the Pakistan’s securities market and attract funding from overseas, State Bank of Pakistan (SBP) is introducing several measures to ease the process of investment for interested groups such as Non-Resident Individual Pakistanis (NRPs). Previously, SBP had introduced a Special Convertible Rupee Account (SCRA) to allow Non-Residents and Foreigners to invest in Pakistan’s securities market. SCRA can be opened with any Authorized Dealer (Bank) in Pakistan and can be funded by remittances from abroad. However, the account opening requirements before NRP can commence trading are quite tedious. The NRP has to open separate accounts such as SCRA with banks, trading account with Broker, and sub account with CDC. Apart from that, SCRA account opening requirements also require lengthy documentary procedures that deter Non-Resident Individual Pakistani to take this route to start investment in Pakistan.

Non-Resident Rupee Value Account (NRVA) is an initiative by SBP to address the limitations of the SCRA account and make the account opening process investor friendly and efficient. NRVA will provide access and ease of investment in shares, residential and commercial real estate, government debt securities, and term/remunerative deposit products offered by banks on repartriable basis. One of the ways that the NRVA framework will achieve this aim is through digitalizing the account opening processes throughout the capital market chain.

The NRVA framework for capital market investment is designed in such a way that the NRP will be able to submit all the relevant information and documentation required to open an NRV account on the online portals of the designated banks. From this point onwards, on the authorization of the NRP, this information will be transmitted to all the relevant capital market entities and used to open CDC investor account, trading account with Broker and UIN registration with NCCPL.

This is an extensive undertaking involving system to system integration between authorized banks, CDC, NCCPL, and Stock Brokers. CDC is taking the lead by being designated as the central point where all the NRP information received from banks will be pooled and then disseminated to other capital market entities.

2. MARKETS COVERED

2.1. Trades executed in Ready and Odd Lot Market.

2.2. State Bank has decreed that initially only a limited number of banks will be able to open and maintain NRVA accounts for NRPs. The list may be expanded later on the prerogative of SBP. The current list of banks includes:

a. Bank Alfalah Limited

b. Faysal Bank Limited

c. HBL Limited

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d. MCB Bank Limited

e. Meezan Bank Limited

f. Samba Bank Limited

g. Standard Chartered Bank (Pakistan) Limited

h. UBL Limited

i. Habib Metropolitan Bank Limited

j. Dubai Islamic Bank

3. ACCOUNT OPENING PROCESSES IN CAPITAL MARKET WITHIN NRVA FRAMEWORK

3.1. On selection of stock Investment option on the Bank’s Portal, client’s data will be digitally routed to CDC and other capital market entities, where the process of opening of IAS account, Creation of UIN and opening of Trading will be commenced.

3.2. UIN CREATION IN NCCPL AND IAS ACCOUNT OPENING

a. Before trading commences NRP UIN has to be registered with NCCPL. NRP UIN in this case will be CNIC/NICOP or Passport No.

b. In case any shortcoming/EDD required in the documents any capital market entities may contact the Bank / NRP for the removal of discrepancy (If any).

3.3. TREC HOLDER TRADING ACCOUNT OPENING

a. List of TREC Holders that have been integrated into NRVA framework and are made available by CDC to the designated banks for selection by the NRP as and when the NRP selects the option to invest in Pakistan’s stock market on the banking portal/mobile app.

b. Data received by CDC from the bank will be routed to the selected TREC Holder through the digital channel for opening of NRP trading account and generate new Back Office ID/Client Code for NRP. However, if their requirements of Enhanced Due Diligence and AML/CFT compliance are not being fulfilled by the data, they can contact the NRP directly or through CDC for more information.

c. If the TREC Holder fails to open the trading account within the stipulated time period, NRP will be informed the reason of failure and request selection of another TREC Holder.

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3.4. INFORMING THE NRP

a. On successful completion of all the activities listed above (i.e. UIN Registration, DSS subscription, NRP IAS Account and trading account opening and tagging), a welcome email will be transmitted to the NRP informing:

1. NRP UIN has been successfully registered in NCCPL database.

2. IAS account opening details.

3. CDC Access Link and login credentials.

4. Information that the account is DSS subscribed and DSS guidelines.

5. Information on client code and links to TREC Holder trading portal.

6. CDC designated bank and their Account No.

7. Fee schedule and charges.

8. Call center and email group details

9. Other information

4. CDC IAS ACCOUNT UPDATE

4.1. Account updation will be executed on the basis of request received from through clients through registered email address on roshandigital@cdcpak.com

4.2. IAS may require additional documents to support the request

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5. TRADING VIA DSS SUBSCRIBED IAS ACCOUNT

5.1. Accessing CDC Access Portal

a) First time visitors to the CDC Access website go through the initial login process where they are required to verify identity by entering secret information and force change the CDC given password.

b) Earmarking Instruction can be initiated via the CDC Access website (www.cdcaccess.com.pk).

5.2. Managing Beneficial TREC Holder

a) The Beneficial TREC Holder (BTH) is the TREC Holder with which the NRPs have prior arrangement to execute trades.

b) For NRP DSS clients, the BTH will be automatically selected on the basis of the selection made by NRPs at the bank portal.

c) For NRP DSS clients the BTH can only be changed if it is changed by NRPs at CDC Access portal.

5.3. Earmarking Instruction

a) Earmarking Instruction (EI) will mean an irrevocable instruction given by DSS client to CDC:

b) To block for a perpetual period the complete portfolio of securities and cash as available in the DSS subscribed IAS account of the client. These blocked securities and cash will not be available to the client for any other transactions or withdrawal.

c) To settle trade(s) on settlement date and within the designated time, provided that the trades executed are within the limits of the securities and cash portfolio earmarked in the DSS subscribed IAS account. Any trade that exceeds the limits of the Earmarked securities and cash will be rejected and settled by the respective TREC Holder.

d) The client will have to accept a disclaimer that the whole portfolio of cash and securities as available in the DSS subscribed IAS Account will be shown to the selected BTH.

e) DSS clients will have the option to de-allocate (de-earmark) the perpetual earmarking of their IAS account subject to the condition that there are no pending settlements of

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trades. Once earmarking is deactivated the portfolio of cash and securities in the DSS subscribed IAS account will not be available for trading.

5.4. Modes of Trade Execution

TREC Holders provide various modes through which the NRP can commence trading:

a) Place trade order on TREC Holder provided online portal/mobile app.

b) Place trade order via phone call

c) Place trade order via email

5.5. Trade Execution – Buy Case

a) For a buy transaction, NRPs must ensure that sufficient cash balance is available in their DSS subscribed IAS account before trade execution.

b) In order to make funds available in DSS subscribed IAS Account, NRPs can transfer the required funds from their NRVA cash account to CDC designated bank account.

c) Upon ensuring that sufficient funds are available with CDC, NRP will initiate buy trade execution instruction to the concerned TREC Holder through the modes listed above.

d) Additionally, the NRP who have opted the conventional mode can also buy securities on the basis of funds that are due from settlement of sell transactions that were conducted on or before the settlement date of the buy transaction (Intra/Inter day trading). However, there are certain restrictions on Shariah (Islamic) based client.

e)

5.6. Trade Execution – Sell Case

a) For a sell transaction, NRPs must ensure that sufficient securities balance is available in their DSS subscribed IAS account before trade execution.

b) Additionally the NRPs will also have the option to sell securities that were bought before and are due for settlement on or before the settlement date of the sell transaction (Intra/Inter day trading). However, there are certain restrictions on Shariah (Islamic) based client.

c) Upon ensuring that sufficient securities balance is available with CDC, the NRP will initiate sell trade instruction to the concerned TREC Holder through the modes listed above.

d)

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5.7. NRP Cash Withdrawal

a) NRP can initiate cash withdrawal request through CDC Access website or through other means (such as formal request through registered email etc.).

b) Upon receipt of request fund transfer on the basis of availability of funds.

6. CAPITAL GAINS TAX

6.1. Capital gains tax (CGT) withheld upon sale transaction by NRP, will be deducted from the respective NRP IAS accounts as per the CGT report provided by NCCPL on a monthly basis.

7. CORPORATE ACTION TREATMENT

7.1. Bonus Shares

a) Bonus shares will be credited into the NRP IAS account as and when announced and credited by the respective issuers in accordance with existing procedures for Bonus Issue.

7.2. Right Shares

a) Right shares offered by the Issuer shall be credited to NRP account on the basis of available holding of NRP in such security at the time of book closure.

b) NRP will have the option to either dispose off Right entitlement by the way of trading or can subscribe for the right shares.

c) NRP requests for subscription of right entitlements and payment through registered email address two day prior to last pament date. NRP will ensure that the required funds are available with CDC for the subscription payment.

d) CDC IAS staff will process the letter of right subscription request for NRP in CDS.

e) CDC IAS shall make payment on behalf of the NRP via cheque in the designated bank account of the Issuer to complete the subscription process.

f) NRP will receive credit of shares subscribed on successful processing of the Right Subscription request according to the existing procedures.

7.3. Cash Dividend

a) Cash dividends will be credited into the NRP NRV account on the next business day after the dividends are credited by Issuer / Paying Agent in CDC designated bank account.

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b) Counterfoil/Warrant will be emailed to the NRP for record purposes.

8. TREC HOLDER COMMISSION & OTHER CHARGES

8.1. CDC IAS will deduct TREC Holder commission and other charges from the NRP cash maintained with CDC on a monthly basis. Accordingly payment (after deducting tax on commission) will be made to the concerned TREC holders. Tax amount will be deposited to government treasury as per existing procedures

9. ALERTS & NOTIFICATIONS

The NRP IAS account holder will be notified through eAlerts pertaining to the account opening process and transactions through the DSS subscribed IAS account.

10. DISPUTE HANDLING TRANSACTIONS

It is responsibility of NRP regarding selection of Beneficial TREC Holder for the purpose of trading or dealings and entering into mutually agreed upon terms and conditions. CDC in any case will not be responsible or liable for any such dealings/trading or matters taking place between the NRP and the TREC Holder.

11. REPORTS & ACTIVITIES

11.1. NRP will have access to all the reports that are available with respect to DSS activities, Cash and Security balances and other reports that are available for IAS account holders.

12. REPORTING TO BANKS

12.1. SBP requires banks to provide trail of the movement of funds to and from the NRP NRV account .In this respect CDC will provide the banks with Broker Note/Bill which will serve as evidence for NRPs fund movement due to trading activities conducted through their DSS subscribed account.

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“Annexure A”

List of CDC Designated Bank Accounts for Roshan Digital Accounts

Title: Central Depository Company of Pakistan Limited

# Bank Short

Name IBAN Bank Branch City

1 UBL PK95UNIL0109000221903166 United Bank Limited Pakistan Stock Exchange Branch Karachi

2 HBL PK07HABB0000357900098001 Habib Bank Limited Pakistan Stock Exchange Branch Karachi

3 BAFL PK90ALFH0012001005052541 Bank Alfalah Limited Pakistan Stock Exchange Branch Karachi

4 FABL PK70FAYS3359390900236890 Faysal Bank Limited IBB DHA PHASE VII EXT Branch Karachi

5 MCB PK07MUCB0142203010000444 MCB Bank Limited Mehdi Tower Branch Karachi

6 MEZN PK44MEZN0001540104638102 Meezan Bank Limited Gulbai Head Office Branch Karachi

7 SAMBA PK25SAMB0000002000875522 Samba Bank Limited Fountain Branch Karachi

8 HMB PK04MPBL0118217140141494

Habib Metropolitan

Bank Limited Pakistan Stock Exchange Branch Karachi

9 DIB PK52DUIB0000000677940001 Dubai Islamic Bank Pak Limited Pakistan Stock Exchange Branch Karachi