Does a company need an SECP licence before offering investment advice?

A company offering regulated securities or futures investment advice in Pakistan generally requires the appropriate licence from SECP before commencing that business. Incorporation does not itself authorise securities advice. The Securities Act, 2015, Futures Market Act, 2016 and Securities and Futures Advisors (Licensing and Operations) Regulations, 2017 provide the principal framework.

The requirement depends on the actual service, not simply what the company calls itself. Educational articles, general market commentary, personalised investment recommendations, brokerage, portfolio management and derivatives advice can present different legal questions. A disclaimer saying "not financial advice" does not necessarily exempt activity that substantively meets a regulated definition.

Characterise the proposed service

Inspect the website, mobile application, subscription terms and actual customer communications. Determine whether the company recommends securities or futures to others for consideration.

A newsletter offering general analysis may require different assessment from a paid service issuing personalised buy and sell instructions based on customers' portfolios.

The legal description should follow what clients actually receive, rather than marketing language adopted to avoid a licence.

Securities and futures categories

Advice involving shares and other securities can engage the Securities Act, while futures advisory activity can engage the Futures Market Act.

Where a business provides both, its licence application and regulatory plan should address every relevant regulated activity.

An adviser licence is not an automatic brokerage, asset-management or custodial licence. The proposed customer journey should be mapped carefully.

SECP licensing powers

SECP's official guidance identifies securities advisers and futures advisers as licensed activities under the corresponding legislation and 2017 regulations.

Regulation 5 provides the application framework. The Commission assesses eligibility, compliance and relevant market and public-interest considerations.

Prospective applicants should use the latest consolidated regulations because financial, governance and documentary requirements may be revised.

Company eligibility and objects

The applicant must establish an eligible legal structure and demonstrate authority to undertake its proposed business.

A company incorporated as an IT consultancy should not assume that its general technology objects alone supply financial-adviser authorisation.

The company's constitutional documents, beneficial ownership and management structure should align with the licensing category.

Directors and management fitness

Regulators may examine directors' qualifications, relevant experience, integrity, past regulatory conduct and financial soundness according to applicable fit-and-proper criteria.

Prepare verified CVs, education records, declarations and complete employment histories.

A qualified technical developer is not automatically an eligible investment-advisory chief executive merely because the company uses an algorithm.

Capital and operational capacity

Licensing regulations may prescribe capital or financial-resource conditions and ongoing operational requirements. The exact thresholds must be checked in the applicable consolidated regulations.

Funds claimed as paid-up capital should be genuine and supported by banking and accounting records.

The business plan should account for compliance, record-keeping, consumer complaints, systems, independent oversight and renewal costs.

Compliance policies

An advisory business may need conflict-of-interest rules, disclosures, client onboarding, record retention and protections against misleading recommendations.

The law applicable to particular services may impose customer-suitability or risk-disclosure requirements. The company should identify them before accepting clients.

A founder who trades the instruments recommended to customers must address relevant conflicts transparently.

Preparing the application

Submit the prescribed form and accompanying constitutional documents, ownership information, management and compliance particulars, financial material and policy documentation.

Explain all intended channels, including Telegram, WhatsApp, web dashboards and automated systems. The actual scope should match the application.

Maintain a schedule of SECP observations and respond with documentary evidence rather than broad assurances.

Licence duration and renewal

SECP's current guidance states that securities and futures adviser licences are valid for one year, with renewal subject to the relevant requirements.

Calendar renewal deadlines and ongoing reporting duties. An expired licence does not become valid because the company has submitted a late renewal request.

Check whether a proposed material change in ownership or management requires prior approval or notification.

Automated recommendations

A platform may automatically recommend securities using machine learning. Automation does not necessarily change the underlying regulatory character of the advice.

The company should document model behaviour, error handling, data sources, disclosures and client suitability where required.

Promises of guaranteed profits can create separate regulatory and consumer risks, especially where evidence does not support them.

Brokerage is separate

Placing or executing client orders may amount to brokerage, requiring a different licence and compliance system.

A company should not claim that an adviser authorisation permits it to hold client funds or execute trades automatically.

Where it works with an existing licensed broker, the arrangement must accurately allocate responsibilities and avoid misleading clients about which entity performs each function.

General financial education

Businesses publishing free educational material or broad market discussions may have a different regulatory position, depending on definitions and actual conduct.

The absence of a subscription fee is not a universal exemption. A service that gives direct transactional recommendations must still be analysed substantively.

Where classification is uncertain, a reasoned regulatory opinion or appropriate clarification can reduce enforcement risk.

Unauthorised operations

A company that solicits paying advisory clients without the required licence can face regulatory consequences under relevant legislation.

A later application does not necessarily cure an earlier period of unauthorised activity. Marketing and contracting should reflect the actual permission held.

The company's directors should preserve compliance records and stop conduct requiring authorisation until approval is obtained.

Practical example

A startup plans a paid service issuing personalised recommendations for PSX equities and PMEX gold futures, delivered by a chatbot and daily notifications.

It should assess both securities and futures advisory categories before accepting customers. Incorporation as a technology company is not enough.

If the platform later allows automated order execution, brokerage and other permissions may also require examination.

Opinion and recommended course

An enterprise providing regulated securities or futures advice requires the relevant SECP authorisation. The legal assessment turns on the activities actually performed and the applicable licensing framework.

Map each service, determine the correct licence, verify management and capital eligibility, prepare compliance controls and obtain permission before trading as a regulated adviser. Continue to monitor renewal and changes in business model.

Principal sources: Securities Act, 2015; Futures Market Act, 2016; Securities and Futures Advisors (Licensing and Operations) Regulations, 2017; SECP, Securities' and Futures' Advisors — Licensing.