Futures Advisory Licence

Futures advisory licensing: the regulated activity

A futures adviser provides investment advice about whether, when and on what terms futures contracts should be entered into, or issues analyses intended to assist those decisions. The Futures Market Act, 2016 and the Securities and Futures Advisers (Licensing and Operations) Regulations, 2017 establish the licensing framework administered by the Securities and Exchange Commission of Pakistan (SECP). The advice may concern commodity-based, securities-based or financial-instrument futures, but the exact products and permissions must be mapped before an application.

A futures adviser is not the same as a futures broker, futures exchange, investment manager or securities adviser. Advising on contracts does not automatically permit accepting customer margin, placing orders, holding collateral, clearing positions or operating a trading platform. The application should describe who provides the recommendation, which contracts are covered, whether the adviser has custody or execution powers, and whether it receives compensation from clients or intermediaries.

The consolidated 2017 advisers regulations, updated through the enacted amendments of 15 June 2023, are the principal procedural source. A 2022 consultation draft is not a substitute for the final 2023 notification. The SECP's public licensing page confirms that futures advice is separately regulated under the Futures Market Act and that regulation 5 governs applications.

Who may apply and which exceptions matter?

Corporate applicant. Regulation 4 provides a route for a company registered under the Companies Act, 2017 with constitutional authority to provide the proposed advice. It must meet the fit-and-proper requirements, maintain the prescribed financial resources and suitable business arrangements, and appoint appropriately qualified persons responsible for the futures advisory function. Where applicable, directors, sponsors and senior management must satisfy Annexure A, and a change in sponsors requires SECP's prior written approval.

Individual applicant. The 2021 amendments introduced licensing of eligible individuals. The 2023 regulation 4(d) describes an individual not employed in a financial institution, holding the mandatory Institute of Financial Markets certifications and meeting Annexure A fit-and-proper criteria. The applicant should check the individual-specific requirements, including the FBR Active Taxpayer List condition, net worth and association membership, rather than submit a corporate governance file for a sole individual.

Professional competence. Annexure A requires the responsible futures adviser, or where relevant the company's CEO or head of advisory business, to have a CFA charter, recognised accountancy-body membership, or sixteen years of education in a relevant field, together with at least three years' relevant financial-products, securities, commodity-futures or financial-sector experience. The specified Institute of Financial Markets certification is additional to the academic and experience test. A degree alone is not a substitute for all three elements.

Conditional existing licences. A qualifying NBFC licensed for Investment Advisory Services may rely on the limited exemption in regulation 3 only if its additional conduct and association conditions are satisfied. Certain securities-broker applicants have an integrated Form A route under regulation 5, but that is a filing accommodation, not a blanket right to undertake every futures advisory activity. A futures-broker licence and a futures-adviser licence must be assessed independently for the exact service and customer relationship.

Publications and research. The definition excludes particular generally available publications and broadcasts where investment advice is not their principal or sole object, and any other specifically notified exclusions. The fact that a report is online, broadcast or sold as a subscription does not by itself determine whether the exception applies. Paid trading signals and personalised derivatives recommendations require close examination.

Form A, Annexure B and supporting documents

The applicant files the statutory Form A with the SECP, the revised Annexure B documents and evidence of payment of the non-refundable Schedule I fee. S.R.O. 742(I)/2023 replaced Annexure B, so a checklist downloaded before that notification may contain superseded duplication. Assemble an indexed dossier that distinguishes information mandatory for all applicants from documents required only for a company or particular ownership structure.

• Applicant's identity, current contact and business addresses, tax number, nature of proposed futures advice and any previous advisory experience.
• Where incorporated, certificate and constitutional documents, business objects, applicable corporate filings, authorised signatory evidence and relevant audited financial statements.
• Names and occupations of sponsors, directors and senior managers, relevant other appointments during the preceding ten years, and details of associated SECP-licensed entities.
• FBR-submitted wealth statement for an individual or promoter where required, comparable foreign-national evidence, or corporate promoter audited financial statements.
• Disclosure of relevant civil or criminal matters, regulatory investigations, penalties and outstanding proceedings affecting the applicant or key persons.
• Documentary proof of the regulation 6 net-worth threshold, financial statements or other reliable resources evidence appropriate to the applicant.
• Education, relevant derivatives or financial-sector experience, Institute of Financial Markets certification and fit-and-proper documentation under Annexure A.
• Office or contact arrangements, manpower, systems, cyber controls where relevant, record-retention facilities, conflicts policy and a sample customer mandate.

A company may need certified copies of incorporation, historical forms or audited accounts; an individual should not be asked for a company's board resolution. An applicant with foreign shareholders, a disciplinary event, previous regulated activity or a proposed digital platform may need additional explanations. Regulation 5 permits the Commission to request clarifications and supplementary evidence. The published form is the legal starting point; verify the current filing and payment channel directly with SECP.

Step-by-step futures adviser application

1. 01
   Determine whether the activity is advice, brokerage or portfolio management

   Map every service, product and revenue stream. Record whether clients receive research on particular futures contracts, personalised recommendations, trade execution, discretionary instructions, clearing services or custody. If the applicant also recommends securities, assess the separate securities-adviser licence and any combined application under regulation 5(2).

2. 02
   Select the applicant and confirm eligibility

   For a company, check incorporation, objects, directors and fit-and-proper records. For an individual, verify financial-institution employment restrictions, FBR ATL, qualification, certification and personal net worth. For a licensed NBFC or broker, document precisely why any exemption or integrated filing provision applies; do not assume a general carve-out.

3. 03
   Check the professional and financial tests before paying

   Under Annexure A, assemble the responsible person's academic or professional qualification, minimum three years' relevant experience and current certification evidence. Regulation 6 requires full advisers to maintain at least PKR 1 million net worth if a company or PKR 500,000 if an individual. The reduced distributor-only thresholds do not apply to a futures-adviser licence.

4. 04
   Prepare the statutory application and evidence schedule

   Complete Form A and revised Annexure B, attach the applicable certified corporate records, owner/officer histories, wealth or audited accounts, litigation disclosures, net-worth evidence and professional documents. Prepare operational policies showing how the applicant will keep customer information, advice rationale and conflicts records, especially where advice involves leveraged futures.

5. 05
   Confirm the payment channel and lodge the application

   The June 2023 Schedule I charges PKR 20,000 for an individual and PKR 40,000 for a corporate futures-adviser application. A separate securities-adviser licence attracts its own fee. Obtain SECP's current account, challan or electronic payment instructions, pay only through the official channel and preserve the receipt. No fixed processing time is assumed.

6. 06
   Handle regulatory questions and maintain an audit trail

   SECP may request further information, review suitability and financial resources, consult other regulators or conduct a premises assessment. Changes in submitted application particulars must be notified within seven working days under regulation 5(5). Keep a response matrix and final copies of all submissions. A pending application is not permission to market as an authorised adviser.

7. 07
   Put derivative-specific customer protections in place

   Following grant of a Form B licence, enter into written advisory agreements and issue appropriate risk disclosures before advising customers. Record their risk profiles, the investment thesis and product assumptions. Explain leverage, margin calls, liquidity, contract expiry, mark-to-market exposure and the possibility of substantial loss; distinguish the advisory recommendation from execution by a licensed broker.

8. 08
   Renew and supervise ongoing activity

   The licence ordinarily lasts one year. File Form C with compliance undertaking and fee one month before expiry; Schedule I sets PKR 10,000 for an individual and PKR 20,000 for a company. Maintain net worth, qualification and association compliance, monitor client complaints, and keep current any separate securities or brokerage permissions.

The prescribed Form A and revised Annexure B are within the SECP consolidated regulations ↗. The SECP licensing page ↗ confirms the application and annual renewal framework. SECP may require a specific submission method or further documents in the individual case.

Minimum net worth, prescribed fees and time limits

Continuing net worth. Regulation 6 requires a full futures adviser to maintain PKR 1 million net worth in the case of a company or PKR 500,000 in the case of an individual. For a company, the regulatory calculation deducts liabilities and revaluation surplus from assets, subject to SECP's clarification power. These are minimum financial-resource requirements throughout the licence, not fees paid to the Commission.

Fees. The 2023-revised Schedule I prescribes a non-refundable PKR 40,000 corporate / PKR 20,000 individual application fee for a securities or futures adviser, and a PKR 20,000 corporate / PKR 10,000 individual renewal fee. Fees are charged separately if both securities and futures adviser licences are sought. Distributor-only fees are different and do not create a cheaper route for a full futures-advisory business.

Time periods. A licence granted in Form B is for one year. Regulation 8 requires renewal in Form C one month before expiry; regulation 5(5) requires notice of changes in filed particulars within seven working days. Where a timely renewal is undecided, regulation 8 includes a continuation provision, subject to its conditions. These are statutory periods, not a promise that an initial application will be decided within a particular number of days.

Other costs. Incorporation, certification, approved-association membership, secure systems and professional work are separate from the statutory licence fee. The exact amount of collection charges and current payment channel must be checked with SECP before remittance.

Conduct, risk disclosure and continuing compliance

Written customer agreement. Regulation 12 requires a written agreement before commencement of advisory business, addressing the services, rights and obligations, relevant affiliations, termination, liability and the quantum and method of fees. A risk disclosure should precede advice and should reflect the client's circumstances. For futures, the mandate should expressly identify the contract classes and whether the adviser is prohibited from executing trades or holding client collateral.

Derivatives suitability. A responsible futures-advice process records client knowledge, investment objectives, loss-bearing capacity and the rationale for recommending particular contracts or exposures. Where a strategy relies on leverage, the adviser should explain price volatility, settlement and margin risks in terms a client can understand. Advice on commodity futures may involve different market, delivery and position risks from cash-settled financial futures. These distinctions belong in the advice file, not merely in a generic disclaimer.

Conflicts and communications. Regulations 11–13 address misleading advertising, customer disclosures, conflicts of interest and remuneration. An adviser should identify any proprietary position, issuer or broker relationship, referral compensation or other interest affecting its recommendations. Separate the advisory function from any permitted trading or brokerage activity and maintain evidence of customer disclosures.

Records, reporting and oversight. Maintain agreements, customer identification and risk profiles, the dated rationale for advice, relevant communications, complaints, employee dealing and financial records as the regulations require. A corporate licensee must also reconcile statutory accounts and audit duties with SECP requirements; the same corporate filing format is not automatically imposed on an individual licensee. Review fit-and-proper status, certification and net worth throughout the licence term.

Digital futures advice. S.R.O. 742(I)/2023 introduced data-protection and cybersecurity obligations and a 15-day prior SECP intimation requirement before launching a digital advisory/distribution platform. Automated futures signals, apps and algorithmic recommendations still need an activity analysis; a digital interface does not remove licensing obligations. A separate assessment may be needed for any virtual-asset activity rather than treating it as ordinary futures advice.

Exit or refusal. A refused renewal or cancellation can trigger duties to notify customers and settle outstanding dues. The adviser remains accountable for past advice and client obligations. A business should maintain an orderly wind-down procedure rather than assume that the end of a licence extinguishes its responsibilities.

Official law, final amendments and filing sources

The primary legal basis is the Futures Market Act, 2016, especially the framework for regulated futures advisers, together with the Securities and Futures Advisers (Licensing and Operations) Regulations, 2017. S.R.O. 49(I)/2021 expanded the eligibility of qualifying individuals. S.R.O. 742(I)/2023 amended eligibility, distribution exceptions, net-worth categories, Annexure B, digital-platform obligations and Schedule I fees. The June 2023 consolidated text should be preferred over pre-amendment checklists.

A consultation proposal is not effective merely because it appears in SECP's drafts library. The 2022 proposals must be distinguished from the actual 2023 notified text. SECP's accessible regulations and notifications listings were checked for later enacted SFA amendments; none was identified in the accessible current listings, but a fresh notification check is necessary before an application. The adviser regime should also be distinguished from the separately updated Futures Brokers Regulations, which regulate a different activity.

• Futures Market Act, 2016 (SECP-hosted Act) ↗
• SECP: consolidated advisers regulations, June 2023 ↗
• SECP: enacted S.R.O. 742(I)/2023 ↗
• SECP: S.R.O. 49(I)/2021 individual eligibility ↗
• SECP: securities and futures adviser licensing ↗
• SECP: notifications register ↗

How Chambers can assist

Chambers can classify the proposed futures-advice business, identify any overlap with securities advice, brokerage or portfolio management, review applicant eligibility, reconcile Form A and Annexure B evidence, prepare corporate and fit-and-proper materials, assess client agreements and risk disclosures, and handle regulatory correspondence where instructed.

For an initial assessment, provide a non-confidential description of the contract classes, whether advice is personalised or general, applicant type, current licences, proposed trading/execution arrangements and whether the service will be delivered through an app or digital platform. Do not transmit sensitive investor identities or financial records through an unencrypted first enquiry.