Islamabad: The Securities & Exchange Commission of Pakistan (SECP) has issued a directive mandating a phased transition of Shariah-compliant institutional investors to conduct their securities trading through Shariah-compliant securities brokers. This directive, referred to as Direction No. 26 of 2025, falls under the purview of section 40B of the Securities and Exchange Commission of Pakistan Act, 1997.

The directive’s first phase requires Shariah-compliant institutional investors, which include Takaful Operators, Non-Bank Finance Companies, and other specified entities, to devise an internal policy by December 31, 2025. This policy will outline the portion of their securities trading business to be routed through Shariah-compliant brokers. The implementation of this policy is expected to commence immediately, with quarterly reporting to the SECP starting March 31, 2026.

According to information available from the Pakistan Stock Exchange (PSX), the directive outlines that by June 30, 2026, these investors should have at least one Shariah-compliant broker included in their panel of approved brokers. The second phase, spanning from July 01, 2026, to June 30, 2027, stipulates that a minimum of 20% of their business should be conducted through Shariah-compliant brokers.

The final phase, commencing on July 01, 2027, will involve an evaluation by the SECP to assess progress on an entity-wise and sector-wise basis. The commission will then determine the further steps necessary for a complete transition to Shariah-compliant brokerage services. Additionally, Shariah-compliant institutional investors are encouraged to adopt takaful for their insurance needs and to engage with Shariah-compliant asset management companies for investment purposes.

This directive marks a significant policy shift in Pakistan’s financial sector, underscoring the SECP’s commitment to enhancing Shariah-compliant financial practices within the designated market category.