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SECP develops rules for issue of commercial paper

ISLAMABAD (October 29 2002) : The Securities and Exchange Commission of Pakistan (SECP) has developed and issued “Guidelines for the issue of Commercial Paper' to further develop and broaden the money market and provide an additional financial instrument to investors.

The issuance of these guidelines also forms a part of the conditions of the recently approved Financial Markets (Non-Bank) Governance Programme Loan 2002 -2005 by the Asian Development Bank.

Commercial paper is a short-term promissory note issued by corporations with a minimum credit rating of A in long-term and A2 in short-term. Commercial Papers are typically used for financing working capital requirements. Through these guidelines, the SECP has notified the eligibility, the period and size, the mode of issue, the expense and the investors in Commercial Papers. Furthermore, the roles and responsibilities of the issue, the Issuing and Paying Agent (IPA) and the procedure for issue and standby facility with financial institutions have also been notified.

According to these guidelines, the maturity of a Commercial Paper is to be between 30 days and one year while the equity of the issuing company should not be less than Rs 100 million as per its latest audited balance sheet. The guidelines have also set out the minimum size of the issue of a Commercial Paper to be not less than Rs 10 million and that it is to be issued at a discount set by the issuer, keeping in view the prevailing t-bill rates and the credit rating.

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