Mutual funds play a pivotal role in channeling public savings into capital markets and investment opportunities. In Pakistan, the mutual fund industry is regulated by the Securities and Exchange Commission of Pakistan (SECP) under a robust legal and supervisory framework. If you’re looking to establish a mutual fund management company—formally known as an Asset Management Company (AMC)—you must fulfill rigorous licensing, capital, compliance, and governance requirements. This comprehensive guide explains how to register a mutual fund company in Pakistan, step-by-step, and outlines the necessary regulatory processes, SECP approvals, and operational obligations.

Understanding the Regulatory Framework

The regulation of mutual funds in Pakistan is governed by the following statutes and regulatory instruments:

• Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 (NBFC Rules)

• Non-Banking Finance Companies and Notified Entities Regulations, 2008 (NBFC Regulations)

• Companies Act, 2017

• SECP Circulars and Directives

• Trusts Act, 1882 (for creation of mutual fund trust deeds)

• Income Tax Ordinance, 2001 (for tax treatment)

The Securities and Exchange Commission of Pakistan (SECP) is the sole licensing and supervisory authority for mutual fund companies and funds in Pakistan.

Step 1: Incorporate an Asset Management Company (AMC)

To initiate the mutual fund business, promoters must first incorporate a company with the Securities and Exchange Commission of Pakistan (SECP) under the Companies Act, 2017.

Key requirements include:

• Company must be limited by shares and incorporated as a Public Limited Company (may be unlisted initially)

• Name should reflect asset management functions (e.g., ABC Asset Management Limited)

• Objectives in the Memorandum of Association (MoA) must clearly state “managing mutual funds, investment portfolios, and collective investment schemes”

Incorporation steps:

• Reserve company name via SECP e-Services Portal

• Submit:

  • Form 1 (Declaration)

  • Form 21 (Registered Office)

  • Form 29 (Director Details)

  • MoA & Articles of Association (drafted as per SECP guidelines)

• Pay incorporation fee based on authorized capital

• Obtain Certificate of Incorporation and National Tax Number (NTN)

At this point, the company is legally incorporated but not yet authorized to operate as an AMC or float mutual funds.

Step 2: Apply for AMC License from SECP

After incorporation, the company must apply to SECP for NBFC license as an Asset Management Company (AMC) under Rule 5 of the NBFC Rules, 2003. This is a comprehensive process requiring both documentation and regulatory vetting.

Minimum Paid-Up Capital Requirement
As of 2025, the minimum paid-up capital for an AMC is PKR 230 million. This must be:

• Fully subscribed and deposited in a scheduled bank

• Verified through a bank statement or auditor’s certificate

Key Documents Required

• Covering letter and license application

• Certificate of Incorporation from SECP

• Memorandum and Articles of Association

• Audited financials (if applicable) or bank statement of capital

• Detailed business plan (including services, funds to be launched, financial projections for 3 years)

• Details of sponsors, shareholders, and directors along with:

  • CNICs or passports

  • Personal wealth statements

  • Source of funds

  • No default and no criminal record affidavits

• Organization structure and staffing plan

• Compliance and internal control framework

• Proposed custodians and trustees

• Proof of office infrastructure and IT systems

Fit and Proper Criteria
Directors, CEO, and key executives must meet SECP’s “Fit and Proper Criteria”, demonstrating:

• Clean financial history

• Experience in capital markets or financial services

• No criminal or regulatory convictions

• Strong ethical and governance track record

After thorough scrutiny, SECP issues the license to operate as an AMC.

Step 3: Appoint Trustee and Execute Trust Deed

Before launching a mutual fund, an AMC must establish a Trust and appoint a Trustee for the fund. This process includes:

• Drafting a Trust Deed as per SECP’s standard template

• Selecting a Trustee from SECP-approved institutions (e.g., Central Depository Company of Pakistan – CDC, MCB Financial Services)

• Signing the deed between AMC and Trustee

• Getting the Trust Deed vetted and approved by SECP

• Registering the Trust Deed under the Trusts Act, 1882

The Trustee holds assets on behalf of investors and ensures compliance with investment objectives and SECP regulations.

Step 4: Obtain SECP Approval for Launching a Mutual Fund

To launch a fund under the AMC license, the company must apply to SECP for approval of:

• Fund type: Equity, Money Market, Fixed Income, Index, Islamic (Shariah-compliant), Fund of Funds, etc.

• Trust Deed and Offering Document

• Fund name and classification

• Investment objectives and policy

• Benchmark and performance measurement criteria

• Fee structure (management fee, front-end/back-end load)

• Custodian and Registrar arrangements

• Shariah compliance certificate (for Islamic funds)

Upon approval, SECP grants a “Certificate of Registration of the Fund” under Regulation 44 of the NBFC Regulations. The AMC can now market the fund and accept investor subscriptions.

Step 5: Registration with FBR and Provincial Tax Authorities

AMCs and mutual funds must register with the Federal Board of Revenue (FBR):

• Obtain NTN for both the AMC and each mutual fund trust

• Register for sales tax if services such as advisory or fund management are taxable

• Declare withholding agent status for deduction of tax from vendors and investors

For services rendered (e.g., management fees), provincial sales tax on services may apply depending on the AMC’s office location:

Step 6: Open Bank Accounts and Setup Fund Infrastructure

The AMC must open separate bank accounts for:

• Operational expenses of AMC

• Mutual fund subscription and redemption

• Trust/custody management

Additional steps:

• Appoint an auditor (must be from SECP’s approved panel)

• Deploy IT system for NAV computation, unit allocation, and regulatory reporting

• Establish AML/CFT framework for investor due diligence

• Hire qualified fund managers, compliance officer, and internal auditor

Step 7: Launch Fund and Commence Operations

Once SECP approval is secured and operational readiness is confirmed, the AMC can:

• Launch a Public Offering of Units through newspapers and digital channels

• Accept investor applications via online or physical channels

• Calculate and publish daily Net Asset Value (NAV) on SECP and PSX websites

• Maintain investor records, unit registers, and compliance logs

• Submit regular performance and financial reports to SECP

Mutual funds can be open-end (redeemable anytime) or closed-end (listed on PSX and traded like stocks).

Taxation of Mutual Funds and AMCs

AMCs are taxed as companies at the standard corporate tax rate of 29% on their net profit.

Mutual Funds (Trusts) enjoy special tax treatment under Clause 99 of Part I, Second Schedule of the Income Tax Ordinance, 2001:

• No tax on fund income if 90% of income is distributed to unit holders by June 30 each year

• If distribution is less than 90%, the entire income becomes taxable

• Capital gains, dividends, and interest income earned by mutual funds are taxed at the source and generally final

• Withholding tax on dividends paid to investors:

  • 15% for individuals

  • 25% for companies (as per filer status)

Mutual funds are exempt from sales tax, but AMCs must pay sales tax on the management fee charged.

Filing Requirements and Ongoing Compliance

Mutual fund companies must maintain strict compliance with SECP and FBR rules:

Shariah Compliance for Islamic Funds

Islamic mutual funds must:

• Appoint a Shariah Advisory Board

• Maintain separate fund pool and avoid non-Shariah investments

• Get all documents vetted and approved for Shariah compliance

• Submit Shariah Review Reports annually to SECP

• Disclose purification ratios and non-compliant income adjustments

Common Challenges in Registration and Operation

• Lengthy SECP approval timelines

• Strict fitness requirements for promoters and directors

• Capital adequacy maintenance

• Shariah compliance and monitoring for Islamic funds

• Market volatility and investor retention

• Cost of technology, compliance, and audit

Growth Prospects in Pakistan’s Mutual Fund Industry

The mutual fund industry is witnessing rapid growth due to:

• Rising investor awareness and demand for passive income

• Government focus on financial inclusion and capital markets

• Expansion of Sahulat Accounts, Digital Onboarding, and Mobile Investing Apps

• Integration with Roshan Digital Account (RDA) for overseas Pakistanis

• Potential entry of global asset managers through joint ventures

With SECP encouraging product diversification (e.g., REITs, commodity funds, ETF listings), opportunities are abundant for innovative fund managers.

Conclusion

Registering a mutual fund company in Pakistan involves incorporation, licensing, trust formation, SECP approvals, tax registration, and technical preparedness. Compliance with SECP’s NBFC rules, strong governance, financial transparency, and regulatory reporting are critical to establishing credibility and attracting investor trust. With rising interest in structured investment products and government support for capital market development, Pakistan offers an evolving landscape for new and experienced asset managers to enter and grow.