PSX Issues New Guidelines for Opening Trading Accounts of Minors

ISLAMABAD: The Pakistan Stock Exchange (PSX), in collaboration with the National Clearing Company of Pakistan Limited (NCCPL) and the Central Depository Company (CDC), has introduced comprehensive guidelines for opening trading accounts for individuals below 18 years of age.

These guidelines have been formulated in consultation with the Securities and Exchange Commission of Pakistan (SECP).

The new framework outlines the process and modalities for opening such accounts, along with detailed terms and conditions governing their operation through a natural or legally appointed guardian.

All securities brokers have been directed to strictly adhere to these prescribed guidelines and ensure compliance with the operational requirements for minor trading accounts.

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Under the guidelines, a “Minor Investor Account” may be opened by a guardian submitting valid NADRA documents such as a Juvenile Card, Form-B, or Child Registration Certificate.

The guidelines outline the following activities and corresponding requirements:

• Activity 1: Preliminary Requirements
  The guardian must approach a securities broker with necessary identity documents of the minor. If the guardian is other than the father, a Guardianship Certificate from a court is mandatory. All AML/CFT checks, including risk assessment and source of funds, will apply through the guardian.

• Activity 2: Assigning a Title to a Minor’s Trading Account
  The trading account shall be titled “Name of Minor (Minor) through Name of Guardian (Guardian).” Brokers must mark the account as a minor’s account within the UIN registration and UKN process.

• Activity 3: Registering the UIN of the Minor in NCCPL UIN Database
  The guardian’s UIN will be registered with NCCPL for settlement and capital gains tax purposes until functionality for minors’ UINs is introduced.

• Activity 4: Account Operating Instructions for Trading and Custody in CDC
  The guardian will have exclusive authority to operate the trading account, and brokers shall act only on the guardian’s instructions.

• Activity 5: Mode for Receipts/Payments in the Minor’s Account
  Transactions may be made through the minor’s own bank account (opened via guardian), a joint account of the minor and guardian, or the guardian’s own bank account. Payments and receipts must follow the agreed mode.

• Activity 6: Trading and Investment-Related Restrictions in Minor Trading Account
  Trading in futures, leveraged products (MTS, MFS, SLB), negotiated deals, and same-day square-ups will not be allowed.

• Activity 7: Steps to Be Taken When a Minor Attains the Age of Majority
  Brokers and NCCPL must monitor minors’ ages through CNIC data and alert guardians a month before the minor turns 18. Upon reaching majority, the account will be suspended for new trades until a new, regular account is opened in the individual’s name.

• Activity 8: Tax Impact on Transfer of Inventory
  When the account transitions, securities will be transferred to the new account while retaining cost and acquisition date to avoid triggering capital gains tax. The “First-in-First-Out” principle will apply during the transfer.