New, comprehensive guidelines governing the opening and operation of trading accounts for minors have been officially announced. This significant regulatory development is the result of a joint effort by the Pakistan Stock Exchange (PSX), the National Clearing Company of Pakistan Limited (NCCPL), and the Central Depository Company of Pakistan Limited (CDC), framed in consultation with the Securities and Exchange Commission of Pakistan (SECP).
Who is a Minor?
For the purpose of these guidelines, a minor is defined as an individual who is below the age of 18 years. The age of majority is set at 18.
The Need and Benefits of the New Regulation
The primary purpose of these guidelines is to enhance financial inclusion and promote a saving and investment culture within Pakistan's capital market.
Benefit | Explanation |
Increased Financial Access | These guidelines facilitate the smooth opening of minor accounts, ensuring children have access to financial services and an early start to investing. |
Consolidated Process | They establish a clear, consolidated process and set of terms and conditions for securities brokers to follow, ensuring consistency and regulatory compliance. |
Investor Protection | By mandating that the account is operated by a guardian and restricting access to high-risk products (like leverage market), the framework protects the minor's investment while ensuring adherence to Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) requirements. |
Key Requirements for Opening a Minor Account
A minor's trading account must be opened and operated through a natural or legally appointed guardian.
1. Documentation for the Minor
The guardian must provide one of the following NADRA-issued documents for the minor:
Juvenile Card
Form-B
Child Registration Certificate
2. Documentation for the Guardian
If the guardian is not the father, a Guardianship Certificate issued by the Court is mandatory.
The guardian is responsible for complying with all AML/CFT conditions, including screening, risk assessment, and source of funds verification.
3. Account Titling and Operation
The account title convention clearly identifies both parties: "<Name of Minor> (Minor) through <Name of Guardian> (Guardian)".
The guardian holds the exclusive authority to issue instructions and operate the trading account.
Funds (receipts/payments) for the minor's account can be processed through any of the following three modes, which must be agreed upon with the broker:
The minor's own bank account (opened through the guardian).
A minor's bank account jointly owned with the guardian.
The guardian's own bank account.
Restrictions on Trading and Transactions
To ensure prudent investment and safeguard the minor's funds, the following trades and transactions are strictly prohibited in a Minor Trading Account:
Futures Markets: Trading in DFC, CSF Markets, and options is not available.
Leveraged Products: Products such as Margin Trading System (MTS), Margin Financing Securities (MFS), and Securities Lending and Borrowing (SLB) are not available.
Negotiated Deals Market: Execution of trades in this market is not available.
Same Day Square-Up: This activity is not allowed.
Transitioning to a Regular Account at Age of Majority
When a minor attains the age of 18, the account must be transitioned to a normal, regular account held solely in the individual's name.
The Process
Alert: Brokers are mandated to keep track of the minor's age and auto-generate an alert to the guardian one month before the minor turns 18.
Suspension: If the individual has not applied to transition to a regular account upon turning 18, the broker must temporarily suspend the account. No fresh exposure or new transfers will be allowed, although liquidation of existing shares is still permitted.
New Account & Transfer: A new trading account (with a new UIN) must be opened solely in the name of the new adult, and the minor's existing account will be closed. The securities inventory from the minor's account will be completely transferred to the new account.
Tax Implications
Critically, the transfer of the securities inventory upon attaining the age of maturity will not result in a Capital Gains Tax (CGT) obligation. The transfer is executed in a manner where the original cost and date of acquisition of the inventory remain unchanged, similar to transfers made through gifts. This transfer follows the 'First-in-First-Out' (FIFO) principle when adjusting the guardian's inventory record.