Stockbroker Client Agreement (Pakistan)
STOCKBROKER AGREEMENT
Under the Securities Act 2015 | Securities Brokers (Licensing and Operations) Regulations 2016 | Pakistan Stock Exchange Regulations
This Stockbroker Agreement ("Agreement") is entered into on [Agreement Date] between:
CLIENT:
[Client Name], CNIC/NICOP No. [Client CNIC], residing at [Client Address], Phone: [Client Phone], Email: [Client Email], NTN: [Client NTN] (hereinafter "Client");
AND
STOCKBROKER:
[Broker Name], PSX TRE Licence No. [Broker License No], having its registered office at [Broker Address], represented by [Broker Rep Name] (hereinafter "Broker");
The Client and Broker are collectively referred to as the "Parties".
RECITALS
WHEREAS the Broker holds a valid Trading Right Entitlement (TRE) certificate issued by Pakistan Stock Exchange Limited (PSX) and is duly licensed under the Securities Brokers (Licensing and Operations) Regulations 2016 promulgated by the Securities and Exchange Commission of Pakistan (SECP);
AND WHEREAS the Client desires to engage the Broker to execute securities transactions on the Client's behalf on PSX and the Broker is willing to provide such services on the terms set out herein;
1. ACCOUNT AND TRADING TERMS
1.1 The Broker shall open and maintain a [Account Type] for the Client in accordance with CDC Account Opening Regulations and PSX Rule Book.
1.2 The Client's authorised trading limit is [Authorised Limit]. The Broker shall not execute transactions exceeding this limit without prior written consent of the Client.
1.3 All securities transactions shall be settled on a [Settlement Cycle] rolling settlement basis in accordance with PSX settlement procedures and the National Clearing Company of Pakistan Limited (NCCPL) netting rules.
1.4 Special instructions: [Special Instructions]
2. BROKERAGE COMMISSION AND CHARGES
2.1 The Client shall pay brokerage commission at the rate of [Brokerage Rate] on the value of each transaction executed by the Broker on behalf of the Client.
2.2 In addition to brokerage commission, the Client shall bear all applicable statutory charges including but not limited to: Capital Value Tax (CVT) under Finance Act 2022, Federal Excise Duty (FED) on brokerage commission, NCCPL clearing charges, CDC custodian charges, and PSX fee per transaction.
2.3 Withholding tax on brokerage income shall be deducted at source by the Client in accordance with Section 233 of the Income Tax Ordinance 2001 at the applicable rate for filer / non-filer status.
3. OBLIGATIONS OF THE PARTIES
3.1 BROKER OBLIGATIONS: The Broker shall execute all Client orders promptly in accordance with PSX Regulations and applicable SECP directives; maintain proper books of account as required under Rule 13 of Securities Brokers Regulations 2016; segregate Client funds from own funds under SECP Client Asset Protection Rules; provide monthly account statements to the Client; and report suspicious transactions to SECP / Financial Monitoring Unit (FMU) as required under Anti-Money Laundering Act 2010.
3.2 CLIENT OBLIGATIONS: The Client shall maintain sufficient funds or securities in the trading account to cover transactions; immediately notify the Broker of any change in CNIC/NICOP, address or contact details; not engage in insider trading or market manipulation prohibited under Section 144A of Securities Act 2015; and comply with all applicable FBR tax filing requirements including Active Taxpayer List (ATL) status.
4. RISK DISCLOSURE
The Client acknowledges that investment in securities involves substantial risk of loss. Past performance of any security does not guarantee future results. The Client has read, understood and accepted the Risk Disclosure Document as required under SECP's Investor Education and Awareness framework. Securities investments are not insured by any government scheme.
5. TERMINATION
Either Party may terminate this Agreement by giving thirty (30) days written notice to the other. The Broker may suspend or terminate the account immediately upon: Client default in payment; regulatory direction by SECP or PSX; or reasonable grounds to suspect financial crime under Anti-Money Laundering Act 2010.
6. DISPUTE RESOLUTION AND GOVERNING LAW
6.1 Any dispute arising out of or in connection with this Agreement shall first be referred to [Dispute Forum] for resolution.
6.2 This Agreement shall be governed by and construed in accordance with [Governing Law].
IN WITNESS WHEREOF
The Parties have executed this Stockbroker Agreement on [Agreement Date].
Witness 1: _________________________ CNIC: _________________________
Witness 2: _________________________ CNIC: _________________________
Client
________________
Signature
Authorised Signatory — Stockbroker
________________
Signature
What Is a Stockbroker Client Agreement (Pakistan)?
A Stockbroker Client Agreement in Pakistan defines what each party must do under the deal and the consequences of failing to perform.
The Pakistan Stock Exchange Limited (PSX), formerly the Karachi Stock Exchange (KSE), the Lahore Stock Exchange (LSE), and the Islamabad Stock Exchange (ISE) — which merged into a single unified exchange in 2016 under the Stock Exchanges (Corporatisation, Demutualization and Integration) Act 2012 — is the primary marketplace for equity and debt securities in Pakistan. PSX operates under a regulatory framework administered by SECP under the Securities Act 2015 (which replaced the Securities and Exchange Ordinance 1969), the Companies Act 2017, and PSX's own Regulations and Business Rules.
The Central Depository Company of Pakistan (CDC), established under the Central Depositories Act 1997, maintains the electronic registry of securities ownership in Pakistan. Under the book-entry system administered by CDC, investors hold securities through a Central Depository System (CDS) account — either a Sub-Account (maintained by the investor's broker on the investor's behalf) or an Investor Account (held directly by the investor with CDC). The Stockbroker Client Agreement must address the type of CDC account being used, the broker's responsibilities for sub-account management, and the segregation of client securities from the broker's own proprietary holdings.
The Securities Brokers (Licensing and Operations) Regulations 2016, issued by SECP under Section 45 of the Securities Act 2015, set detailed requirements for the Stockbroker Client Agreement including: mandatory KYC (Know Your Customer) and AML (Anti-Money Laundering) due diligence under the Anti-Money Laundering Act 2010 and SECP's AML/CFT Regulations; disclosure of brokerage commissions and PSX transaction fees; segregation of client funds in a separate bank account maintained with a bank regulated by the State Bank of Pakistan (SBP); and the broker's order execution policy.
The National Clearing Company of Pakistan Limited (NCCPL) acts as the central counterparty and clearing house for PSX transactions, guaranteeing settlement of trades on T+2 basis (trade date plus two business days) under the NCCPL Regulations. The Stockbroker Client Agreement should address the client's funding obligations for settlements — confirming that cleared funds are available in the broker's client account before settlement date — and the consequences of settlement failure, including the broker's right to sell out positions to meet settlement obligations.
The legal framework governing the Stockbroker Client Agreement (Pakistan) in Pakistan draws on several key statutes and regulatory bodies. Under the State Bank of Pakistan (SBP) Act 1956, the SBP regulates banking. The Securities and Exchange Commission of Pakistan (SECP) regulates capital markets under the Securities Act 2015. Section 4 of the Negotiable Instruments Act 1881 governs promissory notes. The Federal Board of Revenue (FBR) administers tax obligations under the Income Tax Ordinance 2001. The Sales Tax Act 1990 governs indirect taxation. Parties executing a Stockbroker Client Agreement (Pakistan) in Pakistan should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Securities Act 2015 sets the foundational requirements.
When Do You Need a Stockbroker Client Agreement (Pakistan)?
A Stockbroker Client Agreement in Pakistan is required whenever an investor wishes to open a trading account with a SECP-licensed stockbroker and trade securities on the Pakistan Stock Exchange (PSX), as the Securities Brokers (Licensing and Operations) Regulations 2016 mandate a signed written agreement before the broker can accept client funds or execute client orders.
A Stockbroker Client Agreement is needed when a retail investor in Lahore, Karachi, Islamabad, or any city in Pakistan wishes to invest in PSX-listed shares — such as Hub Power Company (HUBC), Oil and Gas Development Company (OGDC), MCB Bank, or Engro Corporation — and opens an account with a stockbroker licensed by SECP. The agreement is the legal foundation of the trading relationship.
A Stockbroker Client Agreement is required when a corporate investor — a company, mutual fund, insurance company, or pension fund — engages a PSX-member stockbroker for portfolio trading. Institutional clients typically negotiate customised agreement terms covering commission rates, settlement procedures, research services, and prime brokerage facilities.
A Stockbroker Client Agreement is needed when a non-resident Pakistani (NRP) or a foreign investor investing under SECP's foreign investor regulations wishes to trade on the PSX through a Pakistani broker. The agreement must address the Roshan Digital Account (RDA) framework administered by SBP for non-resident investments, repatriation of profits, and withholding tax obligations under Section 150 of the Income Tax Ordinance 2001 on dividends.
A Stockbroker Client Agreement is required when an investor wishes to access PSX's Futures Market — trading in stock futures, index futures (KSE-100 Index Futures), and other derivative instruments — which requires a separate derivatives trading agreement or addendum to the standard equity agreement, given the use and margin risks involved.
A Stockbroker Client Agreement is needed when an investor's existing broker is being acquired, merged, or has its licence suspended by SECP, and the investor must transfer their sub-account and trading relationship to a new broker. The new broker must execute a fresh Stockbroker Client Agreement before assuming management of the transferred account.
A Stockbroker Client Agreement is required as part of the documentation for opening a CDC Investor Account or Sub-Account — CDC requires evidence of the broker-client relationship for sub-account maintenance, and CDC's own terms and conditions flow through the broker-client agreement.
What to Include in Your Stockbroker Client Agreement (Pakistan)
A valid Stockbroker Client Agreement in Pakistan under the Securities Act 2015 and the Securities Brokers (Licensing and Operations) Regulations 2016 must contain the following essential elements to protect both the client's investment and the broker's regulatory compliance.
Parties and KYC: Full legal name, CNIC number (or passport number and country for foreign investors), address, contact details, and occupation of the client. The broker's SECP licence number and PSX membership number. Completed KYC documentation as required by the Anti-Money Laundering Act 2010 and SECP's AML/CFT Regulations — including source of funds declaration, beneficial ownership identification for corporate clients under the Beneficial Owners Regulation 2019, and PEP (Politically Exposed Person) screening.
Account Type: Specification of the CDC account structure — Sub-Account maintained by the broker under the investor's UIN (Unique Identification Number) assigned by CDC, or an Investor Account held directly. For joint accounts, both holders must be named and signing authority defined.
Trading Authority and Instructions: Scope of trading authority — whether the client gives discretionary authority to the broker (portfolio management) or retains order-by-order authority. Order types accepted — market orders, limit orders, stop-loss orders. Communication channels for order placement — telephone, email, WhatsApp (with call recording or message logging requirements), or PSX's online trading platform. The broker's order execution policy and best execution obligation under SECP rules.
Brokerage Commission and Charges: The agreed commission rate on executed trades — typically 0.1% to 0.5% of transaction value for retail clients, negotiated lower for institutional clients. PSX transaction fee, SECP regulatory fee, NCCPL clearing fee, and CDC sub-account maintenance fees. All charges must be disclosed in advance under the Securities Brokers Regulations 2016. Withholding tax on brokerage commission under Section 153 of the Income Tax Ordinance 2001.
Client Funds Segregation: The broker's obligation to maintain client funds in a segregated bank account at an SBP-regulated bank, separate from the broker's own funds. The client's right to request a statement of their cash balance and securities holding at any time. The broker's obligation to deposit client funds within 24 hours of receipt. Under SECP Circular No. 16 of 2017, brokers must use CDC's Investor Account and sub-account system to segregate client securities.
Margin and Use: For margin trading accounts — the initial margin percentage required, margin maintenance level, and the broker's right to issue a margin call and to forcibly liquidate client positions if the maintenance margin is not met within the required timeframe. Risk disclosure for margin trading under SECP's Margin Trading System (MTS) Rules.
Settlement Obligations: Client's obligation to confirm cleared funds are available in the broker's client account before T+2 settlement. Consequences of settlement failure — the broker's right to sell out the client's position to meet settlement with NCCPL, and the client's liability for any shortfall, additional charges, and PSX penalty.
Risk Disclosures: Mandatory risk disclosures required by SECP — market risk, liquidity risk, concentration risk, currency risk for foreign investors, systemic risk, and the risk of total loss of investment in equity markets. The client's acknowledgment of having read and understood the risk disclosures.
Dispute Resolution: Internal complaints procedure — written complaint to the broker's compliance officer within 30 days of the event giving rise to the complaint. Escalation to SECP's Investor Education and Advisory Division. Arbitration under PSX's dispute resolution mechanism or under the Arbitration Act 1940. Forms-legal.com provides this Stockbroker Client Agreement (Pakistan) as a reference template. Investors should verify the broker's current SECP licence status on SECP's public register before signing, and consult SECP's investor protection publications before opening a trading account.
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note = {Free legal document template}
}Frequently Asked Questions
The Securities and Exchange Commission of Pakistan (SECP), established under the Securities and Exchange Commission of Pakistan Act 1997, is the primary regulator of Pakistan's capital markets, including all stockbrokers trading on the Pakistan Stock Exchange (PSX). SECP issues stockbroker licences under the Securities Brokers (Licensing and Operations) Regulations 2016, which set minimum capital requirements, fit and proper criteria for directors and key personnel, compliance and record-keeping obligations, and the mandatory terms of the Stockbroker Client Agreement. SECP has authority to inspect broker offices, review client records, suspend or cancel broker licences for regulatory breaches, and impose fines under Section 152 of the Securities Act 2015. SECP also administers the Investors Protection Fund, which compensates retail investors for losses caused by a defaulting broker — up to PKR 500,000 per investor per broker. SECP's Specialized Companies Division and Capital Markets Division oversee market integrity, while the Enforcement Division investigates insider trading under Section 133 of the Securities Act 2015 and market manipulation under Section 134.
Client securities under a Stockbroker Client Agreement in Pakistan are protected through two primary mechanisms. First, the Central Depository System (CDS) administered by the Central Depository Company of Pakistan (CDC) under the Central Depositories Act 1997 maintains securities in electronic book-entry form, credited to the client's Sub-Account or Investor Account under the client's CNIC-based Unique Identification Number (UIN). CDC account records are independent of the broker's own accounts, so even if the broker becomes insolvent, the client's securities remain in their CDS account and can be transferred to a new broker. Second, SECP's Client Asset Segregation requirements under SECP Circular No. 16 of 2017 and the Securities Brokers Regulations 2016 prohibit brokers from commingling client securities with their own proprietary holdings or using client securities to cover the broker's own positions. The Stockbroker Client Agreement must explicitly confirm these segregation obligations. In the event of broker default, NCCPL and PSX have settlement guarantee mechanisms to protect completed trades.
Stock market investors in Pakistan are subject to several taxes that the Stockbroker Client Agreement should address. Capital gains tax on disposal of PSX-listed securities is levied under Section 37A of the Income Tax Ordinance 2001 — the rate varies based on the holding period: shares held for less than one year attract a higher CGT rate; shares held for more than four years are exempt from CGT under the current FBR rules. Dividend income from PSX-listed companies is subject to withholding tax at 15% under Section 150 of the Income Tax Ordinance 2001, deducted by the company at the time of dividend payment and reflected in the CDC account. Brokerage commission paid to the stockbroker is subject to withholding tax under Section 153 of the Ordinance. The broker must issue annual tax certificates to clients showing withholding tax deducted on dividends and capital gains settled through the broker. Under the Finance Act 2023, the FBR introduced additional levies on non-filers (persons not on the Active Taxpayers List maintained by FBR) trading securities — filers receive preferential tax rates, creating a strong incentive for investors to file annual income tax returns with FBR.
The Roshan Digital Account (RDA) is a special account framework introduced by the State Bank of Pakistan (SBP) in 2020 to allow non-resident Pakistanis (NRPs) and foreign nationals to invest in Pakistan's financial markets — including PSX-listed securities, government securities (Naya Pakistan Certificates), and mutual funds — from abroad through digital onboarding. RDA holders can remit foreign currency into a Roshan Digital Account at an SBP-regulated bank in Pakistan and use those funds to invest in PSX through a SECP-licensed broker. The Stockbroker Client Agreement for an RDA investor must address: the source of funds (foreign remittance through RDA), repatriation of principal and returns (SBP regulations allow free repatriation for RDA investments), the currency of settlement (PKR or foreign currency), and the applicable withholding tax rates for non-resident investors on dividends and capital gains under Section 150 and Section 37A of the Income Tax Ordinance 2001. RDA-linked brokerage agreements typically involve three parties — the SBP-regulated bank (RDA custodian), the SECP-licensed broker, and the investor — and the tripartite arrangement should be documented.
If a SECP-licensed stockbroker in Pakistan fails to execute a client's order as instructed under the Stockbroker Client Agreement, the client has several remedies. Under the Contract Act 1872, the broker's failure to execute a valid instruction constitutes a breach of contract, entitling the client to damages for the loss suffered — the difference between the price at which the order should have been executed and the price at which the client eventually bought or sold the securities (or the market price if the opportunity was missed entirely). Under the Securities Act 2015 and the Securities Brokers Regulations 2016, the client can file a complaint with SECP's Investor Education and Advisory Division, which has authority to direct brokers to compensate clients for documented execution failures. PSX also has a dispute resolution mechanism — the PSX Arbitration Committee — for broker-client disputes arising from trading on the exchange. The PSX Investors Protection Fund provides compensation for losses caused by broker default (insolvency, fraudulent conversion of client funds) up to PKR 500,000 per client. For larger losses, the client must pursue civil litigation before the courts in Karachi (where PSX is headquartered) or the investor's own city.
A SECP-licensed stockbroker in Pakistan must complete Know Your Customer (KYC) verification before executing any client orders, as required by the Anti-Money Laundering Act 2010, the Anti-Money Laundering Regulations 2015, and SECP's AML/CFT Guidelines for Capital Market Entities. The mandatory KYC documents for a retail individual client are: (1) copy of the NADRA Computerised National Identity Card (CNIC) — both sides — with the original produced for verification; (2) proof of address — utility bill (LESCO, SSGC, PTCL) or bank statement dated within the last three months; (3) National Tax Number (NTN) certificate or ATL (Active Taxpayers List) confirmation from FBR — required for tax withholding compliance; (4) completed and signed account opening form with source of funds declaration; (5) bank account details for settlement purposes — a cancelled cheque or bank confirmation from an SBP-regulated bank. For corporate clients, additional documents are required: SECP certificate of incorporation, memorandum and articles of association, board resolution authorising the trading account, and UBO (Ultimate Beneficial Owner) declaration under SECP's Beneficial Owners Regulation 2019. For non-resident Pakistanis using the RDA framework, NICOP (National Identity Card for Overseas Pakistanis) and foreign address proof are required.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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