Karachi: VIS Credit Rating Company Ltd. has assigned an initial Broker Fiduciary Rating of 'BFR3' to Pearl Securities Limited, marking the brokerage firm as maintaining good fiduciary standards with a stable outlook.
According to a statement by VIS Credit Rating Company Limited, the rating reflects Pearl Securities Limited's adequate business and financial stability. The company's management, client services, internal controls, regulatory compliance, and ownership and governance framework are considered sound.
Pearl Securities Limited, incorporated in 2000, provides a range of services including equity, commodities, money market, and interbank foreign exchange brokerage. The company's majority shareholding is held by the Government of Khyber Pakhtunkhwa-GPI Fund and Ms. Fatima Usman. With its head office in Karachi, the firm operates six additional branches across Sindh, Punjab, and Khyber Pakhtunkhwa. It holds a Trading Right Entitlement Certificate from the Pakistan Stock Exchange for trading and self-clearing services and is a member of the Pakistan Mercantile Exchange Limited.
The rating underscores the company's governance framework, supported by its strong sponsor profile. The board includes five directors, with two government nominees, enhancing its governance structure. However, the governance could be further improved by expanding board committees and eliminating overlaps in committee memberships.
While management and client facilitation tools are in place, the company could enhance customer experience by improving its investor grievance process and increasing the frequency of disaster recovery drills. Expanding the scope of internal controls, regulatory compliance, and establishing an independent risk management department are recommended to strengthen the control environment.
Financially, the company faces profitability challenges due to high finance costs, despite operational efficiency. It also has significant exposure to market risks, with high gearing and leverage levels affecting its financial position. Going forward, reducing debt, strengthening liquidity, and effectively managing market risks will be crucial for sustaining its business and financial health.