Press Release
Date: 30-Nov-22
PACRA Maintains Broker Fiduciary Rating of Spectrum Securities Limited

Rating Details Rating Type BFR
Dissemination Date Current (30-Nov-22 ) Previous (20-Dec-21)
Action Maintain Initial
Rating BFR 3 BFR 3
Outlook Stable Stable
Rating Watch - -

Rating Rationale Factor Comment
Ownership The majority stakes are controlled by Mr. Muhammad Owais who owns ~83% of the shares. The rating takes support from the sponsors business acumen. Mr. Owais is also engaged in the real estate business
Governance The Company's board comprise of three directors including the CEO while the presence of independent director is well noted.
Management and Client Services SSL has an adequately defined organizational structure. Clients have access to research portal, while grievance procedures are also in place.
Internal Controls and Regulatory Compliance The internal audit and compliance functions are segregated; however, the audit committee lacks independence.
Business Sustainability Ratings are constrained by the Company's significant dependence on equity brokerage operations, limited diversification of income streams.
Financial Sustainability The core income has declined leaving an impact on the Company's equity. The unrealized losses on proprietary book have further add up to the net loss.

Key Rating Drivers The assigned rating of Spectrum Securities Limited ("SSL or the "Company") incorporates adequate ownership structure and governance framework. Increasing the board size and inclusion of independent director in board level committees may result in improved governance framework. SSL’s services mainly comprise of equity brokerage where it has a good mix of corporate/institutional and HNWI's. SSL has adequately defined organizational hierarchy where the responsibilities and reporting lines are structured. SSL provides prudent services to its clients with access to technical and fundamental reports and a dynamic reporting mechanism. Client services may be further enhanced through complaint tracking system. SSL has a sound IT infrastructure supported by established IT policy. Contingency measures are in place with off-site data backup. The internal control and regulatory compliance is considered sound whereby the Company has established Trading Policy and Procedures to deal with any potential conflict with clients trades. Segregation of Head of Finance and Compliance may strengthen the compliance function. The rating takes comfort from a low leveraged capital structure. For FY22, the revenue from equity brokerage has declined YoY by ~42% which is in line with the drop in market volumes. Improvement in equity through internally generated profits is critical going forward.

About the Entity
Legal Structure Public Limited
Year of Establishment 27-Oct-14
Type of License Trading and Self-clearing
Majority Ownership Mr. Muhammad Owais | ~83%

Regulatory Disclosures Analyst Applicable Criteria Related Research
Afnan Iqbal

Methodology | Broker Fiduciary Rating | Jan-22

Sector Study | Brokerage & Securities | Jan-22

Disclaimer This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA. The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.