Rating Details	Rating Type	BFR
	Dissemination Date	Current (20-Dec-21 )
	Action	Initial
	Rating	BFR 3
	Outlook	Stable
	Rating Watch	-

Rating Rationale	Factor	Comment
	Ownership	Controlling stakes are held by Mr. Muhammad Owais at ~51%. The CEO Mr. Ahmed Nabeel also owns ~20% of the ownership.
	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 Compilance	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 Company has an adequate capitalization level, Net Capital Balance stands at ~PKR 92mln at end-Jun'21.

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 incorporates low leveraged capital structure of the Company. Timely materialization of outstanding receivables is important. At end-Jun'21, the brokerage revenue clocked in at ~PKR 118mln (SPLY: ~PKR 55mln) and the equity improved to ~PKR 187mln at end-Jun'21 (SPLY: ~PKR 135mln). Improvement in equity through further capital injection and reduction in outstanding receivables will be important, 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 afnan.iqbal@pacra.com +92-42-35869504 www.pacra.com	Methodology | Broker Fiduciary Rating | Jan-21	Sector Study | Brokerage & Securities | Jan-21

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.