EMPLOYEE CODE OF CONDUCT - PACRAThe Pakistan Credit Rating Agency Limited EMPLOYEE CODE OF CONDUCT...

February 2015

THE PAKISTAN CREDIT RATING AGENCY LIMITED

CODE OF CONDUCT

EMPLOYEE CODE OF

CONDUCT

CONTENTS

Defined Terms 1

Statement of Integrity

A Guiding Set of Principles 8

Open Door Communication 8

Work Environment 9

Ethical Business Practices 9

Business Records

Gifts, Entertainment or Things of Value

Intellectual Property

Quality & Integrity 10

Confidentiality 11

Restrictions & Requirements

Authorized Access & Use

Trade Secrets & Proprietary Information

Employee Personal Data

Securities Investment & Trading 13

“Insider Trading” & “Tipping”

Securities Ownership & Participation in

a Rating Action

Conflicts of Interest 13

Rating Fee

Business Conference / Panel

Discussions & Speaking Engagements

Investor Calls / Inquiries

Firewalls

Disclosure

Significant Interest

Outside / Personal Activities

Business / Investment Opportunities

Code Administration 16

Regulatory Requirements / Best

Practices 16

The Pakistan Credit Rating Agency Limited

EMPLOYEE CODE OF CONDUCT

CODE OF CONDUCT Page 1 of 20

February 2015 www.pacra.com

DEFINED TERMS

Affiliate

The term is synonymous to “associated companies” and “associated undertakings” as

defined in Pakistan’s Companies Ordinance (1984), Part 1, Clause 2 of 2:

“Any two or more companies or undertakings, or a company and an undertaking,

interconnected with each other in the following manner:

i If a person who is the owner or a partner or director of a company or undertaking, or

who, directly or indirectly, holds or controls shares carrying not less than twenty

percent of the voting power in such company or undertaking, is also the owner or

partner or director of another company or undertaking, or directly or indirectly, holds

or controls shares carrying not less than twenty percent of the voting power in that

company or undertaking , or

ii If the companies or undertakings are under common management or control or one is

the subsidiary of another”

Types of

Affiliate Description Status

Rating

Affiliate

An Affiliate primarily involved in

providing Rating products and

services

PACRA has no Rating Affiliate

Non-Rating

Affiliate

An Affiliate primarily involved in

providing Non-rating products

and services

PACRA has one Non-Rating

Affiliate by the name of PACRA

Analytics (Private) Limited – a

wholly owned subsidiary

Applicable Law

All statutory regulations / laws applicable upon PACRA or which PACRA has decided to

follow:

Regulator Law / Regulations

Securities &

Exchange

Commission of

Pakistan (SECP)

Credit Rating Companies Rules, July 26, 1995

Code of Conduct for Credit Rating Companies/Agencies,

January 13, 2014

The Companies Ordinance, 1984 (Ordinance Number XLVII

OF 1984)

Listed Companies (prohibition of insiders trading) Guidelines,

March 27, 2001

State Bank of

Pakistan (SBP)

Criteria for the recognition of External Credit Assessment

Institutions, July 04, 2005

Association of

Credit Rating

Agencies in Asia

(ACRAA)

Code of Conduct Fundamentals for Domestic Credit Rating

Agencies, April 2011

Business

Records

All formal Documents / Reports that require to be preserved (for a designated period of

time) as per PACRA current practice or Applicable Law (Clause 2.1-d & 2.1-e of SECP

Code of Conduct for Credit Rati-ng Companies / Agencies, January 13, 2014)

2.1-d: Keep the following records in support of each credit rating and review thereof:

i Summary of discussions with the issuer, its management, auditors and creditors which

have a bearing on the credit rating;





ii Decisions of the rating committee, including voting details and notes of dissent, if

any, by any member of the rating committee; and

iii Where a quantitative model is a substantial component of the credit rating process, the

rationale for any material difference between the credit rating implied by the model

and the credit rating actually assigned.

2.1-e: Ensure that for all ratings whether active, withdrawn or matured, records shall be

maintained for a period of not less than five years and in case of instrument rating/grading,

the time period of five years shall be reckoned from the date of maturity of such

instrument

Client

PACRA entertains two kinds of Clients (including existing and potential)

i Rating Client: An entity / issuer, whose rating assignment is to be undertaken,

having signed a Rating Mandate with PACRA

ii Non-Rating Client: Any party having an assignment mandate with PACRA for

any Non-rating product or service

Codes of

Conduct

Sets of Standards (Do’s & Don’ts) governing day-to-day conduct. PACRA has the

following Codes of Conduct:

i PACRA Code of Conduct

ii Rating Committee (RC) Code of Conduct

iii Employee Code of Conduct

iv Board Code of Conduct

Communication

Cell

A separate function / cell established inside PACRA responsible for communication with

market participants and the public about any questions, concerns or complaints that

PACRA may receive. Communication Cell may resort to seeking counsel to resolve

queries

Company The Pakistan Credit Rating Agency Limited (PACRA)

Compliance

Communication

E-mail

[email protected]

Confidential

Information

PACRA classifies information as Public or Confidential / non-public.

Public Information is information available in a legitimate manner (website

dissemination, subscription etc.). For instance, all information on PACRA’s website is

Public Information. Similarly, PACRA Detailed Report Package of a Public Rating is

considered Public Information because it is available to everyone, though PACRA may

charge for it.

Confidential Information is any data or information, tangible or intangible, material

(sensitive) or not, that is either:

i Not available without the explicit consent of the owner of such information

ii Capable of: (a) Having an effect on the market for a Security, and (b) Affecting

the investment decision of an investor

iii Made available to PACRA with the implicit or explicit understanding / agreement

that it would remain confidential; and / or

iv Proprietary to PACRA so that PACRA is the originator of such information

Confidentiality

Agreement A formal, written agreement between one, who discloses information that it considers

confidential and the other, who receives such information, knowing fully well that the

mailto:[email protected]





information is confidential, binding the latter to an oath of confidentiality

Conflict of

Interest (COI)

Conflict of interest (COI): A situation wherein an individual / organization, upholding a

position of trust and fiduciary responsibility, encounters a competing personal /

professional interest that has the potential to make it difficult for such individual /

organization to fulfill its position of trust / fiduciary responsibility objectively and

impartially:

i Potential COI: A COI that exists due to inherent aspects in a business model

despite institution of prudent systems and controls to manage such COI

ii Actual COI: A COI that comes into existence as a result of a failure in systems

and controls instituted to manage a potential COI

Discrimination

Preference for one employee over another on the basis of race, color, gender, age, religion,

national origin, marital status, disability, or any other characteristic

[The above mentioned characteristics are protected by international laws of equality and

non-discrimination (Universal Declaration of Human Rights, 1948; Article 2)]

Employees

Full-time or part-time individuals working for PACRA for a work-duration of minimum

90-days. All Employees are classified as per their Line of Business:

Types of

Employees Line of Business

Internal RC

Members

See Defined Term “Rating Committee (RC), RC Members”

later in this Section

Rating Analysts

Employees assigned to a Rating Team under any designation / job

title whose function is to:

a) assign ratings;

b) assist / arrange materials being considered for rating opinion;

c) supervise Employees included in (a) and / or (b)

Criteria

Employees

Employees responsible for formulating Criteria / Methodology,

Policies, Codes of Conduct, and transition and default studies

Business

Development

Employees

Employees responsible for business lead generation, negotiation,

marketing, and sales functions

Support

Employees

Employees responsible for performing support functions such as

administration, accounting and finance, information technology,

compliance

Analytical

Employees Employees responsible for performing non-rating business

Family Member

The term “Family Member” shall include only those family members who are dependent

of the analyst (SECP Code of Conduct for Credit Rating Companies / Agencies, issued

January 13, 2014; Clause 3.1-a-xv) – Via SECP Letter No: SMD / CIW / CR / 03 / 2009 dated

February 10, 2015

Harassment

Harassment encompasses any action (psychological, verbal, physical) directed from one

employee towards another (the “recipient”), whereby:

Submission to such action is either explicitly or implicitly made a term or

condition of the recipient’s employment;

Submission to or rejection to submit is used as the basis for employment decisions

(promotion / demolition / performance evaluation) affecting the recipient; or

Such action has the purpose or effect of unreasonably interfering with the





recipient’s work performance or creating an intimidating, hostile, or offensive

work environment

Insider “A person who is a director, chief executive, managing agent, chief accountant, secretary

or auditor of a listed company or the beneficial owner holding directly or indirectly not

less than 10% of the shares of a listed company; or a person who, is or was connected with

the company or is deemed to have been connected with the company, and who is

reasonably expected to have access, by virtue of such connection, to unpublished price

sensitive information….” – Clause 2-g of SECP Listed Companies (Prohibition of insiders

trading) Guidelines – March 27, 2001

Insider Trading Trading a Security while in possession of Confidential Information

IOSCO Code of

Conduct

The International Organization of Securities Commissions (IOSCO) is an association of

organizations (securities commissions / key regulators) that regulate the world’s securities

markets. Having members from over 100 different countries, the organization’s role is to

assist its members to promote high standards of regulation and best practices. IOSCO

Code of Conduct is the gold standard to be followed by credit rating agencies around the

world

The controlling version of IOSCO Code of Conduct Fundamentals for Credit Rating

Agencies (May 2008) is maintained on PACRA’s website: www.pacra.com

Issuer Any entity by which a security has been / being issued

Line of Business

Areas of activity / functionality at or in PACRA: (i) Ratings, (ii) Criteria, (iii) Business

Development, (iv) Support (Administration, Accounts and Finance, Information

Technology, Compliance), (v) Non-rating business

Own/

Ownership

All methods by which a Covered Person may possess an interest in a Security including

direct and beneficial ownership:

“Beneficial Ownership of Securities of any person shall be deemed to include the

securities beneficially owned, held or controlled by him or his spouse or by any of his

dependent lineal ascendants or descendants” Clause 224 (3)-a of the Companies

Ordinance 1984 - Trading by directors, officers and principal shareholders

PACRA Policies PACRA’s official, documented statement on its business, conduct and processes

PACRA

Products and

Services

PACRA has two main businesses; (i) a Rating Business, and (ii) a Non rating Business

furnishing the following products and services respectively:

i Rating products and services: These are derived out of the rating process and

offered with respect to Ratings

ii Non-Rating / Analytics / Ancillary products and services: Constitutes all those

products and services that are not Rating products and services

PACRA Values

PACRA’s value system can be defined in a single word – Integrity defined as the

foundation underpinning all its acts.

PACRA Values are:

Honesty, Timeliness, Transparency, Teamwork, Knowledge

http://www.pacra.com/





Policy

Committee (PC)

Committee to deliberate upon matters pertaining to interpretation of PACRA Policies,

Codes of Conduct and Applicable Law. Apart from the permanent members, the

Committee may invite other Employees to participate, whenever deemed necessary:

PC Constitution

Members Designation

Managing Director Chairman

Chief Operating Officer Member

Compliance Officer Secretary

Primary

Analytical

Responsibility

Primary Analytical Responsibility constitutes all those Clients that are assigned in one’s

portfolio. It is determined based upon an Employee’s designated role:

Designated Role Primary Analytical Responsibility

i Rating Analyst Rating Analyst’s own Rating Portfolio

ii Analytical Employee Analytical Employee’s own Analytical Portfolio

iii Team Leader Rating Portfolio of all Employees under supervision

Ratee The entity / issuer whose rating is assigned

Rating also

termed Rating

Opinion

Rating reflects an opinion assigned by PACRA that is:

i Placed on a Rating Scale

ii Assigned as per an established Methodology

Currently, PACRA offers various types of Ratings, namely, Entity Ratings, Instrument

Ratings, Structured Finance Ratings, Insurer Financial Strength (IFS) Rating, Project

Grading, Fund Stability Rating, Star Ranking (Fund Performance) Ranking, Capital

Protection Rating, Asset Manager Rating and Security Agency Grading. In future,

PACRA may add other types of Ratings to its products and services menu

Rating

Committee

(RC), RC

Members

Rating Committee: PACRA Rating Committee (RC) is a forum whereby the rating

proposed by the Rating Team undergoes deliberation culminating in a decision as to what

the final rating would be. RC is core to the finalization of rating opinion. Rating

decisions are taken exclusively by the RC and not by any individual and are completely

independent of any influence.

RC Members: PACRA RC is structured to include both Internal (in-house) and External

RC Members:

Internal RC Member: A PACRA Employee who has been formally designated

in the position. He may have other responsibilities / functions in PACRA.

External RC Member: A person who has been nominated in this role by

PACRA. External RC member should not have any direct or indirect association

with PACRA or any of its directors and shareholders.

Rating Mandate An agreement enumerating the terms and conditions driving the rating relationship

between PACRA and the Ratee

Rating Report

Rating Report comprises two components:

(i) Report Package: A public document on PACRA’s website containing a rating

rationale, analyses, financials and regulatory and supplementary disclosures

(ii) Detailed Report Package: A public document (furnished primarily to the Client)

containing a long-form, explanatory version of the Report Package. Anyone,

other than the Client, may obtain it either through purchase from PACRA or

through the Client itself





Rating Scale

A Scale comprising numeral / alphabet letter grades indicating position in a series or order

(from highest / best to lowest / worst). Each position on a Rating Scale corresponds to a

definition of such position.

Secondment

Transfer of human resource from any Line of PACRA Business to work on a specific

assignment (Rating or Non-rating Business) for any designated period of time OR until the

Assignment is completed or vice versa. This also covers transfer of human resource to /

from PACRA to PACRA Analytics (Pvt.) Limited (the Affiliate) or vice versa

Securities Stocks, bonds, commodities, foreign exchange currencies, indices and their derivatives

(futures contracts, options, etc.)

Selective

Disclosure

Intentional or unintentional release of Confidential Information to a select individual /

group

From PACRA’s point of view: Selective disclosure constitutes divulging the

rating opinion to anyone other than the Client before Public Dissemination. The

release of such information to the Client doesn’t constitute selective disclosure

From Client’s point of view: Selective disclosure constitutes divulging the rating

opinion to anyone else before Public Dissemination by PACRA

Senior

Management

Personnel

Herein, Managing Director (Mr. Adnan Afaq) and Chief Operating Officer (Mr. Shahzad

Saleem)

Service

Grievance

Complaint made by an Employee / group of Employees (in which he / she / they are the

affectees) pertaining to perceived: (i) violations of the employment contract and / or

PACRA Human Resource policy, (ii) Discrimination and Harassment in the workplace

Significant

Interest

Any interest in another company that would influence the Employee to make a decision

based on that company’s or the Employee’s own interests rather than PACRA’s is

considered “significant.” An interest can be financial, such as owning stock, or personal,

such as a family or other close relationship with a company / its owner

The Code Employee Code of Conduct

The Compliance

Officer

Individual appointed by PACRA and notified to the Securities and Exchange Commission

of Pakistan as the Compliance Officer

Team & Rating

Team

Team: A typical PACRA Team in any Line of Business comprises a Team Leader and

team members reporting into the Team Leader

Rating Team: The make-up of a typical Rating Team designated to complete a single

rating assignment comprises a Lead Analyst, a support analyst (may or may not be present

in all Rating Teams) with one Team Leader. The Rating Team may be reinforced by

additional members, if deemed necessary, subject to the complexity of the rating

Team Leader Employee responsible for supervising the work of other Employees (team members)

Tipping

Tipping occurs when a Person, possessing Confidential Information, and fully aware of

the fiduciary / regulatory responsibility to safeguard misuse of such information, causes

another to trade upon such Confidential Information. Tipping is deemed to have taken

place simply by the act of conveying Confidential Information irrespective of whether or

not a Trade actually occurred using Confidential Information thus conveyed

Trade, Trading Any transaction:





By which a person acquires or divests from a position in a Security, and

The Securities underlying such transaction are held for a period of less than three (3)

months

Vendor Any entity (individual or corporate) contracted to provide goods and services to PACRA

for a negotiated price

Ilnap:*;vln Conp. *r l*l.,li-:i jil'r'The Pakistan Credit Raling 4 Limited

Statemcnt oi lntegrify

FACAA is ccxmitted to providing quali{r pr*dricls ;rndservices. Il so doing, it is dedicated to a set of cr'rre FACF-AValnes, ail d{riveclfi'om integriq!'. PACRA define,r int*gril3'a=the fcrLurcla;irxr uncletpinning all its acts. As PA{*E€'s s',rst*'r::*dsir+Lr;=!e 1s d*penc1*ri ,;:r the confidener- *l' iis Ci1*nts, it is

ess*nliai io saieg*ard its inErgrity.

FPt il::st take every precauiiol to avoid Conflicts of luterest andLrse care and professional juclginent to maintain trath tliesul:stalce aiirl appeaiatce rf indeper:r1en*e mrl objectivity,pai'::*ularl,y with rerpe*l ir-: tl:e Cor:frrJ=::tial lnfcnnation thst isaceessibi= 1s s5 ir-lii*** :he i*u:i** r.Gulss of fulfiliing r:ur j*bduii+s,

.#ach r'ne of us :r--:r:s: riiligently elmply with Applic*ble Law;Codes cf Ccnil;el ,q-:rrl PACLA Folicies. At the saine time, notonly ar* we enlnisted to be responsible for our orvn actions but:.:lEa ibr fostering a cultnre in *4rich compliance i.vith ApplicableLarv. Codes ol Conduct and PACRA Falicies is piv*tal ti-'

business-speeifi c activirie:.

Fi*a=e nste th a: cornplialce with Applicable Lar.v, Corle= .:iCc,r;di:ct and I'ACRA Polieies is a *i:iriiition of err-:p!*yrjlerit atFACFS and lailing to cornply ina-v i*ad to initiaiir-''ir of a

il i -s+ip linal y process irrc 1 nding tenn iirati*r r.

^j..; I sec ii. e;sc,=il*ni corporate and finareiai perforniar;e* is an

oulrotle *l- hig!: staldards of govemance arrd compliar,ee. Asrve ii':i-:ns on becon:ing ihe pre-eminei:t rating ag-;1e-l in our:egion. lve mlist reeog+iz* rlat onlJ' one kirrd o1'perlor::rance

"vil1 lead :o sr:eers=. ar:d that is performance \.",,iij: ?I{?EGRITv.

A*i=reri AraeManirging Direc

il i:t ; * r {--a:1;:: :-. ilT?"*-*'" i ?:i il: iti . i: il a"i-i





Capitalized terms have the meaning set forth in “Defined Terms”

1 A GUIDING SET OF

PRINCIPLES

1.1 Objective: PACRA Employee Code of Conduct is designed to help

bring Employees’ conduct in their day-to-day professional and business activities

in conformance with PACRA Values, Policies and Applicable Law.

1.2 Applicability: The Code is applicable on all Employees and External

RC Members.

1.3 PACRA’s functioning, designed for optimal utilization of its human

resources, routinely requires Employees to assume a role in more than one Line of

Business. As such, Employees need to ensure that they remain compliant,

wholly and simultaneously, with all Code provisions relevant to the Lines of

Business in which they are discharging responsibility at any given point in time.

1.4 All key external communications (other than Rating Services-related and

other routine communications) need to be pre-approved by the Managing Director

(MD) before being sent outside PACRA. An example of such communication is

PACRA Employees’ views / opinions expressed in print media / business seminar

/ panel discussion.

1.5 The Code is a statement of policies for individual and business conduct

and does not, in any way, constitute an employment contract or an assurance of

continued employment. In the event that any provision of this Code conflicts with

any provision in an Employee’s individual written employment contract, the

provisions in the latter will prevail.

1.6 The Code should be read together with all relevant PACRA Policies and

Applicable Law in order to achieve comprehensive understanding. Employees

and External RC Members are responsible for reviewing and understanding the

Code, the Policies and the Applicable Law to the extent related to them and their

Lines of Business.

1.7 At times, the Code and PACRA Policies may be stringent than the

Applicable Law. In all such cases, the stringent requirement will be applicable.

2 OPEN DOOR

COMMUNICATION

2.1 PACRA supports and maintains open door communications to report any

violations of Applicable Law, Codes of Conduct and PACRA Policies:

i Employees are encouraged to raise concerns and report instances of

violation immediately after assuring themselves of the authenticity of

such in the light of their understanding of Applicable Law, Codes of

Conduct and PACRA Policies

ii Team Leaders shall be available to discuss such concerns and investigate

instances in an environment free from distractions, and

iii Employees may directly contact the Senior Management either orally or

through e-mail

Retaliation against any Employee for reporting in good faith any such

concern and / or instance of violation is strictly forbidden and will not be

tolerated

2.2 PACRA strives to maintain an environment conducive to addressing any

issue that might be counterproductive to Employee performance and job

satisfaction. One such area is redressal of Service Grievance. PACRA

encourages its Employees to express, discuss and share any Service Grievance

that might be weighing on their minds:





i In the first instance, each Team Leader is available to discuss Service

Grievances and facilitate resolution within the Team

ii In case, the Employee is unable to find satisfaction through discussion

with Team Leader, the Employee has recourse to a designated authority

PACRA has designated the MD as the Authority to redress a Service

Grievance

3 WORK

ENVIRONMENT

Zero tolerance for

Discrimination and

Harassment, at any

hierarchical level –

Inside & Outside

PACRA

3.1 PACRA’s goal is to nurture an environment conducive to encouraging

Employees to use the full range of their talents, skills and abilities.

3.2 The Code provisions for work environment are applicable: (i) Inside

PACRA (including inappropriate use of Company resources such as electronic

mail, messenger and the Internet to create harassment), and (ii) Outside PACRA -

PACRA-arranged events (professional and recreational both) and all external

official activities (Client site visit etc.)

i No Employee shall engage in discriminatory conduct against another

Employee

ii No Employee shall employ Harassment as a means to an end

iii In case an Employee informs PACRA that he / she has been subject to

Discrimination and / or Harassment during the course of discharging his /

her duties in the workplace by a non-employee (Client, Vendor), PACRA

will take appropriate corrective action and preventive steps in order to

remedy the situation

4 ETHICAL BUSINESS

PRACTICES

Business Records

Gifts & Entertainment

Intellectual Property

4.1 BUSINESS RECORDS:

Employees shall:

i Make reasonable efforts to safeguard Business Records and maintain

them in their designated location and format in order to ensure

preservation, speedy retrieval and prevent breach of confidentiality

ii Not create / destroy or participate in the creation / destruction of any

records that are intended to misrepresent and / or mislead anyone or

conceal anything from their rightful recipient

4.2 GIFTS, ENTERTAINMENT OR OTHER THINGS OF VALUE:

4.2.1 Employee or Family Member (either individually or as part of a group)

shall not:

i Accept any gift from any Client:

(a) In the form of cash / cash equivalent

(b) Regardless of its value, where there is any reason to believe that it is

being offered in an attempt to influence the Employee’s work

judgment, and /or

(c) Extravagant or lavish in nature, exceeding local social / business

customs

ii Accept gifts from any Client, if it is valued greater than $100. Gifts

valued upto $100 may be accepted provided permission of such is

obtained from the Team Leader

iii Receive personal benefits (such as loans or guarantees of personal





obligations) as a result of their position, until and unless such have been

duly authorized and approved by the MD

4.2.2 Employee or Family Member (either individually or as part of a group)

may:

i Accept any travel or lodging facility related to a valid activity necessary

to conduct PACRA’s rating process such as a management meeting, site

visit etc.

ii Exercise discretion in accepting invitation to Client-sponsored

entertainment (for instance, musical concert etc.)

iii Accept meeting supplies such as notepads, pencils and food and beverage

during a business meeting

iv Extend tokens (greeting cards) to existing Clients

4.2.3 Business Development & Analytical Employees may:

i Extend reasonable gifts of a souvenir nature (for instance, PACRA

engraved pen) and tokens to Clients

4.3 INTELLECTUAL PROPERTY:

PACRA maintains and respects intellectual property rights for its own and third-

party work. Employees shall:

i Forfeit all rights to PACRA for the work performed by them such that

PACRA owns all copyrights and know-how associated with such work

and reserves the right to display, edit, maintain, destroy and sell it in any

manner it deems appropriate

ii Whenever referencing / using third-party copyrighted material in their

work, acknowledge the use of such material by giving due credit, and, if

required, obtain the consent, in writing, of the original owner

5 QUALITY &

INTEGRITY

5.1 Employees shall:

i Comply with all Applicable Law governing their activities in each

jurisdiction in which they operate

ii Deal fairly and honestly with Clients, subscribers, investors, other market

participants, Vendors and any other party with whom an existing or

potential business relationship is present

iii Maintain no proprietary interest in and entertain no reasonable

expectation of privacy while using any computer equipment or Company-

provided internet access, including electronic mail, instant messaging or

similar technologies

iv Not handle or save any personal data on Company computer storage

devices, if intending to avoid inspection

v Safeguard their passwords including not sharing them with other

Employees, for access to all intranet, computer and e-mail systems

vi Not attempt to disable or evade the operation of information protecting

Company-installed security features such as network access protocols,

virus protection, downloading and software / hardware addition / deletion

restrictions

vii Safeguard the laptops, smartphones or any other technology resource

provided to them by the Company taking steps to prevent such





technology resources from being lost, stolen or accessed by an

unauthorized person

viii Not use PACRA’s money, materials, supplies or other resources,

including computers, to advance their personal interests

ix Use Company resources, including time, equipment, materials, resources

and information, solely for discharging their job responsibility

x Return all Company property and resources in their possession to

PACRA at the time of leaving employment

5.2 Business Development Employees shall:

i Not get involved in unfair competitive practices such as soliciting the

clients of any competitor on implicit or explicit assurance of higher rating

or any other undue benefit

5.3 Rating Analysts and RC Members shall:

i Use methodologies established by PACRA in assessing an entity /

issuer’s creditworthiness and apply a given methodology in a careful,

uniform and consistent manner, as determined by PACRA

ii Take steps to avoid issuing any credit analyses or reports that contain

misrepresentations or are otherwise misleading as to the general

creditworthiness of an issuer or obligation

5.4 Rating Analysts shall:

i Not either implicitly or explicitly, orally or in writing, give any assurance

or guarantee of a particular rating prior to a rating assignment. This does

not preclude them from developing prospective assessments / scenarios

used in structured finance and similar transactions

ii Refrain from making proposals or recommendations regarding the design

of structured finance products that PACRA rates

6 CONFIDENTIALITY 6.1 Restrictions & Requirements

6.1.1 Employees shall:

i Not use Confidential Information for any purpose other than to discharge

their responsibilities towards their jobs

ii Take measures to prevent the transfer and misuse of Confidential

Information by others

iii Exercise due care and diligence not to mention / discuss Confidential

Information in places where they can be overheard, such as taxis,

elevators or restaurants, or with Family Members or business or social

acquaintance

iv Not selectively disclose Confidential Information, when interacting with

investors, subscribers or any third-party

v Not refer to Confidential Information in any published report /

publication, until and unless prior consent to such disclosure has been

solicited from the Client. In the absence of such consent, Confidential

Information shall only be used to draw broad inferences in analysis

vi If requested to disclose Confidential Information by the Government of

Pakistan, state department / agency or a judicial authority (court,

lawyers), immediately forward such request to PACRA MD





6.2 Authorized Access and Use:

6.2.1 Rating Analysts:

i May share Confidential Information pertaining to an individual Client

with other Rating Analysts when sharing of such information is deemed

necessary in order to formulate a sector study and / or to reach a rating

opinion for the other Client

ii May discuss the publically available analysis supporting a rating (Report

Package, Press Release) on investor calls

iii Shall bring all requests for information (even if, such request pertains to

non-confidential information) either from inside PACRA and / or outside

(from an Affiliate, a Client or any third-party) to the attention of the

Team Leader before acquiescing to it

iv Shall not e-mail any PACRA document(s) to Clients or any third-party

without copying the same to the Team Leader

v Shall place all PACRA documents exclusively in their designated place in

eFolders and Client Files and not leave their soft and hard copies in

undesignated places

vi Shall not access a fellow analyst efolder / Client file without prior notice

and only after explicitly stating the purpose / scope of such access

6.2.2 Rating Analysts & other Employees

i May share Confidential Information only to the extent necessary for the

latter to discharge their support / administrative responsibilities, achieve

compliance with regulatory reporting purposes and / or implement

PACRA Policies

6.2.3 Rating Analysts & Analytical Employees:

i Rating Analysts may share Confidential Information pertaining to an

individual Client with Analytical Employees in cases where an explicit,

written consent has been furnished by the Client of its own free will

allowing the sharing of such information for a clearly stated purpose /

assignment

ii Analytical Employees shall not disclose to Rating Analysts any

information on the name of any Non-Rating Business including the fee

paid for delivering such product or service

iii Rating Analysts shall not be Employees of a Non-Rating Affiliate and

vice versa. However, Rating Analysts and Analytical Employees may be

engaged by the Non-Rating Affiliate or Rating Company / Affiliate

respectively under Secondment

iv Rating Analysts and Analytical Employees shall not participate in any

assignment for Clients; they have worked upon within the last twelve (12)

months, while on Secondment as described in (iii) above

v Rating Analysts and Analytical Employees may collaborate on research

projects and/or product development provided the Confidential

Information exchanged is not specific to a particular Client

vi Rating Analysts and Analytical Employees may jointly sponsor business

events and conferences and appear on discussion panels and seminars

together

6.3 Trade Secrets and Proprietary Information:





i Employees shall safeguard the confidentiality of PACRA’s trade secrets

and proprietary information (proprietary models / programs, product

designs, business plans) during the tenor of their employment at PACRA

and perpetually thereafter

ii Employees may disclose such information in the ordinary course of their

authorized business activities to parties (such as Vendors, consultants,

advisors, trainers etc.) with whom PACRA has entered into appropriate

Confidentiality Agreements

6.4 Employee Personal Data:

i Employees collecting, using, transferring and disclosing Employee

personal data for the purpose of discharging their job responsibilities shall

exercise caution to safeguard and maintain the confidentiality of such

information

7 SECURITIES

INVESTMENT &

TRADING

7.1 Prohibition on “Insider Trading” & “Tipping”

7.1.1 Employees and Family Members are prohibited from:

i Engaging in any Trade or causing / recommending another to Trade while

in possession of Confidential Information. This prohibition applies to

any:

Confidential Information concerning any Security, regardless of

whether or not it is rated by PACRA

Circumstance (occurring within or without PACRA) in which the

Employee or Family Member comes into possession of Confidential

Information

ii Engaging in any Trade or causing / recommending another to Trade while

in possession of Confidential Information relating to any Security that is

proprietary to PACRA

7.2 Securities Ownership & participation in a Rating Action

7.2.1 Rating Analysts shall be barred from:

i Participating in or otherwise influencing the determination of rating of

any particular Security if the Rating Analyst or Family Member:

Owns securities or derivatives of the rated entity, other than holdings

in diversified collective investment schemes

Owns securities or derivatives of any entity related to a rated entity,

the Ownership of which may cause or may be perceived as causing a

Conflict of Interest, other than holdings in diversified collective

investment schemes

8 CONFLICTS OF

INTEREST

8.1 Rating Fee:

i Although it is generally not possible to prevent entity / issuers and their

agents from raising issues concerning fees and billings with Rating

Analysts, in such cases, Rating Analysts shall refer these inquiries to

Accounts and Finance

ii If fee discussions occur at any meetings, discussions or other interactions

where Rating Analysts are present, they shall excuse themselves from the





discussion

8.2 Business Conferences, Panel Discussions & Speaking Engagements:

i Rating Analysts may attend business conferences, seminars and panel

discussions hosted by industry forums / associations and entities / issuers

(Clients and potential Clients) that are widely attended by a broad range

of market participants

ii Rating Analysts may invite industry representatives, existing Clients and

potential Clients and their employees to be PACRA’s guest at appropriate

events (for instance, a conference, seminar held to create public

awareness for ratings)

iii Rating Analysts may express their views / opinions (based on their

knowledge and expertise gained from their position at PACRA) in print

and electronic media after soliciting approval from the MD (See 1.4

above)

iv Team Leaders may participate in panel discussions regarding sectors that

PACRA covers and other relevant topics (on which PACRA maintains a

view in public domain) hosted by industry forums / associations provided

such activity isn’t utilized as an opportunity to solicit business

8.3 Investor Calls / Inquiries:

i Rating Analysts are encouraged to be responsive to investor inquiries and

should proactively interact with investors on analytical topics

ii Team Leaders may attend one-on-one investor meetings provided such

activity isn’t utilized as an opportunity to solicit business

8.4 Firewalls:

8.4.1 Business Development & Accounts & Finance:

i For budgeting and planning purposes, Accounts & Finance may share and

discuss information concerning individual fees and billings, transactions,

sector and rating class-level revenue information and considerations on

market share with Business Development Employees

8.4.2 Business Development and Ratings:

i If a meeting is intended to cover only ratings-related analytical topics

such as annual rating reviews and surveillance, special reports, criteria or

rating methodologies, Business Development Employees (though not

required to be present) may attend, where appropriate, to gather first-

hand information for discharging their job responsibility (for instance,

new developments such as an expansion of rating universe and PACRA’s

impact in the market)

ii Team Leaders may attend meetings, discussions and interactions arranged

solely to secure new / future business, but only for the purpose of

discussing analytical views and risk considerations


i Shall not recommend the purchase of any PACRA product or service

ii Shall not suggest or imply that the purchase of any particular PACRA

product or service will have a favorable effect on a Rating

iii Shall refer any inquiry about the Rating and / or Non-rating products and

services to an appropriate Analytical Employee or Business Development

Employee





8.4.4 Analytical Employees:

i Shall not recommend to their respective clients the purchase of Rating

products and services as part of their engagement with such clients

ii Shall refer any inquiry about the Rating products and services to Business

Development Employees

8.5 Disclosure:

8.5.1 Rating Analysts and RC Members shall:

i Disclose any conflict of interest, including those of their Family Members

to Team Leaders and MD respectively

8.6 Significant interest:

8.6.1 Employees:

i Shall not acquire or maintain a Significant Interest in any entity / issuer,

decisions on behalf of which may compete with decisions that the

Employees make on behalf of PACRA as part of their job

ii Shall not take a part-time or second job without express written

permission of MD

iii Shall not be hired to work as a consultant or other independent contractor

for PACRA where payment is made outside normal payroll routines

iv Shall base purchasing decisions (equipment, insurance, office supplies

etc.) on the basis of quality, price and service, irrespective of the fact that

a potential Vendor is also a Client


i Shall not participate in or otherwise influence the determination of the

rating of any Client, if they:

a Have had a recent employment or other significant business

relationship (shareholder, director), during the last one year, with the

Client

b Have a Family Member currently working for the Client

c Have, or had (within the last one year), any other relationship with

the Client or any related entity / issuer

ii Shall promptly disclose to the Team Leader if, at any time, they become

involved in any personal relationship that creates the potential for any

real or apparent Conflict of Interest (including, for example, any personal

relationship with an employee of a rated entity / issuer within his/her area

of Primary Analytical Responsibility)

iii Shall not join, within one year of leaving PACRA, any entity within the

Primary Analytical Responsibility

8.7 Outside / Personal Activities:

i Employees may participate in any legal and ethical outside / personal

activity of their choice - including participation in the political process or

a social organization, expressing their personal views and opinions on

any subject in media - on their own time

ii Such activities may be pursued by above without violating the Code as

long as care is exercised not to imply that Employees are acting on behalf

of PACRA. Thus:

Employees are not permitted to allow their PACRA affiliation to





be noted in any outside organization’s promotional materials /

brochures or activities

8.8 Business / Investment Opportunities:

i Employees, upon learning of a business / investment opportunity (that , in

their opinion, may be of interest to PACRA) through the use of PACRA

resources (their position at PACRA, conversation with existing Clients

and potential Clients, Vendors, business associates) shall consider it their

duty to inform PACRA and refrain from capitalizing upon such

opportunity for their personal gain till the time they are reasonably certain

that PACRA is no longer considering such opportunity

9 CODE

ADMINISTRATION

9.1 Certification: All Employees affirm their adoption, adherence and

compliance to PACRA Employee Code of Conduct at the time of their entry to

PACRA and annually thereafter:

9.2 Interpretation: The Policy Committee is responsible for interpreting and

applying the Code to specific situations when questions arise.

9.3 Investigations of Suspected Violations: All reported violations will be

promptly investigated and treated confidentially to the extent reasonably possible.

9.4 Disciplinary Policy: Compliance with all Codes of Conduct and PACRA

Policies, including this Code, is a condition of employment and failing to comply

will lead to initiation of a disciplinary process including termination. Compliance

with the Codes of Conduct and PACRA Policies shall be monitored on periodic

basis.

Employees shall cooperate fully to provide truthful, accurate

information and to respond to requests for certifications

The controlling version of the Employee Code of Conduct and PACRA

Policies are available on the website:

www.pacra.com

10 REGULATORY

REQUIREMENTS

& BEST

PRACTICES

10.1 PACRA’s compliance to SECP’s regulatory requirements, the Applicable

Law and IOSCO Code of Conduct in terms of Employee Code of Conduct is as

follows:

PACRA’s Compliance for Employee Code of Conduct

SECP’s Code of Conduct for Credit Rating Companies (CRCs)

SECP Regulation Code Clause

2.1-(b): ensure that analysts follow the defined rating

criteria, methodologies and procedures carefully,

uniformly and in a consistent manner as consistent

application of rating criteria, methodologies and

procedures is essential for comparing;

2.3.2-(a): CRA shall:

frame and implement whistle-blower policy encouraging

all employees to intimate the compliance officer any

unethical practice or misconduct relating to the credit

Clause 5.3-(i)

Section 2: Open Door

Communication and

PACRA Whistleblower

Policy

http://www.pacra.com/





rating, by another employee of the CRA that came to his

knowledge;

2.3.3-(a): CRA shall:

maintain principle of integrity in seeking rating business;

3.1-(a): CRA shall ensure that:

vii: it shall not provide consultancy/advisory services or

other services to any of its clients or to any of its clients’

associated companies and associated undertakings that is

being rated or has been rated by it during the preceding

three years unless it has adequate mechanism in place

ensuring that provision of such services does not lead to a

conflict of interest situation with its rating activities;

xii: an analyst having any interest in a credit rating or any

of his family members has any such interest, shall not be

involved in such rating process;

xiv: the analysts and members of the rating committees

including the external members have disclosed all the

conflict of interest, including those of their family

members, if any, to the officer designated by the CRA for

the purpose; and

xv: the analysts or any of its family members shall not

buy or sell or engage in any transaction in any security

which falls in the analyst’s area of primary analytical

responsibility. This clause shall, however, not applicable

on investment in securities through collective investment

schemes.

Clause 5.2-(i)

Clauses 6.2.3,

Clauses 8.4.3 and 8.4.4

Clauses 8.6.2

Clause 8.5.1

Clauses 7.2.1

Annexure V-(1):

The CRA must have a Code of Conduct for its employees,

hereinafter referred to as the Employees’ Code of Conduct

Employee Code of

Conduct developed &

disclosed on website

IOSCO Code of Conduct for Credit Rating Agencies (IOSCO)

IOSCO Provision Code Clause

1.3: In assessing an issuer’s creditworthiness, analysts

involved in the preparation or review of any rating action

should use methodologies established by the CRA.

Analysts should apply a given methodology in a

consistent manner, as determined by the CRA.

1.6: A CRA and its analysts should take steps to avoid

issuing any credit analyses or reports that contain

misrepresentations or are otherwise misleading as to the

general creditworthiness of an issuer or obligation.

1.11: A CRA and its employees should comply with all

applicable laws and regulations governing its activities in

each jurisdiction in which it operates.

1.12: A CRA and its employees should deal fairly and

honestly with issuers, investors, other market participants,

and the public.

1.13: A CRA’s analysts should be held to high standards

of integrity, and a CRA should not employ individuals

Clause 5.3-(i)

Clause 5.3-(ii)

Clause 5.1-(i)

Clause 5.1-(ii)

* Section 5: Quality &

Integrity





with demonstrably compromised integrity.

1.14: A CRA and its employees should not, either

implicitly or explicitly, give any assurance or guarantee of

a particular rating prior to a rating assessment. This does

not preclude a CRA from developing prospective

assessments used in structured finance and similar

transactions.

1.14-1: A CRA should prohibit its analysts from making

proposals or recommendations regarding the design of

structured finance products that a CRA rates.

1.16: Upon becoming aware that another employee or

entity under common control with the CRA is or has

engaged in conduct that is illegal, unethical or contrary to

the CRA’s code of conduct, a CRA employee should

report such information immediately to the individual in

charge of compliance or an officer of the CRA, as

appropriate, so proper action may be taken. A CRA’s

employees are not necessarily expected to be experts in

the law. Nonetheless, its employees are expected to report

the activities that a reasonable person would question.

Any CRA officer who receives such a report from a CRA

employee is obligated to take appropriate action, as

determined by the laws and regulations of the jurisdiction

and the rules and guidelines set forth by the CRA. CRA

management should prohibit retaliation by other CRA

staff or by the CRA itself against any employees who, in

good faith, make such reports.

2.2: A CRA and its analysts should use care and

professional judgment to maintain both the substance and

appearance of independence and objectivity.

2.5: A CRA should separate, operationally and legally, its

credit rating business and CRA analysts from any other

businesses of the CRA, including consulting businesses,

that may present a conflict of interest.

2.9: A CRA and its employees should not engage in any

securities or derivatives trading presenting conflicts of

interest with the CRA’s rating activities.

2.12: A CRA should not have employees who are directly

involved in the rating process initiate, or participate in,

discussions regarding fees or payments with any entity

they rate.

2.13: No CRA employee should participate in or

otherwise influence the determination of the CRA’s rating

of any particular entity or obligation if the employee:

a: Owns securities or derivatives of the rated entity, other

than holdings in diversified collective investment

schemes;

b: Owns securities or derivatives of any entity related to a

rated entity, the ownership of which may cause or may be

perceived as causing a conflict of interest, other than

holdings in diversified collective investment schemes;

c: Has had a recent employment or other significant

business relationship with the rated entity that may cause

* Statement of Integrity

Clause 5.4-(i)

Clause 5.4-(ii)

Section 2: Open door

Communication and

PACRA Whistleblower

Policy

Clauses 4.2

Clauses 8.4.3 and 8.4.4

Clauses 7.2

Clauses 8.1

Clauses 7.2 and 8.6.2





or may be perceived as causing a conflict of interest;

d: Has an immediate relation (i.e., a spouse, partner,

parent, child, or sibling) who currently works for the rated

entity; or

e: Has, or had, any other relationship with the rated entity

or any related entity thereof that may cause or may be

perceived as causing a conflict of interest.

2.14: A CRA’s analysts and anyone involved in the rating

process (or their spouse, partner or minor children) should

not buy or sell or engage in any transaction in any security

or derivative based on a security issued, guaranteed, or

otherwise supported by any entity within such analyst’s

area of primary analytical responsibility, other than

holdings in diversified collective investment schemes.

2.15: CRA employees should be prohibited from

soliciting money, gifts or favors from anyone with whom

the CRA does business and should be prohibited from

accepting gifts offered in the form of cash or any gifts

exceeding a minimal monetary value.

2.16: Any CRA analyst who becomes involved in any

personal relationship that creates the potential for any real

or apparent conflict of interest (including, for example,

any personal relationship with an employee of a rated

entity or agent of such entity within his or her area of

analytic responsibility), should be required to disclose

such relationship to the appropriate manager or officer of

the CRA, as determined by the CRA’s compliance

policies.

3.13: CRA employees should take all reasonable measures

to protect all property and records belonging to or in

possession of the CRA from fraud, theft or misuse.

3.14: CRA employees should be prohibited from engaging

in transactions in securities when they possess confidential

information concerning the issuer of such security.

3.15: In preservation of confidential information, CRA

employees should familiarize themselves with the internal

securities trading policies maintained by their employer,

and periodically certify their compliance as required by

such policies.

3.16: CRA employees should not selectively disclose any

non-public information about rating opinions or possible

future rating actions of the CRA, except to the issuer or its

designated agents.

3.17: CRA employees should not share confidential

information entrusted to the CRA with employees of any

affiliated entities that are not CRAs. CRA employees

should not share confidential information within the CRA

except on an “as needed” basis.

3.18: CRA employees should not use or share confidential

information for the purpose of trading securities, or for

any other purpose except the conduct of the CRA’s

business.

Clauses 7.2

Clauses 4.2.1-(i)

Clause 8.6.2-(ii)

Clauses 5.1-(v) to (x)

Clauses 7.1

Section 7: Securities

Investment & Trading

Clause 6.1.1-(iv)

Clauses 6.2

Clause 6.1.1-(i)





ISSUED BY:

THE PAKISTAN CREDIT RATING AGENCY LIMITED

Awami Complex, FB-1, Usman Block, New Garden Town

Lahore

Phone: +92 42 3586 9504 - 6

Fax: +92 42 3583 0425

EMPLOYEE CODE OF CONDUCT - PACRAThe Pakistan Credit Rating Agency Limited EMPLOYEE CODE OF CONDUCT...

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