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The board of directors of Securities and Commodities Authority (SCA) has approved a draft regulation for trading in capital increase issue rights. The approval, which came during a board meeting, held at the SCA’s Dubai headquarters and presided over by the board chairman, H.E Sultan bin Saeed Al-Mansoori, Minister of Economy, was part of the SCA’s regulatory and oversight role and reflects the SCA’s commitment to issuing regulations that would sustainably organize business transactions of the local markets, giving the latter greater in-depth and providing it with new investment tools.
The board also approved during the meeting a suggestion to make implementation of XBRL compulsory upon public joint stock companies in the country.
H.E. Mohammed bin Ali bin Zayed Al-Falasi, Deputy Board Chairman, H.E. Abdullah Salim Al-Turifi, SCA Chief Executive Officer, H.E. Mubarak Rashid Al-Mansoori, H.E. Abdullah bin Ali Al-Hamli and H.E. Butti Khalifa bin Darwish Al-Falasi, attended the 18th meeting of the fourth board.
H.E. Ibrahim Al-Za’abi, Deputy CEO for Legal Affairs and Issuance (Board Rapporteur) and H.E. Maryam Al-Suwaidi, Deputy CEO for Licensing Affairs, Supervision and Enforcement (Board Coordinator) were also present at the meeting during which the board reviewed measures taken so far to execute decisions and recommendations issued during its previous meeting.
Capital Increase Issue Rights:
In accordance with the powers vested into the SCA board by virtue of Article (4) of Cabinet Decision No. (12) of 2000 concerning the listing of securities and commodities, which made the seeking of approval of SCA board mandatory before any security is listed in the local markets, the board approved a Regulation for Issue Rights. The Regulation will provide new investment options and give greater in-depth to local financial markets. It also seeks to further develop the markets and to allow the trading of new securities for more relief for shareholders of listed companies, giving them priority of trading in their capital increase issue rights in accordance with the best international practices.
The Regulation allows a shareholder who does not want to or cannot subscribe for the share increase to sell his rights to for financial benefit. This new financial tool is arguably an addition to the markets and will further boost trading on those markets. 
The regulation was issued after going through various stages during which its draft was published on the SCA website to invite inputs and feedbacks from interested persons and all other stakeholders. The feedbacks and contributions were taken into consideration in the final draft of the regulation.
The 7-article Resolution consists of the definition of terms and phrases, general rules, the procedures involved in and distribution of the issue rights to shareholders, while Article 4 dealt with the listing and trading of issue rights, which is subjected to the rules of trading, clearance, settlement and commission applicable to shares.
Priority for Issue Rights Holders:
Article (5) states that holders of Issue Rights should be given the priority to trade first in the capital increase issue rights at the end of the clearance and settlement period and urged the market to put in place the technical checks and balances to effect this rule. The market shall also send the final record of the issue rights holders to the company at the end of the final day of clearance and settlement period regarding the trading of those rights to allow decision to be made in accordance with the details of the records. Article (6) outlines the rules governing the capital increase issue rights, as distribution of the capital share increase will be made to issue rights owners based on their stakes rights before any excess of shares will be distributed to those who requested for more than their rights and the remaining excess shares offered for public subscription.
Meanwhile, the board has also approved a suggestion to make the implementation of XBRL compulsory on listed public joint stock companies and brokerage firms in view of the success recorded during the trial period and the benefits the markets will be deriving from the implementation of the system. 
The XBRL system will be implemented from beginning of 2014, when the annual reports of the year 2013 will be announced in accordance with the system, while brokerage firms will also be making disclosure of their financial statements, financial liquidity, segregation of accounts and financial liability reports. All companies who will be subjected to the new system shall be notified early to allow them enough time to prepare technically for successful implementation of the system.
 
http://www.sca.gov.ae/English/news/Pages/2013-06-09.aspx
The board of the Securities and Commodities Authority (SCA) held its seventh meeting—chaired by H.E. Minister of Economy and Board Chairman—in Dubai. The meeting discussed a number of matters relating to the development of securities-related financial services and activities and bringing them in line with the best international practices and standards. It also dealt with key issues associated with the sector.
Keen to improve the regulations that govern the operations of UAE-based markets and to conduct ongoing reviews of the regulations that regulate securities trades to ensure that they keep pace with the latest developments in international markets.
The Emirates Securities and Commodities Authority (ESCA), the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) and the Dubai Financial Services Authority (DFSA) announced today that, following the enactment of relevant legislation and rules, a new fund passporting facility is available . This passporting facility, which has been the subject of extensive public consultation since November 2018, will facilitate the promotion of the funds licensed by each authority across the United Arab Emirates (UAE).
The implementation of the Passporting Agreement will enhance the UAE's position as an international financial centre and a platform for entrepreneurship. This cooperation will allow new market leaders, investors and companies to expand and grow in the UAE markets, which supports the ESCA efforts and initiatives in providing the appropriate climate for the investment of savings and funds in securities in line with the objectives of the UAE economic development process.

 


Studying regulating the transfer of jurisdiction over financial and monetary intermediaries to SCA in coordination with the UAE Central Bank
Examining a report about the financial analysis of listed companies and ADX’s and DFM’s sectors for 2018
The board of the Securities and Commodities Authority (SCA) held its ninth meeting, chaired by H.E. Eng. Sultan bin Saeed Al Mansoori, Minister of Economy and Board Chairman, at SCA’s Dubai office. The meeting discussed a number of initiatives aimed at the development of securities-related financial services in line with the best international standards and practices. The meeting dealt with a number of important matters relating to the securities sector, including:
Adequacy standards for management companies and investment managers

The board approved a study on the adequacy standards for management companies and investment managers and gave companies a grace period for compliance. The adequacy standards regulations comprise nine articles outlining the scope of application, capital adequacy, credit risk, operational risk, market risks (managed assets), risk management and control, penalties, compliance, and term.
In its eighth meeting held on March, the board instructed that a study be conducted about the extent of compliance of licensed management companies and investment managers with the adequacy standards and the costs that they will bear if the proposed standards are implemented. The study showed that there are no binding provisions on adequacy standards up until now and no additional fees will be imposed on management companies and investment managers as a result of the implementation of the proposed standards.
The study stated that the purpose of developing adequacy standards for management companies and investment managers is to protect investor assets and to promote the stability of the financial system by supervising systemic risks on the corporate level, which is a key requirement by the Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO). The proposed regulations seek to complement existing regulations as Article 26(22) of the SCA Board Chairman’s Decision No. (9/Chairman) of 2016 concerning Mutual Fund Regulations states that the management company shall: “maintain the solvency required to practice the business to ensure its stability and meet its obligations as per the relevant criteria issued by the Authority”.
As part of SCA’s efforts to improve the country’s financial sector, the board examined a study by SCA’s management concerning regulating the issuance of asset-backed securities (securitization), which are the processes by which the originator sells and transfers inpidual and pooled assets to a special purpose vehicle, or SPV, which typically takes the form of a limited liability company that issues tradable securities backed by these assets. The board issued a directive concerning coordination with the competent authorities to amend the relevant legislation in a manner that allows the issuance of regulations relating to such products.
The transfer of jurisdiction over financial and monetary intermediaries to SCA
The board also ordered the conduction of a study on regulating the transfer of jurisdiction over financial and monetary intermediaries to SCA and another study on regulating the business of these intermediaries in coordination with the UAE Central Bank. This will be done through an action plan that enables these intermediaries to come under SCA’s jurisdiction following the provision of the proper legal cover, while studying the consequences of regulating and supervising these companies.
Report on the financial analysis of listed and brokerage companies
To follow up on the conditions of local listed public joint-stock companies to ensure their financial stability and to implement Federal Law No. (2) of 2015 concerning Commercial Companies, the board reviewed a report on the financial analysis of listed public joint-stock companies and the sectors at the Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM).
The board also reviewed a report on the financial analysis of ADX’s and DFM’s licensed financial brokerage companies, which have disclosed their 2018 financial statements.
SCA’s relation with associated parties
The board reviewed a report on SCA’s relation with associated parties most notably the Prime Minister’s Office, the UAE Central Bank, Ministry of Economy, Ministry of Finance, Ministry of Justice, Ministry of Interior, the Federal Competitiveness and Statistics Authority, the Federal Authority for Government Human Resources, economic development departments, ADX, DFM, the Dubai Gold and Commodities Exchange, brokerage companies, the Dubai Financial Services Authority, the Abu Dhabi Global Market, educational institutions, IOSCO, and the other regional and international bodies, including counterparts.

 

 

In response to directives from the wise government that urges the introduction of innovative initiatives that address the challenges faced in various sectors, H.E. Eng. Sultan bin Saeed Al Mansoori, Minister of Economy and Chairman of the Securities and Commodities Authority (SCA), adopted an initiative by the Dubai Financial Market (DFM) to launch a governance index for joint-stock companies listed on local markets. The idea is to create a benchmark that measures the level of compliance with the implementation of the principles of wise governance. This will foster and support the rights of shareholders and investors in UAE-based securities markets as they will have knowledge of the companies that comply with the implementation of governance rules before they buy and invest in their stocks. 


The ESGUAE index aims at measuring compliance with the implementation of corporate governance and institutional discipline standards across listed companies in an effective, efficient, and professional manner. It also aims to foster the culture of governance and to raise awareness among these companies of the importance of putting into effect the principles of governance and transparency to help them improve their performance, identify current and future challenges, come up with solutions, and make appropriate recommendations by assessing the performance of their boards.
The index is the fruit of collaboration between the DFM, Hawkamah, and Standard & Poor’s, which prepared technical studies on this subject. Under this index, companies will be classified according to qualitative and quantitative measurements and their weight will be determined based on their degree of governance.

The index is premised on the idea of assessing companies by the information they voluntarily disclose to the DFM using around 200 internationally-recognized variables that cover governance, environment, and corporate social responsibility. This is inspired by the wise leadership’s vision that focuses on corporate governance and sustainability, as well as environmental preservation.
According to the study, five criteria were approved for calculating the index, including ownership structure and rights of shareholders, financial statements and operational information, the operating principles of the board of directors, the principles of transparency and disclosure, and the principles of social and environmental responsibility.

 

 

As part of SCA’s and the markets’ endeavors to develop the financial sector and upgrade the local markets from "emerging" to "advanced" by meeting the standards of the indices providers and based on the recommendation and request of the Market Promotion Committee composed of SCA and the financial markets in the country, SCA’s board approved the amendment of the provisions of Articles (31) and (34) of the Authority’s Board of Directors’ Decision No. (2/R) of 2001 regarding the Regulations as to Trading, Clearing, Settlement, Transfer of Ownership and Custody of Securities, which regulate the dates and mechanisms of settlement in the trading in the financial markets in the country, noting that the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM) were coordinated with in this regard. The board approved the subject under discussion on the agenda, taking into consideration that the amendment is commensurate with the requirements for the promotion of the country's financial markets on the MSCI indices. 

The amendment adopted by the board to Article (31) allows to grant the clearing house (which is the entity that carries out settlement operations and issues orders of payment of the monies due to customers) the power to change the date and mechanism of settlement in accordance with the criteria for facilitating market accessibility as this is an administrative procedure in the market related to a regulatory mechanism that gives flexibility and authority to set the procedure and the time required for the broker\clearing member to pay off the amounts owed by them in a way that is commensurate with the nature of trading operations in each market.

The amendment to Article (34) of the regulations provides the clearinghouse with flexibility and authority to set the procedure and the time required to pay the amounts owed to the broker/clearing member in accordance with the nature of the trading operations in each market.
Controls for the accreditation of the in-kind share evaluators for public joint-stock companies
In view of the SCA’s keenness to develop the legislation that regulates the operation of the financial markets in the country, and given that SCA reviewed the regulations and legislation regulating the trading of securities on a periodic basis in order to ensure compliance of these regulations with the levels of development in the international markets, SCA’s board approved the amendment of Articles (1) and (26) of the SCA’s Board Chairman’s Decision No. (11/Chairman) of 2016 regarding the Regulations for Issuing and Offering Shares of Public Joint Stock Companies, in particular, the rules governing the accreditation of the in-kind share evaluators for public joint-stock companies.
The amendment to Article (1) of the regulations is made in order for the definition to conform to what is stated in Article (26) of the same regulations. Clause (B) in Article (26) of the regulations was also amended and deleted from the definition of the in-kind share evaluator. Hence, the text includes all the forms that address the evaluation tasks, while the experience clause has been added to the same article to ascertain the efficiency of the in-kind share evaluator by verifying his/her experience in evaluating the in-kind share in order to protect shareholders' funds by reaching fair values for in-kind shares.
Guide to SCA’s Regulatory Philosophy
In application of the best international practices on clarifying the scope and role of regulatory authorities in financial markets, the board reviewed a guide prepared by SCA entitled, "Regulatory Philosophy of the Securities and Commodities Authority". This guide aims at clarifying the scope and philosophy of SCA to rely on the basic principles adopted in all its activities to fulfill its mission, values and strategic objectives and to provide an overview of the regulatory policies adopted by it in the capital markets sector in order for it to serve the interests of the national economy in accordance with the UAE’s Vision 2021 and the future vision associated with the UAE Centennial 2071. The guide includes many points such as SCA’s strategic objectives, SCA’s powers, the concept of organization in SCA, SCA’s regulatory functions, the basic principles of SCA’s regulatory policies philosophy, competitiveness, future prospecting, disclosure and transparency, governance of the SCA’s design and preparation of legislation process, financial inclusion, innovation and sustainability, awareness, investor protection, investors empowerment, monitoring and compliance, enforcement and adjudication of complaints, and good governance.

Financial Analysis Report for Listed Companies
In order for the board to follow-up on the situation of listed local public joint-stock companies, and in application of the provisions of the Commercial Companies Law No. (2) of 2015, the board reviewed a report on the financial analysis of these companies and the financial sectors in ADX and DFM for the first quarter of this year and directed to follow up on the situations of these companies and take the necessary procedures in accordance with the law and regulations.

SCA is among the Top Ten Federal Government Bodies in a Positive Work Environment
As part of the continuous follow-ups to the periodic subjects and issues, SCA’s board reviewed the results of SCA’s 2018 happiness and positivity study, which included upgrading SCA to ninth place to become among the top ten federal government bodies in the positive work environment. SCA also succeeded in raising the positivity rate in the work environment from (73%) to (78%), and job satisfaction from (74%) to (77%). It also made strides in the gender balance index by an improvement rate of (17%), exceeding the government average by eight degrees.
The results of the study also included SCA’s success in raising percentage of employees responding to the study to (173) employees compared to (140) in 2017 (i.e. an increase of 9%). The board was informed of the report contents and commended its progress and the high rates of indices.
At the beginning of the meeting, the board reviewed the minutes of the ninth meeting of the sixth session and the follow-up report on the implementation of the resolutions and recommendations issued during the same, and decided to adopt it.

 

 

CEO of the Securities and Commodities Authority (SCA), issued a decision concerning capital adequacy standards for investment managers and management companies. The decision will enter into force 30 days from the date of its publication in the official gazette. Companies will be given a one-year grace period for compliance. 

This decision came after the SCA board has approved, in its last meeting, a study on adequacy standards for management companies and investment managers. The study was aimed at protecting investor assets and promoting the stability of the financial system through monitoring systemic risks, which is a key requirement by the Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO).
The decision includes nine articles on the scope of application, capital adequacy, credit risk, operational risk, market risk (managed assets), risk control and management, penalties, compliance, and entry into effect.
Article 1 of the decision stipulates that investment managers and management companies must demonstrate ongoing compliance with the adequacy standards provided therein, in accordance with the calculation methods outlined in the form prescribed by SCA.
Capital adequacy
Article 2 on capital adequacy stipulates that:
1. The investment manager and the management company must allocate capital to cover credit risk, market risk, and operational risk, even if not included as balance sheet items, in accordance with the ratios specified in Articles 3, 4, and 5 of this decision.
2. For the purposes of capital adequacy calculation, capital is classified as follows:
a. Tier one capital (core capital).
b. Tier two capital (supplementary capital).
c. Tier one capital should not be less than tier two capital.
Credit, operational, and market risk
The article on credit risk stipulates that the capital allocated to cover credit risk must not fall below 14% of the calculated amounts, according to the form prescribed for the purpose of capital adequacy calculation.
Article 4 on operational risk includes risks resulting from inadequate or failed internal regulation, employee errors, or external events, including legal risk. It stipulates that the capital allocated to cover operational risk must not fall below 25% of the total expenses shown in the results of previous fiscal year.
The article on market risk (managed assets) states that the capital allocated to cover market risk (managed assets) must not fall below 0.02% of the value of these assets.
Penalty and risk control and management
Article 6 on risk control and management stipulates that the investment manager and the management company must incorporate an effective mechanism and enforceable accounting and administrative procedures into its internal control system to manage and control risks the company may be exposed to.
Article 7 on penalties stipulates that violators of the provisions of this decision will be subject to penalty, in line with Federal Law No. (4) of 2000 concerning the Emirates Securities and Commodities Authority and Market and the regulations issued thereunder.

 

 

 

The SCA has published the Chairman of the Authority’s Board of Directors’ Decision of 2021 Regulating the Virtual Asset and the Digital Product, and the amendments related thereto in the guide of financial activities rules, as well as the decision of the market’s work on its website www.sca.gov.ae. This is for the purpose of receiving observations and obtaining the views of specialists, those interested and the financial industry in general.
Knowing that Authority has set the date of December 27 as the last date for receiving comments and views, and that the version displayed on the website is a preliminary draft, and some of the provisions contained therein may be modified upon issuance.
The draft of the decision regulating virtual asset and digital product included 16 articles.

 

As part of CMA’s regulatory responsibility to
regulate and develop the Capital Market and protect citizens and investors, the
Board has issued its resolution dated 02/07/1434H corresponding to 12/05/2013
to adopt the ratio of %10 (ten percent) of the stock price fluctuation limit of
listed companies in the Saudi Stock Exchange on its first day of trading.

 



http://www.cma.org.sa/en/News/Pages/CMA_N_1302.aspx

CMA board has issued its resolution approving the new Corporate Governance Regulations.
The new Regulations have paid heed to setting effective governance arrangements for the joint stock companies listed in the Saudi Stock Exchange to ensure the clarity of the relationship between shareholders and the company's board from one side, and between the board and the executive management team on the other side. The regulations also took care of the shareholders' rights in these companies, such as the right of fair and equal treatment of shareholders without discrimination and the right of accessing the information transparently to enable them to fully exercise their statutory rights. Moreover, the Regulations cover the rights of stake holders in these companies.
The Regulations have set detailed provisions on the composition of Board of Directors and committees in terms of competencies, responsibilities, meetings, members' rights and duties. These provisions emphasize the principle of active participation in decision making within the Board of Directors as they deal with the issues of conflicts of interest between board members and the company, and adopt honesty, truthfulness and care as a foundation and methodology for these boards.
The Regulations also included detailed provisions regarding companies' external auditors and internal control procedures compelling Boards of Directors to disclose all information the shareholders and dealers need to build their investment strategies or perform any transaction with the company in a fair and systematic manner for all parties.
The Regulations contribute to interacting with the set of national legislations under which companies operate and integrate to fulfil their objectives with efficiency and integrity. The benefits of Corporate Governance are not confined to companies, rather they directly outreach the national economy for the role played by governance-based companies' growth and continuity in boosting the economy and increasing the GDP in line with the Saudi Vision 2030. These Regulations were prepared in cooperation between the CMA and the Ministry; and come as part of the continuous coordination between them under the singed memorandum of cooperation to harmonise policies and procedures adopted for the implementation of the Companies Law to ensure integration and harmony in achieving the sough objectives; and in completion of the legislations issued by CMA in light of the new Companies Law such as the Regulatory Rules and Procedures issued pursuant to the Companies Law relating to joint stock companies listed in the Saudi Stock Exchange that regulates the Remunerations of board members in these companies, the Holding of general and special assembly meetings of shareholders and their participation therein through contemporary technology, Buy-back, sale and pledge of shares, Pledge of company's shares, Issuance, buy-back and conversion of preferred shares by the company, Dividend distribution to shareholders of the company, Issuance and sale of pre-emptive rights resulting from capital increase, and proxy procedures for attending general and special assemblies.
The Capital Market Authority’s Board of Commissioners has issued its resolution to adopt the updated Merger and Acquisition Regulations, thereby replacing the previously implemented Merger and Acquisition Regulations, which was adopted in 2007. This update comes in continuation of the Authority’s efforts to regulate mergers and acquisitions transactions in accordance with best international practices, and in line with the powers vested in the Authority by the new Companies Law with regards to merger transactions, of which a party is a listed company.
It is worth mentioning that the updated regulation aims to set the base for the principles of fairness, equality of treatment and equal opportunities amongst owners of securities who are the subject of a merger or an acquisition. In the light of this, the updated regulation included a number of examples to clarify cases in which a person will be considered as a related party and the obligations arising therefrom. Furthermore, it included a number of examples in which a group of persons are presumed to be Acting in Concert and as such their collective ownership in the listed company will be treated as that of a single person’s ownership.
The Capital Market Authority (CMA) announced that, as of 1st of January 2018, foreign investors would be granted direct access to invest in the Parallel Market "Nomu" on similar terms as those to local investors.
In 2015, the CMA started the deregulation process by allowing foreign financial institutions to invest directly in the Saudi capital market. These initial steps were followed by several further regulation and infrastructural developments that aimed to ease foreign investment access to the capital market. It is worth mentioning that the CMA is working in parallel with the country's General Investment Authority (SAGIA) to set up a framework for non-residential strategic investors to own strategic stakes in listed companies. This would augment the current QFI regime to create more options for foreign investors.
The eligibility criteria in order to trade and participate in the Parallel Market “Nomu" are any of the following persons:
1. Authorized Persons act for their own account
2. Clients of a person authorized by the CMA to conduct managing activities.
3. The Government of the Kingdom, any government body, any supranational authority recognized by the Authority or the Exchange.
4. Government-owned companies either directly or through a portfolio managed by a person authorized.
5. Companies and funds established in GCC countries.
6. Investment Funds.
7. Qualified Foreign Investors.
8. Any other legal persons allowed to open an investment account in the Kingdom and at the Depositary Center.
9. Natural person fulfil any of the following criteria
   a) conducted transactions in security markets of not less than 40 million Saudi riyals in total, and not less than ten transactions in each quarter during the last twelve months
   b) the average size of his securities portfolio shall exceed 10 million Saudi Riyals during the last twelve months,
   c) holds a professional certificate in securities which is recognized by the CMA or an accepted jurisdiction.
In addition, the CMA issued a guidance note for the investment of non-resident foreigners in the Parallel Market "Nomu", which aims at clarifying the mechanism of investment and related restrictions.
The CMA Board has issued its Resolution on amending the Resolution of Securities Disputes Proceedings Regulation (Regulation), by adding a chapter regulating the Class Action Suit, which the CMA has previously posted its draft on its website for (30) calendar days, to obtain the views and remarks of the public.
The regulation of class action suit within the Resolution of Securities Disputes Proceedings Regulation, aims to facilitate litigations proceedings where the plaintiff is a group of persons who share the same legal issues, merits and subject matter of requests, which is appropriate to the nature of the listed companies and the size of their shareholders. The amendment also aims to develop litigation mechanisms and procedures in line with the best international practices, all of which are to enhance the attractiveness of the Saudi capital market and reduce the risk of investing in it, in addition to its role in reducing the time required to resolve investor compensation issues, which in turn, facilitate the work of the committees on one hand and focuses the efforts of investors on the other.
The CMA has prepared an amended draft of the Rules for Qualified Foreign Financial Institutions Investment in Listed Securities.

The purpose of these Rules is to set out the procedures, requirements and conditions for the registration of qualified foreign investors with the Authority to invest in listed securities, and to specify their obligations and the obligations of authorized persons in this regard.

 

The CMA Board has issued its Resolution approving The Rules for Special Purposes Entities ("the Rules") and the Special Purposes Entity by-laws, and will enter into force starting from 15/7/1439H corresponding to 1/4/2018G.
The Rules aim to regulate the establishment and licensing of the special purpose entity; and to define the related monitoring and supervisory rules , taking into consideration all recommendations, observations and opinions, received from investors, specialists, and interested parties during the public consultation.
The resolution to adopt the Rules has been issued in conjunction with the approval of the outcomes of the CFI track within the Transition & Activation of Responsibilities Project (TAR), where the Rules On The Offer Of Securities And Continuing Obligations issued by resolution dated 9/4/1439H corresponding to 27/12/2017G, contain provisions regulating the issuance and trading of securities through a special purpose entity.
The CMA Board has issued its Resolution approving the Rules of Offering Securities and Continuing Obligations, and the updated Glossary Of Defined Terms Used In The Regulations And Rules Of The Capital Market Authority and approve the Listing Rules, and the updated Glossary Of Defined Terms Used In The Exchange Rules which will be effective from 15/7/1439H corresponding to 1/4/2018G, except for the definition of "Qualified Investor" set out in the updated Glossary Of Defined Terms Used In The Regulations And Rules Of The Capital Market Authority and the updated Glossary Of Defined Terms Used In The Exchange Rules, paragraph and (f) of article (71) of the Rules of Offering Securities and Continuing Obligations, and paragraph (b) of article (40) of the Listing Rules which will be effective starting from 31/12/2017G.
The resolution also included that the rules of offering securities and continuing obligations, starting from their effectivity date, shall replace the Offer of Securities Regulations issued under the Board Resolution no. (2-11-2004) dated 20/8/1425H, corresponding to 4/10/2004G, amended under Board resolution no. (3-151-2016) dated 22/3/1438H corresponding to 21/12/2016G, the Listing Rules issued under the Board Resolution no. (3-11-2004) dated 20/8/1425H corresponding to 4/10/2004, amended under Board resolution no. (1-64-2016) dated 19/8/1437H corresponding to 26/5/2016G, and the Parallel Market Listing Rules issued under the Board resolution no. (3-151-2016) dated 22/3/1438H corresponding to 21/12/2016G.
It's worth mentioning that the Rules of Offering Securities and Continuing Obligations aims to regulate the offering of securities in Saudi Arabia. It includes the conditions of the offer of securities, identifies the requirements of listing and offering, and the conditions and requirements of capital changes. In addition to regulating the continuing obligations on issuers whom their securities are listed in the Main Market, and the process of listing and offering shares in the Parallel Market.
Also, the Listing Rules aims to regulate the listing of securities, the continuing obligations on the issuers of listed securities, the suspension of trading listed securities and delisting of listed securities.

 


In continuance to the Capital Market Authority's role in regulating and developing the capital market, and based on the Companies Law issued by the Royal Decree number (M\3) dated 28/01/1437H, and in accordance with the powers vested in the Authority under the Capital Market Law, the Capital Market Authority's Board issued its resolution regarding the adoptions of the amended Corporate Governance Regulations, the Regulatory Rules and Procedures Issued Pursuant to the Companies Law relating to Listed Joint Stock Companies and the Guidance Note to the Regulatory Rules and Procedures issued pursuant to the Companies Law relating to Listed Joint Stock Companies, to be effective upon their publication date.
The amendments come in line with the amendments made to the Companies Law issued by the Royal Decree Number (M/79) dated 25/07/2018G, as these amendments granted the competent authorities to establish rules of authorisation for businesses or contracts that are made for the company, which a board member has direct or indirect interest in, and rules of authorization over the engagement of a Board Member in any business that may compete with the company or with one of its activity.
It's worth mentioning that the views of the public, specialists and interested parties were taken into consideration when preparing these amendments.

 

 


In continuance to the Authority’s role in regulating and developing the Capital Market, and in line with the Saudi Vision 2030, and in accordance with the Capital Market Law issued by Royal Decree number (M/30) dated 02/06/1424H, the CMA Board issued its resolution on 1/9/1440H corresponding to 6/5/2019G to publish the proposed amendments to the Rules on the Offer of Securities and Continuing Obligations, for public consultation, for a period of 30 calendar days ending on 2/10/1440H corresponding to 5/6/2019G.
The proposed amendments to the Rules on the Offer of Securities and Continuing Obligations comes in line with the Authority’s objectives to regulate and develop the Capital Market, and the efforts of the Authority and the Saudi Stock Exchange Company (Tadawul) to encourage foreign issuers to list their shares in the Main Market, promote the trading and listing in the Parallel Market and enable direct listing of shares in the Parallel Market. The amendments come at the same time with the proposed amendments to the Listing Rules issued by the Saudi Stock Exchange Company (Tadawul) to this regards, and which will be published for public consultation in concurrence with the publication of the Rules on the Offer of Securities and Continuing Obligations for the same purpose.
The most prominent amendments to the Rules on the Offer of Securities and Continuing Obligations are as follows:
 Regulating the registration of shares for direct listing in the Parallel Market by indicating the provisions and requirements related to the application for registration of shares in the Parallel Market and the information required upon submitting such application to Authority, and adding Annex 20(a) regarding the registration document and Annex 7(b) regarding the issuer’s acknowledgement upon applying for the registration of its shares in the Parallel Market.
 Changing the disclosure requirement of the first, second, and third interim financial statements of the financial year of an issuer whose shares are listed in the Parallel Market to the semi-annual interim financial statements of an issuer’s financial year.
 Adding a requirement obliging the issuer seeking registration and offering of its shares in the Parallel Market or the registration of its shares in the Parallel Market to submit along with its application to the Authority electronic copies of the acknowledgement and an undertaking signed by the board of directors of the issuer and by each proposed director of the issuer in the form set forth in Annex 8 of the Rules on the Offer of Securities and Continuing Obligations.
 Amending paragraph (c) of Article 69 of the Rules on the Offer of Securities and Continuing Obligations to include termination of a director's membership in the board of directors or director's dismissal from the board of directors, and termination of any of the audit committee's membership.
 Stating the provisions of the Rules on the Offer of Securities and Continuing Obligations, which a foreign issuer who submits an application for the listing its shares in the main market pursuant to the Listing Rules the, must comply with.

 

 

In continuance to the Capital Market Authority's (CMA) role to regulate and develop the capital market, and in its efforts to enhance the market's efficiency and attractiveness and to expand the institutional investments base, and in line with its strategic plan (Financial Leadership Program) and the objectives of (the Financial Sector Development Program) one of the Saudi 2030 vision programs, and based on the Capital Market Law issued under the Royal Decree Number (M/30) Dated 2/6/1424H, the CMA Board has issued its decision to adopt the Instructions for the Foreign Strategic Investors' Ownership in Listed Companies "instructions", to be effective as of the date of their publication, after the Draft Instructions were made available for public consultation on the Authority's website for a period of (30) calendar days. The aforementioned Board Decision further included amending subparagraph (a\2) of Article (14) of the Rules for Qualified Foreign Financial Institutions Investment in Listed Securities and paragraph (2) of Part (3) of the Guidance Note for the investment of Non-Resident Foreigners in the Parallel Market by adding the following statement: "except the foreign strategic investors pursuant to the Instructions for the Foreign Strategic Investors' Ownership in Listed Companies" to be read as follows: "The maximum proportion of the shares of any issuer whose shares are listed or convertible debt instrument of the issuer that may be owned by all foreign investors (in all categories, whether residents or non-residents, except the foreign strategic investors pursuant to the Instructions for the Foreign Strategic Investors' Ownership in Listed Companies) in aggregate is 49%. 

The Instructions aim to regulate the provisions, requirements and conditions for the foreign strategic investors' ownership of a strategic shareholding in listed companies, in addition to determining the foreign strategic investors' obligations and the obligations of the Authorised Persons in this regard. During the preparation of these Instructions, the CMA considered all recommendations, observations and opinions received from investors, specialists and interested parties during the public consultation.

 

The new Commercial Companies Law comes at a time the Sultanate of Oman is preparing for 2040 vision which focuses on enabling the private sector to take the lead in the production process and effectively contributing to the growth of the economy and creating employment opportunities for the citizens. Thus, the development of the legislative structure and creating investment friendly environment within this vision which aims to make the Sultanate of Oman attractive and encouraging to the local and foreign investment. The role of the Government will be complementary and supportive to the role of the private sector. It is an auspicious coincidence to issue this significant law at this time. 

 


Chairman of the Board of Directors of the Capital Market Authority has issued an administrative decision issuing the Take over and Acquisition Regulation for the public joint stock companies listed on the Muscat Securities Market (MSM) which was published in the Official Gazette on 19 May 2019 pursuant to Article 7 of the Capital Market Law.
The regulation aims to regulate take over and acquisition processes at not more than 25% of the shares of pubic joint stock companies and controlling percentage in the company to provide protection for shareholders and for fair, transparent and equitable treatment of all the parties and to provide exit in cases of acquisition. The Regulation is a government initiative in the economic persification process “Tanfeeth” supervised by the Unit of Implementation and Follow Up.
Al Salmi pointed out that the regulation stipulated the parties it applies to such as offeror and offeree, processes of acquisition and take over, timings and terms and conditions for take over and acquisition offers and percentages of take over offers.
He said the regulation ensures equal opportunities for all the shareholders to benefit from the take over and acquisition offers including the allowance paid for take over beside the fair and equitable treatment of all shareholders specifically minority shareholders with regard to compulsory take over and acquisition offer.
He explained that such procedures are necessary for the stock markets and applicable in most advanced markets. He added the regulation was prepared after reviewing the experiences of such market and consideration of the realities of the local market and recognized practices and adapting them with the requirements of the local market. The draft was offered for consultation by the public and all the public joint stock companies, law firms, audit firms and interested persons for their views, opinions and proposals which is a policy adopted by CMA in drafting all the laws and regulations regulating the capital market and insurance sector.
Article two of the regulation provides it apply to three cases:
The first: any person who acquires jointly or severally not less than 25% of the voting shares in the company and intends to acquire 25% or more of its shares.
The second : Any person acquiring jointly or severally 25% of the voting shares in the company and intends to acquire voting shares at more than (2%) every six months from the date of first purchase transaction.
The third : Any person acquiring jointly or severally 25% of the voting shares in any company controlling the company and intends to acquire voting shares in the company at more than 2% every six months from the date of first purchase transaction.
The regulation contains the terms and conditions for the persons involved in the take over and acquisition process which provides for robust standards of integrity, transparency and fairness for all the participants.

 

 


The Executive President of the Capital Market Authority confirmed that the Government agreed to suspend the income tax related to pidends on shares and interests at 10% imposed after the issuance of the Income Tax Law promulgated by Royal Decree No. 9/2017 for three years as from May 6, 2019 extendable.
He said the move was based on the approval of His Majesty Sultan Qaboos bin Said may Allah protect him to create an attractive environment for foreign investments for the development of the national economy and the national interests in view of the open doors policy adopted by the Sultanate with regard to the foreign investments and economic principles which would enable the private sector to play a greater role in the comprehensive development programs and policies.
HE concluded that such decision would provide more incentives and facilities to attract direct and indirect foreign investments and Oman would be attractive destination for global investment and robust securities market.

 

 

 

In the implementation of the Oman Vision 2040 and in response to the requirements of the capital market participants and entrepreneurs, the Executive President of the Capital Market Authority, announced that the new Rules for Crowdfunding Platforms is ready and operational for those who wish to practice the business in the Sultanate of Oman and they are available on the CMA’s electronic media, adding that the regulation for such type of funding is very flexible with adequate facilities.

Under the recent amendments to the Executive Regulation of the Capital Market Law (ERCML) published in the Official Gazette Issue No. 1417, the companies intending to practice the business will be exempted from the licensing fees of RO155,000 in total until 1 January 2023. The move to exempt the fees comes within the endeavors of the government to ease the commercial business, to stimulate the economic recovery, to encourage the creation of the largest possible number of various types of crowdfunding platforms and to attract both local and foreign investors into the Sultanate of Oman for the purpose of supporting the entrepreneurs and to transform the results of research and development and innovations into small and medium enterprises (SMEs) able to achieve growth to enhance the GDP.

On the key features of the Crowdfunding regulation, the Executive President of the Capital Market Authority said the directives allow the operator of the platform to provide funding through four (4) ways - (1) Donation Crowdfunding, (2) Reward Crowdfunding, (3) Equity Crowdfunding, and (4) Peer to Peer Crowdfunding. Obtaining funding through the platforms will be restricted to companies and enterprises, not inpiduals.

The directives to limit the risk of investors with low solvency and lack of investment experience, placed limits to the funds that can be invested, based on the type of funding provided by the platform. The directives allow the operator of the platform to attract investors and donors inside and outside the Sultanate of Oman and may provide funding to any company or enterprise in the Sultanate of Oman or abroad in accordance with the specific terms and conditions.

The directives include a number of obligations to be satisfied by the operator companies of the crowdfunding platforms toward the CMA as the CMA will monitor the performance of the company licensed to operate the platform to ensure compliance with the regulation as well as the obligations of each party in the funding process. His Excellency emphasized that the key obligation that will contribute to enhancing the confidence and protect all parties is the provision of written information security policy to protect the confidentiality, safety and quality of information and IT assets based on best international and local practices in information security, and the operator will be obliged to display all the information and disclosures issued by the applicant for funding on the same platform and to do the due diligence to ensure they are correct and fair as well as immediate disclosure on the platform of any errors or misleading information or statements or investment risks related to the applicant for funding or their investment undertakings. The rules also oblige the operator of the platform to put in place anti-money laundering and combating terrorism procedures.

 

The Board of Directors of the Qatar Financial Markets Authority “QFMA” approved an important rules and regulations. This comes as a part of the QFMA’s initiatives for the capital market and its ongoing efforts to regulate and activate the capital market, protect its stability and its participants, and persify its investment tools and mechanisms supporting Qatar Stock Exchange “QSE”.
THE MOST IMPORTANT OF SUCH RULES AND REGULATIONS APPROVED BY THE BOARD ARE:
   1. Rules regulating the market maker activity, which is a new addition to the financial services activities. Such rules aim at activating trading and increasing liquidity in the market, as well as maintaining its stability and balance when the financial services companies, specialized in this activity licensed and regulated by the QFMA, provide continuous offer prices for buying and selling the securities traded in the market.
   2. Operating procedures for ETFs “Exchange Traded Funds”, including short selling transactions covering such fund’s units or index components. This is an addition of a new financial product to the Qatari market alongside shares, governmental treasury bills and bonds, which contributes in the persity of securities available for investors.
   3. Procedures for protecting minority and small investors as a result of the transformation of public shareholding companies to another type of companies as set forth in the Companies Law No. 11 of 2015. Through which such procedures, the QFMA aims to provide adequate protection as per the international best practices for all shareholders when public shareholding company listed on the QSE transforming to any other type of companies.
   4. Rules for employees’ incentive shares in public shareholding companies listed on the QSE, which allow the listed companies organizing incentive schemes for their employees while preserving the shareholders' rights of the company by granting them the right to approve such schemes and supervise their implementation through periodic reports presented annually to shareholders.


As a part of developing the regulations to enhance the Qatari capital markets sector and regulate doing businesses related to financial securities, the board of directors of Qatar Financial Markets Authority "QFMA" issued Decision No. 5 of 2019 concerning the new "Financial Services Rulebook".
The Rulebook promotes to perform the financial services activities set out in Article (4) thereof, after obtaining the required license from the QFMA. The Rulebook obliges all concerned entities subject to the QFMA's jurisdiction to implement it.
The Rulebook provides less requirements than the previous one regarding the capital required for performing such activities, in order to enhance financial liquidity at Qatar Stock Exchange, attract and encourage foreign and local investment for better competitiveness. It will also improve the quality of the financial services provided to participants and investors of the capital market, which would in turn increase the competitiveness of Qatar's economy and increase economic growth rate in line with Qatar National Vision "QNV" 2030.
According to the Rulebook, for granting a license to perform financial services activities, the applicant shall meet a number of requirements, including what related to the paid up capital which is a minimum of QR 3 million for the executive broker, QR10 million for clearing brokers, and QR 20 million for comprehensive brokers. For other financial services companies licensed to perform all financial services activities (excluding margin trading, securities' lending and borrowing, execution of securities purchase and sale's orders for a third party, own securities' trading, market maker and liquidity provider), the minimum paid up capital shall be QR 25 million.

 


The Qatar Financial Markets Authority (QFMA) announced today the issuance of Governance Code for Listed Funds and Listing Rules for Funds' Units listed in the Qatar Stock Exchange (QSE).
This issuance comes as a part of the QFMA's ongoing development of its regulations to enhance attractiveness of investment environment of the capital market, as well as to increase persity of the financial products listed in QSE.
QFMA announced, "It will continue to strengthen its regulations to meet the investors' needs with adopting the best international practices related to investment funds and relevant governance. This is a significant step for QFMA while exerting efforts to develop the Qatari capital market, and strengthen the elements that attract local and international funds for listing in QSE.
QFMA added, "The revision and update of Listing Rules & Governance Code would provide a clear framework for local and international fund management companies to be listed in QSE and encourage the development of asset management in the State of Qatar."

 

In line with CMA’s endeavor to regulate securities activities according to Law No. 7 of 2010 Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and its Executive Bylaws and their amendments, and in CMA’s pursuit of transparency, and its belief in the value of participation and the importance of benefiting from the expertise and capabilities of regulated entities, with respect to their valid aspirations and visions in the issued decisions and regulations relevant to the field of securities activities, which would fulfill common interests, support the implementation of CMA’s decisions and regulations when properly enforced, contribute to CMA’s success in achieving its goals, and consequently achieve public interest goals.
Thus, the CMA announced conducting an opinion poll for regulated entities on the draft amendment of the Executive Bylaws of Law No. 7 of 2010 Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and their amendments, by adding Appendix 1 “Standards of Systems for Maintaining Records” to Module Eight (Conduct of Business). 
Based on the comprehensive vision of the Capital Markets Authority (CMA) to strengthen the legislative structure of the capital market, and in the framework of its efforts to activate its supervisory role and establish an effective regulatory system in line with the latest international standards and updates, it started to implement one of its strategic approaches “Preparation of the Capital Adequacy Rules for Licensed Persons", which represents a legal entitlement in accordance with the provisions of Law No. 7 of 2010 Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities, and its Executive Bylaws and their amendments, in particular item No. (2) of Article (66) of the Law, which stipulates that “A Person licensed to engage in the management of Securities activities shall comply with the regulations specified in the Bylaws and in particular as follows: 2- Maintain adequate capital”. Additionally, Article (6-4) of Module Six (Policies & Procedures of Licensed Persons) of the Executive Bylaws of Law No. 7 of 2010 Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and their amendments, stipulates that “The Authority has the right to impose additional requirements or to make requests for specific reports to ensure that the Licensed Person has the ability to continue their business, particularly holding a sufficiency of capital, in a manner that is commensurate with the nature and volume of the Securities Activities that they carry out.” 

Having Perused:

- Law No. (7) of 2010 Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and its Executive Bylaws, and their amendments; and
- CMA Board of Commissioners Resolution passed in its meeting No. (35) of 2021 held on 06/10/2021.

The Following Was Resolved
Article (1)
Form 2 (Report indicating Securities Investment Portfolios of the Licensed Person) of Appendix 2 (Securities Investment Portfolios Forms) of Module Seven (Clients’ Funds and Clients’ Assets) of the Executive Bylaws of Law No. (7) of 2010 Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and their amendments is hereby amended pursuant to Annex (1) attached to this Resolution.

Article (2)
The concerned bodies shall execute this Resolution, each within its jurisdiction. This Resolution shall come into force from the date of its issuance, and it shall be published in the Official Gazette.

Prof. Ahmad A. Al-Melhem
Issued on: 10/10/2021

 

The Capital Markets Authority (CMA) issued its Resolution No. (123) of 2021 on Monday, 1/11/2021 Regarding Regulating the Division of Licensed Companies or Companies Listed in the Securities Exchange, and according to what was stated, the following was decided:
• Introducing Chapter Five (Division) of Module Nine (Mergers and Acquisition) of the Executive Bylaws of Law No. 7 of 2010 Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and their amendments, which includes provisions regulating the pision of licensed companies or companies listed in the Securities Exchange.
• Introducing Appendix (11) "Procedures of Executing the Division" of Module Nine (Mergers and Acquisitions) of the Executive Bylaws of Law No. 7 of 2010 Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and their amendments.
• The CMA also issued Resolution No. (123) of 2021 to amend the fee schedule issued by Resolution No. (9) of 2016 by adding application fees to execute the Division.
Within the framework of the approach adopted by the CMA in communicating and coordinating with the concerned authorities, and the CMA’s constant keenness to enhance the strength of the financial sector and the institutions operating in it, the CMA conducted a survey of the opinion of reputable local bodies during the period from 01/06/2021 to 01/07/2021, which, with its results, enriched the target content to complete the process of amending regulations and regulatory controls.
These amendments come with the purpose of completing the issuance of the regulations and controls regulating the capital markets necessary to implement the provisions of the law establishing the CMA and the Executive Bylaws and in line with Item No. (6) of Article (4) of Law No. 7 of 2010 Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and its amendments.
This is to enable the capital market to possess the elements of competition regionally and internationally by providing an attractive environment for foreign investments, localization of local investments, and creating suitable investment opportunities in light of appropriate protection for persons dealing in securities.
After the completion of the public consultation seminars on the first set of implementing regulations issued by the CMA in cooperation with World Bank experts in 2015, a specialized CMA working group has completed a rigorous translation process of the three implementing regulations into Arabic, thus allowing for the regulations to be published in the official gazette. The implementing regulations are already considered by CMA as set into force since the date of their publication.
A small brief on the published implementing regulations:

Licensing and Registration Regulation
In order to carry on a securities related business, an institution must be licensed by the CMA under Law 161/2011. Similar to banking business, licensing is critical to protecting customers and ensuring the safety and soundness of institutions operating in the capital markets. Licensed institutions are hence subject to ongoing supervision by the CMA.
Therefore, and as a direct result of this regulation, Banks, financial institutions and financial intermediaries with capital markets business will be “approved institutions” and subject to CMA regulations.

Business Conduct Regulation
“Business conduct” refers to how an approved institution governs and manages its business, its business operations, its systems and controls and its dealings with clients. Business conduct regulations are critical to investor protection, and to ensuring licensed institutions operate with integrity, sound management and effective controls.

Market Conduct Regulation
“Market conduct” refers to the standards of conduct applicable to trading by persons in securities markets. This regulation is critical to market integrity and ensuring fair and efficient markets. It applies to all persons involved in trading, except for item 4 below, which only applies to “Approved Institutions”.
FRA’s BOD decided that companies wishing to offer its shares, whether existing shares or capital increase shall be registered at FRA’s registry first before being listed at the Egyptian Exchange. Also, FRA’s BOD decision stated that companies shall meet the requirements set for calculating the fair value and approving prospectus or disclosure form for offering.

For its part, FRA will comply with standards of transparency and quality systems and companies’ requests shall be decided upon within fifteen days from the date of submitting the needed documents. In addition, Companies will be given a period of no more than one month to complete the offering and trading process in the Egyptian Stock Exchange. In this respect, investors will be aware of the timing of offering, listing and trading.

This decision will be followed by changes in many rules and executive procedures of listing rules prepared by the Authority, that is after consultations with the Egyptian Stock Exchange in preparation for its publication in the Egyptian Gazette and applying it from the next day of publication.
FRA’s Board approved number of important amendments to the Executive Regulations of the Capital Market Law. The amendments to the real estate investment trusts (REITs) included increasing the percentage in which the (REITs) may invest their funds in one project to be 50% if the size of the fund is 500 million pounds or less. In addition, if the fund size is more than 500 million pounds, then it will invest 30% of its funds as long as there is an acceptable feasibility study that is being disclosed to certificates holders. On the other hand, another restriction was amended regarding the fact that the total number of those who own 10% or more of the real estate investment trusts (REITs) shall not exceed75% of the total of fund’s certificate. If these funds are listed at the Stock Exchange, then it shall meet some listing requirements, namely, the minimum number of certificates’ holders and the ratio of tradable certificates. In addition, another restriction is amended and it is related to the fact that ratio of the contribution of the real estate investment trusts (REITs) in the capital of the unlisted real estate company shall not be less than two-thirds of its capital. The new amendments grant the Fund the right to set the percentage of contribution which is in the interest of certificates’ holders pursuant to the fund’s investment policies.
The amendments approved by the Board also allow Investment Manager to use intraday trading system provided that the transactions shall not exceed 15% of the daily volume of fund’s transactions.
Regarding charitable funds, the new amendments allow these funds to invest in various types of mutual funds and it not being limited to private equity funds or real estate investment trusts (REITs) in accordance with the regulations set by the Authority .

In order to facilitate the work of the open-ended funds, the proposed amendments allow banks and insurance companies to issue more than one issuance for open-ended funds.

 

FRA’s Board of Directors issued a regulatory decision after gaining the Board’s approval. The said decision requires obtaining the approval of the company’s General Assembly upon purchasing treasury shares where the percentage of ownership or voting rights of a shareholder or a related group exceeds the percentage set upon submitting a mandatory tender offer, besides the shareholder and the related persons will not participate in voting on purchasing decision in the General Assembly, that is due to the possibility of obtaining an exemption from the Authority upon submitting a mandatory tender offer.
The decision also regulates obtaining an exemption from the Authority regarding not submitting a mandatory tender offer in cases of capital increase whether in cash or through credit balances if the percentage of ownership or voting rights of a shareholder or related group exceeds the percentage set upon submitting a mandatory tender offer, on condition that this is not resulted from purchasing subscription rights in capital increase.

The Authority's decision no. 81 of 2013 was canceled in the light of what was stated in the new decision. Besides, rules of purchasing treasury shares stated in listing and delisting rules will be amended in line with the provisions of the said decision .

 

FRA agreed in principle on the Capital Market Advisory Committee’s recommendation to regulate the rules governing intraday trading mechanism, which increase the maximum limit of THE client to be 1/10000 instead of 20000/1 and allowing him to repeat dealing within the said percentage during intraday trading session. The said proposal shall be presented to the Board of Directors at the next meeting to proceed with the amendment procedures. Also, FRA approved the Committee’s recommendation regarding adding Index Fund certificates to List “ B” of marginable securities list and this shall be done concurrently with the updated lists which include shares that are allowed to be engaged in specialized activities.
FRA’s BOD approved the amendment to decision no. (17) of 2017 issued on 28/2/2017 regarding regulating trading rules and proof of ownership of unlisted securities. The new amendment extends the period in which brokerage companies can notify the Stock Exchange of the transactions required to transfer the ownership of the unlisted securities for one month from the date of the order instead of one week, taking into account the practical cases for such transactions that can exceed the set period stated in the said decision. In addition, extending the period of one week that is stated in the decision will grant greater flexibility that suits the nature of market’s transactions.
The said amendment also states that the purchaser may prove that he deposits the value of the transaction in the bank account for a period exceeding one month stipulated in the same decision in accordance with reasons estimated by the Authority.
In its session held by the end of last year, FRA’s BOD approved a new draft law to regulate consumer finance activity and moved forward to send it to the competent official authorities to issue the legislation. FRA’s Chairman emphasized that the draft law consisted of twenty nine articles regulating each activity aimed at providing financing to purchase goods and services for consumption purposes in Egypt. In addition, it included financing through commercial payment cards or payment systems.
Within the framework of FRA’s regulatory role to ensure the safety and stability of non-banking financial markets and enhance the efficiency of their transactions, FRA’s BOD approved the issuance of capital adequacy standards for financial leasing and factoring companies. The said standards will enhance the ability of companies to provide financing through credit risk management and facing operational risk management according to the best international practices of credit risk measurement methods.
Based on the principle of providing information on sound trading mechanism in the Egyptian Capital Market, the rules and procedures governing this market and facilitating access to them to make sound investment decisions, FRA’s Chairman revealed that the Authority has prepared an updated version of the Executive Regulations of Capital Market Law. He added that information is an indispensable necessity for securities market participants, relevant parties from companies operating in the field of securities as well as listed and unlisted companies.
FRA’s Chairman stressed the keenness of FRA’s Board of Directors to speed up the process of setting the rules, procedures and controls related to the formation of the first board of directors of “Policyholder Protection Funds”. The said rules will maintain the safety and stability of non-banking financial markets and protect consumer rights.
FRA’s BOD approved in its last session the statute of the Egyptian Securities Federation. The Board grants the Federation an independent legal personality which contributes to the development of the Capital Market and raises awareness of it. Also, FRA’s BOD stressed that members’ of the Federation shall abide by the code of ethics and rules governing the obligations and rights of the members. Besides, it shall develop the skills of those operating in the field of securities.
In order to add new mechanisms and increase liquidity on the Egyptian Stock Exchange, FRA issued regulatory decision no. (268) of 2019 on short selling rules and activating the mechanism. The Egyptian Stock Exchange, MCDR shall prepare and set up the automated systems and technical requirements related to short selling mechanism. Both parties shall inform the Authority before activating the mechanism.
Within the framework of FRA’s efforts to achieve the third objective of its comprehensive strategy for developing non-banking financial sector (2018-2022), namely "Enhancing national competitiveness and attractiveness for Foreign Investments", FRA’s Chairman revealed that FRA’s Board approved several procedures included amendments to listing and delisting on the Stock Exchange. The said amendments will stimulate Egyptian and foreign companies to move towards listing on the Egyptian Stock Exchange.
FRA’s Chairman issued a procedural decision to form a Founding Committee to elect the first board of the Egyptian Securities Federation under the chairmanship of Mr. Sulaiman Nazmi and the membership of four representatives of companies licensed to carry out securities activity or subjected to the provisions of Central Depository and Registry Law .
FRA’s Chairman stated that the said decision defined the functions of the Founding Committee in taking the necessary procedures upon joining the companies licensed by the Authority to practice one of activities related to the field of securities and subjected to the provisions of the Capital Market Law and the Central Depository and Registry Law. The committee shall follow the procedures for convening the first General Assembly of the Federation to elect the Board of Directors and this shall be within a period not exceeding six months from the date of the issuance of decision no. (375) of 2019.
FRA’s Chairman revealed that as part of FRA’s effort in developing and activating investment funds as a non-banking financial activity, and within the framework of facilitating the procedures of investment funds in general, and activating the role of Real estate investment trusts through removing the obstacles arising upon establishing the fund, In its session held mid-week, FRA’s BOD approved a draft amendment to some provisions governing Real estate investment trusts and stated in the Executive Regulations of the Capital Market Law.
FRA facilitated the establishment of a new futures company and allowed the Egyptian Stock Exchange to trade in derivative according to certain technical and regulatory determinants within the framework of implementing the roadmap set by the Authority to activate Futures Exchanges and trading in derivatives either through licensing the establishment of a new entity " Futures Exchanges" or granting license to the Egyptian Stock Exchange to engage in the activity without the need to establish a company,
FRA’s Chairman emphasized that FRA’s BOD approved in its last session a decision allowing the Authority to grant license to joint-stock companies to engage in futures contracts after ensuring that it meets all the procedures and conditions prescribed by law to establish companies operating in the field of securities and after obtaining FRA’s BOD approval.
In the framework of FRA’s efforts to practice its role in protecting minority investors and achieving the third objective of its comprehensive strategy for the development of non-banking financial sector (2018-2022), namely "Improving the competitiveness of the national economy and attractiveness to foreign investments", FRA’s Chairman emphasized that FRA’s Board of Directors has approved an amendment to listing and delisting rules by decision no. 43 of 2019. The said decision stipulated that in cases of conflict of interest, FRA’s Board may limit the vote on the optional delisting in the Extraordinary General Assembly of the Company to minority shareholders (Free-Trading Shares) without the vote of the principal shareholder/s and their related parties. 


In light of applying the amendments to the Capital Market Law issued by Law no. 17 of 2018, which includes regulating offering of financial instruments in the Egyptian market, determining the meaning of public offering and its provisions, the conditions and controls to be complied with upon issuing any securities or financial instruments through the private placement and setting a definition of what is meant by the public offering and private placement,
Dr. Mohammed Omran - FRA’s Chairman said that the Board of Directors approved at a meeting yesterday the issuance of the controls and procedures to be complied with at the public offering and private placement.
FRA’s Chairman added that the Egyptian capital market is currently witnessing a trend towards increasing the number of companies to be listed on the Stock Exchange, whether through private sector companies’ offerings and the state-owned companies' offerings program, which is expected to add about 35 new companies to the capital market. In this respect, 275 companies will be listed on the Egyptian Stock Exchange, and market capitalization will be increased to 1.6 trillion pounds by the end of 2022 according to FRA’s comprehensive strategy for non-banking financial activities 2018-2022.
FRA’s Chairman stated that FRA’s BOD decision no. (48) of 2019 stipulated that the company wishing to offer its securities shall enter into a contract with the Lead Manager to carry out the process of promoting, covering and executing the subscription. The contract shall specify the mechanism set for determining offering price, either on a fixed price basis or in accordance with the BOOK BUILDING ISSUE; this shall be disclosed in the prospectus of both public offering and private placement. In both cases, subscription requests and tender offers shall be received through ONLINE DISPLAY systems and will be only reviewed by the Authority and the Lead Manager.
He stressed that the Board was keen in its decision to reveal what is meant by qualified investor - closing the door of diligence in determining them - and restricting them in public legal persons from insurance funds , public and private pensions , fund companies , local, Arab, regional and international financial institutions. The decision defined the requirements that shall be met by these legal persons and natural persons who have liquid assets of 5 million EGP and preferably have experience in the field of securities for at least 5 years.
He noted that Leading Manager shall be responsible of verifying, proving and keeping documents to demonstrate the capital adequacy of private placement clients and meeting the definition and specifications included in the prospectus. That is besides checking the availability of a statement that shows if the client is using delivery against payment mechanism, custodian or the bank contracted. Also, he shall define the means and timing of cash payment to the buyers, means and timing of collecting cash for the sellers.
In addition, Lead Manager shall authenticate method of price determination. Also, he shall state any data related to the subscription, any amendments and timings in the register of BOOK BUILDING ISSUE mechanism. He shall determine the final price of the public offering in accordance with means stated in prospectus and send a copy to the Authority immediately after completing offering process.
FRA’s Chairman also confirmed that the decision included a package of obligations on the remaining parties in the offering. The decision obligated the recipient of the orders in the case of the private placement to take care of the concerned man to ensure that the orders that are included suit the client’s capital adequacy and his experience in order to achieve the seriousness of orders and the ability to pay. Subscription requests received by the broker shall be limited in quantity and price. Also, he shall collect sufficient information about the subscribed investors to ensure that they meet the requirements of the qualified investor and ensure that the investor is the final beneficiary of the subscription and independent of the issuing company and any party. In addition, he shall ascertain sources of client’s financing.
On the other hand, the decision prohibits brokerage companies in the case of public offering to grant financing to clients and to register non-covered purchase orders (at the fixed rate of payment) by the client's own resources.
Dr. Omran stated that in the private placement MCDR shall verify the payment of the entire value of purchased shares in parallel with the settlement process.
FRA’s BOD decision no. (48) of 2019 also stipulates the conditions and procedures to be followed at the public offering. As the company wishing to submit the offer is obliged to submit a fair value study if the offering is for the first time or if the company has listed securities but not active in accordance with the rules set by the Stock Exchange and approved by the Authority in this regard. The fair value study is prepared pursuant to Financial valuation Standards issued by FRA’s BOD no. 1 of 2017 and in accordance with the provisions of Article 85 of the Executive Regulations of Law 95 of 1992.
FRA’s Chairman stressed that companies wishing to offer its shares in public offering shall use price stability mechanism following the offering in accordance with a number of controls. This mechanism aims to support the stability of share price in the market for the benefit of the shareholders that is by dealing through the lead Manager.

 


In order to raise awareness of the requirements needed to apply E-Payment Law no.18 of2019 regulating the Use of Cashless Payment Methods - and clarify the obligations of those dealing in the non-banking financial activities, facilitate them through announcing a guiding plan and recommend the law’s rapid implementation, FRA’s Chairman issued periodical memo no. (2) of 2019 to regulate the Use of Cashless Payment Methods in financial transactions for all companies and entities subjected to FRA’s.
He emphasized that the periodical memo has defined the scope of compliance with Cashless Payment Methods in financial transactions. He added that entities and companies under FRA’s supervision shall settle their financial obligations - by using Cashless Payment Methods - when they exceed the limits specified in the Law’s Executive Regulations. Also, upon granting cash financing provided by Mortgage finance companies, financial leasing or factoring companies, microfinance companies or any non-banking financial institution or upon distributing the profits resulting from the contribution to companies’ capital or investment funds, payments to syndicates’ members and participants in private insurance funds and insurance compensation. Also, using Cashless Payment Methods upon granting subsidies and donations by NGOs or other private legal persons and establishments of various kinds. Also, upon paying fees in cases of purchase or rent or exploitation or use of land or real estate. Upon paying the dues of suppliers, contractors, service providers. Moreover, it is used upon paying the dues of employees, experts, heads, and members of boards of directors, committees and social insurance contributions. Also, whenever the number of employees or the total value of their monthly wages exceed the limits specified in the Executive Regulations of the said law.
FRA’s Chairman said that the other part of the obligations - stipulated in the periodical memo - is represented in collecting cash financing premiums, insurance premiums, syndicates’ subscriptions, private insurance fund subscriptions using Cashless Payment Methods, as well as subsidies and donations granted by NGOs and institutions, or granted by other private legal persons and establishments of various kinds, fees in cases of sale, rent, exploitation or use of land or real estate or express transport vehicles and fines and other receivables to companies and entities operating in non-banking financial activities whenever it exceeds limits stipulated in the Executive Regulations of the law.
He asserted that the Authority set a guiding model of six-phases for a reconciliation plan in its periodical memo. It calls upon the companies and entities under its supervision to implement this plan as soon as possible so as not to be exposed to the penalties and fines stipulated in Articles (7, 8) of E-Payment Law.
He added that the period of reconciliation will take six months from the date of applying the Executive Regulation of Law No. 18 of 2018. The reconciliation plan includes several stages. The first phase involves consultation process and choosing provider of cashless payment solutions to settle payments and receipts if the dealers do not have existing bank accounts or other Cashless Payment Methods such as credit and debit cards, payment using mobile phone, prepaid cards.
This is followed by signing a contract with provider of cashless payment solutions, and obtaining the prior approval of the Authority required only for those licensed to engage in microfinance activity in the matter to activate cashless payment transactions for its clients. Then, the third phase which is the experimental operation of all cashless payment services and starting the awareness plan for clients and stakeholders. The fourth phase is collecting cashless payments. The fifth phase witnesses the implementation of cashless transactions and finally, settling all payments (payment and collection) through cashless payment methods and addressing all obstacles facing the process.

 


FRA’s BOD approved in its session today a draft law on amending the provisions of Law No. (141) of 2014 on regulating microfinance. The new amendment will cover all financing activities granted for micro, small, and medium-sized enterprises (MSMEs). In this respect, this will enable the maximum number of target groups and SMEs to access various means of finance. The draft law will be sent to the Prime Minister for its issuance.
The draft law is a step that is taken by the regulator to comprehend the developments revealed by the actual application of the law over the past four years regarding the need to increase finance value granted to clients. In addition, the new amendments will provide a new finance ceiling for another category to facilitate the associations and civil institutions engaged in finance activity in light of the variables witnessed by the Egyptian economy.
The Egyptian constitution issued in 2014 has committed the Egyptian state to protect economic, productive, service and information activities as one of the basic components of the national economy. Since Financing SMEs – is held outside the banking sector- and is not subjected to an integrated legal regulation, besides a large part of it is practiced through informal mechanisms and customary practices that lack the legal basis. Consequently, the national economy loses advantages of efficiency, justice and stability in financing transactions in this field, despite it represents more than 80% of the structure of the Egyptian economy and % of private agricultural sector in Egypt.
He added that the new draft law will enable the maximum number of target groups and SMEs to access various means of finance, in a move to attract hundreds of thousands of jobs annually which contributes to the elimination of unemployment. On the other hand, the draft law regulates the work of entities granting finance, reduces risks, encourages the expansion of this activity and protects the rights of beneficiaries through putting microfinance entities under a strict regulatory system, pursuant to the best international practices in this regard.
The draft law’s legal framework includes an amendment to Microfinance Law to regulate SME finance along with microfinance activities in terms of rules and regulations set for the companies to practice both activities in a manner that achieves flexibility and ease of application. That is in addition to the possibility to amend and develop these rules in accordance with the needs of the industry and its development. The project also emphasizes that MSME finance is one of the non-banking financial tools and then subjected to the provisions of Law No. (10) of 2009.
The most important part of the draft law includes the following:
- Replace the title of Law No. (141) of 2014 on regulating microfinance activity, with the following title: “Law on regulating MSME finance”. The term "Microfinance" shall be replaced by the term “MSME finance” whenever it is mentioned in Law No. (141) of 2014 referred to.
- The licenses granted to companies, associations and NGOs to carry out microfinance activity shall continue to apply unless they are canceled in accordance with the provisions of the law.
- Add definitions related to MSMEs
- Issued and paid-up capital of companies operating in SME finance shall not be less than 20 million EGP and 5 million EGP for financing micro enterprises. On the other hand, companies wishing to engage in financing SMEs and microfinance activities together must meet the minimum issued and paid up capital for each of the two activities.
- The statute of the Egyptian Union of Microfinance - currently exist - shall be amended to include entities engaged in SME finance and changing its name to become “Egyptian Union of MSME finance”.
- Companies, associations and NGOs licensed by the Authority to engage in SME finance may operate in financial leasing activities, taking into account the provisions stipulated in Law No. 176 of 2018 promulgating the Law regulating Financial Leasing and Factoring activities.
It is worth mentioning that the draft law has witnessed several sessions of community dialogue in the past period with representatives of financial institutions operating in SME finance, the Micro, Small and Medium Enterprises Development Agency (MSMEDA), the Egyptian Union of Microfinance as well as companies and associations licensed to engage in microfinance activity.

 

 

In recognition of the effective role played by Holding Companies in establishing new companies and increasing their capital in a manner that increase the economic activity, In order to facilitate these companies to enable them to achieve their objectives, FRA’s Chairman issued decision no. 74 of 2019 on exempting Holding Companies - that engaged in company incorporation or capital increase in accordance with requirements stated in Capital Market Law and related decisions- from abiding by the conditions stated in the ownership structure which shall be met by the companies upon establishment and licensing.

FRA’s Chairman emphasized that the decision came in accordance with FRA’s BOD approval at its meeting last week to grant Holding Companies a facilitation upon its establishment due to the effective role it plays in establishing new companies and increasing their capital in order to provide new job opportunities. That is besides its role in increasing the production of goods and services, which in turn is reflected in the GDP growth rate.
FRA’s Chairman explained that decision no. (74) of 2019 contributes to the implementation of the Sustainable Development Strategy (SDS): Egypt Vision 2030, as Holding Companies play an active role in increasing direct investment.

 

As FRA seeks the development of the legislative structure of non-banking financial activities in order to absorb the changes that occur in the capital market and to strengthen the competitiveness of the national economy and investors’ protection,

FRA’s Chairman revealed that FRA’s BOD approved at its last meeting last week a proposal to amend some provisions of the Central Depository and Registry Law to become a comprehensive law regulating clearing and settlement transactions both in the present and future markets. That is besides some provisions governing clearing and settlement of derivatives, commodities, other financial instruments or indicators. The new law will include clearing and settlement of all securities, namely government securities, whether treasury bills or government bonds.
In order to activate Futures Exchanges and to update its system of work, the proposed amendment allows companies to be licensed by the Authority to carry out clearing and settlement of futures contracts, whether this license is granted to central depository and registry companies or through a new company established for this purpose.
FRA’s Chairman said that one of the most important issues dealt with in the amendment was to allow the Central Bank of Egypt to establish a joint stock company wholly owned by it or with others to carry out clearing and settlement of government bonds and treasury bills. He pointed out that FRA’s BOD should issue the necessary conditions, controls and procedures for granting the license and practicing the activity.
He added that in light of the Central Depository and Registry Law, the central depository activity deals with depository and registration of securities, clearing and settlement of financial centers arising from trading and transfer of ownership of securities including registering the right of pledge. He noted that it was important that the proposed amendments include provisions regulating securities pledge between the pledgor debtor and pledgee creditor.
FRA’s Chairman affirmed that the proposal established a unified law regulating clearing and settlement, whether for the present market represented in securities and government securities or for future market represented in futures contracts. In this respect, investors will refer to one legislation that includes all the provisions governing Central Depository and Registry and the rules to be followed upon clearing and settlement of securities and contracts subject to its provisions.
The proposed amendments include the following:
1- Granting license to companies authorized by the Authority to carry out clearing and settlement of contracts traded on the Futures Exchanges, whether it is a license for the depository companies or through a new company established for this purpose. The Authority shall manage the conditions, controls and procedures necessary for granting the license and practicing the activity.
2- Allowing the Central Bank of Egypt (CBE) to establish a joint stock company wholly owned by it or with others, to carry out clearing and settlement operations for government bonds and treasury bills
3. Regulating securities pledge between the pledgor debtor and pledgee creditor.
4. Allowing MCDR, in the event of bankruptcy by one of its members, to finalize and settle the final orders ordered by such member and to settle the financial centers. Besides, allowing the Authority to cancel such transactions and orders if accompanied by fraud. In this respect, the bankrupt member is obliged to pay a compensation to activate FRA’s role in regulating the market and protecting investors of goodwill.
It is worth mentioning that the Central Depository and Registry Law. (93) of 2000 was issued to regulate the central depository and registration activity in the present market. The said law discussed in details the provisions related to the central depository, registration, clearing and settlement of securities in order to settle the legal centres arising from dealing in securities. In addition, the said law specified the rights and obligations of those who deal in these securities. The law also regulated the provisions of establishing and managing the company licensed by FRA to carry out the activities of central depository and registration.
In 2018, pursuant the amendments to the Capital Market Law under Law no. (17) of 2018, the Law stipulated the establishment of Futures Exchanges and other indicators determined by the Authority. noting that Futures Exchange’s clearing and settlement transactions shall be carried out in accordance with the provisions of the Central Depository and Registry Law through MCDR licensed by the Authority.

 

FRA’s Chairman stressed on FRA’s keenness to develop and activate real estate investment trust (REITs), facilitate their work and reduce their burdens to carry out their activities in order to play their vital role in promoting the construction industry as it is in the international markets.

FRA’s Chairman said ministerial decree no. (1347) of 2019 on amending some provisions of the Executive Regulations of the Capital Market Law stipulated that Management Services Company shall conduct periodical valuation of the REITs’ total assets every six months at least (instead of every three months) ). This shall be applied on (REITs) that are not listed at the Stock Exchange in order to reduce the financial burden on the Fund, given the nature of some (REITs) targeting long-term investment in unlisted real estate assets or securities. Meanwhile, if the Fund is listed at the Stock Exchange, the valuation shall be conducted quarterly.
FRA’s Chairman added that the amendments have taken into account "further facilitation and easing of financial burdens so that the REITs’ assets will be valuated by one or more of the Real Estate Appraisal Experts listed at FRA’s registry - rather than requiring that the valuation be made by two experts - who must be independent of either party. Upon the preparation of the report, real estate appraisers shall abide by the Egyptian Financial valuation Standards issued by FRA’s BOD. The report shall only be sent to the Auditor without interfering with valuation tasks.
He emphasized that the Authority is - currently- in consultation with officials of the Ministry of Finance to prepare some tax incentives to encourage engaging in real estate investments through REITs.
FRA’s Chairman noted that the amendment was issued to avoid conflicts of interest. In this respect, it was required to obtain the approval of Certificate Holders Group if the REITs’ funds are directed to any investments or real estate owned directly or indirectly by any related parties by an amount not exceeding (25%) of the Fund’s assets. In addition, two real estate appraisers who are list at FRA’s registry shall valuate the assets; afterwards Fund’s auditors shall approve the valuation.

 

 

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