1
EXECUTIVE REGULATIONS
Of Law No. 7 of 2010 concerning Establishment of Capital Markets
Authority and Organization of Sec...
2
A. Shares issued or proposed to be issued in a
company’s capital.
B. Any instrument that originates or proves
indebtedne...
3
Custodian : A corporate body licensed by the authority to carry out
the activity of asset custody in accordance with the...
4
board of directors or by any general assembly of the
respective company.
Market Maker : The person, who ensures availabi...
5
are listed.
6
Chapter Two
“Capital Markets Authority”
Article (2)
The Authority shall exercise its authorities in accordance with Law ...
7
4. Organizing promotion of investment funds and the other collective investment
schemes.
5. Organizing the public offeri...
8
4. Conduct inspections and control over the activities of licensees by virtue of Law No. 7
of 2010.
5. Purchase, acquire...
9
Article (9)
Should the chairman be absent or the position thereof becomes vacant, the Vice-chairman
shall replace the Ch...
10
2. Should he be convicted with a final verdict of a crime of breach of honor or trust.
3. Should he be absent for three...
11
Article (19)
The Board may establish permanent or temporary advisory committees and entrust them
with studying a certai...
12
Article (24)
The financial year of the Authority shall commence of April 1st
and end on March 31st
of
each year, except...
13
Article (29)
The Authority shall have one or more of independent auditors of the audit firms approved
by the Authority....
14
interest at the outset of the meeting and leave the meeting before discussion of the topics
starts.
Article (36)
The Au...
15
Article (41)
The Authority shall set the rules and terms that the auditors should fulfill to be enrolled in
the relevan...
16
Complaint & Grievance Committee
Article (47)
The Board of Commissioner shall form a committee to handle the complaints ...
17
Article (52)
The Committee shall decide on the complaints within thirty days of the date of submission
thereof. Prior t...
18
Complaint shall be recorded in a designated registered on the date of receipt thereof. The
complainant shall receive a ...
19
the crimes in violation of the provisions of the Law No. 7/2010 and these regulations and
the resolutions issued in imp...
20
No person may refrain from providing any information, data or documents requested by
the Judicial Controllers under the...
21
Chapter Three
“Stock Exchange Markets”
Article (68)
A Stock Exchange Market is the place, where stocks and other securi...
22
not exceeding the expiry date of sixty day period commencing from the first day of
the next month in which the Founders...
23
object by a reasoned letter to any of such nominees for not fulfilling the required
conditions.
Such objection shall en...
24
4. Adhere to provide and operate its services as per the rules and regulations stipulated
by the Authority.
5. Adhere t...
25
2. If it deemed there is a financial irregularity or any other situation that may indicate
inappropriateness of the mem...
26
4. The clearing agency shall record the transfer of the title in the shareholder’s register
maintained by it.
5. The cl...
27
Article (85)
The Stock Exchange Market’s Management should inform the Authority of any disciplinary
action taken agains...
28
3. In case of closure of Stock Exchange Market.
4. If the Stock Exchange Market did not abide by the Authority’s instru...
29
1. Stock Exchange Market shall adhere to application of internal accounting system in
accordance with the international...
30
Chapter Four
“Clearing Agency”
Article (95)
A clearing agency means any entity that provides facilities for carrying ou...
31
1. Taking the arrangements and measures for the fair and effective clearing and
settlement of any trading transactions ...
32
3. The clearing agency should have one or more external auditor and should enable that
auditor to access all data and r...
33
Article (108)
Upon completion of any procedures on default in repayment, the clearing agency shall
prepare a report on ...
34
such rules and regulations or amend them on behalf of the clearing agency at the latter’s
expense.
Article (113)
The cl...
35
Article (116)
The Authority may issue any instructions to the clearing agency to ensure the fair, efficient
and appropr...
36
7. If the agency requested cancellation of its license.
The Authority should publish the resolution of license cancella...
37
Chapter Five
“Regulated Securities Activities and the Licensees”
Scope of Application
Article (123)
Activities, which a...
38
2. Excluding from paragraph (1) of this Article, it is not required to obtain a license from
the Authority to practice ...
39
5. A copy of the company’s memorandum and articles of association and any
amendments made thereto.
6. A declaration by ...
40
19. A list of requirements, which the applicant deems non-applicable and the reasons
therefor.
To be registered Functio...
41
Article (133)
The Authority may require passing a qualifying test to fill and of the to be registered
functions. The Au...
42
The Authority may issue an initial approval on the license application to enable the license
applicant complete legal f...
43
License Renewal
Article (141)
1. After payment of the related charges, the license renewal application is submitted at
...
44
5. Notify the Authority in writing upon any change relating to insolvency or liquidation of
the licensee, any controlli...
45
Internal Systems and Bylaws
Article (146)
The licensee should the Authority’s approval of all of the systems and bylaws...
46
Loss Sharing
Article (148)
The licensee may not offer sharing in loss to which the customer would be exposed.
Informati...
47
License Cancellation
Article (153)
The Authority may suspend or cancel the license or restrict the activity of any lice...
48
The Authority may reject the application of license cancellation if it deemed that
continuity of the license is necessa...
49
Article (162)
The licensee should ensure the proper care of his customer’s interests and avoidance of
any conflict of i...
50
The following actions by the licensee shall not be deemed as lending under the previous
Article:
1. Settlement of a dea...
51
2. The margin should be in cash or in the mode of investment positions in securities fully
paid up or by acceptable gua...
52
1. Should accurately and timely demonstrate the assets and liabilities of all customers
severally and collectively.
2. ...
53
The licensee should set the proper arrangements to ensure that carrying out operations
and disposal of assets are made ...
54
The licensee should maintain, in a separate manner, all accounts, records, terms of
services and the other agreements t...
55
The licensee should prepare and maintain proper internal control records and procedures
with respect to any authorizati...
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
Exectuive regulations of cma law 07 for 2010 english
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Capital Markets Authority Law Kuwait

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Exectuive regulations of cma law 07 for 2010 english

  1. 1. 1 EXECUTIVE REGULATIONS Of Law No. 7 of 2010 concerning Establishment of Capital Markets Authority and Organization of Securities Activity Chapter One “Definitions” Article (1) In implementation hereof, the following terms and expressions shall have the meanings ascribed to them: Concerned Minister : The Minister of Commerce & Industry. Authority : Capital Markets Authority. Board : The Authority’s Board of Commissioners. Stock Market : Stock Exchange Market. Stock Market Members : Companies and funds listed in stock exchange market and the brokers. Clearing Agency : The entity that clears and settle securities trading and handles the centralized placement of securities. Person : Natural persons or corporate body. Licensee : A natural person or corporate body having a license from the Authority to carry out one of the securities activities stated in Article (124). Registered Person : A natural person registered with the Authority to carry out a function that should be registered with the Authority. Issuer : The corporate body that has the right to issue securities. Listed Company : Any shareholding company listed in stock exchange market. Security : Any bond of whatever legal form that proves a share in a marketable finance licensed by the authority such as:
  2. 2. 2 A. Shares issued or proposed to be issued in a company’s capital. B. Any instrument that originates or proves indebtedness that has been, or shall be, issued by a company. C. Loans, bonds and other instruments that could be convertible into shares in a company’s capital. D. All marketable general debt issued by various government entities or the public authorities and institutions. E. The sukuk issued under the applicable Shari’a- compliant contract forms. F. Any right, option or derivative relating to any of the securities. G. Units in any collective investment scheme. H. It should not be considered as securities the commercial papers such as promissory notes, letters of credit, fund transfers, exclusively inter- bank traded instruments, insurance policies and the rights of beneficiaries on pension schemes. Broker : A person carrying out purchase and sale of securities on behalf of others for commission. Trader : A person carrying out purchase and sale of securities for his own account. Investment Portfolio Manager : The person entrusted with management of the investment portfolio on behalf of customer or for the company in which he is working. Investment Advisor : A corporate body providing investment advisory services relating to securities for commission. Collective Investment Scheme : An entity engaged in placement of investors’ funds therein under different types of investment. Investment Trustee : A corporate body licensed by the authority to carry out monitoring and supervision over collective investment schemes.
  3. 3. 3 Custodian : A corporate body licensed by the authority to carry out the activity of asset custody in accordance with the Law No. 7 of 2010 and these Executive Regulations. Placement Agent : The person, who offers or sells securities for the issuer thereof or its ally, or receives securities from the issuer or its ally for re-marketing purpose. Shari’a Auditor : A person undertaking the supervision of the licensee’s business to assure their compliance with the Shari’a rulings and regulations issued by the Authority. Insider : Any person who has access by virtue of his/her position to material non-public information or data on a listed company. Public Offering : A process of invitation to the public for subscription in the securities through various published announcements. Private Placement : An invitation addressed to specific category or specific person for subscription in a closed shareholding company or upon increase of capital of an existing company in accordance with the terms and requirements determined by the Authority. Ally : The person, who is affiliated to other person(s) or subject to his/their control. Associate Company : A company in which a person owns a share exceeding 20% of its capital, or which is similar to another company being a subsidiary of the same third person. Subsidiary Company : A company in which a person owns a share exceeding 50% of its capital. Competent Court : The court set forth in Law No. 7 of 2010 and these Regulations. Effective Control : Any position, agreement, equity stake or interest, of whatever percentage, that leads to control in appointment of the majority of the members of the Board of Directors or over the resolutions passed by the
  4. 4. 4 board of directors or by any general assembly of the respective company. Market Maker : The person, who ensures availability of forces of supply and demand on one security or more as per the controls and regulations preset by the Authority. Option Contracts : A contract or an agreement that grants a person the right, but not a commitment, to purchase or sell a security or a group of securities or an index of securities to another person. However, such right does not entail possession of securities. Sale Offer : A desire to assign the title of a security listed in stock exchange market and through it for cash consideration. Purchase Offer : A desire to own a security listed in stock exchange market and through it for cash consideration. Credit Rating Agency : A corporate body licensed to carry out the activity of credit rating or credit information classification. Related Party : A person, who is a member in the board of directors, executive management or supervisory board for a broker or investment advisor; a manager or holder of a supervisory position in any of the aforesaid entities; or an employee or representative of any of those entities dealing with the public or having the discretion to act upon the securities or funds as a part of his job with the entity licensed to carry out securities activity. Primary Market : The market in which subscriptions and issuance of securities are processed. Secondary Market : The market in which purchases and sales of securities are processed and the related titles are transferred in accordance with the governing laws and regulations. Main Market : It is that part of the secondary market in which companies that meet specific criteria set by the market are listed. Parallel Market : It is that part of the secondary market in which companies that meet lower criteria set by the market
  5. 5. 5 are listed.
  6. 6. 6 Chapter Two “Capital Markets Authority” Article (2) The Authority shall exercise its authorities in accordance with Law No. 7 of 2010 and these Regulations as well as the resolutions and regulations promulgated by the Board of Commissioners in application of the Law and its Executive Regulations. Article (3) The Authority aims to: 1. Organize the securities business in line with the principles of equity, efficiency, competitiveness and transparency. 2. Make the public aware of the securities business and its benefits, risks and obligations associated with the investment in securities, and encourage development thereof. 3. Provide protection for those involved in the securities business. 4. Minimize the typical risks expected to occur in the securities business. 5. Implement the full disclosure policy in a way to realize equity and transparency and prevent conflict of interest and any insider trading. 6. Seek to ensure compliance with the laws and regulations related to securities activity. Article (4) Board of Commissioners shall be responsible for: 1. Issuing the regulations and instructions required for implementation of the law, and the recommendations and studies necessary to develop the laws that help to realize the Authority’s objectives. 2. Issuing the licenses for stock exchange markets and the related activities, and monitoring their activity. 3. Issuing the licenses for memberships of the stock exchange markets and permits for the employees therein and everybody working in the securities activity including asset management entities, investment funds, brokerage companies, securities and investment custody companies, advisory services firms, etc.
  7. 7. 7 4. Organizing promotion of investment funds and the other collective investment schemes. 5. Organizing the public offering and private placement of Kuwaiti and Non-Kuwaiti securities, and monitoring and supervision over the same. 6. Organizing mergers and acquisitions and monitoring and supervision over the same. 7. Setting rules of self-control and organization in the securities activity. 8. Approval of all rules and regulations established by stock market management to carry out its operation and endorsement thereof. 9. Setting rules for compliance with the profession’s ethics, efficiency and integrity of the licensees and endorsement thereof. 10. Providing the proper systems to protect the dealers and minimize the improper, illegal and unfair practices. 11. Cooperating with regulatory authorities and the similar foreign institutions with respect to the organization and coordination of, and participation in, the mutual activities. 12. Conducting all duties and responsibilities assigned to it, as stipulated in the Law No. 7 of 2010 or any other Law in order to avoid market fluctuations. 13. Issuing all resolutions, which fall within the Authority’s competences and are deemed necessary to implement the provisions of the Law No. 7 of 2010 and these Executive Regulations, any delegating, at his its discretion, some of its competences. 14. Setting the rules, processes and procedures required for the activity of each person carrying our business in accordance with Islamic Shari’a. Article (5) The Authority shall carry out what follows: 1. File the civil and commercial lawsuits related to violation of the provisions of Law No. 7 of 2010 and the regulations issued thereby, or those lawsuits where the Authority has interest therein. 2. Receive complaints filed regarding violations and crimes set forth in the present Law, the administrative investigation thereof and referral thereof to the disciplinary board, should it deem so necessary. 3. Carry out all procedures that may lead to reveal crimes set forth by Law No. 7 of 2010, and refer penal complaints to the public prosecution in every incident suspected to be a crime, whether it occurred against the Authority or the dealers in the securities activity.
  8. 8. 8 4. Conduct inspections and control over the activities of licensees by virtue of Law No. 7 of 2010. 5. Purchase, acquire and dispose of properties of whatever type, and carry out all legal actions. 6. Publish materials related to the securities activity. 7. The Authority is entitled to impose charges and collect fines within the scope of implementation of the Law. Further, It may carry out all the necessary actions that enable it to perform its duties and realize its objectives set forth in Law No. 7 of 2010. Authority’s Board of Commissioners Article (6) The Authority shall be managed by a Board named The Authority’s Board of Commissioners that comprises of five dedicated commissioners appointed by a decree upon the nomination of the concerned Minister. The decree shall appoint the chairman and vice-chairman of the Board from the Board members. Article (7) Board of Commissioners is the highest power in the Authority and responsible for all resolutions issued by it whether legislative, regulatory or executive. The Board of Commissioners shall set forth the competences of each commissioner and the limits of his responsibilities in the authority matrix to be issued by the Board upon finalization of the Authority’s organizational structure. Article (8) The chairman shall represent the Authority before third parties and courts. He shall carry out the duties of the Executive Director and execute all resolutions of the Authority. He shall also supervise all technical and administrative departments related thereto. He shall exercise his competences in accordance with the laws, regulations and resolutions endorsed by the Board of Commissioners, as set forth in the authority matrix approved by the Board. He shall be liable together with the other commissioners for the management of the Authority, and may delegate some of his administrative authorities to one of the commissioners or to an administrative unit within the Authority.
  9. 9. 9 Article (9) Should the chairman be absent or the position thereof becomes vacant, the Vice-chairman shall replace the Chairman in all of his authorities and preside all of the Board meetings. Article (10) Should the chairman be absent or the position thereof becomes vacant, and should the vice-chairman not be able to perform his duties for any reason whatsoever, the Board shall convene within two weeks and commission a member to carry out the duties of the Chairman of the Board by proxy. Article (11) Should the Executive Director be absent or the position thereof becomes vacant, the Board shall convene and commission one of the commissioners or the Authority’s Executive Management to carry out the Executive Director’s duties. Article (12) The commissioner should be a Kuwaiti natural person known for his integrity, experience and specialization related to the Authority’s business and no final verdict of bankruptcy or of a crime of breach of honor or trust should be issued against him. Article (13) The commissioner, in carrying out his duties in the Authority, may not be engaged in any trading business for his own account or in his capacity as attorney, custodian or guardian. He may not carry out any job, occupation or any other work in the public or private sectors, provide any services or consultation, whether directly or indirectly, or take part in the membership of any Board of an entity subject to the supervision of the Authority or any of its related entity. Article (14) The term of membership of the Commissioner is five years, renewable for one term, except for the members of the first board, where the term of three thereof only may be renewed for a third term. The seat of the Commissioner shall become vacant by death, incapacity or resignation. Furthermore, the Commissioner shall lose his capacity and the seat thereof become vacant in the following cases: 1. Should a final verdict of bankruptcy be issued against him.
  10. 10. 10 2. Should he be convicted with a final verdict of a crime of breach of honor or trust. 3. Should he be absent for three consecutive meetings or six non-consecutive meetings without a reason accepted by the Board of Commissioners. 4. Should he breach the provisions of Articles 27 or 30 of the Law No. 7 of 2010. 5. Should he intentionally breach the code of conduct set by the Board of Commissioners. A resolution thereon should be issued by the Board of Commissioners to set out the reason for vacancy of the seat. Article (15) The Board of Commissioners shall meet at least eight times a years based on an invitation by the Chairman or a written request by at least two Commissioners setting out the subject and date of the meeting. In such case, the meeting shall be held in the scheduled date to discuss only the subject of the invitation. Article (16) Meeting of the Board of Commissioners shall be valid if attended by the majority of the Commissioners, provided that the Chairman or the Vice-Chairman should be among the attendees, except for the meeting as stipulated in Article (9) of the Law No. 7 of 2010. The Board resolutions shall be passed by the majority of members’ votes. The Board may accept attendance of some of its members via the advanced communication methods. Article (17) Meetings of the Board of Commissioners shall be held in the Authority’s Headquarter or any other premises to be determined by the Board. Article (18) In case of any contingency, the Chairman may seek approval of the Commissioners on a resolution given the character of urgency via fax or any other communication method that produces a written evidence of the Commissioner’s approval. Such resolution shall be valid and effective by virtue of approval of the majority of the Commissioners. All such resolutions should be presented to the Board in its first meeting for endorsement thereof.
  11. 11. 11 Article (19) The Board may establish permanent or temporary advisory committees and entrust them with studying a certain subject within its jurisdictions stipulated under the Law No. 7 of 2010. The Board may outsource the duties of the committees to expert from outside the Authority. Article (20) The Board of Commissioners shall be solely authorized to establish and approve the Authority’s organization structure and the administrative and financial authority matrixes, and may make the necessary amendments thereof, whenever required. Article (21) The Authority’s Board shall set the administrative and financial bylaws of the Authority’s personnel affairs without conforming to the rules stipulated under the Civil Service Law and System, provided that the Civil Service Law and System shall be applicable to all matters not provided for in the Authority’s bylaws. The Chairman of the Authority’s Board of Commissioners shall have the jurisdictions of the Civil Service Commission and Minister with respect to the Authority’s personnel. Legal Department Article (22) With observation to the Second Article of the Amiri Decree No. 12 for 1960 regulating the Fatwa & Legislation Department, the Authority shall have a Legal Department reporting to the Authority’s Chairman to handle all lawsuits, appear before all courts and arbitration panels, express legal opinion and conduct investigations. The Legal Department shall also prepare projects and propositions for the laws, regulations and resolutions relating to the stock market system. The Board of Commissioners shall pass the resolutions necessary for regulating the Legal Department. The Authority’s Finance & Budget Article (23) The Authority shall have an independent budget to be prepared in accordance with the rules stipulated under the Authority’s Budgeting & Financial Position Policy issued by a resolution of the Board of Commissioners.
  12. 12. 12 Article (24) The financial year of the Authority shall commence of April 1st and end on March 31st of each year, except for the first financial year of the Authority that shall commence from the date on which Law No. 7/2010 comes into effect and end on March 31st . Article (25) The Authority’s income comprises of the funds of charges and fines that the Law and its regulations stipulate collection thereof for the Authority’s account, or any other resources collected as a result of practicing its activity or employment of its reserves. The Authority shall not receive any funds from the Public Treasury. Article (26) The Authority’s revenues shall include the service charges and fines imposed by the Law No. 7/2010 and the regulations issues in implementation thereof, in particular: 1. Charges relating to practice of its activity and authorities, e.g. charges on license, registration, etc in accordance with these regulations and resolutions of the Board of Commissioners. 2. Proceedings of fines whether by virtue of a court ruling or otherwise. 3. Proceedings on settlement in case of violations and crimes as per the provisions of Article (131) of the Law No. 7/2010. A resolution is to be issued by the Board of Commissioners for a schedule of charges. Article (27) The Authority should establish, from its annual surplus, cash reserves that secure its financial stability on the long run. The Board of Commissioners shall determine and specify, by virtue of a resolution to be passed by it, the nature and amount of such reserves, where the amount in excess of the specified limit shall be deposited in the Public Treasury of the State. Article (28) The Authority shall maintain proper records and books of accounts to accurately disclose its assets, liabilities and financial position at the end of each financial year in accordance with the International Accounting Standards and in line of an overall framework of internal control.
  13. 13. 13 Article (29) The Authority shall have one or more of independent auditors of the audit firms approved by the Authority. Article (30) The auditors may access, at any time, all information and data maintained by the Authority or any of its directors, officers or employees for reporting purpose. Article (31) The Authority shall be subject to the succeeding supervision of the State Audit Bureau, and shall be subject to neither the preceding supervision of the State Audit Bureau nor the provisions of Public Tenders Law No. 37 for 1964 and the amendment thereto. Article (32) Any funds due to the Authority shall be considered as public funds and shall be treated in the same manner as the debts due to the Public Treasury. Such funds should be collected in accordance with the procedures applicable to collection of the debts due to the Public Treasury. Article (33) The Authority may not be engaged in any commercial business. It may not lend monies or issue securities or invest therein. Article (34) The Authority shall submit to the concerned minister an annual report to be presented to the Ministers’ Council within 120 days of the end of each financial year on its activities and business throughout the last year, provided such report should include the Authority’s accounts and the auditors’ report. Adherence to Neutralism, Disclosure & Confidentiality Article (35) Any person invited to a meeting within the Authority’s jurisdiction and had an direct or indirect interest in the topics under discussing in that meeting may not participate in the discussion thereof or express an opinion or vote thereon. Such person should disclose that
  14. 14. 14 interest at the outset of the meeting and leave the meeting before discussion of the topics starts. Article (36) The Authority’s Commissioners are committed to disclose in writing upon commencement of their duties of the securities listed in Kuwait Stock Exchange, which are possessed by any of them, his spouse or his minors, and of any change thereto. The Board of Commissioners shall establish a special system of disclosure rules and procedures for the persons mentioned in this Article. Article (37) The Commissioner or any person working in and with the Authority’s Committees, with or without pay, must maintain confidentiality of the information he obtained by virtue of his aforesaid position and the documentation under his custody, and must disclose the same only to the Authority’s concerned persons, unless otherwise stipulated by the Law No. 7/2010 or any other law, or required by a ruling or order issued by a judicial entity to oblige him to disclose or provide any information or documentation he obtained by virtue of his aforesaid position. The person required to disclose the confidential information or documentation must inform the Authority, in advance, of the information and documentation to be disclosed and the entity to which disclosure shall be made. Article (38) All data and information relating to the Authority’s activity shall be confidential and may not be revealed without the Authority’s approval or by a court order. Data and information of the persons, being licensees or traders in Stock Exchange Market, shall be duly protected and treated as personal and confidential information that may not divulged except in the cases permitted by the law or by a judicial order. Special Rules & Systems Article (39) The Authority shall establish a special system for listing in Stock Exchange Markets. Article (40) The Authority shall issue a special systems for governance of the companies and licensees.
  15. 15. 15 Article (41) The Authority shall set the rules and terms that the auditors should fulfill to be enrolled in the relevant register maintained by the Authority. Article (42) Activity of a credit rating agency may not be practiced without obtaining the related license from the Authority, which shall establish a special system to license and accreditation of credit rating agencies and enrolling them in the relevant register maintained by the Authority. Article (43) The Board of Commissioners shall develop, at its first formation, the Code of Honor, whereby all rules and codes ethics shall be specified for the Authority’s Commissioners. Article (44) The Authority shall enact the rules for compliance with the ethics of professional practice, efficiency and integrity of the licensees. Supervision & Inspection Article (45) All licensees and all persons enrolled in the Authority’s registers shall be subject to rules, regulations and instructions of supervisions laid by the Authority. In addition, all the persons registered in the Authority’s records shall be subject to its supervision. Article (46) The Authority may inspect on the licensees, who are subject to its supervision to ensure their compliance with the provisions of the law, regulations, orders and resolutions issued by the Authority. To this end, the Authority may conduct regular inspections by giving a prior notice. The Authority may conduct sudden inspections to realize its supervisory objectives or investigate any complaint or violations raised to its attention.
  16. 16. 16 Complaint & Grievance Committee Article (47) The Board of Commissioner shall form a committee to handle the complaints and grievance. The aforesaid committee shall comprise of three members including the Chairperson of the committee, who should be elected among the three members. The grievance committee shall receive the complaints from any party against any error committed by a licensee and the complaints presented to it regarding the violations and crimes mentioned in the Law. Article (48) The complaints should be submitted to the committee’s secretary and recorded in a designated register. The secretary should present the complaints to the Authority’s Executive Director. Article (49) The complaint should be written and include the following particulars: 1. Name of the complainant/grievant and his title, profession and address including phone no., fax no. and email. 2. Substance of the complaint and the supporting documents. 3. Grievant signature and date of submission. 4. The complained against person and his address including phone no., fax no. and email. Article (50) The complainant should deposit into the Authority’s treasury a non-refundable amount of KD 100, and shall give to the depositor a dated receipt thereof. Article (51) The Committee should conduct an administrative investigation on the complaints presented against violations and decide on or file the same. The committee may refer the complaints, at its own discretion, to the Disciplinary Board. If the committee, having conducted the required investigation, became satisfied that there is a quasi crime, it may recommend to refer the complaint to the Public Prosecution.
  17. 17. 17 Article (52) The Committee shall decide on the complaints within thirty days of the date of submission thereof. Prior to issuing its resolution, the committee may hear the testimony of anybody if deemed necessary or request any missing documents or request completion thereof. Article (53) The Committee shall inform the complainant of its resolution within a week of the date thereof. Such resolution may be complained against within a week of the date of being served by a notice or notified of the resolution. Article (54) The same complaint may not be submitted by the same person and for the same reasons. Article (55) The Committee shall receive the complaints from the concerned persons against the resolutions issued by the Capital Markets Authority in accordance with the provisions of the Law and these regulations and the orders issued in implementation thereof. The complainant should deposit the stipulated charge. Complaint against all matters not provided for in the law should be made before the committee within thirty days of the date on which the concerned person has been served by a notice of the resolution. Article (56) The complaint should include the following particulars: 1. Name of the complainant, his profession and address including phone no., fax no. and email address. 2. Date if issuing the complained against resolution and the date of notifying the complainant. 3. The subject of the complaint and reasons thereof. The supporting documents should be enclosed with the complaint. Article (57)
  18. 18. 18 Complaint shall be recorded in a designated registered on the date of receipt thereof. The complainant shall receive a copy of his complaint on which the entry no. and date thereof shall be recorded. Article (58) The complaint shall be presented, upon receipt thereof, to the executive Director of the Authority to refer the same to the committee, take the procedures for presentation of the complaint to the committee and fix a date to discuss the complaint, and, accordingly, inform the complainant to appear before the committee in principal, by proxy or through a representative. The committee may request any necessary clarifications and documentation from the concerned persons. The Committee’s Secretary shall notify the Authority’s Executive Director of the complaint immediately upon receipt thereof. Article (59) The committee shall decide on the complaint by a reasoned resolution within thirty days of the date of presentation thereof to the committee or of the date of receiving the required clarification, as the case may be. All discussions of the committee shall be confidential and issued by the majority. Resolutions of the committee on the complaints shall be considered by the committee as final. Article (60) The concerned person shall be notified of the committee’s resolution and the reasons thereof. Article (61) The complainant against the administrative resolutions issued by the Authority in accordance with the law or these regulations or the orders issued in implementation thereof should deposit in the Authority’s treasury an amount of KD 500 to be refunded to him in case of issuing a resolution in his favor subject, however, to a deduction of 10% of the aforesaid amount as charges. Judicial Control Article (62) The concerned minister shall grant the capacity of Judicial Controller (Officer) to the Authority’s personnel based on nominations by the Board of Commissioners in evidencing
  19. 19. 19 the crimes in violation of the provisions of the Law No. 7/2010 and these regulations and the resolutions issued in implementation thereof. Article (63) In carrying out their duties, those given the capacity of Judicial Controller shall have the following authorities: 1. Access to the premises of the companies working in securities or inside the headquarters of Stock Exchange Markets or in any other entity in which they exist. 2. Inspection on the entities subject to the Law no. 7/2010 to ensure their compliance with the provisions of the Law and the regulations, rules and resolutions issued in implementation thereof. 3. Access the records, books, documents and information or computer documentation, tapes or systems or any other storage or processing media in the premises of the companies working in securities or inside the headquarters of Stock Exchange Markets or in any other entity in which they exist, or placed in its possession or under its control. 4. Right to obtain information and justification when requested. They may call witnesses and hear their testimonies, or ask any person, who has technical experience, to express an opinion on any matter within their duties and recording the same in the minutes. Article (64) Officers in the entities mentioned in the preceding article should provide the Judicial Controllers with the information and documents they request for this purpose. Those employees may retain such documents or place them under their custody and refer the same to the concerned body for action, if the case so required. Article (65) The Judicial Controllers should maintain a record of tasks they have completed and illustrate the proof of fact in case of any violation summary of which should be included in the record that should be presented to the Authority’s Executive Director. The Judicial Controllers should prepare written reports on a regular basis on their assignments. Article (66)
  20. 20. 20 No person may refrain from providing any information, data or documents requested by the Judicial Controllers under the allegation that such information, data or documents are subject to protection or confidentiality restrictions. Concerns by the person of being exposed to a penalty shall not be considered as an acceptable excuse for rejecting inspection on any information or documents or disclosure thereof, responding the questions or disallowing access to the premises requested by the Judicial Controllers. Article (67) No person may hamper, or provoke or assist, to hamper the Judicial Controllers from exercising their jurisdictions whether by destroying the documents, refraining from providing information or documents, giving false or misleading information or refusing to provide any possible assistance.
  21. 21. 21 Chapter Three “Stock Exchange Markets” Article (68) A Stock Exchange Market is the place, where stocks and other securities are bought and sold. A Stock Exchange Market follows the procedures applicable to trading and carries out the usual functions of a stock market in accordance with the standards and regulations issued by the Authority. Article (69) No person may establish or operate, or assist to establish or operate, a stock market exchange without obtaining the license from Authority and as per the latter’s applicable procedures. The Authority shall be solely authorized to issue a stock exchange market license that should be announced in the Official Gazette. Article (70) A Stock exchange market license may not be given except to a shareholding company, provided that its share capital is fixed by a resolution of the Board of Commissioners, its activities are restricted to operating stock exchange market and its shares are allocated as follows: 1. 50% of shares to be offered in public auction among the companies registered with Kuwait Stock Exchange at tranches of 5% each. Auction is awarded to the highest bidder for each share above the par value plus incorporation expense, if any. 2. 50% of shares to be publicly offered to all nationals. 3. The difference between the nominal value of the total shares offered in the auction plus the incorporation expenses, and the proceeds of the sale of shares shall be transferred to the State’s General Reserve. 4. Founders’ Committee delegated by the Board of Commissioners shall incorporate the company and allocate all the shares of public offering pari passu to all Kuwaiti nationals whose names are registered with the Public Authority for Civil Information on the subscription date. Share fractions shall not be allocated. Amounts of subscriptions by the nationals shall be paid to the State as per the procedures and in the manner to be determined by the Authority without any interest, charge or increase over the share price, provided that such payment should be made on a date
  22. 22. 22 not exceeding the expiry date of sixty day period commencing from the first day of the next month in which the Founders’ Committee initiated invitation of the national through Kuwait printed and audio video media to pay the subscription receivable amounts. 5. Share fractions, which are not allocated to the nationals, shall be transferred to the State. All shares whose values are not paid by the national to the State on the due date for any reason, whatsoever, shall be transferred to the State on the next day of the expiry date of the period specified for payment of such subscriptions. 6. The State may offer the shares transferred to it as per the preceding item in a public auctions at tranches of max. 5% of the company’s shares. 7. In all cases, no natural person or corporate body may own, except by inheritance, a 5% stake of the company’s shares whether directly or indirectly, or through associates, subsidiaries or companies over which that natural person or corporate body exercises effective influence. 8. Titles of the company’s shares may not be transferred without approval of the Authority as per the applicable rules. Article (71) The following conditions should be fulfilled by a Board Member of Stock Exchange Market and should be applicable also in case of continued filling of this position: 1. He should not be condemned of a crime of breach of honor or trust. 2. He should not be bankrupt. 3. He should be of good conduct. 4. He should have sufficient experience in the financial, economic and legal affairs in line with the rules and regulations issued by a resolution of the Authority. Article (72) A Stock Exchange Market is managed by a Board of Directors to be formed as follows: Chairman and a Vice-Chairman to replace the Chairman in case of the latter’s absence, and six members to be elected in the company’s general assembly and subject to approval of the Authority’s Board of Commissioners. Chairman of Stock Exchange Market of his deputy should inform the Authority’s Board of Commissioners of the name of the nominees for the memberships of the Stock Exchange Market’s Board of Directors at least thirty days before the date of the company’s general assembly meeting for election of the Board of Directors. The Board of Commissioners, within fifteen days of being notified, may
  23. 23. 23 object by a reasoned letter to any of such nominees for not fulfilling the required conditions. Such objection shall entail elimination of the nominee. No nominee should be proposed to the Stock Exchange Market’s Board of Directors if the Board of Commissioners has not been notified of that nominee or in case of any objection against that nominee as per the provisions of this Article. The Board of Commissioners may request from Stock Exchange Market’s Board of Directors to dismiss any member if the latter no longer meets a condition of those stipulated under this Article, or this action is deemed appropriate to maintain safety of the traders’ funds or for Stock Exchange Market’s interest. In case of failure to dismiss that member, the Board of Commissioners may issue a reasoned order to dismiss any member and notate that order in the Authority’s records. Article (73) The Chairman of Stock Exchange Market shall carry out the duties of the Executive Director and shall exercise his jurisdictions as per the Stock Exchange Market’s Articles of Association and the resolutions passed by the Board of Directors. The Chairman of Stock Exchange Market shall be responsible for monitoring all the administrative and technical boards and shall represent the Stock Exchange Market before the courts. Article (74) All the Stock Exchange Market employees and Executive Director, during their work there, are prohibited from trading in the securities for his account or as an attorney, guardian or custodian, working in any job in the public or private sector, provision of any services or consultations, whether directly or indirectly, or participating as a member in the Board of Directors of any listed company or any company carrying out the securities activity, inside or outside Kuwait. Article (75) The Stock Exchange Market should: 1. Ensure existence of a fair, transparent and efficient stock exchange market. 2. Ensure existence of a management being aware of the risks associated with its business and operations. 3. Prioritize the public interest in case of a conflict with that of the stock exchange market or its members, shareholders or management.
  24. 24. 24 4. Adhere to provide and operate its services as per the rules and regulations stipulated by the Authority. 5. Adhere to organize its operations, standards of its practices and its members’ behaviors as per the rules, policies and procedures of the Stock Exchange Market. 6. Adhere to the organize the operations and standards of practices of the companies listed therein as well as its employees as per the relevant governing regulations. 7. Adhere to provide its services as per the most recent techniques and automated applications and systems in line with the international standards approved or resolved by the Authority. 8. Maintain the confidentiality of the information under its custody with respect to its members and customers, unless it is required by the law or the regulations to publish or disclose. It may not divulge such information to anybody other than the Authority or by an order from the Authority or the court. 9. Abidance by the instructions of the Authority. Article (76) The Stock Exchange Market should establish a system for confidentiality of the trading related information and data or any other information and data related to the Stock Exchange Market’s members in a manner to ensure restricted access thereto except for the authorized persons. Neither the stock exchange market’s member of the Board of Directors nor any member of the Executive Management, other than those authorized, may access such information except within the limits of the system approved by the Authority. Article (77) The Stock Exchange Market should cooperate with the Authority whenever deemed necessary by the Authority to accomplish the Authority’s functions and duties including providing the Authority with the reports, data and other information relating to the Stock Exchange Market’s business, securities trading or any other information, as request by the Authority to ensure the proper application of the law. Article (78) The stock exchange market is committed to inform the Authority, at the earliest, of the following: 1. If it found that one of its members is no longer able to adhere to any of the stock exchange market’s rules of the financial resources controls.
  25. 25. 25 2. If it deemed there is a financial irregularity or any other situation that may indicate inappropriateness of the member of his incapacity to fulfill his obligations. 3. Any disciplinary action it takes against any member or any of his subordinates. Article (79) The Stock Exchange Market should establish rules and regulations for organization of trading and activity of Stock Exchange Market as well as its reliance on the Authority, in particular: 1. Listing of securities in the Stock Exchange Market. 2. Trading system. 3. Rules for announcement of disclosures. 4. Risk Management System. 5. Complaint & Grievance System. 6. Dispute Settlement System. 7. Code of Professional Conduct applicable to members of the Board of Directors of Stock Exchange Market and employee therein. Article (80) Titles of the securities not listed in Stock Exchange Market may not be transferred or traded before the lapse of three calendar years of the date of completing incorporation, except in the cases is inheritance or execution of a final court ruling. Article (81) The following procedures should be followed in transfer of the securities not listed in Stock Exchange Market: 1. The concerned person should submit the application to the Stock Exchange Market’s management, which should ensure appearance of the concerned persons or their legal representatives. 2. Payment of the required charges. 3. Upon approval of Stock Exchange Market on the application, the Stock Exchange Market’s management refer the same to the clearing agency, which maintain the shareholder’s register of the related company.
  26. 26. 26 4. The clearing agency shall record the transfer of the title in the shareholder’s register maintained by it. 5. The clearing agency shall issue a new share certificate and deliver it to the new owner after payment of the charge thereon. Article (82) The Board of Commissioners may request from the Stock Exchange Market to prepare specific rules within the scope of its work or amend the same within specific period. If the Stock Exchange Market fails to abide by the request or to meet the request within the specific period, the Authority may prepare the rules or amend them on behalf of the Stock Exchange Market at the expense of the latter. Article (83) No rules issued by the Stock Exchange Market or any amendment thereof through removal, replacement or change thereof or addition thereto, shall be valid unless they are approved by the Authority. The Stock Exchange Market should provide the Authority with the reasons and objectives for proposing such rules or amendment thereof and set out the desired effects thereof, and, thereupon, the Authority may give its approval, disapproval or amendment and notify the Stock Exchange Market of its resolution within a period not exceeding three month of the date of notification of proposal. Article (84) A committee shall be formed in the Stock Exchange Market to be entrusted with consideration of the violations committed by any of its members to the Stock Exchange market’s regulations and systems. The Committee may impose the following penalties: 1. Warning. 2. Issuing and order to the violator to discontinue. 3. Subjecting the violator to further supervision. 4. Suspension of profession practice for a period not exceeding one year. 5. Imposing restrictions on the violator’s activities. 6. Cancellation of the transaction related to the violation and its resultant effects, if possible. 7. Suspension of trading of a security for specific period.
  27. 27. 27 Article (85) The Stock Exchange Market’s Management should inform the Authority of any disciplinary action taken against any of its members, details of the committed violation, the taken procedures and the penalty imposed. The Authority may, by virtue of a resolution to be issued by it or based on a complaint filed by the complainant within fifteen days of notifying him in writing of the resolution, may refer the subject to the Disciplinary Board to review the disciplinary action in accordance with its approved review System. The Disciplinary Board may confirm the Stock Exchange Market’s resolution or amend or cancel the same by a reasoned resolution. Article (86) In case of disaster, crises and disturbance that may result in adverse effects in the market and in giving by some traders of misleading indications, the Authority shall then have the widest powers to issue the instructions that mail to regain the equitability, transparency and efficiency of the market. The Authority may take any of the following precautions: 1. Suspend trading in the stock market or trading of any listed security for limited period. 2. Cancel trading in the stock market for specific period or cancel transactions on certain stock. 3. Issue resolutions to liquidate all or part of balances or reduction thereof. 4. Amend the trading days or hours. 5. Amendment or suspension of any of the stock market rules. Article (87) In case of incompliance by the Stock Exchange Market with the Authority’s resolutions or instructions issued within its jurisdictions stipulated under the preceding article, the Authority may take any proper procedure to ensure the systematic trading or liquidate any position relating to the securities. Article (88) By virtue of a written notification to the Stock Exchange Market, the Authority may cancel the license as of the date specified in the Authority’s resolution in the following cases: 1. If the company is no longer able to meet one of the conditions by which the company was qualified for the license. 2. If operations in the Stock Exchange Market ceased for more than five working days.
  28. 28. 28 3. In case of closure of Stock Exchange Market. 4. If the Stock Exchange Market did not abide by the Authority’s instructions regardless of warnings by the Authority. 5. If it did not provide the Authority with the information requested by the latter, or provided incorrect or misleading information. The Authority should publish the resolution of license cancellation and reasons thereof in the official gazette. Article (88) The Authority, of its own accord, may grant the Stock Exchange Market time extension or extend the given period after the date of license cancellation if the Authority deemed it necessary for the public interest or based on a request by the Stock Exchange Market’s company till closure of the operations therein or to hand over its activities to another licensed Stock Exchange Market. Article (89) The Authority, of its own accord, may grant the Stock Exchange Market time extension or extend the given period after the date of license cancellation if the Authority deemed it necessary for the public interest or based on a request by the Stock Exchange Market’s company till closure of the operations therein or to hand over its activities to another licensed Stock Exchange Market. Article (90) A listed company may submit a complaint to the Complaints and Grievances Committee of the Authority with respect to the resolution passed to cancel its license, within fifteen days from the date of receiving a written notice thereof or publication of the same in the official gazette, and the Committee shall give a reasoned decision on the complaint within twenty days from submission thereof. Article (91) Members of Stock Exchange Market should abide by its systems, rules and procedures. Article (92) Stock Exchange Market shall adhere to the rules of accounts and review as follows:
  29. 29. 29 1. Stock Exchange Market shall adhere to application of internal accounting system in accordance with the international standards approved by the Authority. 2. Stock Exchange Market shall provide the Authority with a comprehensive annual report including statement of income, audited balance sheet and the external auditor’s report within forty five days of the end of the financial year. 3. Stock Exchange Market should have one or more external auditor and should enable that auditor to access all data and records as well as the other requirements for external audit assignments. Article (93) Stock Exchange Market shall apply a comprehensive system for risk management to identify, assess, manage and address the risk associated with its activities, and provide the Authority with a risk report on a semiannual basis. Article (94) The Authority may appoint an auditor for the Stock Exchange Market, by virtue of a written notification, at the latter’s expense to examine and audit the Stock Exchange Market’s accounts, statements and records, and submit a general or special report on a certain matter, if the Authority deemed it appropriate for the public interest. Article (95) The Stock Exchange Market shall provide the Authority with an annual report within forty five days of the end of the financial year to particularly include the following: 1. The management report, which includes description of the activities carried out by the Stock Exchange Market throughout the last year with respect to the financial, intellectual and human resources made available to the Stock Exchange Market. 2. The financial report including the external auditor’s report and evaluation of efficiency of the internal control system. 3. Governance report. 4. Any other ad hoc reports required by the Authority.
  30. 30. 30 Chapter Four “Clearing Agency” Article (95) A clearing agency means any entity that provides facilities for carrying out settlement and clearing operations among the securities traders with respect to payment and/or delivery and provides the related services including securities placement within a central system for custody and title transfer. Article (96) No person may incorporate or manage a clearing agency or assist in incorporation of management thereof or announcement thereof without obtaining a clearing agency license issued by the Authority as per the following terms: 1. It should be a shareholding company whose share capital is not less than twenty million Kuwaiti Dinars and whose activities should include management of operations of clearing and settlement and the central placement of securities, custody thereof and the related and associated matters necessary for the good running of the agency. 2. It should have experience in the clearing field and the members of the management thereof should have the relevant specialization. 3. It should provide a bank guarantee of not less than eight million Kuwaiti Dinars. 4. Entry of a foreign strategic partner experienced in clearing management is not allowed except by approval of the Authority. 5. Any other terms determined by the Authority. Article (98) All the clearing agency employees and executive officer, during their work there, are prohibited from trading in the securities for his account or as an attorney, guardian or custodian, working in any job in the public or private sector, provision of any services or consultations, whether directly or indirectly, or participating as a member in the Board of Directors of any listed company or any company carrying out the securities activity, inside or outside Kuwait. Article (99) The clearing agency should abide by the following obligations:
  31. 31. 31 1. Taking the arrangements and measures for the fair and effective clearing and settlement of any trading transactions of securities. 2. Management of risks associated with its activity and operation at the highest levels of professionalism. 3. Prioritization of the public and traders’ interests over the company’s. 4. Management of its services as per the related rules approved by the Authority. 5. Maintaining confidentiality of all information and data under its custody unless it is required by the Authority or the courts. 6. Providing its services in line with the most recent techniques and automated applications and systems Article (100) The listed companies, brokers and the other clearing agency members should abide by the settlement and clearings rules applicable in the clearing agency as per the system approved by the Authority. Article (101) Each Kuwaiti shareholding company shall place its shareholders’ register, upon completion of incorporation, with a clearing agency licensed by the Authority, and the existing companies shall place their shareholders’ registers with a clearing agency licensed by the Authority within six months from the date of publishing hereof. Article (102) The clearing agency is committed to provide all data and information requested by the Authority to enable the latter to carry out its functions and duties including the reports, data and information relating to the clearing agency’s operations or trading in securities. Article (103) The clearing agency shall adhere to the rules of accounts and review as follows: 1. The clearing agency shall adhere to application of internal accounting system in accordance with the international standards approved by the Authority. 2. The clearing agency shall provide the Authority with a comprehensive annual report including statement of income, audited balance sheet and the external auditor’s report within forty-five days of the end of the financial year.
  32. 32. 32 3. The clearing agency should have one or more external auditor and should enable that auditor to access all data and records as well as the other requirements for external audit assignments. Article (104) The clearing agency shall apply a comprehensive system for risk management to identify, assess, manage and address the risk associated with its activities, and provide the Authority with a risk report on a semiannual basis. Article (105) The Authority may appoint an auditor, at the expense of the clearing agency, and inform the latter, in writing, of appointment of the auditor to examine and review the agency’s records, books and accounts and provide a general or special report on a certain matter, if the Authority deemed it necessary. Article (106) The clearing agency shall provide the Authority with an annual report within forty five days of the end of the financial year to particularly include the following: 1. The management report, which includes description of the activities carried out by the clearing agency throughout the last year with respect to the financial, intellectual and human resources made available to the clearing agency. 2. The financial report including the external auditor’s report and evaluation of efficiency of the internal control system. 3. Governance report. 4. Any other ad hoc reports required by the Authority. Article (107) The clearing agency should inform the authority at the earliest of the following: 1. If it found that any of its counterparty became unable to abide by any of the rules applicable to operations of clearing, settlement and placement. 2. If it deemed that the financial position of a counterparty and his ability to fulfill obligations gave signs of instability, or his ability to fulfill obligation has already become unstable.
  33. 33. 33 Article (108) Upon completion of any procedures on default in repayment, the clearing agency shall prepare a report on these procedures setting out the following with respect to each defaulting customer: 1. Information of the defaulting customer and the procedures taken against him. 2. The net receivable amount as per the clearing agency certificate, or absence of any receivable balance. Article (109) The clearing agency shall send a copy of its report prepared as per the following article to: 1. The Authority. 2. Stock Exchange Market. 3. The defaulting entity. Article (110) The Authority, in case of receipt of default in payments, may resolve to publish a notice thereof in the manner deemed appropriate by the Authority to draw attentions of the creditors of the defaulting entity mentioned in the report. Article (111) In case of publishing by the Authority of the default notice, any creditor of the defaulting entity may submit an application to the Authority to peruse the report. In such case, the Authority may: 1. Make available the report the creditor within two days as of the receipt of the applications. 2. Provide the creditor with all or part of the report, as requested, subject to payment of the required charges. Article (112) The Authority may require the clearing agency to set rules and regulations relating to clearing and settlement operations, registration of securities and the other activities that relate to the agency’s business or amend the same within a specific period. If the clearing agency did not adhere to the requirements or the specific period, the Authority may sect
  34. 34. 34 such rules and regulations or amend them on behalf of the clearing agency at the latter’s expense. Article (113) The clearing agency provide the Authority with its internal bylaws and instructions and amendment thereof for approval before validity thereof particularly including: 1. Procedures for registration of securities and transfer of titles thereof, and clearing and settlement of the related trading contracts. 2. Defining rights and obligations of the related parties to operations of clearing and settlement of securities as well as transfer of the titles thereof. 3. The time at which the rights of the creditors of security trading parties arise, including those rights relating to cash consideration or its equivalent and the related securities as a result of sales, purchases or title transfer. 4. Information, data and records, which are confidential and the persons, who have access thereto. 5. Information, data and records that the clearing agency should disclose and those thee public may access and obtain copies thereof. 6. Standards of the professional ethics applicable to each of the clearing agency’s members, board of directors, chief executive officer and employees. Article (114) No rules issued by the clearing agency nor amendments thereto, either by withdrawal, replacement or change thereof, or addition thereof, shall be valid and effective unless they are endorsed by the Authority. The clearing agency should provide the Authority with the reasons and objectives for proposing such rules or amendments thereto, and highlight the desired effects thereof and, thereupon, the Authority may resolve its approval, disapproval or amendment thereof and inform the clearing agency in writing of its resolution within at latest one week of the resolution date. Article (115) In case of incompliance by any trader with the clearing rules, the clearing agency may force that trader to pay the charges arising out of his incompliance. The clearing agency should prepare a schedule of charges on cases of incompliance with the regulations, provided that such schedule should be approved by the Authority before it comes into effect or making any amendment thereto.
  35. 35. 35 Article (116) The Authority may issue any instructions to the clearing agency to ensure the fair, efficient and appropriate settlement of security transactions and maintain integrity of comprehensive risk management in Stock Exchange Markets. The Authority may, in particular, issue instructions with respect to settlement of securities contracts and make amendments to the contractual obligations that may arise from the securities contract or any other matters deemed necessary by the Authority to implement the provisions of the law. Article (117) In case of disasters, crises and disturbance that may result in adverse effects in the market, the Authority may issue instructions of amendment or suspend any of the clearing agency rules. Article (118) If the clearing agency failed to comply with the resolutions or instructions of the Authority issued under its powers specified in the preceding article, the Authority may take any procedure deemed necessary to maintain the fair settlement and efficiency of the commercial transactions of securities or any category thereof. Article (119) The Authority may, by a written notice, cancel the clearing agency’s license granted to it in accordance with the provisions of the Law No. 7/2010 as of the date specified in the Authority’s resolution, in any of the following cases: 1. If the clearing agency is no longer able to meet one of the conditions by which it was qualified for the license. 2. If clearing agency ceased to undertake the duties, which the clearing agency is assigned to or licensed for management thereof. 3. Liquidation of the clearing agency. 4. Failure to fulfill any obligation required under the Law No. 7/2010. 5. Failure to provide the information requested by the Authority, or providing incorrect or misleading information. 6. Making any amendments by the clearing agency to its objectives in its memorandum or articles of association without obtaining a prior approval of the Authority.
  36. 36. 36 7. If the agency requested cancellation of its license. The Authority should publish the resolution of license cancellation and reasons thereof in the official gazette. Article (120) The Authority may grant the clearing agency a specific time extension or extend the given period after the date of license cancellation if the Authority deemed it necessary for the public interest or based on a request by the agency to suspend its operations or to hand over its activities to another licensed agency. Article (121) The agency may submit a complaint to the Authority’s Compliant & Grievance Committee against the resolution of cancellation of its license, within fifteen days of the date on which it has been notified thereof in writing or the date of publishing the resolution in the official gazette. The Authority should decide on the complaint by a reasoned resolution within twenty days of submission date. Article (122) If a person is subject to insolvency, bankruptcy or liquidation, or in case of appointing a receiver on his properties, the clearing and settlement procedures of the clearing agency shall take priority over any procedure or usual debts.
  37. 37. 37 Chapter Five “Regulated Securities Activities and the Licensees” Scope of Application Article (123) Activities, which are practiced by the licensee inside the State of Kuwait or outside Kuwait with a customer in the State of Kuwait, or for his own account, shall be subject to the law and these regulations. Definition of the Securities Activities Article (124) The following operations are considered as securities activities for the purpose of application of the law and these regulations: 1. Brokerage in purchase of securities and sale thereof on behalf of others for a commission. 2. Purchase and sale by a person of securities for his own account. 3. Providing the investment consultations relating to securities for commission. 4. Management of investment portfolio. 5. Origination and management of collective investment schemes. 6. Custody of assets composing collective investment schemes. 7. Offer or sale of securities on behalf of its issuer or its ally, or getting securities from the issuer or its ally for remarketing thereof. 8. Credit rating agency. 9. Any other activity considered by the Authority as securities activities. License Article (125) 1. No person may practice securities activities in the State of Kuwait unless he is licensed by the Authority to practice the same.
  38. 38. 38 2. Excluding from paragraph (1) of this Article, it is not required to obtain a license from the Authority to practice the activity by a person of purchase and sale of securities for his own account if he did not introduce himself as practicing securities business and has never been a market maker. 3. A single corporate body may practice two or more of the securities activities. 4. Companies and branches of the foreign companies carrying on business in the State of Kuwait and willing to practice the securities activities should submit a license application from the Authority as per the terms and conditions preset by the Authority for each activity. Headquarter of the Licensee Article (126) The licensee is required to have his headquarter of management in the State of Kuwait. License Applicant Article (127) For the purpose of application of these regulations, the license applicant means the person, who submits to the Authority an application to obtain a license to practice any of the securities activities. A license application may be submitted by those, who intend to establish a corporate body for this purpose. The license applicant is subject to the law and these regulations effective from the date of application submission. License Application Article (128) The license application is to be submitted on the form designed by Authority as per the activity type of the license. The application should be accompanied with the following information and documents: 1. Name of the license applicant and his address, identity no. of the natural person or the commercial register no. of the corporate body. 2. Names and nationalities of the founders and their equity stakes in the corporate applicant. 3. Names, nationalities, identity nos., qualifications and experiences of the managers of the corporate body. 4. Applications of registration of all to be registered functions on the forms designated and approved by the Authority.
  39. 39. 39 5. A copy of the company’s memorandum and articles of association and any amendments made thereto. 6. A declaration by the license applicant’s legal representative including his approval on the application and contents thereof, wherein he declares accuracy and completeness of information included therein and the documents accompanied therewith. 7. Sufficient information about any effective control or allied person. 8. Amount of license applicant’s capital or proposed capital. 9. Approval of the Central Bank of Kuwait if the applicant is a bank licensed to carry out investment activities. 10. Sufficient information, as per the standards and forms designated by the Authority, about license applicant’s systems, control procedures relating to policies and systems of risk management, procedures of combating money laundering and terror financing, compliance systems and code of conduct. 11. Details of the procedures and systems to be followed for all work procedures and the significant administrative procedures including opening and operation of customers’ account, executing and recording orders, executing, settlement and confirmation of trading deals, providing appropriate consultation and services for customers, handling and custody of customers’ assets and funds, providing reports to the customers and adherence to all requirements of records maintenance. 12. Terms of services and schedule of proposed fees, commissions, charges and expenses. 13. Any other agreements or arrangements with other parties to provide any material services or operations. 14. Financial statements audited by an auditor approved by the Authority to be submitted in the manner determined by the Authority including the current financial position of the license applicant along with the projected financial position after twelve months of the date of business commencement. 15. Declarations as per the forms designed by the Authority to be signed by the corporate body or managers thereof, or by the persons, who intend to establish a corporate body to carry out securities activities, wherein they declare that no verdict of bankruptcy, penalty on a crime of breach of honor or trust or penalty on one of the crimes specified in the Companies Law, Law of Commerce or Capital Authority Markets Law has been issued against them over the five year period preceding the license application unless they were discharged. 16. A detailed statement of the activities the license applicant is willing to practice. 17. A proof for payment of charges on application review by the Authority. 18. Any other statements or documents requested by the Authority.
  40. 40. 40 19. A list of requirements, which the applicant deems non-applicable and the reasons therefor. To be registered Functions and Qualifying Tests Article (129) To be registered functions mean the functions, which the Authority requires the applicant to find and register with the Authority as per the activity type of the subject securities. Article (130) The following functions with the license applicant or any licensee are considered as to be registered functions that should be performed by persons resident in the State of Kuwait: 1. Chief Executive Officer and similar 2. Financial Manager and Similar 3. Executive Managers or Managers and similar 4. Risk Manager and similar 5. Chief Internal Audit and similar 6. Compliance Officer 7. Money Laundering and Terror Finance Reporting Officer 8. All Customer Service Officers including promoters, investment advisors, investment portfolio managers and corporate finance specialists 9. Any other functions deemed by the Authority as to be registered Article (131) No person, except for a licensee, may perform a to be registered function unless otherwise approved by the Authority in writing and in advance. Article (132) On employee may perform more than one to be registered function for the account of a licensee, except for dual jobholding of compliance officer and any of customer service functions. Functions of the chief executive officer, financial manager and compliance officers should be performed by different persons.
  41. 41. 41 Article (133) The Authority may require passing a qualifying test to fill and of the to be registered functions. The Authority may also preset the test requirements and the general guidelines relating to the acceptable qualifications as well as the required conditions and duties, as deemed by the Authority. Article (134) The registered person shall be under the Authority’s power for two years as of the date of cancelation of this registration with respect to any act or omission took place before cancelation of his registration. In case of initiating any investigation or taking any action during this period, the registered person shall remain under the Authority’s power till completion of the investigation or actions. License Application Consideration Article (135) The Authority shall consider the license application and may request any additional information or documents or any clarifications to ensure that: 1. The license applicant has the required ability and efficiency to carry out the type and volume of the subject securities activities as per the rules determined by the Authority. 2. The license applicant has the experience and resources sufficient to practice the type of the subject securities activities as per the rules determined by the Authority. 3. The license applicant has the administrative experience, financial systems, risk management policies and systems, technical resources and the operating systems sufficient to fulfill his commercial and regulatory obligations to practice the type of securities activities, being the subject of license application. 4. The license applicant’s board members, officers, staff and agents, who are practicing or shall practice the subject securities activities, have the necessary qualifications, skills and experience determined by the Authority and are distinguished by honesty and integrity required to practice such activities. Initial Approval Article (136)
  42. 42. 42 The Authority may issue an initial approval on the license application to enable the license applicant complete legal formalities or fulfill certain criteria, provided that the license requirement should be finalized within at latest six months of the approval date. Resolution of License and Tenure thereof Article (137) The Authority shall decide on the license application within a month of completion of the requisite information and documents and inform the applicant of the resolution to be issued in this respect. In case of rejection of the application, the related resolution should be reasoned. The tenure of license shall be three years. Carrying out the Activity Article (138) The licensee should start carrying out the licensed activity within six months of receipt of the Authority’s letter to practice the activity. Terms for License Validity Article (139) Continued validity of the license requires the licensee to meet the following conditions at all times: 1. The ability and efficiency to practice the securities activities he is licensed to practice. 2. The regulations stipulated in Article (135) and any criteria determined by the Authority. 3. Maintaining a sufficient capital in line with the capital adequacy requirements set by the Authority. Amending the list of the licensed activities Article (140) The licensee may apply to make an amendment to the list of licensed activities and the Authority should decide on that application within thirty days of completion of all documents deemed necessary by the Authority. The applicant should provide all the required information and documents on the designated form and pay the charges.
  43. 43. 43 License Renewal Article (141) 1. After payment of the related charges, the license renewal application is submitted at least two months before expiry date of the license, on the form designated by the Authority for this purpose and as per the type of the licensed activity. 2. The Authority shall consider the license renewal application and may require additional information and documents to ensure that the license applicant still maintains ability and efficiency to practice the activity as per Article (120). The Authority shall decide on the renewal application within thirty days of completion of the required information and documents and inform the applicant of the resolution to be issued in this respect. In case of rejection of the application, the related resolution should be reasoned. Share Capital Article (142) The Authority’s Board of Commissioners determines, by a resolution, the minimum share capital of the licensee’s share capital as per the type of the licensed securities activity, and the legal form required to carry out the activity. Notice Requirements Article (143) The licensee should: 1. Notify the Authority in writing at least thirty days as of the date of any change of his commercial name under which he practices the securities activity in the State of Kuwait, address of the head office or address to which notices or documents should be addressed, if it is different. 2. Notify the Authority in writing within seven days as of establishment, possession, sale or dissolution of any allied person or in case of any change in the information submitted to the Authority with respect to the offices of branches through which the licensee practices its securities activities and any material changes in the information submitted to the Authority for obtaining the license. 3. Notify the Authority in seven days as of the date on which the licensee ceased performing a to be registered function and notify the Authority in writing upon his resignation, dismissal or termination of his relationship with him. 4. Notify the Authority in writing within seven days as of appointment of an auditor, or his resignation or replacement thereof.
  44. 44. 44 5. Notify the Authority in writing upon any change relating to insolvency or liquidation of the licensee, any controlling company or his allied person, investigation by regulatory authority, imposing precautions or disciplinary actions against the licensee relating to securities activity, pronouncement of verdict against the licensee, any other violation relating to fraud or act in violation of integrity or trust or imposing any penalty as a result of tax evasion. 6. Notify the Authority in writing upon issuance of any resolution or action in any country or region outside the State of Kuwait with respect to grant of cancellation of any license to practice the securities activity, banking business or insurance business. 7. Notify the Authority in writing upon withdrawal or rejection of membership or cancellation of a membership in a stock exchange market or in a clearing agency. 8. Notify the Authority upon knowing of occurrence of any noticeable failure in his control systems or procedures including any failure reported by the auditor or decrease of capital below the minimum required to practice the activity. Controlling the licensee Article (144) 1. The licensee should obtain the Authority’s approval upon entry into arrangements or agreements, which result in effective control by or over him or discontinuation of existing control. 2. The Authority shall approve the actual controller after completion of any information or documents required by the Authority and after ensuring that any control over a licensee shall not impede the actual supervision over him or his operations or compliance with the law or these regulations. 3. The provisions relating to the actual control, as stipulated in this article shall apply to the ally of the licensee, wherever the provision is applicable. Maintenance and Inspection of Records Article (145) 1. The licensee should record and maintain sufficient information about the securities activities he carries out to evidence his compliance with these regulations and maintain the records determined by the Authority by any mean that makes them available for inspection and perusal at any time for five years unless the Authority determines longer period. 2. The Authority may inspect the records of the licensee at any time by its employees or through a person delegated by the Authority for this purpose.
  45. 45. 45 Internal Systems and Bylaws Article (146) The licensee should the Authority’s approval of all of the systems and bylaws relating to organization of his works and supervision over them to ensure compliance with the law and these regulations and avoidance of conflict of interests. Such bylaws should cover, as a minimum, the following aspects: 1. The licensee’s organization structure setting out the authorities, duties and responsibilities of the executive management and the various functions as well as the reporting lines. 2. The documentary cycle to be followed in work accomplishment. 3. Setting the responsibilities and authorities relating to approval of expenses. 4. Policies, systems and procedures of the internal audit. 5. Systems and policies of human resources, development and training. 6. His investment policies. 7. Procedures of transactions with related parties. 8. Policies and procedures, which are preventive of information leakage between the licensed activities. 9. Procedures of handling investors’ complaints. 10. Risk management policies and procedures. 11. Procedures of combating money laundering and terror finance. 12. Compliance manual and program. 13. Code of conduct. 14. Manual of operating procedures. 15. Manual and plans of work follow up. The Authority may require the licensee to get other bylaws approved, or exempt certain activities from some of these bylaws. Gifts and Incentives Article (147) The licensee or his ally, or any third party directed by him may not urge any customer to enter into deal by offering or giving gifts or incentives, or accept gifts or incentives.
  46. 46. 46 Loss Sharing Article (148) The licensee may not offer sharing in loss to which the customer would be exposed. Information Confidentiality Article (149) 1. The licensee should maintain confidentiality of information obtained from the customers. 2. The licensee should get approval of the policies and procedures for maintaining confidentiality of information or insider information he obtains in the course of his practicing of securities activity to ensure that acquaintance with such information is available only to his authorized personnel. Using Customer’s Properties Article (150) The licensee may not use the assets and funds or information or opportunities of the customer for his own benefit or for the benefit or another person without disclosing the same in full to the customer under a mutual written agreement. Discharge from Responsibility Article (151) Any condition to discharge the licensee from responsibility or limit it shall be null and void if such discharge or limitation contradicts with the obligations of the licensee as per the law or these regulations. Temporary discontinuation of practicing activity Article (152) The licensee, who intends to temporarily discontinue practicing securities activity, should send a prior and written notice to the Authority of the date of discontinuation and reasons for his resolutions at least forty five days of that date. The licensee should ensure accomplishment of any pending works or transfer the same to any other licensee and notify his customer within reasonable period before discontinuation.
  47. 47. 47 License Cancellation Article (153) The Authority may suspend or cancel the license or restrict the activity of any licensee or any of his related parties, if proved that he perpetrated any of the following: 1. Committing a material error, giving misleading information, omission of material fact upon submission of his license application or omission of any required information to the Authority. 2. Non fulfillment of the criteria applied by the law or these regulations. 3. Breach of any provisions, rule, system or regulations issued under the law or another law of securities or rule of regulations of another country. 4. Negligence in monitoring any of his subordinates or the persons registered with him to prevent them from any acting in violation of the law and these regulations. Article (154) The Authority may cancel the license of the licensee if he did not practice the securities activity or stop the same for six consecutive months after receipt of activity initiation letter. Article (155) The licensee shall remain subject to the power of the Authority for two years as of cancellation of the license with respect to any act or omission occurred before cancellation of his license. In case of investigation or taking any actions during this period, the licensee shall remain subject to the Authority’s power till the investigation or actions are completed. Article (156) The licensee may submit a reasoned application to the Authority to cancel his license at least three months as of the proposed date of license cancellation. The Authority may approve cancellation or postpone the date thereof, or request other precautions deemed necessary to protect the customers of the licensee. Article (157)
  48. 48. 48 The Authority may reject the application of license cancellation if it deemed that continuity of the license is necessary to investigate in any case relating to the licensee, to protect his customers’ interests, impose attachment or meet requirements on the licensee under the law or these Regulations. Advertisements of Securities Article (158) No person may fix or send an invitation or advertisement for securities to a person in the State of Kuwait unless the advertiser is licensed or the contents of the invitation or the advertisement are approved by a licensee an on the condition that any procedures, requirements or terms set by the Authority should be fulfilled. Article (159) The licensee may set a code of conduct to force the individuals seeking to gain business on his behalf not to follow ways of pressure or giving any misleading or false statements and urge them to disclose their objectives and identities to the customers. Providing the Customer with Terms of Service Article (160) The licensee should provide his customer with the terms of services, which determines the bases of practicing securities activity with the customer or for his account. This should be done before practicing any securities activity with the customer or for his account. Such terms should be in an agreement form to be valid and effective immediately after obtaining a copy thereof signed by the customer. Terms should be in line with any requirements approved by the Authority. Knowing Customers Article (161) 1. The licensee should obtain information from the customer about his financial position, his experience in investment, his investment objectives relating to the services he provides and any information specified by the Authority before he provides brokerage, investment consultation or investment portfolio services. 2. The licensee should request from his customer to update the information mentioned in Article (1) of this Article at least once a year. Care of Customer’s Interests
  49. 49. 49 Article (162) The licensee should ensure the proper care of his customer’s interests and avoidance of any conflict of interests between his own interests and the customer’s interests with respect to the deals or services provided to the customer. The licensee should disclose to the customer in writing of any conflict of interest, unless this would be a disclosure of insider information. In such case, the licensee should take the necessary steps to ensure fair treatment of the customer. Article (163) The licensee may not collect high commissions from his customers or provide high discounts on transactions or be involved in excessive purchases and sales in a customer’s account. Risk Clarification to the Customer Article (164) The licensee should enable the customer in a sufficient and clear manner to understand the nature of risks associated with the type of deal to be entered into. Lending the Customer Article (165) As for the securities activity, and notwithstanding the provisions of Law No. 32 of 1968 on Cash, the Central Bank of Kuwait and Organization of the Banking Profession and amendments thereto, no person licensed for lending and regulated by the Central Bank of Kuwait, may lend or provide credit facilities to a customer, unless the following two conditions are met: 1. The licensee should evaluate and document the customer’s financial position based on the information disclosed by that customer. Such evaluation should be made by one of the licensee’s employees, provided that such employee should be independent of brokerage or marketing activities. 2. The customer should give his prior and written approval on the loan or credit facilities setting out the maximum limit of the loan or credit facilities and details of the amount we well as any reimbursed expenses. Article (166)
  50. 50. 50 The following actions by the licensee shall not be deemed as lending under the previous Article: 1. Settlement of a deal in case of delinquency or default of the customer, or 2. Payment of an amount to fulfill a margin call sent to the customer within a period not exceeding five working days. Margin Deals Article (167) Margin deals are those deals made by the broker by funding part of the securities value in the customer’s account by guaranteeing the securities in such account. The margin shall be the minimum limit of funding that the investor shall pay of his funds to execute the deal. Article (168) The licensee may not execute margin deal with a customer or for the latter’s account unless the customer approves the terms of services, which should specifically provide for the following: 1. The circumstances in which the customer may be requested to provide a margin. 2. Details of the method of providing a margin. 3. Details of the steps the licensee may take if the customer failed to provide the required margin including the method(s) of the margin call to the customer. 4. Explanation of risks associated with the margin deals and risks arising from customer’s failure to meet the margin calls to the extent that the licensee may close the customer’s investment position after a period specified by the licensee and that the licensee shall have the right to close the investment position in all cases after lapse of five working days from customer’s failure to fulfill. 5. Except for failure to provide margin, explanation of any cases that may result in closure of the customer’s investment position without sending a prior notice thereof. Margin Limits and Monitoring Article (169) The licensee upon execute a margin deal with the customer or for the customer’s account, should do the following: 1. request the customer to pay a margin of not less than 25% of the deal value before execution thereof.
  51. 51. 51 2. The margin should be in cash or in the mode of investment positions in securities fully paid up or by acceptable guarantee. 3. Monitor, on a daily basis, the margin provided by the customer and ensure that the margin remains equal to the minimum percentage of 25% of the current value of each investment position in the related security. Authority’s Powers relating to the Margin Article (170) The Authority may fix a higher or less percentage for the margin to be provided for the deals in any security or any class or category of securities. The Authority may prohibit margin deals on any security or any class or category of securities. Disclosure of Fees and Charges Article (171) Before providing any services, the licensee should fully disclose to his customers the fees and commission he receives. Customers’ Notices and Reporting Article (172) 1. Upon executing any purchase or sale of security with a customer or for his account, the licensee should promptly send to the customer a deal execution notice, which should include all of the information determined by the Authority. 2. The deal execution notice mentioned in paragraph (1) of this Article should not be sent if the licensee acts as a manager of the customer’s investment portfolio and the customer confirmed non-requirement of obtaining a written deal execution notice. Article (173) The licensee acting in his capacity as manger of investment portfolio for an customer should send to the customer a monthly evaluation report on the securities or the cash balances relating to the securities in the customer’s portfolio. The report should include any information required by the Authority. Customers’ Records Article (174) The licensee may prepare and maintain correct records for each executed deal. All records should be updated and sufficient to prove compliance with these Regulations at all times. Article (175) The licensee should prepare and maintain correct records for the customers’ accounts, provided that they:
  52. 52. 52 1. Should accurately and timely demonstrate the assets and liabilities of all customers severally and collectively. 2. Include all the information necessary to enable the licensee to prepare a statement of the assets and liabilities of each customer and details of deals executed for each customer’s account. 3. Highlight all of the customer’s funds and assets for which the licensee is responsible. Article (176) The licensee’s records should include the following: 1. Details of all orders posted by any customer with respect to a security. 2. Details of all purchase and sale deals of securities done by the licensee for the customer or executed by the licensee for his own account. 3. A record of revenues and expenses for each customer with explanation of nature thereof. 4. Details of all receipts and payments on the customer’s funds and assets. 5. A record of the customer’s funds and assets. Article (177) The licensee should set specific procedures for the transactions on the customers’ personal accounts in wine with what endorsed by the Authority in this respect. Phone Call Recording Article (178) The licensee should not make or accept any phone calls from customers or potential customers relating to any acts in the field of securities activity unless the licensee records such phone calls. The licensee should disclose, to his customers or potential customers, recording of phone calls and maintain such recordings for three years after making the phone calls. If a phone call relates to a dispute with a customer, that phone call recording should be maintained till the final settlement of the dispute and completion of investigation thereof. Arrangements of Management and Supervision Article (179) The licensee should make the proper arrangements to maintain the clean and appropriate allocation of key responsibilities among his board members, partners or senior management to determine the person, who should be entrusted with each function, and provide the adequate supervision over and monitoring of his works and affairs. Article (180)
  53. 53. 53 The licensee should set the proper arrangements to ensure that carrying out operations and disposal of assets are made in accordance with a general or special authorization by the concerned department. Article (181) The licensee should set the arrangements preventive of information leakage between the various securities activities he is licensed to practice and ensure that perusal of and access to the various information is available only to the related persons. Compliance Article (182) The licensee should appoint one of his executive officers to act as a compliance officer. Article (183) The Authority may require the licensee to form a compliance committee as per the instructions and controls preset by the Authority. Article (184) The licensee may assign to an outsourcer specific functions relating to compliance and other functions, provided that the licensee shall remain responsible before the Authority for such functions. Money Laundering & Terror Finance Article (185) The licensee should ensure that his customer has fulfilled all obligations under the rules and regulations relating to combating money laundering and terror finance applicable in the State of Kuwait. Article (186) The licensee should appoint one of his key executive persons to act as “Money Laundering & Terror Finance Reporting Officer” to be responsible for reporting any suspect of money laundering or terror finance as per the instructions approved by the Authority with respect thereto. Audit of Accounts Article (187) The licensee should appoint an external auditor, who should be one of the offices registered with the Authority, provided that such auditor should not be a manager, officer, employee, shareholder or partner of the licensee. Article (188)
  54. 54. 54 The licensee should maintain, in a separate manner, all accounts, records, terms of services and the other agreements to which the licensee is a party for five years, and the auditor should be given access thereto. Article (189) The Authority may require the licensee, as per the type of the licensed activity, to submit periodical reports on all of his operations including an annual report of the audited financial statements. Article (190) The licensee should apply a risk management system and appoint an officer to be approved by the Authority to handle the duties of managing and addressing risks associated with his activities and submit a special risk report to the Authority on a semiannual basis. Customers’ Complaints Article (191) The licensee should have written procedures to ensure the proper and prompt handling of customers’ complaints and taking the corrective and timely procedures thereon. Article (192) The licensee should set procedures for settlement of complaints in a clear manner that ensures keeping each employee dealing with customers familiar with these procedures, immediate investigation of the complaint, keeping a record of the written complaints and documentation of the taken actions with respect thereto. Business Continuity Article (193) The licensee should set the proper arrangements to ensure his ability to continue in practicing his activities and fulfilling his legal obligations upon occurrence of any unexpected interruption of his business taking into consideration the nature, volume and diversity of his business. These arrangements should be documented, regularly updated and reviewed to ensure effectiveness thereof. Article (194) The proper records relating to the arrangements of business continuity should be maintained for five years after discontinuity of using or updating thereof. Authorization on Account in the Name of the Customer Article (195)
  55. 55. 55 The licensee should prepare and maintain proper internal control records and procedures with respect to any authorization on an account in the name of the customer and ensure that all deals executed under the authorization are within the scope of granted authorities and he has proper procedures to give and receive instructions under the authorization. Employee’s personal Dealings Article (196) No employee of a licensee may: 1. Be a party to any deal on a security to which a customer of the licensee is a party. 2. Open a trading account with another licensee unless the licensee for which the employee works does not provide a service similar to the services provided by the other licensee. Article (197) Any employee of a licensee must disclose to the compliance officer all the securities deals he is executing through another licensee. Article (198) The compliance officer should establish the proper procedures to monitor the employees’ personal dealings in securities in a way that ensures compliance with the law and these Regulations. The Persons licensed to operate in accordance with the Islamic Shari’a Advisory Council of Shari’a Supervision Article (199) An Advisory Council of Shari’a Supervision “ACSS” reporting to the Board of Commissioners shall be formed by a resolution of the Authority’s Board of Commissioners. ACSS shall be the reference in all matters relating to the Authority’s resolution in the Shari’a compliant activities. Article (200) The ACSS shall comprise of five members of the experts specialized in the jurisprudence of Islamic Finance, law, economy and administrative science. Islamic scholars shall form the majority of ACSS and the Board of Commissioners shall issue a resolution of the names thereof. Article (201) The ACSS may seek assistance of experts from outside the Authority subject to approval of the Executive Director. Article (202)

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