Chairman’s Office
The Authority’s Board of Directors Decision No. (27) of 2014 Concerning Brokerage in
Securities
The Chairman of the Board of Directors of the Securities and Commodities Authority,
Having considered Federal Law No. (4) of 2000 concerning the Emirates Securities and
Commodities Authority and Market, as amended;
Federal Law No. (8) of 1984 concerning Commercial Companies, as amended;
Federal Law No. (5) of 1985 concerning issuing the Civil Procedures Law;
Federal Decree No. (32) of 2013 concerning the formation of the United Arab Emirates
Council of Ministers;
Council of Ministers Decision No. (13) of 2000 concerning the Regulations as to the
Functioning of the Securities and Commodities Authority, as amended;
Council of Ministers Decision No. (11) of 2000 concerning the Regulations as to Market
Licensing and Supervision;
Council of Ministers Decision No. (108/7 and/5) of 2010 concerning the Reformation of the
Board of Directors of the Securities and Commodities Authority;
The Authority’s Board of Directors Decision No. (1) of 2000 concerning the Regulations as
to Brokers, as amended;
The Authority's Board of Directors Decision No. (2) of 2001 concerning the Regulations as to
Trading, Clearing, Settlement, Transfer of Ownership and Custody of Securities;
The Authority’s Board of Directors Decision No. (29/R) of 2009 concerning the Regulation
of Securities Custody Activities;
Following consultation and coordination with the concerned markets in the State;
Based on the approval of the Authority's Board of Directors at its 25th meeting, fourth
session held on 25/06/2014;
Has resolved:
Definitions
Article (1)
The following words and expressions shall have the meanings set forth opposite each of
them, unless the context of the provision requires otherwise:
State:
The State of the United Arab Emirates
Law:
Federal Law No. (4) of 2000 concerning the
Emirates Securities and Commodities
Authority and Market
Central Bank:
Central Bank of the United Arab Emirates
Authority:
The Securities and Commodities Authority
Board:
The Board of Directors of the Authority
Market:
A securities market licensed in the State by
the Authority
Clearing House:
The entity conducting clearing and settlement
operations for all orders executed in the
Market in accordance with the relevant
regulations and decisions
Securities:
Shares, bonds and notes issued by joint stock
companies, bonds and notes issued by the
Federal Government, Local Governments,
public authorities and public institutions in
the State, and any other domestic or nondomestic financial instruments accepted by
the Authority
Brokerage:
Brokerage in purchasing or selling securities
in the Market in accordance with the
provisions of these regulations
Brokerage Company:
A legal person authorized to conduct
brokerage activities
Brokerage Company (Trading Member):
A Brokerage Company which receives and
records orders of purchasing or selling
Securities to be executed in the Market
without conducting clearing and settlement
operations for these transactions
Brokerage Company
Clearing Member):
(Trading
and A Brokerage Company which receives and
records orders of purchasing or selling
Securities to be executed in the Market and
conducts clearing and settlement operations
for these transactions
Executive Branch:
The executive branch of a Brokerage
Company which receives and records the
orders of clients to purchase or sell securities
to be executed in the Market
Order Receiving Branch:
The branch of a Brokerage Company which
opens the accounts and receives the orders of
clients to purchase or sell Securities
First Chapter
General Provisions
Article (2)
1.
Brokerage activity may not be conducted unless licensed by the Authority, such licence
to be renewable on an annual basis, and only after registering in the register of brokerage
companies maintained by the Authority. As an exception, the Ministry of Finance and
the Central Bank may conduct brokerage activities for Securities pertaining to the
Federal Government or to the Governments of any of the Emirates members of the
Federation without being registered with the Authority.
2.
The Authority shall issue a decision to suspend unlicensed Brokerage activities. This
decision may include closing the locations where these activities are being conducted.
Article (3)
1. A Brokerage Company may not be a partner in another Brokerage Company. A
Brokerage Company may not be a partner in any other company without the approval of
the Authority.
2. A partner in a Brokerage Company may not hold more than 5% of the share capital of
another Brokerage Company or be a member of its board of directors, board of managers
or hold a position in its executive management.
Second Chapter
Licensing Conditions
Article (4)
First: A licence to conduct Brokerage activities requires the following:
1. The applicant must be a legal person incorporated within the State in accordance
with the Commercial Companies Law or a branch of a foreign company, provided
that its parent company conducts the same activity and is subject to the supervision
of a regulatory authority which carries out functions similar to those of the
Authority.
2. The activity of the company or branch, or one of its activities, must be Brokerage,
provided that its other activities are licensed by the Authority and provided that
there is no conflict between the activities in accordance with the regulations issued
by the Authority.
3. The contract of establishment of the company must be written in Arabic and
endorsed by the official authorities.
4. The paid capital must not be less than AED 3 million for a Brokerage Company
(Trading Member) and AED 10 million for a Brokerage Company (Trading and
Clearing Member).
5. A guarantee must be provided in accordance with the terms and conditions
mentioned in these Regulations.
6. The licensing fees must be paid.
7. To appoint technical and administrative personnel to conduct the Brokerage
activity in accordance with the conditions set out by the Authority in relation to the
Brokerage activity and the requirements of certain positions.
8. An appropriate office, electronic programs and technical systems to conduct the
Brokerage activity must be available.
9. An internal monitoring system that can guarantee the proper implementation of
laws, regulations, decisions and circulars issued pursuant to it and the
implementation of the by-laws applicable in the Market.
10. A risk management operational guide book must be available. This guide book
must list and define the possible risks the company might face, the ways of
handling these risks when they occur, monitors and reports them in a way that
allows the company to continue conducting its activity and complying with the
provisions of these Regulations.
11. Any additional conditions or requirements decided by the Authority according to
public interest needs.
Second:
An applicant may, in the event his application is approved by the Authority,
provide an undertaking to fulfill the conditions mentioned in paragraphs from 7 to
10 of the above paragraph of this article within the period specified by the
Authority. Otherwise, the approval will be considered null and void.
Third:
A Brokerage Company must fulfill all the licensing requirements in a continuous
manner.
Technical and Administrative Personnel
Article (5)
First: To be appointed in the technical and administrative team in a Brokerage
Company, the following conditions must be satisfied:
1.
To be a natural person with full capacity.
2.
The person must be fit and proper and in particular:
a. To be of good conduct and behavior and never been sentenced by a freedom
restraining penalty in any crime against honor or honestly unless
exonerated.
b. Has not stopped paying his/her commercial debts even if this was not
related to a declaration of bankruptcy, he/she has never been declared
bankrupt unless exonerated.
Second:
It shall not be permitted to hold two positions that are contradictory in their tasks,
in accordance with the regulations set out by the Authority.
Third:
The company shall notify the Authority of the appointment of the approved
employees and of any amendment or change to the termination of their services.
License Application
Article (6)
1.
A license application to conduct the activity of Brokerage shall be submitted to the
Authority on the application form set for this purpose, along with supporting
information, statements and documents, in particular :
a. The legal form of the applicant together with a report stating the names of the board
of managers, the board of directors and the executive management.
b. A statement declaring any legal or judicial liabilities or responsibilities related to the
applicant.
c. A statement clarifying technical systems used and the work procedures proposed to
conduct the Brokerage activity.
d. A receipt of payment of the licensing application fee.
2.
The Authority may request any additional clarifications, information or documents.
3.
The Authority shall take its decision of accepting or rejecting the license application
within a maximum period of 15 working days from the date of submitting a completed
application. If the Authority does not issue a decision in this regard within the mentioned
period, the application shall then be considered as rejected. The applicant may not submit
a new application before six months from the date the first application was rejected or
from the date that was considered as a rejection date of the application.
4.
The Authority may impose conditions and restrictions to its approval to grant a license
for the purpose of public interest needs.
5.
The Authority may, at its own discretion and for the sake of public interest, stop issuing
licenses for the period of time it deems necessary.
Duration and Renewal of Licenses
Article (7)
1.
The license shall be valid for one year ending at the end of December of each year. The
duration of the first license shall start on the date it was granted and shall end at the end
of December of the same year.
2.
The license shall be renewed by submitting an application to the Authority at least one
month before the end of the license duration after verifying that the company is in
compliance with the provisions of these regulations and has paid the annual renewal fees.
The Authority may suspend the company from conducting its activity in case a
completed renewal application is not submitted within the specified period.
Registration of the Brokerage Company
Article (8)
A register of Brokerage Companies shall be maintained by the Authority. The register shall
record names, addresses, numbers and dates of registry of Brokerage Companies. A company
registered at the register may submit an application to the Market to obtain an approval to
conduct Brokerage activity. The Market may approve or reject the application provided that
the Market shall inform the Authority of the names of companies granted approval to conduct
Brokerage activity.
Temporary suspension and Cancellation of License
Article (9)
1.
A Brokerage Company wishing to temporarily suspend its Brokerage activity or which
has a reason preventing it from conducting its activity must submit a request to the
Authority requesting a temporary suspension of its activity. The Authority may reject or
approve the request after satisfying all the requirements the Authority deems necessary to
protect the interests of the clients. The period of suspension of the activity shall not
exceed six months from the date of approval and may be renewed for a similar period,
provided that the company must retain the guarantee during this period and must fulfill
the conditions and requirements the Authority deems necessary to keep the company’s
license valid. In all cases, the company may request resuming the activity before the end
of the suspension period.
2.
A Brokerage Company wishing to permanently stop its Brokerage activity must submit
an application of such to the Authority, provided that the company fulfills the conditions
and requirements of license cancellation determined by the Authority.
The decision to cancel a license shall be issued by the Authority and, once issued, shall
be published in two daily newspapers published in the State, one of which should be in
Arabic on the account of the Brokerage Company. The guarantee provided by the
Brokerage Company shall be redeemed after (3) months of the publication date if
approved by the Market and after the settlement of all the transactions of the company
and the confirmation that no outstanding obligations are due on the company to its
clients, the Markets or to the Authority as a result of performing the Authority’s
decisions in relation to Brokerage activities.
Trading in Foreign Markets
Article (10)
A Brokerage Company may conduct Brokerage or trading activities for its clients in foreign
markets which are under the supervision of a regulatory authority which carries out similar
functions to those of the Authority after obtaining the approval of the Authority and in
accordance with the conditions issued by the Authority.
Third Chapter
Provisions of Guarantee
Conditions of Guarantee
Article (11)
1.
A Brokerage Company (Trading Member) shall submit a guarantee to the Authority and
a Brokerage Company (Trading and Clearing Member) shall submit a guarantee to the
Market.
2.
The guarantee shall be in a form of a bank guarantee, in cash or both.
3.
The guarantee shall be issued in order to guarantee the settlement of a Brokerage
Company’s transactions in the Markets as well as to guarantee the fulfilment of its
commitments towards its clients or the Market, or for the implementations of the
Authority’s decisions. Priority is given to settling the company’s transactions in the
Markets then to the clients’ rights.
4.
The value of the guarantee may not be less than AED 1 million for a Brokerage
Company (Trading Member) and AED 50 million for a Brokerage Company (Trading
and Clearing Member).
Restricting Purchasing Transactions up to the Value of the Guarantee
Article (12)
The Market, after obtaining the approval of the Authority, shall determine the permitted
threshold for purchase transactions of a Brokerage Company based on the value of the
guarantee provided by the company.
Liquidating or Using the Guarantee
Article (13)
1.
The Market shall have the right to liquidate the guarantee provided by the Brokerage
Company or use it in full or in part at any time to guarantee the settlement of the
company’s transactions in the Market.
2.
The Authority or the Market may liquidate the guarantee provided by the Brokerage
Company or use it in full or in part at any time to fulfil the obligations of the Brokerage
Company towards its clients or markets, or to implement the decisions issued by the
Authority in this regard.
Dividing and Increasing the Value of the guarantee
Article (14)
1.
A Brokerage Company may split the value of the guarantee between the Markets in
which it is registered, provided that the total value of the guarantees is not less than the
amount specified in paragraph (4) of article (11) of these regulations.
2.
A Brokerage Company shall proportionally increase the value of the guarantee to match
the increase of the size of its business as per the Market decision. The Brokerage
Company may, after obtaining the approval of the relevant Market, pledge all or part of
the Securities it owns and which are deposited at the Clearing House as a guarantee to
increase the value of its guarantee, provided that the value of the Securities shall be
calculated as 50% of their market value and shall authorise the Market to sell these
Securities or part of them at the market price in order to cover any claims or financial
obligations which may result from the company’s inability to fulfil its obligations
towards it clients or the Markets, or as a result of implementing the Authority’s
decisions.
Provisions Concerning the Letter of Guarantee
Article (15)
The letter of guarantee shall satisfy the following:
1. to be issued by a bank operating in the State.
2. to be unconditional and unrestricted, and payable upon request – of the Authority or
the Market. It must also include the purposes of the guarantee mentioned in paragraph
(3) of article (11), and cannot be cancelled without the approval of the Authority or
the Market, as necessary.
Fourth Chapter
Obligations of the Brokerage Company
By-laws of the Brokerage Company
Article (16)
A Brokerage Company must take all necessary administrative and technical procedures to
perform the activity it was licensed to perform in accordance with the provisions of these
regulations, particularly:
1. To prepare an internal written by-laws within one month from the date of being
licensed and to provide the Authority with a copy of these by-laws, provided that the
provisions of this internal by-laws must be amended to reflect any amendments made to
the relevant laws, regulations, decisions, circulars by-laws issued by the Market. The
Brokerage Company must notify the Authority of any such amendment. The internal
by-laws must include the following:
a. The Brokerage Company’s organisational chart, the area of expertise of
departments and the administrative responsibilities of directors and other
employees at the company.
b. The documentation process to be followed from the date the investor started
dealing with the Brokerage Company until the transaction is completed and the
investor is notified.
c. The relationship between the Brokerage Company’s headquarters and its
branches and the authorities permitted to the branches.
d. The correspondence recording system.
e. The internal record keeping system.
f. The company’s system for recording client complaints.
g. The company’s system for handling errors resulting from the Brokerage
Company executing its transactions.
h. The company’s system for handling the clients orders in case of a default in
payment and in other events of default of not fulfilling obligations due on the
clients to the Brokerage Company.
i. The administrative and accounting procedures adopted by the Brokerage
Company and the necessary measures to control and preserve internal information
processing systems.
j. The procedures for complying with the laws, regulations, decisions, circulars and
rules applicable in the State regarding money laundering and terrorism funding.
2. Perform a periodic review of the internal compliance system and the operational risk
management guide and to update them regularly in accordance with the nature of the
company’s business and the measures in place in this field.
3. Establish a code of conduct for employees at the company and to supervise them, and
regulate and monitor their personal transactions in Securities to ensure that the
employees are complying with the laws, regulations, decisions and circulars issued by
the Authority, especially those related to trust, integrity and conflict of interests.
4. Partners must not be allowed to get loans or withdraw money from the company’s
funds except within the limits of their credit balances at the company. Furthermore,
they must not use these funds in any way, whether through withdrawal, funding,
transfer or otherwise, for transactions that are not related to the company’s activity.
5. Not to permit a partner in a Brokerage Company, members of its board of directors or
board of managers or any of its employees to purchase or sell Securities for their own
account or for the account of their spouses, ascendants or descendants up to the second
degree or to their spouses or minor children before obtaining the approval of the
Authority.
6. The accounts of clients must be segregated from the accounts of the company
according to the mechanism and requirements issued by the Authority.
7. It must not disclose the names or information of its clients to other brokerage
companies, other clients or to third parties, and must not disclose to them any
information regarding its clients’ transactions or orders.
8. The username and password provided by the Market to the approved employee must
not be used to execute orders by any other employee or by any third party.
9. Collaborate and coordinate with the internal controller and enable him to perform his
duties and to notify the Authority of any violation to the relevant laws, regulations,
decisions, circulars or by-laws or to any internal regulations applicable in the Markets.
10. Not to dismiss the internal controller without a decision of the company’s board of
managers/board of directors. The Authority and the internal controller must be
notified of such a dismissal no less than 30 days before the dismissal and the notice
must clarify the reasons and justifications of the dismissal.
11. Set out the necessary financial allocations for debts where the collection is
questioned, in accordance with the requirements set out by the Authority.
Obligations of the Brokerage Company towards the Authority and the Market
Article (17)
A Brokerage Company shall have the following obligations towards the Authority and the
Market:
1. Continuously maintain the required capital adequacy to carry out its activities and ensure
it can fulfil its obligations in accordance with the criteria set out by the Authority.
2. Provide the following reports to the Authority:
a. Monthly reports regarding transactions in Securities made for each member of
the company’s board of managers/board of directors, the company employees,
affiliated companies, or any other transactions the Authority requests to
include in these reports. These reports must be submitted to the Authority
within five working days from the end of the month. A copy of these reports
must be provided to the Market.
b. Periodic financial reports (quarterly, semi-annual) audited by the company’s
external auditor to be submitted within 45 days from the end of the relevant
period. The reports must be signed by the chairman of the board of directors or
by the general manager, as the case may be, or by the person authorised to
sign on his behalf.
c. Annual financial reports audited by the company’s external auditor to be
submitted within 90 days from the end of the fiscal year. The reports must be
signed by the board of managers or the board of directors, as the case may be,
or by the person authorised to sign on their behalf.
d. Periodic report regarding the segregation of accounts, to be submitted upon
request.
e. Any other financial statements or reports requested by the Authority.
3. Obtain the prior approval of the Authority before taking any of the following procedures:
a. Amending the company’s memorandum or articles of association.
b. Adding, removing or amending an activity in the commercial license.
c. Increasing or decreasing the company’s capital.
d. Conducting merger or acquisition transaction.
e. Changing the address or offices of the company’s headquarters or branches.
f. Changing the partners or amending their shares percentage in the company.
g. Launching any advertising campaigns to promote the company’s services.
4. Notify the Authority and the Market immediately of the following:
a. Any material changes or developments in the company, or any shortfall that
affects its financial position.
b. Any amendment to the information or data provided as part of the license
application.
c. Any change or amendment to the orders system used by the company.
d. Any change to the members of the company’s board of managers or board of
directors.
e. Any attachment or mortgage of the company’s assets, any lawsuits in which
the company or one of its approved employees at the Authority is a party and
any court decisions in these lawsuits that might affect the company’s financial
position.
f. Any violations by its employees to the laws, regulations, rules or circulars
applicable at the Authority or the Markets.
5. Establish an independent department for each licenced activity if the company is licensed
to conduct more than one activity. The departments and activities must be completely
separated in order to avoid any conflict of interests.
6. The company must not publish or promote any incorrect data or information about the
status of the entities which have Securities listed in the Market.
7. Verify the eligibility of its clients and the appropriateness of the transactions executed by
it.
8. The company must not execute any purchasing or selling orders outside the trading
session unless permitted in accordance with the applicable regulations.
9. Settle all the obligations resulting from trading transactions conducted by the company
within the relevant periods.
10. Verify that the client has approved every executed order, including obtaining the client’s
signature on the written instruction form; or record and archive the orders obtained by
phone or online in accordance with the conditions and technical requirements set out by
the Authority. The company must also check the validity of orders received by facsimile,
email or other electronic means, and it must keep a copy of these orders and issue a
confirmation to the client in relation to each order executed on the same day the order
was executed. In all cases, the burden of proof lies with the Brokerage Company before
the Authority and the Market.
11. Maintain books and commercial records, or use computer systems and other modern
technical systems that comply with international accounting standards and the
requirements issued by the Authority and to maintain the information and orders of
clients, whether written, recorded on the phone or having been received in any other
electronic means decided by the Authority for a period of 10 years. Backup copies of
these information and orders must also be kept for the same period in order to safeguard
the clients’ data and transactions and prevent them from getting damaged for any reason.
12. Maintain, at any time, the records, documents, accounts and financial statements that
clarify the company’s financial position and the financial position of its clients, as well
as the transactions and account opening agreements of each client. These records and
documents shall be provided to the Authority upon request.
13. Comply with all organisational rules, procedures and requirements set out by the
Authority regarding internal control and the work of the internal controller.
Obligations of the Brokerage Company toward its Clients
Article (18)
A Brokerage Company and its employees shall abide by the ethics of the profession and
shall refrain from doing anything that may harm the reputation of the Market, its
members or those dealing in it, in particular:
1.
Not to execute any orders for clients before signing an account opening agreement
dated and signed by both parties or by the person legally authorised to do so on their
behalf. The agreement must clarify the rights and obligations of the two parties, the
mechanism of terminating the agreement, the investment objectives of the client, and
the means of receiving orders and notices and the identity of the custodian of the
Securities. The Brokerage Company must ensure that all important information is
mentioned in the form prepared by the Authority and that the information is updated
regularly.
2.
To ensure that the client is capable of paying for the purchasing transactions of
Securities before the settlement date. Upon the execution of purchasing and selling
transactions of Securities, at the same trading session, a cash balance must be
available in the client’s account to cover the value of the purchase. Clearance between
the purchasing and selling transactions in the same trading session shall not be taken
into account.
3.
Not to deal with third parties on behalf of the client unless through a power of
attorney that states the limits and the powers of the attorney in relation to the account
and how to deal with the shares. This power of attorney must be certified inside or
outside the State in accordance with the requirements adopted by the official
authorities. The Brokerage Company may also use the power of attorneys prepared by
the Market and act according to the limits mentioned therein.
4.
To include the relevant key information related to the orders received from the client,
such as the time and date, the type of security, the number of Securities, the price and
the validity period. In the event these orders are written, they must be signed by the
client or his representative.
5.
Not to receive or maintain any blank orders signed by clients.
6.
Not to operate the accounts of the clients in a manner that contradicts with their orders
or with the authorised activity of the company.
7.
To notify the client and the custodian, in writing or in the agreed manner, of the
transactions executed for his account as soon as such transactions are executed. The
client or the custodian may object to any transaction in accordance with the “Delivery
Versus Payment” procedure.
8.
Not to combine its capacity as a Brokerage Company and its capacity as an agent in
the contract where it act as broker to execute.
9.
To provide the client with a detailed quarterly statement – there are any transaction
during this period- without prejudice to the client’s right to request a detailed
statement or a statement of the balance of his Securities at any time.
10.
Not to use the statements, transactions and orders of the clients to make benefits or
profits for the company, its employees or third parties. They must also maintain the
confidentiality of these statements, transactions and orders.
11.
To observe the principles of integrity and trust, to avoid any conflict of interest while
conducting the activity, not to prioritise the personal interest or the interest of third
parties over the interest of clients, not discriminate between clients and to perform the
orders of clients on the time they were received.
12.
To conduct the authorised activity with the utmost care in accordance with the laws
and regulations issued in relation to the activity and in accordance with the conditions
and requirements based on which the license was issued. The commercial practices,
the principles of integrity, trust, equality and the clients’ interests must also be taken
into consideration.
Provisions Concerning the Brokerage Company (Trading Member)
Article (19)
A Brokerage Company (Trading Member) shall comply with the following:
1. To execute an agreement with a Clearing Member to settle the clients’ accounts or the
accounts of the company. The agreement must regulate the relationship between the
parties, the rights and obligations of each party, the procedures and the way of
distributing the commission between the parties. A copy of the agreement, once
executed, must be provided to the Authority and the Market.
2. Not to receive any money from the clients provided that the clients shall pay to the
Clearing Member.
Provisions Concerning the Brokerage Company (Trading and Clearing Member)
Article (20)
The Brokerage Company (Trading and Clearing Member) shall comply with the
following:
1. To settle its commitments with the Market in accordance with the Market’s
regulations.
2. Not to pay any cash money to clients with debt balances and not to pay any amounts
that exceed the client’s credit balance, subject to the margin trading system.
3. Not to add any balance to the accounts of clients through deferred cheques except
after the effective collection of these cheques.
4. Not to perform or take any action that might freeze the Securities of clients or prevent
them from using these Securities, neither for the benefit of the company or any third
party, unless in accordance with a judicial order, the Market procedures or in
accordance with decisions issued by the Authority.
5. To obtain a statement from any client wishing to transfer dividends to his bank
account. The statement must include the client’s bank account number and must be
signed by the client to indicate that he has agreed to transfer his dividends. The
Brokerage Company (Trading and Clearing Member) must make sure that it has
received this statement from the client and must provide the Market with a list of all
client names, supported with a copy of the statements received from and signed by the
clients.
Fifth chapter
Rights of Brokerage Companies
Article (21)
1.
2.
A Brokerage Company shall be entitled to obtain its commission from the person who
instructed it to act as a broker for the execution of a contract and a total commission on
each executed transaction in accordance with the rates specified in the regulations issued
by the Authority.
The Brokerage Company may reduce the commission it charges for each executed
transaction.
Article (22)
1. The Brokerage Company must sell the Securities subject of the transaction being
executed – in the event the client does not pay for it within two settlement days – within
a period not exceeding one business day from the settlement date and after obtaining the
approval of the Market. The sale must be done at the market price and the client shall be
responsible for any loss resulting from this sale.
2. The Brokerage Company shall be responsible for any loss resulting from the sale if it did
not comply with the provisions of Paragraph 1 of this article.
3. In all cases, any profits generated from the sale concluded in accordance with the
provisions of this article shall be deposited in the account of the Investor Protection
Fund.
Conducting Other Activities
Article (23)
The Brokerage Company may:
1. Conduct any other activities licensed by the Authority provided that they do not
contradict with the articles of association of the Brokerage Company and the matrix set
out by the Authority.
2. Invest in activities or other assets, provided that such investment does not exceed 15% of
the total initial share capital (Tier 1) and the additional share capital (Tier 2) as
mentioned in the financial solvency standards adopted by the Authority, and subject to
the provisions of paragraph 1 of article 3 of these regulations.
Sixth Chapter
Trading of the Brokerage Company in its Own Name and for Its Benefit
Article (24)
First:
A Brokerage Company may not trade Securities in its own name and for its benefit
unless it has obtained the approval of the Authority to do so and in accordance with
the terms, conditions and procedures mentioned in these regulations.
Second: The request of the company to trade in its own name and for its benefit shall be
submitted to the Authority on the template prepared for this purpose together with
all supporting information, statements and documents, particularly:
1. Accounts statement of the Brokerage Company with national and foreign
banks as well as any change to these accounts. An approval from the board of
managers or the board of directors on the right of the Authority to ask about
these accounts shall also be provided.
2. A report prepared by the board of managers or the board of directors clarifying
the Brokerage Company’s investment policy and the size of the funds being
allocated for this purpose. The report must also show the sources of funding,
how the investment in Securities would affect its financial position, and the
company’s plans to remedy this effect if the value of the Securities in which it
is investing dropped.
3. A decision from the board of managers or the board of directors that includes
the name, capacity and qualifications of the person delegated to manage the
Brokerage Company’s account for the purpose of investing in Securities.
4. A statement clarifying the existence of an internal control system that prevents
the Brokerage Company, when trading in its name and for its own benefit,
from benefiting from financial advices or financial analysis reports issued by
the company but have not been disclosed, or from the trading of its clients, if
these have an effect on the price of the Security.
Third:
The Authority shall issue its decision to approve or reject the request within no
more than 15 business days from the day the request was submitted satisfying all
imposed conditions and requirements. Upon issuing its decision, the Authority
must take into consideration the sanctions taken against the Brokerage Company
by the Authority or the Market during the last two years. The Authority may
append to its approval the conditions or restrictions decided by it for the purpose of
public interest.
Fourth: Without prejudice to any other obligations in these regulations or in any other
regulation, the Brokerage Company that has obtained an approval from the
Authority to trade Securities in its name and for its own benefit shall:
1. Obtain an investor number from the Clearing House to be used only for the
purpose of trading in the Brokerage Company’s own name and for its own
benefit.
2. Maintain the financial solvency requirements to continue its activity in a
manner that guarantees the fulfilment of its obligations.
3. Always maintain a sufficient balance in its bank accounts before executing a
purchase transaction and not to pay from the balances of clients.
4. Establish a special register for transactions executed for its own benefit. The
register must contain the details of all the orders relating to the trading
transactions and the approvals provided by the Market.
5. Give priority to the orders of the clients when executing order for the
Brokerage Company.
6. Prepare a quarterly report that confirms that the investment transactions do not
violate the applicable investment laws, regulations and policies. The report
must be submitted to the company’s board of managers or board of directors
and a copy of it must be provided to the Authority. The report must bear the
signature of the internal controller.
7. The size of investments of the Brokerage Company in Securities must not
exceed 40% of its initial share capital (Tier 1) and its additional share capital
(Tier 2) as mentioned in the financial solvency standards adopted by the
Authority. The company’s investments in one security must not exceed 10% of
the total amount allocated by the Brokerage Company for investment in
Securities for its own benefit.
8. Issue orders regarding its transactions through the person delegated for the
management of the investment account.
9. Not to trade in Securities in foreign markets except within the limit of 10% of
the total amount allocated for investment in Securities for the company’s own
benefit.
10. Provide the Authority with any agreements the Brokerage Company, or any of
its affiliated companies, entered into with banks that create financial
obligations on the company. It must also provide the Authority with any
undertaking or guarantee provided by the Brokerage Company to any third
party.
11. Not to execute any transaction for the account of the Brokerage Company
related to a security that was subject of a financial consultancy or a financial
analysis report issued in relation to this security. The Brokerage Company
must not trade in any financial derivatives related to this security during the
period determined in the financial consultancy and financial analysis decision
issued by the Authority.
12. Not to trade in any security or any financial derivative related to this security
in a manner that contradicts with the recommendations mentioned in the
financial consultancy and financial analysis report issued in relation to this
security, or is contrary to the advice provided to its clients, for the period
mentioned in the financial consultancy and financial analysis regulation.
Seventh Chapter
Branches of the Brokerage Company
Common Provisions for the Branches
Article (25)
1.
A Brokerage Company may not open branches inside or outside the State except after
obtaining the Authority’s approval for each branch.
2.
The Authority may suspend the activity of any branch where the activity is being
conducted without the approval of the Authority. The decision may include closing of the
location through administrative means.
3.
The application to open the branch shall be submitted by the legal representative of the
Brokerage Company together with the documents proving the fulfilment of the
conditions mentioned in these regulations. The Authority shall issue its decision to
approve or reject the application to establish a branch within 15 business days from the
date a completed application was submitted to the Authority.
4.
All the provisions mentioned in these regulations shall apply to the branch.
5.
The Brokerage Company may request to close the branch and the Authority, after
consulting the Market, may approve this closure.
6.
Without prejudice to the sanctions mentioned in these regulations, the Authority may
cancel the approval issued for the branch if one of the Authority’s approval conditions
became unsatisfied by the branch or if it breached a provision of the law or the related
regulations, decisions or circulars.
Executive Branch
Article (26)
1. To obtain an approval to open an Executive Branch, the following conditions must be
satisfied:
a. A decision has been issued by the company’s board of directors or board of
managers to open the branch.
b. A manager must be appointed for the branch. The manager must meet all the
conditions set out in the requirements issued by the Authority. The manager of the
branch shall submit an acknowledgment for his full responsibility for the actual
management of the branch.
c. A table signed by the legal representative of the Brokerage Company must be set to
determine the duties, responsibilities and authorities vested in the managers of the
branch.
d. Submit a title deed for the office of the branch or a lease contract for the branch
certified by the relevant authorities.
e. Present a statement clarifying the technical equipment at the branch and a statement
containing the names of the branch’s employees and their job titles.
f. The Brokerage Company must comply with the provisions of the laws and
regulations. This could be verified by verifying the professional record of the
Brokerage Company. The Authority may assess whether or not the Brokerage
Company is in compliance with these laws and regulations.
g. The necessary links between the markets and the headquarters exist.
h. The branch must be completely independent from any other entity in terms of
location and all organisational, technical and administrative aspects.
i. The Authority and the Market must be notified of all information in relation to the
branch, including any changes that may affect it or affect its management as soon as
they occur.
j. Any other conditions requested by the Authority.
2. The Authority may, before providing its approval, inspect the office of the branch to
ensure that all technical and administrative equipment are available.
Order Receiving Branch
Article (27)
1.
The same conditions mentioned in paragraph 1 of article 26 of this regulation shall apply
to the Order Receiving Branch except those mentioned in paragraphs (b, c and g).
2.
The Brokerage Company may open an Order Receiving Branch outside the State after
receiving approval to do so from the Authority and under the same conditions imposed to
open an Order Receiving Branch inside the State. The company must keep all original
documents related to clients, especially agreements to open accounts, as well as orders
for trading transactions at the company’s headquarters inside the State.
Eighth Chapter
Merger and Liquidation
Merger of Brokerage Companies
Article (28)
Subject to the merger provisions mentioned in the Commercial Companies Law, the
following provisions shall apply to the merger of Brokerage Companies licensed to work in
the State:
1. The merger of brokerage companies shall be through acquisition or amalgamation. The
decision of merger shall not enter into force unless the Authority and the competent
entity mentioned in the Commercial Companies Law have approved it according to the
form resulting from the merger.
2. If the merger is between two or more brokerage companies through acquisition, the
application must be submitted to the Authority along with the following documents:
a. A resolution approved by the board of directors or board of managers of the
acquiring Brokerage Company and the acquired Brokerage Company confirming
their wish to merge.
b. A copy of the merger contract.
c. A statement signed by the internal controller and external auditor of the Brokerage
Company clarifying the obligations of each company and the rights of their clients.
d. The financial statements of each Brokerage Company duly audited at the closest date
to the request submission.
e. An evaluation of the net assets of the acquired Brokerage Company in accordance
with the provisions of evaluating in kind shares mentioned in the Commercial
Companies Law as amended.
f. A report clarifying the procedures taken in relation to the employees approved by
the Authority.
g. A letter from the financial markets issued during the week before the date of
submitting the application. The letter must contain the obligations of the acquired
Brokerage Company.
h. An undertaking from the acquiring Brokerage Company to increase its capital upon
approving the merger and according to the result of the evaluation of the acquired
Brokerage Company.
i. An undertaking from each party in the merger to comply with the rights of its clients
and the obligations of financial liability of the acquired Brokerage Company
according to the final report.
3. If the merger between two or more brokerage companies is done through amalgamation,
the brokerage companies requesting the merger shall abide by all the obligations and
procedures specified in paragraphs 2 and 7 of this article. Each acquired Brokerage
Company must issue a decision to dissolve itself and establish a new Brokerage
Company in accordance with the provisions of the Commercial Companies Law. The
share capital of this new company shall be the net the evaluation results of the merged
brokerage companies. All the rights and obligations of the merged companies according
to the last report submitted to the Authority directly before the merger shall be
transferred to the new company.
4. Any person with interest may submit his objection to the merger within three months
from the date of announcing the merger in the commercial register. The objection must
include the reasons for objection and all information and rights relating to the Brokerage
Company’s debts and it must be submitted to the relevant authority and the Authority at
the same time. The merger shall not be approved until the objection is settled amicably
and judicially.
5. The acquiring and acquired Brokerage Companies shall be inspected to examine all
statements, information, obligations and rights relevant to each company and to prepare a
report in this regard.
6. After satisfying all conditions and required documents, the merger application shall be
submitted to the Board to take its decision in relation to the merger.
7. The acquired Brokerage Company shall:
a. Execute the merger decision and issue a resolution to dissolve the company after
three months from the date of announcing the merger in the commercial register.
The actual date of dissolving the company and merging it must be published in two
daily local newspapers at least one of them is published in Arabic.
b. Not to dispose of any of its assets and properties being evaluated by the committee
established for this purpose. In case the company had to dispose of any of these
assets or properties for an urgent reason, the Authority must be notified immediately.
c. Notify the Authority of any changes to its financial liability and provide the
Authority a properly audited statement clarifying the rights and obligations of the
company’s clients toward the company. The statement must cover the period from
the date of submitting the application until the day before the date of actual
dissolution of the Brokerage Company and the performance of the merger decision.
The statement must also be signed by the Brokerage Company’s board of managers
or board of directors as well as its auditor.
8. The acquired and acquiring Brokerage Companies shall continue to conduct their
activities normally until a decision is issued by the Authority and the competent entity
approving the merger.
Liquidation of Brokerage Company
Article (29)
1. The Authority may request to dissolve and liquidate a Brokerage Company whenever
necessary for the interest of the Market or the investors or for the public interest.
2. Without prejudice to the measures mentioned in the Commercial Companies Law, if the
Brokerage Company is liquidated in a voluntarily or mandatory manner, the liquidation
must be done under the supervision and control of the Authority.
Ninth Chapter
Monitoring and Sanctions
Monitoring and Inspection
Article (30)
The Authority shall have the right to monitor and inspect regularly or without prior notice the
brokerage companies to check if these companies are in compliance with the laws and
regulations of the Authority or with the decisions, circulars or conditions issued accordingly.
The Authority shall also investigate the violations resulted from the inspection or in the
complaints received by the Authority.
The Authority may request that the Brokerage Companies, their employees or their clients to
provide it with all the information and documents the Authority deems necessary for the
purpose of monitoring and inspection.
Complaints
Article (31)
The Authority shall receive complaints in relation to the activity of the Market or brokers.
The Authority shall, after investigation, issue the appropriate decisions in relation to such
complains and implement these decisions in the manner it deems appropriate.
Persons with interest may object to the decisions issued by the Authority regarding the
complaint within 30 days from the date of being notified of such decision.
Sanctions
Article (32)
1. In the event of material change in the management of the Brokerage Company or if the
company’s representatives are repeatedly absent from trading sessions for more than a
week without notifying the Market, or in case the company failed to meet one of its
licensing conditions, the Market may suspend the work of Brokerage Company for no
longer than five business days or may refer the matter to the Authority which shall in
turn take the appropriate decision if there are reasons to suspend the company’s work for
a longer period.
2. In the event the Brokerage Company breached the provisions of the laws, regulations,
decisions, circulars or conditions issued by the Authority, the Authority may impose any
of the following sanctions:
a. Send a warning to the Brokerage Company.
b. Impose a fine that does not exceed the maximum amount mentioned in the law and
regulations issued by virtue thereof.
c. Suspend the Brokerage Company from conducting the activity for no more than one
year.
3. The Authority may cancel the license of a Brokerage Company in any of the following
events:
a. Failure to meet one of the licensing conditions mentioned in these regulations.
b. Serious violation of any of its obligations or commitments.
c.
d.
e.
f.
Failure to pay the annual renewal fee or the fines.
A final judicial order is issued declaring the company bankrupt.
Dissolution or liquidation of the company.
If no request is sent to the Authority for the company to resume its work after a
temporary suspension.
g. If the activity has not been conducted within three months from the date the license
was acquired.
The decision to cancel the license of a Brokerage Company and remove the company
from the register shall also determine the action to be taken in relation to the guarantee
and whether the guarantee shall remain in place until the settlement of all the company’s
obligations toward its clients or the markets or until the fulfilment of the Authority
decisions in relation to the activities of the company. Such decision shall be published at
the expense of the company in two daily newspapers issued inside the State, provided
that one newspaper is in Arabic.
4. The Authority may cancel trade transactions that violate the law or the regulations,
decisions or circulars issued by virtue thereof. It may order to restore the status to the
way it was before the trade transaction was conducted, according to the Market
mechanism and without causing any damage to good faith third parties.
5. If the approved employees at the Brokerage Company breached the law or the
regulations, decisions or circulars issued by virtue thereof, the Authority may impose any
of the following sanctions:
a. Warning.
b. Suspension from work for no more than two months.
c. Cancel the approval of the relevant employees.
Entry into Force
Article (33)
1. The Authority’s Board of Directors Decision No. (1) of 2000 concerning the regulations
as to brokers shall be repealed.
2. Companies licensed to conduct the activity of Brokerage must comply with the
provisions of these regulations within six months from the date this regulation is
effective.
Article (34)
This decision shall be published in the Official Gazette and shall have effect as from the day
following its publication.
Engineer / Sultan Bin Saeed Al Mansouri
Chairman of the Board of Directors
Issued in Abu Dhabi on 13/07/2014