In the name of God
Disciplinary Regulations Governing Non-Brokerage Financial
Institutions
In order to regulate and oversee the activities of non-broker financial institutions
and on the strength of paragraphs 2 and 3 of article 7 and article 28 of the
Securities Market Act and article 14 of the Law for Development of New Financial
Instruments and Institutions, the present regulations were approved by the
Securities and Exchange Organization (hereinafter the SEO) board of directors.
Article 1): The definitions provided for terms and phrases in article 1 of the
Securities Market Act ratified in November 2005 by the Islamic Parliament and
article 1 of the Law for Development of New Financial Instruments and
Institutions to facilitate implementation of the overall policies under article 44 of
the Constitution enacted in November 2009 by the Islamic Parliament shall also
apply for the purposes of the terms used in the existing regulations. Other terms
used herein will be defined as follows:
1. Securities Market Act (hereinafter the Act) means the Securities Market
Act of I.R.I ratified in November 2005 by the Islamic Parliament (the Islamic
Consultative Assembly)
2. Law for Development of New Financial Instruments and Institutions
(hereinafter the Development Law) denotes the Law for Development of
New Financial Instruments and Institutions which was enacted in
November 2009 to facilitate implementation of the overall policies under
article 44 of the Constitution;
3. Rules and regulations mean the enactments of the Islamic Parliament,
decrees of the Council of Ministers, the Securities and Exchange High
Council and approvals of capital market under any title or designation such
as laws, by-laws regulations, constitutions/statutes, circulars and
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implemental rules and guidelines when they have been approved,
communicated, and promulgated;
4. Regulatory/supervisory body (authority) denotes the Department for
Supervision of the Financial Institutions of the SEO;
5. Designated person/entity means any of the financial institutions registered
with the SEO with the exception of the brokerage firms and the Central
Securities Depository and Settlement Company;
6. Mutual Fund Regulator means a legal person or entity that has assumed
operational or regulatory responsibilities or is acting as a guarantor in the
mutual investment funds.
Article 2- Any kind of act or omission of act by the designated persons as well
as by the organs, directors and personnel of the designated persons which
results in the breach of laws and regulations shall be regarded as violation. If
no disciplinary actions have been established in other legislation, the offending
party shall receive the penalties set forth in the existing regulations.
Article 3- With respect to the violations referred to in article 2 of these
regulations, the investigative authority may, appropriate to the nature and
degree of the offence, impose one or more disciplinary actions on the
designated person as follows:
1.
2.
3.
4.
5.
6.
7.
8.
9.
a written notice without entering it in records;
a written warning by entering it in records;
restriction on the relevant activities up to three years;
restriction on other activities beyond the normal activities up to three
years;
prohibition of providing certain services or undertaking some obligations
up to three years;
suspension of related activities up to three years;
suspension of other activities beyond the normal activities up to three
years;
revocation of the relevant business license or other activities;
revocation of establishment license or business license;
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10. imposition of cash penalty/fine as prescribed in the executive
regulations under article 14 the Development Law.
Article 4- With respect to the violations referred to in article 2 of these
regulations, the investigative authority may, appropriate to the nature and
degree of the offence, impose one or more of the following disciplinary actions
on the directors and staff of the designated person if it finds that their
performance has affected the commission of offence within the context of
these regulations:
1. a written notice without entering it in records;
2. a written warning by entering it in records;
3. disqualification from assuming responsibilities in the respective
designated entities up to three years;
4. prohibition of using the professional certificates issued by the SEO up to
three years in maximum;
5. suspension or prohibition of using the licenses or certificates issued by
the SEO, related associations, exchanges or OTC markets up to three
years;
6. revocation of the licenses or certificates issued by the SEO, associations.
exchanges or OTC markets;
7. disqualification from assuming responsibilities in all or some of the
financial institutions, issuers registered with the SEO and self-regulatory
organizations up to three years;
8. cash penalty/fine for directors as prescribed in the executive
regulations under article 14 of the Development Law.
Article 5- With respect to the violations referred to in article 2 of these
regulations, the investigative authority may, appropriate to the nature and
degree of the offence, impose one or more of the following disciplinary
actions on the designated entity if it finds that its performance has affected
the commission of offence within the context of these regulations:
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1) if the offending entity falls within the category of designated persons or
entities, thereafter:
1-1) as to the offending entity:
1-1-1) a written notice without entering it in records;
1-1-2) a written warning by entering it in records;
1-1-3) restriction on the relevant activities up to three years;
1-1-4) restriction on other activities beyond the related activities up
to three years;
1-1-5) prohibition of providing certain services or undertaking some
obligations up to three years;
1-1-6) suspension of related activities up to three years;
1-1-7) suspension of other business licenses beyond the related
activity up to three years;
1-1-8) revocation of establishment and business licenses;
1-1-9) revocation of other establishment and business licenses;
1-1-10)
cash penalty/fine as prescribed in the executive
regulations under article 14 of the Development Law ;
2-1- as to the directors and the staff of the offending entity whose acts
have been effective in the commission of offence as determined by the
investigative authority:
2-1-1- a written notice without entering it in records;
2-1-2- a written warning by entering it in records;
2-1-3- disqualification from assuming responsibilities in the related
designated entity up to three years;
2-1-4- prohibition of using the professional certificates issued by
the SEO up to three years;
2-1-5- disqualification from assuming responsibilities in all or some
of the exchanges, OTC markets, and designated entities up to three
years;
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2-1-6- cash penalty/fine as prescribed in the executive regulations
in article 14 of the Development Law;
2) if the offending entity does not fall within the category of designated
persons/entities:
2-1) a written notice without entering it in records;
2-2) a written notice by entering it in records;
2-3) a written warning by entering it in records;
2-4) disqualification from assuming responsibilities in the related
designated persons up to five years;
2-5) disqualification from assuming responsibilities in exchanges, OTC
markets, issuers registered with the SEO and designated persons up to five
years.
Article 6- The disciplinary actions enumerated herein (apart from the written
notice without entering it in records) shall be filed in the offender’s records.
The investigative authority shall, in its inquiry into each case of referral,
consider the disciplinary actions already filed in the offender’s records, and
then decide on a disciplinary action consistent with the type, nature and
degree of the violation committed.
Article 7- In order to prevent commission of any violation or repeat or spread
of the extent of such violation and further restore the condition to the previolation situation or make compensation for the victims of violations, the
investigative authority shall oblige the designated person, its managers/
directors and/or any of the bodies of the designated person to take some
measures and further establish a time-limit for performance of some specific
tasks. Accordingly, the investigative body shall be allowed to impose one or
more of the disciplinary actions listed in articles 3, 4 and 5 of these regulations
to guarantee the enforcement of the decisions so taken, as the case may be.
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The investigative authority shall have the power to force the designated
person or the affiliated body/department to take the following actions:
1.
2.
3.
4.
5.
to initiate organizational restructuring;
to modify the operational processes and reinforce internal controls;
to amend the ownership structure of the designated person;
to revise the structure of funding resources and assets composition;
to recruit a sufficient number of personnel with qualifications in certain
fields;
6. to employ specific equipment and possibilities;
7. to transfer or adjust all or parts of the obligations undertaken by the
designated person contrary to the prevailing rules;
8. to compile reports or prepare particular evidence and documents so as
to retain or present them to the SEO or other authorities.
Article 8- In the event that the professional certificates of the offending staff
or directors of the designated person as provided in these regulations are
revoked, the offender shall be deprived of receiving the relevant license or
certificates for the second time for one year as of the effective date of the
verdict. Should the offender again fulfill the qualifications for obtaining the
relevant certificate over this period of time, the certificate will be issued upon
expiry of the stipulated period.
Article 9- The investigative authority may decide that the elimination of
restrictions on activities or removal of business license suspension as imposed
under the provision of the existing regulations should be subject to satisfaction
of some conditions or performance of some tasks by the designated person, its
managers/directors and/or each of its affiliated bodies/departments.
Accordingly, the investigative authority shall be allowed to establish the
procedures for fulfillment of conditions or performance of the tasks decided
on under this article.
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Article 10- In deciding on the type, nature and degree of the disciplinary
actions as prescribed herein, the investigative authority shall have to take the
following circumstances into consideration:
1) significance of violation in terms of transactional volume or transaction
value in rials (local currency);
2) the number of people sustained loss on the ground of violations;
3) the scale of the impact of violation on the transactions in the securities
market and/or activity of participants in such market;
4) the offender’s violation records with the disciplinary tribunals or courts
of law inside or outside the country for natural persons over the recent
five years and for legal entities over the recent two years;
5) the level of offender’s cooperative efforts towards prevention of the
spread or continuity of violation or elimination of the ensuing effects;
6) criminality of violation.
Article 11- If the regulatory authority detects that the pending violations listed
herein are insignificant in respect of transactional volume or its rial worth has
inconsequential effect on the activities of the designated person or on the
transaction trend in the securities market or transaction trend in the stock
market or the activity of participants in such market, it may directly decide on
the issuance of an administrative ruling to the designated person, its
managers/directors or staff so as to provide them some guidelines towards
compliance with laws and regulations. A copy of this ruling should
simultaneously be communicated to the Department for Violations Follow-up
of the SEO.
Article 12- The investigative authority shall be allowed to decide that the verdict
passed under the provisions of these regulations should simultaneously be
made public or communicated to the special groups or persons such as major
shareholders or owners of privileged units (management) of the defeated
(losing) designated person or its administrative or regulatory
departments/bodies.
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Article 13- The disciplinary actions set forth in this instrument shall be served
solely for the merit of the disciplinary violation and as to the criminality of such
acts the provisions of chapter 6 of the Act shall apply.
Article 14- The existing regulations comprising 14 articles were adopted on May,
18, 2013 by the SEO’s board of directors.
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