Union of Arab Securities Authorities.

Markets Regulations


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CMA board has issued its resolution approving the new Corporate Governance Regulations.
The new Regulations have paid heed to setting effective governance arrangements for the joint stock companies listed in the Saudi Stock Exchange to ensure the clarity of the relationship between shareholders and the company's board from one side, and between the board and the executive management team on the other side. The regulations also took care of the shareholders' rights in these companies, such as the right of fair and equal treatment of shareholders without discrimination and the right of accessing the information transparently to enable them to fully exercise their statutory rights. Moreover, the Regulations cover the rights of stake holders in these companies.
The Regulations have set detailed provisions on the composition of Board of Directors and committees in terms of competencies, responsibilities, meetings, members' rights and duties. These provisions emphasize the principle of active participation in decision making within the Board of Directors as they deal with the issues of conflicts of interest between board members and the company, and adopt honesty, truthfulness and care as a foundation and methodology for these boards.
The Regulations also included detailed provisions regarding companies' external auditors and internal control procedures compelling Boards of Directors to disclose all information the shareholders and dealers need to build their investment strategies or perform any transaction with the company in a fair and systematic manner for all parties.
The Regulations contribute to interacting with the set of national legislations under which companies operate and integrate to fulfil their objectives with efficiency and integrity. The benefits of Corporate Governance are not confined to companies, rather they directly outreach the national economy for the role played by governance-based companies' growth and continuity in boosting the economy and increasing the GDP in line with the Saudi Vision 2030. These Regulations were prepared in cooperation between the CMA and the Ministry; and come as part of the continuous coordination between them under the singed memorandum of cooperation to harmonise policies and procedures adopted for the implementation of the Companies Law to ensure integration and harmony in achieving the sough objectives; and in completion of the legislations issued by CMA in light of the new Companies Law such as the Regulatory Rules and Procedures issued pursuant to the Companies Law relating to joint stock companies listed in the Saudi Stock Exchange that regulates the Remunerations of board members in these companies, the Holding of general and special assembly meetings of shareholders and their participation therein through contemporary technology, Buy-back, sale and pledge of shares, Pledge of company's shares, Issuance, buy-back and conversion of preferred shares by the company, Dividend distribution to shareholders of the company, Issuance and sale of pre-emptive rights resulting from capital increase, and proxy procedures for attending general and special assemblies.
In line with CMA’s endeavor to regulate securities activities according to Law No. 7 of 2010 Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and its Executive Bylaws and their amendments, and in CMA’s pursuit of transparency, and its belief in the value of participation and the importance of benefiting from the expertise and capabilities of regulated entities, with respect to their valid aspirations and visions in the issued decisions and regulations relevant to the field of securities activities, which would fulfill common interests, support the implementation of CMA’s decisions and regulations when properly enforced, contribute to CMA’s success in achieving its goals, and consequently achieve public interest goals.
Thus, the CMA announced conducting an opinion poll for regulated entities on the draft amendment of the Executive Bylaws of Law No. 7 of 2010 Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and their amendments, by adding Appendix 1 “Standards of Systems for Maintaining Records” to Module Eight (Conduct of Business). 
After the completion of the public consultation seminars on the first set of implementing regulations issued by the CMA in cooperation with World Bank experts in 2015, a specialized CMA working group has completed a rigorous translation process of the three implementing regulations into Arabic, thus allowing for the regulations to be published in the official gazette. The implementing regulations are already considered by CMA as set into force since the date of their publication.
A small brief on the published implementing regulations:

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

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

Market Conduct Regulation
“Market conduct” refers to the standards of conduct applicable to trading by persons in securities markets. This regulation is critical to market integrity and ensuring fair and efficient markets. It applies to all persons involved in trading, except for item 4 below, which only applies to “Approved Institutions”.
EFSA’s BOD issued a decision to regulate trading on unlisted securities and transfer of ownership. Those rules include transfer of unlisted securities’ ownership and automated trading system(s), or what is known as the Over-the-counter (OTC).
Trading in unlisted securities or proof of transfer of ownership shall be held through automated trading system(s) or OTC . He added that this shall be applied only on delisted securities deposited by central depository system. Trading shall be held according to this mechanism for two days a week, as determined by the Stock Exchange the same way as it determines trading hours. Transactions shall be settled through this system in the third day of transaction T+3.
Price limits will not be applied, closing price will not be calculated and price indices will not be calculated as well, and if there will be any amendments to the data or issuance elements of these securities that are traded on the OTC, the Stock Exchange will stop trading in them in accordance with this mechanism, that is if the Exchange’s rejects the continuation of trading in these stock in light of the justifications offered by the company and accepted by the Stock Exchange.
EFSA’s BOD Decision no.1 of 2017 on the issuance the First Egyptian Financial valuation Standards was published in the Egyptian Gazette (issue no.23). Standards include "scope of application" and "standard of professional conduct" and " Professional Competence Requirements" as well as " scope of work" and " implementation of the valuation process" and " reasonableness of assumptions" in addition to "valuation methods and " preparation of valuation report ".
The Egyptian Financial valuation Standards are considered as a guide for the best global practices. It was issued after being presented for social dialogue and consultations with associations operating in capital market, investment and financial analysis. These standards are issued to complete the system of disclosure. It includes the Egyptian Accounting Standards and the Egyptian Auditing Standards in addition to the Egyptian Real Estate evaluation standards.
All independent financial consultants and their assistants shall abide by those standards. In addition, it shall be applied in all cases related to the valuation of companies, securities or other assets taking the form of facility or project.
EFSA’s BOD decision no.40 of 2017 regarding the Precautionary Measures set for those who violate trading rules in the Egyptian Gazette (issue no.71 dated 26 March 2017). The said decision stated that some precautionary measures may be taken in case of repeated violations. The said measures prevent the violator from dealing in specialized activities such as margin trading or Intraday trading and also preventing him from purchasing in the market.
If the precautionary action is taken to prevent the violators from dealing during the period of investigation, the period shall not exceed three months. On the other hand, if EFSA requests to file a lawsuit, suspension shall be continued until referring it to the court and a verdict is issued or the public prosecutor saved the incident or the violators make reconciliation with EFSA, whichever is earlier.
These precautionary measures will be applied in a narrower scope. He added that these measures were issued due to the repeated violations of trading rules stated in the Capital Market Law and its Executive Regulations and other related decisions.
The Article 43 of the Capital Market Law stipulates that EFSA shall take the necessary measures to achieve its objectives including regulating the Capital Market to make sure that those transactions are not tainted with fraud, exploitation or speculations.
The Article (4) of Law No. 10 of 2009 regarding regulation of non-banking, financial markets and instruments mandated the Authority to work on the safety and stability of financial markets and to provide means, systems, and rules that enhance the efficiency of these markets and the transparency of the activities. Also, it states that EFSA shall take the necessary measures to reduce manipulation and fraud in those markets.
EFSA’s BOD decision on amending listing and delisting rules was published in the Egyptian Gazette stipulating that a period of 21 days shall be set between notification of shareholders or invitation to the General Assembly Meeting of a joint stock company and the meeting of the General Assembly.

The amendment to Article 35 of listing and delisting Rules comes within the framework of applying best practices to protect shareholders and within the context of improving Egypt's ranking in international indicators like the World Bank Investment Climate indicator.


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