Title: Circular No. (16) of 2023 Regarding the Rights Following the Securities Ownership of Clients

"Circular to all Investment Portfolio Managers"

Chairman of the Board of Directors 

Greetings,

In line with the objectives of the Capital Markets Authority, which aims to “Enhance investor protection” and “Impose requirements of full disclosure in order to achieve fairness and transparency, and to prevent conflicts of interest and the use of inside information”,as well as” Ensure compliance with the rules and regulations related to securities activities”, and within the framework of ensuring compliance with the Executive Bylaws of Law No. 7 of 2010 on the Establishment of the Capital Markets Authority and Regulating Securities Activities and their amendments.

And in view of the observations of the Capital Markets Authority regarding a negative phenomena among some licensed persons managing investment portfolios, by not adhering to the provisions of Law No. 7 of 2010 Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and their amendments when carrying out their activity related to client portfolios. This negative phenomenon can be summarized as follows:

The investment portfolio manager exercises control of an unannounced, indirect ownership in one of the listed companies exceeding 5% through investment portfolios of securities for the benefit of clients and managed by the investment portfolio manager, through assigning the voting rights of securities owned by clients in those investment portfolios to the benefit of investment portfolio manager without disclosing the realized interest from this alliance with others.

Therefore, the Capital Markets Authority urges all investment portfolio managers to comply with the legal obligations related to practicing the activity of investment portfolio manager for the rights following the ownership of clients’ securities on their behalf for an interest of up to 5% or more of the capital of a company listed on the securities exchange through the clients’ investment portfolios (whether the portfolio management mechanism was managed by the company, or the client, or the custodian), as this is considered an (indirect) benefit in an alliance with others, which requires the investment portfolio manager to disclose this interest realized between the investment portfolio manager and his clients.

Accordingly, all investment portfolio managers shall abide by all regulatory and legal requirements for exercising the rights following the securities ownership of clients , especially the following:

• Article (100) of Law No. 7 of 2010 Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and its Executive Bylaws and their amendments.

• The definition of “Acting in Concert” of Module One “Glossary” of the Executive Bylaws of Law No. 7 of 2010 Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities.

• Item No. (5) of Article (2-1-2) of Module Ten (Disclosure and Transparency) of the Executive Bylaws of Law No. 7 of 2010 Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities.

We kindly request your compliance with the content of this Circular.

Prof. Ahmad A. Al-Melhem
Issued on: 10/12/2023

Copy of the Official Document