CMA LAW: A Circular to all Licensees Practicing the Activity of Securities Brokerage Regarding raising clients' awareness of the trading conducts which violate the provisions of Article (122) of Law No. (7) of 2010, and compliance with the related legal responsibilities No. (CMA/S.S/S.C.M/2/2013)

Mr. Chairman of the Board of Directors

Based on the Capital Market Authority's objectives concerning "raising public awareness of securities' activity; and the benefits, risks, and obligations related to investing in securities and encouraging its development", in addition to the Board of Commissioners competencies regarding "providing the appropriate regulations for protecting traders and limiting the inappropriate, illegal, and unfair practices in securities' activity", and in execution of the provisions of Law No. (7) of 2010 regarding the Establishment of the Capital Market Authority & Regulating Securities' Activity, and in order to observe and limit the practices and conducts that have either negative or positive impact on the prices of the listed securities that affect the market indexes, especially the ones that are considered as types of manipulation and may mislead people when trading in securities; punishments of such acts are mentioned in Article (122) of Law No. (7) of 2010, and due to the Capital Market Authority concern of protecting traders from these practices; securities brokerage companies trading in the market shall comply with the following:

First: Raising Clients' Awareness

Securities brokerage companies shall take all the necessary procedures to raise their clients' awareness regarding inappropriate conducts and practices which violate the law, while emphasizing that they shall avoid any acts that may lead to such conducts and practices in order to promote the legal awareness to protect them from committing such acts; punishments of these acts are mentioned in Article (122) of Law No. (7) of 2010 Regarding the Establishment of Capital Market Authority & Regulating Securities' Activity. This includes providing written warnings to clients who own electronic trading accounts in order to clarify the risks of transactions that may involve the crimes stipulated in Article (122) of Law No.7 of 2010, or inform them that the deal that will be entered may lead the client to commit the crimes stipulated in Article (122) of Law No. (7) of 2010.

Second: Legal responsibilities of securities brokerage companies towards Clients

Provisions of Article (151) of the Executive Bylaw of Law No. (7) of 2010 stipulate the following:  "Any condition releasing the licensee from responsibility or limiting the same shall be null and void if such release from or limitation of responsibility contradicts with the obligations of the licensee in accordance with the Law or this Bylaw", and the provisions of Article (164) of the Executive Bylaw of Law No. (7) of 2010 stipulate the following: "The licensee shall clearly and sufficiently inform the client of the nature of the risks associated with the type of transaction which shall to be entered by the client".

We would also like to affirm your involvement in the legal responsibilities towards any criminated acts as provided in Article (122) of Law No. (7) of 2010 if the CMA finds that your company did not carry out the required awareness role for limiting such acts.

We hope you would lay down internal procedures to contribute in raising clients' awareness and strive to limit such conducts and practices.

Dr. Mahdi Ismael Al Jazzaf

Vice Chairman of CMA Board of Commissioners

Date of Issue: 30/5/2013

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