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CMA LAW: Resolution No. (12) of 2016 Regarding Issuance of Appendix 10 of Module Eleven of the Executive Bylaws of Law No. 7 of 2010 (Execution Rules of Securities)
Date Publish
03 March 2016
Having Perused:
- Law No. (7) of 2010 regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and its Amendments, and its Executive Bylaws; and
- Based on CMA Board of Commissioners' Resolution passed in its meeting No. (8) of 2016 held on 29/2/2016 on approving issuance of Appendix 10 (Execution Rules of Securities) of Module Eleven (Dealing in Securities) of the Executive Bylaws of Law No. 7 of 2010 regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and its Amendments.
The Following Was Resolved
Article (1)
Appendix 10 (Execution Rules of Securities) of Module Eleven (Dealing in Securities) of the Executive Bylaws of Law No. 7 of 2010 regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and its Amendments, and its Executive Bylaws, which is attached to this Resolution, is hereby issued.
Article (2)
The concerned bodies shall execute this Resolution, each within its jurisdiction. This Resolution shall come into force from the date of issuance. It shall be published in the Official Gazette.
Mishaal M. Al-Usaimi
Vice Chairman, CMA Board of Commissioners
Issued on: 3/3/2016
Appendix 10
Execution Rules of Securities
Preamble:
This Appendix includes sale rules for execution of attached Securities, pursuant to a writ of execution and an attachment report of the debtor’s garnishment, and a report disclosing what they hold in their custody issued by the Issuers or the Obligors or the Clearing Agency, according to the regulations mentioned in Chapter Ten herein above.
First: General Rules
1. Receiving the execution request and specifying the sale date:
The Authority, upon a request of the General Department of Execution, shall specify the sale date of attached Securities pursuant to the writ of execution and the attachment report of the debtor’s garnishment, and the entity’s declaration of what it holds in its custody. The sale date shall be set within a period not less than 30 days and not more than 60 days from the date on which the request received by the Authority.
2. Appointing the entity which conducts the sale:
The Authority shall appoint a Broker or Investment Portfolio Manager from the list of Licensed Persons to conduct the sale of Securities subject to execution according to the mechanism determined by the Authority. The appointed Broker shall determine the base price of Securities which are unlisted or suspended from trading in the Exchange. If the entity which conducts the sale faces any obstacle which prevents it from performing its tasks, the Broker or Investment Portfolio Manager whose name is next on the list of Licensed Persons shall be chosen.
3. Determining the sale medium:
a. The sale medium of listed Securities, which are subject to sale by execution, shall be through the Exchange.
b. The sale medium of Securities which are unlisted or suspended from trading and are subject to sale by execution shall be through an auction.
c. Any other medium deemed by the Authority to achieve interest.
4. Opening temporary trading account:
The Authority shall notify the Clearing Agency to open a temporary account to execute the sale under the name (Ministry of Justice – General Department of execution – indebtedness (name of debtor).
5. Announcing the sale on the notice board in the Exchange:
The Authority shall notify the Exchange to declare the sale of Securities by an announcement on the notice board in the Exchange, which shall be ten days before the determined date for the sale and on daily basis. The sale announcement shall include the following:
a. Sale days, time and place.
b. Security’s name, type and volume.
c. Auction times of Securities which are unlisted or suspended from trading.
d. Sale conditions and base price of Securities which are unlisted or suspended from trading in the Exchange.
The Authority may obligate the company, whose Securities are suspended from trading or the unlisted company that issues Securities subject to execution, to disclose the last approved financial statement if the Securities subject to execution reach a percentage with a significant effect, as deemed by the Authority.
Second: Procedures of executing sale of Securities
1. Submission of execution request, and determination of the sale date shall only be after fulfilling the necessary conditions and requirements, in particular the following:
a. Original copy of the served writ of execution.
b. Original copy of the attached entity’s report of what it holds in its custody.
c. Original copy of the attachment report of execution.
The submitted request shall be notated in the public record at the Authority.
2. Specifying whether the securities subject to execution are listed or unlisted or suspended from trading.
3. The entity which conducts the sale shall declare whether there is an obstacle or not, and shall undertake to perform the sale procedures upon request, within three days from notifying it of its appointment.
4. The Exchange shall announce the sale of securities subject to execution on the notice board in the Exchange according to the information it receives from the Authority.
5. Sale of Listed Securities:
a. The entity conducting the sale shall carry out the sale of Securities subject to execution on the specified date as published on the notice board in the Exchange according to the medium specified by the Authority.
b. The entity conducting the sale shall seek the best price for selling such Securities, without affecting the trading in the Exchange.
c. If the sale days end without selling all or some of the Securities subject to execution, the entity conducting the sale shall notify the Authority of the same, and the Authority shall inform the Public Department of Execution to specify another date to conclude the sale transaction. The execution judge, upon the request of the stakeholders, may extend the sale period until all Securities subject to execution are sold, or until the debt value is fulfilled.
d. The entity conducting the sale shall offer the Securities subject to execution at the beginning of the trading session on the specified date. It shall abstain from selling Securities which exceed the value of the debt and the execution costs.
e. The Authority, if it deems necessary, may request the entity conducting the sale to divide the sale transaction of the Securities subject to execution over more than one trading session, which shall not be more three Business Days.
6. Selling Securities which are unlisted or suspended from trading:
a. Broker conducting the sale shall specify the base price of Securities which are unlisted or suspended from trading. He shall perform his task and notify the Authority in his report which include the base price within five Business Days from the date of his appointment by the Authority, and he shall comply with the following criteria:
• Unlisted Securities:
Price of unlisted Securities shall be determined by the Broker based on the Clearing Agency’s statement about the price of the last transaction of the Security subject to execution and its date, in addition to the unlisted company’s statement about the Security’s book value according to the last approved financial statement. The base price shall be determined in the highest value.
• Securities Suspended from Trading:
The price of Securities suspended from trading shall be determined based on the price of the Security’s last transaction.
b. The auction session for selling Securities which are unlisted or suspended from trading shall be held on the specified time. The entity conducting the sale shall be aware of such session, and it shall be attended by a representative of the General Department of Execution, the Authority and the Clearing Agency (and the Exchange if the Securities are suspended from trading). Its procedures shall be notated in a sale report prepared by the entity conducting the sale according to the provisions of Article (10-24) herein above, and it shall be signed by the representatives of the mentioned entities.
c. The entity conducting the sale shall carry out the sale transaction of the Securities subject to execution on the determined date, which is published on the notice board in the Exchange, at a public auction or through the sale medium determined by the Authority based on the specified base price. It shall refrain from selling Securities which exceed the debt value and the execution costs.
d. In case no person makes any bids for purchasing Securities subject to execution in the auction session during the period specified in the sale announcement, the entity conducting the sale may adjourn the auction session and notate the same in the sale report. The auction session shall be held again the next Business Day. If no person makes any bids for the purchase, the session shall be adjourned and that shall be notated in the sale report. The auction session shall be held again the next Business Day, and Securities shall be sold to whoever wins the bid even if the price is less than the valuation price.
7. After completing the sale report and signing it by the representatives of entities mentioned in item (6) paragraph (b) of this Appendix, the entity conducting the sale shall submit the sale report to the execution officer to have it approved by the execution judge and shall notify the Authority and the Clearing Agency (and the Exchange for the Securities which are suspended from trading) of completing the same.
8. The Authority, upon a written request from the debtor, may adopt another medium for selling Securities subject to execution through the trading system or execution in an auction, as the case may be, if it deems that such medium would achieve public interest or interest of all parties. In addition, the sale proceeds shall fulfill all of the required debt value, or obtain a written approval from the creditor if the sale proceeds were less than the requested debt value, and a written approval from the pledge creditors, if any.
9. Selling Securities subject to execution in an auction sale shall only be taken into consideration after obtaining the judge’s approval of the sale reports, and shall notify the Authority, the Clearing Agency, and the entity conducting the sale (and the Exchange for Securities which are suspended from trading) of the same.
10. In all cases, the execution costs shall be calculated according to the system adopted in the Exchange. Such costs shall be distributed as follows:
a. Execution costs of listed Securities:
- Entity conducting the sale 70%
- Exchange 29%
- Clearing Agency 1%
b. Execution costs of unlisted Securities:
- Entity conducting the sale 70%
- Clearing Agency 30%
11. The Clearing Agency shall carry out the settlement and clearing procedures, make the necessary amendments to the Securities’ holders register, and deposit the sale proceeds in the treasury of the General Department of Execution after deducting the execution costs of the sale transaction. The General Department of Execution may distribute the sale proceeds pursuant to the provisions of the law.
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