Dose the Capital Market Institution -licensed in carrying out securities business- have to work in accordance with certain principles or obligations?
An authorised person must comply with the following principles:
1) Integrity, by conducting its business with integrity.
2) Skill, care and diligence, by conducting its business with due skill, care and diligence.
3) Efficiency of management and control, by taking reasonable care to organise its affairs responsibly and effectively, with adequate risk management policies and systems.
4) Financial prudence, by maintaining adequate financial resources in accordance with the Rules issued by the Authority.
5) Proper market conduct, by observing proper standards of market conduct.
6) Protection of Clients’ assets, by arranging for adequate protection of its clients’ assets.
7) Co-operation with regulators, including disclosing to the Authority any material event or change in the authorised person’s business operations or organization.
8) Communications with clients, by communicating information to them in a way which is clear, fair and not misleading.
9) Paying due regard to customers’ interests, by treating them fairly and paying due regard to their interests.
10) No conflicts of interest, by managing conflicts of interest fairly, both between itself and its customers and between a customer and another client.
11) Customers’ suitability, by taking reasonable care to ensure the suitability of its advice and discretionary managing decisions for any customer to whom it provides those services.
Is there any required paid up capital when for carrying on securities business?
Yes, the paid up capital of the applicant must not be less than the following:
• dealing, custody and managing: SR 50 million;
• arranging: SR 2 million; and
• advising: SR 400,000.
• All activities SR 50 million.
Where is the management and head office of the Capital Market Institution required to be in?
An authorised person must have its management and head office in the Kingdom.
What are the registerable functions? Who prescribes them?
The Authority shall prescribe the registrable functions. The following functions are considered functions that must be performed by registered persons:
1) CEO or Managing Director;
2) finance manager;
3) a director or partner;
4) senior officers or managers;
5) compliance officer;
6) MLRO;
7) client functions, including sales representatives, investment advisors, portfolio managers and corporate finance professionals as defined by the Authority.
What does Securities Business mean?
A security activity shall mean any of the following activities:
◾Dealing
◾Arranging
◾Managing
◾Advising
◾Custody
What does Dealing activity mean?
Dealing activity means a person deals in a security as principal or as agent, and dealing includes to sell, buy, manage the subscription or underwrite securities.
What does Arranging activity mean?
Arranging activity means a person (natural or legal person) introduces parties in relation to securities business, advises on corporate finance business or otherwise acts to bring about a deal in a security.
What does Carry out Securities Business means?
Securities business shall mean engaging in any of the securities activities specified in Article of the Securities Business Regulations by any person acting by way of business unless any of the exclusions specified in Chapter 2 of Part 2 of the mentioned regulation apply.
When is a person considered carrying out securities business in the Kingdom?
A person carries out securities business in the Kingdom if:
a) he engages in securities activity from a permanent place of business in the Kingdom;
b) he is presumed to carry out a securities activity from a permanent place of business in the Kingdom in any of the following situations:
1. he engages in the relevant activity, or in securities business generally, in the Kingdom; or
2. he engages in the relevant activity with or for a person in the Kingdom.
Does carrying out a Securities business in the Kingdom need an authorization?
A person who intends to carry out securities business in the Kingdom must have an authorisation issued by the Authority, Unless a person is an exempt person as specified in Annex1 to the Securities Business Regulations.
Are there any securities business activities do not require an authorisation from the Authority?
There are some securities business activities do not need an authorization from CMA, as follows:
◾ The activities within the groups and joint projects.
◾ activities carried out in the course of carrying out any profession or business which does not otherwise consist of carrying out securities business.
◾ Sale of Goods and Supply of Services if the activity of the securities is necessary or complementary to those purposes.
◾ executor of a will.
◾ Activities related to the sale of the company.
And that is according to the details contained in these regulations.
Is a person excluded from the authorisation when dealing in securities that is not a contractually based security as a principal?
Dealing by a person as principal in a security that is not a contractually based security is excluded unless:
a) the person holds himself out as engaging in the business of dealing in securities; or
b) the person regularly solicits members of the public to deal in securities.
Who are the addresses in the Prudential Rules?
The addresses in the prudential rules are the authorised persons that are authorised to carry out any of the securities business in the Kingdom.
What is the purpose of these Prudential Rules?
The purpose of these Rules is to specify the requirements that an authorised persons needs to comply with to maintain its financial prudence, confront any losses and ensure continuity of its business. The Rules also aim to ensure the availability of the needed financial resources to carry on the authorised person businesses.
What is the capital base?
The capital base consists of Tier-1 capital and Tier-2 capital which are calculated as per the Prudential Rules.
