AMERCAMERC Quarterly Quarterly Review Review A PUBLICATION OF THE AFRICA MIDDLE EAST REGIONAL COMMITTEE OF IOSCO 57th Edition / January to March 2020

EDITORIAL BOARD Luke Ombara Chairman

Antony Mwangi Member

Leah Muli Member

Viola Kilel Member

Published by AMERC Secretariat: Capital Markets Authority Kenya, 3rd Floor Embankment Plaza , Upperhill, Longonot Road. Nairobi, Kenya. 1 +254 20 2264900, [email protected], www.cma.or.ke AMERC Quarterly Review

HIGHLIGHTS OF THE 44th AMERC MEETING AND CONFERENCE 29 – 30 JANUARY 2020 IN DOHA, QATAR

FOR PRIORITIZATION AND FOLLOW UP Dear AMERC Members, Key Matters for IOSCO Board Meet- ing It was a pleasure to attend the just concluded AMERC Meeting and Conference hosted by the 1. Market Conduct – Mr. Andrews em- Qatar Financial Markers Authority Africa (QFMA) phasized the impact of evolving tech- led by the Chief Executive Officer, Mr Nasser Ah- nology, such as Artificial Intelligence mad Al-Shaibi. I would also like to thank the im- and Machine Learning, on marketbe- mediate former AMERC Chair, Mr Paul Muthau- haviour. Issues for consideration include ra, who joined us for the meeting, and extend conflict of interest, incentivisingmarket my appreciation for his contributions to AMERC intermediaries to improve behaviour, during his tenure. legal but harmful conduct and its im- pact on outcomes for investors. I also want to express my gratitude to the IOS- 2. Sustainable Finance – Mr. Andrews CO Secretary General, Mr. PaulAndrews, for his said the Sustainable Finance Network presence and valuable contributions in the of IOSCO would produce a report high- meeting. The presenceof heads of delegation lighting 10 recommendations on sus- from across the AMERC region demonstrated tainable finance. their commitment to AMERC, and the meeting 3. Financial Stability - Mr. Andrews said presented a good opportunity to share experi- the three key pillars of IOSCO are; inves- ences from the various jurisdictions and to learn tor protection, fair & efficient markets, from each other. and systemic risk. He observed that the Financial Stability Board takes the lead I observed that low listings and declining IPOs on systemic risk but the IOSCO Board is remain a major regional concern. Based on the taking a key interest on systemic risks in findings on the AMERC Survey on listings and the capital markets. the discussions that emerged, there was an ex- 4. Asset Management - the Board pectation from members to look at the wider would be expected to consider the use context of capital markets solutions that can be of leverage in investment funds in a way leveraged by businesses including private eq- that could support financial stability. uity. In this context, I appreciated the presence The Board will consider liquidity, data of Financial Sector Development Africa (FSDA) collection, leverage issues and mea- who are supporting the workstream of the List- surement of leverage across all funds ings Working Group. and jurisdictions. The key focus was not- ed to be establishing a consistent rather Its important to undertake a continuous review than identical arrangements given the of global and domestic risks inrespective juris- very distinct types of funds and uses of dictions and take mitigation measures to pro- leverage; mote financial stability. Open deliberation of 5. Market fragmentation – Mr. Andrews risks and opportunities would help build pro- indicated that this was a key issue for active mitigation measures, support harmoni- the G20 Presidency of Japan. The Board zation of rules and laws and promote improved is considering the next steps forward information exchange amongst regulators. given that this is a key issue.

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Update on the Listings Project 6. Elections - Mr. Andrews noted that elections Mr. Guillermo Larraín from the consultant, are held every even number year and indicated ChileCapital, presented a summary of find- this will be coming up to fill various slots. ings. Some of the key recommendations arising from the work of the consultancy Presentations on Parallel Market and Fin- supporting the AMERC Working Group on tech Regulatory Sandbox Framework Listings include: exit strategies for private The presentations, which were prepared by equity through the capital markets to en- the Capital Market Authority of Saudi Arabia, hance market deepening, creating more gave an opportunity for members to learn awareness on the opportunities available from Saudi Arabia’s experience in setting up a in the capital markets; reviewing compli- parallel equity market with less onerous eligi- ance costs for listed companies especially bility requirement and their fintech regulatory in the SME segment and encouraging fam- sandbox, which were appreciated by members ily-owned businesses to consider listing on looking at innovative approaches to encourage the securities exchanges. listings and facilitate deepening of their capital markets. AMERC members expect to benefit from the outcome of the consultancy on listings to Presentation by QFMA on QFMA AML/ unlock the potential for additional listings; and promote and deepen market-based fi- CFT Digital Learning Module QFMA showcased their innovative learning nancing through capital markets products module in partnership with the Chartered In- in the AMERC region. Noting the diverse stitute for Securities & Investment (CISI) where levels of development of markets in the they devised a professional assessment digital region, the work will leverage lessons from module on AML/CFT rules and regulations na- jurisdictions that have increased listings tionally and internationally for capital market through policy interventions and innova- professionals. tive and facilitative regulatory frameworks.

Top Risks and Initiatives Members presented highlights of domestic Discussion on Priorities in the AMERC risks affecting their markets and the oppor- Region The presentation, which was prepared by the tunities they were seeking to capitalize on. Capital Market Authority Saudi Arabia, high- There was a great deal of coherence and lighted the main preliminary analysis of the consistency in both risks and opportunities survey conducted among AMERC Members across the region. to identify their priorities and perceived chal- lenges. The top three priorities identified in the On the risk side key concerns include; regu- survey were; fintech, capacity building, and sus- latory responses to trading in crypto assets; tainable finance. Members were encouraged to cyber security threats; unfavourable mac- complete the survey tool and submit their re- ro-economic environment; political risk; sponses as so far only 30 percent of the mem- non-responsive regulatory framework; rep- bers had responded. It was also proposed that utational risk; regulated entities engaging a team is formed, consisting of several AMERC in unlicensed/new business lines without members, to analyse the results in order to pres- prior regulatory approval; over-regulation; ent the outcomes in the AMERC Annual Meet- low uptake of capital markets products and ing in June. services; lack of diversified products; de- cline in IPO activity; low level of liquidity; combating money laundering; protection of retail and non-qualified investors; en- hanced corporate governance disclosure; systemic risks; proliferation of unregulated online products;

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They also identified opportunities to grow mar- The need for smart regulation cannot be em- kets including; promoting fintech-related inno- phasized enough given the level of innova- vations; optimal use of risk-based supervision tion in the market and the legal implication in the licensing and approval process; develop- that follow. It is important to understand that ment of the bond market; enhanced information it’s not an all size fits all and each jurisdiction sharing among regulators; artificial intelligence/ should consider what works for them. Secu- machine learning; mandatory listing of pub- rities regulators should be flexible and fair lic interest companies; local currency financing in accommodation new technologies while of infrastructure projects; introduction of new ensuring investor protection. The capacity of products such as exchange traded derivatives; regulatory staff should be enhanced including encouraging retail investors to consider collec- use of Regtech. tive investment schemes; and deepening finan- cial literacy and education through social media. Principle based approach to regulation will encourage innovation but all the while taking Public Conference stock of the risks that come with technology. The QFMA 3rd Annual conference was attend- Discussions by QFMA on mechanisms of pro- ed by high ranking Qatar officials. Keynote ad- tecting minority rights will ensure their par- dresses by the QFMA Chief Executive Officer. Mr ticipation in securities market when they feel Nasser Ahmad Al-Shaibi, and IOSCO Secretary protected. International standards and best General, Mr. Paul Andrews, set the tone of the practices require protection of minority rights conference. The 5 panel discussions addressed through well governed companies, minority current pertinent matters in the capital markets voting rights, protective rights from related space. It was noted that apart from financial lit- party transactions and adequate investor re- eracy initiatives to promote uptake of capital lations. Independence of boards and level of market products, focus should begin to shift to transparency and disclosures will improve the the financial health of the investor. On crypto level of trust of minority investors. assets, regulatory interventions should not stifle innovation but build trust and protect investors. Upcoming Meeting The need for securities regulators to gain a deep- I would like to note that the AMERC Meeting er understanding of the underlying technology and Conference, 2021 will be hosted by Com- is essential to manage this delicate balance be- mission d’ Organisation et de Surveillance des tween regulation and facilitating innovation. Operations de Bourse (COSOB) Algeria and thereafter we will seek expressions of interest Low listing and liquidity in most markets was for hosting of the AMERC Meeting and Confer- identified as a major challenge. The panel dis- ence in 2022. cussions on enhancing capital markets listing and liquidity encouraged members to share reg- Finally, I look forward to working with all ulatory experiences on improving listings. Key members and thank you all for your continu- initiatives identified included; financial literacy ous support to ensure that AMERC continues initiatives especially educating entrepreneurs to make significant contributions for the over- on alternative methods of financing, bring eli- all improvement of the global securities mar- gible companies into an incubation system that kets. will end in listings, relaxing listing requirements for certain market segments, reduce time to Regards, market and associated listing costs. Liquidity can be improved by use of market makers, product MR. KHALED ALHOMOUD diversification and stock splits. COMMISSIONER, CAPITAL MARKETS AUTHORITY SAUDI ARABIA VICE CHAIR AMERC

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ANGOLA UPDATE FROM CMC ANGOLA

This programme was desgned to dispel doubts, collect contributions and improve the entire AGT HOLDS A VAT LAW CLARIFICATION logistical apparatus essential for the ccorrect and SESSION proper implementation of VAT without jollts, so that economicc agents are in harmony with the new measures.

CMC HOLDS THE VIII ANNUAL STAFF GATHERING

VAT Law Clarification session

The Capital Markets Commission (CMC) hosted in February at it’s premises the Tax Authority (AGT), that held a clarification session on the Law approving Value Added Tax (VAT). VAT is a tax that, besides being able to improve the State tax revenues, forces the trader to have his accounting well run. VIII Annual staff gathering The event was conducted by senior tax officers from AGT, who spoke to an audience consisting The Capital Markets Commission (CMC) held it’s 8th Annual of representatives from Brokers, Collective Staff Gathering from 29 to 31 January 2020. Investment Schemes Management Companies, Investment Companies, Real Estate Appraisers and The event main objective was to gather contributions CMC staff. and reflections from CMC employees on the various topics under analysis through open, interactive Topics discussed during the session ranged from and multidisciplinary discussions, leading to the the general aspects of VAT functionality to the implementation of the measures and actions set legal framework for invoices and equivalent out in the 2020 Action Plan, as well as in the 2017- documents. The AGT officers clarified the main 2022 CMC’s Strategic Action. changes of the implementation the VAT in the financial institutions under the supervision of the For three days, the participants in the VIII Annual representatives of institutions from the Angolan Staff Gathering of the Capital Markets Commission financial system, such as BAIGEST, Atlântico Gestão focused on various themes, some of them related to de Activos, Odell Global Investors, BFA Gestão de the organisational and institutional sphere, as well Activos, Económico Fundos Investimento, BNI as the boosting of the different segments of the Asset Management and Madz Global and Africa angolan securities market, with particular emphasis Brokers participated in the session. on the equity market, which continues to be the main topic of debate and the greatest challenge This event is part of the clarification programme ahead. carried out by the tax authority regarding the importance and advantages of VAT for the Angolan economy.

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ANNUAL MARKET REPORT SUBMITTED The Angolan Stock (BODIVA) will implement a BY BODIVA programme, in partnership with the London Stock Exchange, aiming to help companies prepare for the entry into the stock market.

The Minister of Finance, Mrs. Vera Daves de Sousa explained that the company preparation program, Investor Readiness Program, results from an agreement signed in January with the London Stock Exchange and will focus mainly on the 17 companies that will be privatized via capital market.

The program will help the Angolan companies to BOLDOVA be prepared to meet the investment requirements The Angolan Stock Exchange (BODIVA) presented demanded by investors in the international markets. the “BODIVA Markets Annual Report” in March 5 in Luanda. The Minister highlighted the importance of the, partial, opening of the capital account by On the same instance BODIVA promoted the the National Bank of Angola, a mechanism that launch of a magazine, called A BOLSA, which creates the conditions for the effective entry of compile all the information regarding the activity foreign investment, hopefully through BODIVA. of both the market and the BODIVA members, in In the current context of uncertainty and public order to make it known to the public. expenditure restraint, it is even more relevant to activate the financing of companies and the The event also served to bring together the main economy via capital market. players of the Securities Market managed by BODIVA with the aim of discussing the challenges CMC ADDRESSES THE IMPACT OF and paths to be followed in order to make the CORONAVIRUS IN THE WORLD AND IN THE securities market an effective reality in teh ANGOLAN ECONOMY Angolan economy.

During the event, cooperation agreements were also signed with international entities, which aim to ease the exchange of information and services that seek to develop the business sector of BODIVA and the securities market.

BODIVA LAUNCHES PROGRAM TO PREPARE COMPANIES FOR STOCK MARKET Sessions on Impact of cornavirus in the world and in the Angolan economy

The Capital Markets Commission held on the March 6, another edition of “Breakfast”, an event aimed to address and promote a reflection on the current economic issues.

The Economic Impact of Coronavirus was the subject of this edition, whose debate focused on BODIVA launcches program to prepare companies for stock market the importance of China in the world economy, the

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• possible impacts on the world and Angolan • economy. • • The fall in the price of oil, essentially as a result of • the global economic cooling, predicts a reduction • in Angola’s Net International Reserves (NIR), • consequently the rise in the exchange rate, the high • risk of an increase in the inflation rate, culminating • in an inevitable increase in the level of public • indebtedness. • • SUPERVISORY AND ENFORCEMENT ACTIVITIES Source: GVIME From January to February, the CMC carried out monitoring activities within the scope of the prudential supervision of its regulated entities, specifically, Intermediaries Agents, Stock Exchange and the Collective Investment Schemes.

The supervision of the entities totalised sixty-two (62) off-site supervisions, one (1) registered entities and one (1) transgression process, as described on the table below:

Table 1: Supervisory and Enforcement Activities from January to February 2020

Fonte: DSOIC,DSIFIM e GIC

TRADING OF TREASURY BONDS ON THE DEBT AND STOCK EXCHANGE FROM JANUARY TO FEBRUARY 2019

During the first quarter, the Angolan Stock Exchange (BODIVA) registered a trading of treasury bonds in the amount equivalent to USD 160,662,361 in January, USD 156,823,839 in February respectively, showing a negative variation in both months, according to the table below:

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CRPMF UPDATE FROM CRPMF

This decision was enacted by the Authority of BACKGROUND Heads of State and Government of the Union in July 2018. The proceeding of using the new name is The Conseil Régional de l’Epargne Publique et des undergoing and will be effective after the ratification Marchés Financiers (CREPMF) has continued, during of the modified Treaty by all the members’ states. T1 2020, the implementation of reform projects aimed at increasing the attractiveness of the AT THE REGULATORY LEVEL market, strengthening protection of investors and institutional reforms. During the first quarter of 2020, the following regulations were promulgated by CREPMF: For that, it has defined with others stakeholder of the market New priorities coveringthe period 2020 Green, social and sustainable bond issuance – 2024 with the same declined vision in the last guides Strategic plan “Make the WAMU Regional Financial CREPMF has published on 27 th March, 2020 Market an attractive and secure African financial regulation about Green, Social and Sustainable center for sustainable financing of the economies of Bonds. The Guidelines are based on the International the Union”. Capital Market Association (ICMA) principles, the leading setting of standard for sustainablefinance. The new priorities are articulated around four (4) This regulation has been written with the assistance goals: of InternationalFinance Corporation, a member of the World Bank Group. http://www.crepmf.org/ • Improving the governance and capacities of Wwwcrepmf/Actualites/Pdf/CIR_PJ_2019_0001.pdf stakeholders in the Regional • Financial Market (CREPMF, Central Structures, Regulation on the issuance of sovereign commercial players); securities • Strengthening investor protection on the Sovereign bonds remain the main issuance Regional Financial Market; securities on the Regional financial market. During • Improving the attractiveness and diversification the last five year, sovereign securities issuances have of the Regional Financial Market; represented more than 90 % of the total of bond • Improving communication and visibility of the issuance including those of the private sector. Regional Financial Market. The findings of the International Monetary Fund The implemented activities during the 1st Quarter Technical assistance program(AFITAC de l’Ouest) of 2020 were driven in the line of these goals in an allow CREPMF to modernize the sovereign bonds institutional, regulatory and operational framework. issuance by adopting new regulation. CREPMF Board adopted this regulation that has been AT THE INSTITUTIONAL LEVEL published on 23 th March 2020. The main advances of the regulation are about: CREPMF has engaged the ratification of the modified Treaty by the eighT member’s state of West Africa - The possibility of adopting a unique decree, by the Monetary Union. Indeed, during the Head of States Minister in charge of Finance, for the issuance in a meeting on July 12, 2019, decision has been taken calendar year; to approve the modified Treaty with the new name - The cap at 10% of the amount of the of CREPMF to « Autorité des Marchés Financiers de oversubscription; l’Union Monétaire Ouest Africaine (AMF – UMOA) ». - The raising of resources and their listing on the secondary market within 30 days;

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- The supervision of the deadlines for the transfer of - The absence of an Investment Committee taking funds collected by the investment or divestment arrangers of the operation to National Treasures; decisions; - The cap at 10% of the amount of the - The discrimination between clients with a view to oversubscription. benefit one at the expense of http://www.crepmf.org/Wwwcrepmf/Actualites/ the other; Pdf/INSTRUCTION_N63- - Carrying out cross transactions between clients 2020.PDF under management under mandate; Regulation relating to the conditions for - The globalization of orders without defining the issuance bond by private allocation rules. To modernize issuance of bonds throw private placement, CREPMF have reviewed the framework Regulation relating to cantonment of funds by publishing new regulation on the matter. The This regulation aims to encourage Brokers to comply main advances related to the revised framework are: with the following requirements:

- the raising up of the maximum amount of the - Keep accounts allowing them to distinguish at any issuance to US$ 34.5 billion instead of US$ 17.25 time the funds held for each client and SGI's billion taking into account market observations on own funds; the recent years; - Regularly reconcile their accounts with those of - the reduction of the nominal value to US$ 17 250 any third party holding these funds; instead of US$ 86 200 to - Take necessary measures to ensure that funds allow a better dissemination of securities between deposited by clients are held in an account or investors and a reduction of accounts separate from any other account used to risks; hold funds belonging to themselves. - the definition of rules about Qualified Investors in order to overcome the different interpretations. MARKET ACTIVITIES http://www.crepmf.org/Wwwcrepmf/Actualites/ Securities raising for the 1 st Quarter 2020 Pdf/INSTRUCTION_N47- During the 1st quarter of 2020, four (04) sovereign 2020_REVISEE.pdf bonds are issues on the WAMU’s market for a total amount of US$ 630 billion US.Secondary market Regulation on the organization of the internal The secondary market remains strongly marked by control system of market operators the decrease in the prices of listed companies since To reinforce the risk management framework, 2016, which led to a general decline in indices and CREPMF has published on 20 th March 2020 new market capitalizations. regulation on the organisation of the internal control system. It should be noted that the decrease was less http://www.crepmf.org/Wwwcrepmf/ pronounced in 2019 with a fall of BRVM Composite Reglementation/pdf/Instructions/INSTRUCTION_ index at 7.55% compared to 2018 when it closed N61-2020.PDF down 29.14%. In the first quarter, the main index decrease by 15.79%. In the period under review, Regulation on asset management eleven (11) of the forty-six (46) companies listed The new adopted regulation is accompanied with a increased their prices. model contract of mandate for the management of a securities account and aims to prevent the abuses The total market capitalization decreased by 1.82% below: to US$ 15.22 billion compared to December 2019. - Non-compliance with the principles of allocation Due to the prices decrease on the BRVM, the market of clients' securities; capitalization of the equity market, at the end of March 2020, fell down by 15.01% to US$ 6.98 billion. However, the bond market increased by 12.97% to

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US$ 8.24 billion over the same period. It should be development of the regional financial market of the noted that the bond market performance is due to WAMU for the period 2020 – 2024 and is articulated thelisting of new issuance on the BRVM. around three (3) main components included (i) The market transactions carried out has a support for strengthening market surveillance, represented a volume of 28.86 millions of shares with a view to preventing and managing risks, (ii) and an estimated value of US$ 0.05 billion. That a support for strengthening consumer protection represented a respective increase of 71.39% and and investors education and (iii) the coordination of 14.14% compared to the first quarter of 2019. the project.

Dialogue with the markets intermediaries and trade parties on the 2020 Outlooks – 21th January 2020 Although the appreciable results of the regional financial market, essential operational and strategic efforts are to be made, given the challenges that arise.These are among others the risks linked to the increase in the number of actors not correlated with evolution in the secondary market, challenges of competitiveness,, diversification/innovation, security, and the investor base.

The establishment of an Investor protection fund, the listing of SMEs in the 3 rd. compartment of Joint Capital Markets Conference “J-CAP 2020” the BRVM, the securities tax harmonization, listed in thepriorities of CREPMF during 2020 were In collaboration with the World Bank Group, the encouraged. first edition of the Capital Market Conference was held on February 10 and 11, 2020 in Abidjan, with the central theme: “CAPITAL MARKETS: INVESTING FOR GROWTH”. The conference brought together around 300 people made up of both political and economic leaders.

This conference aimed to share innovative and relevant solutions for the development of local financial markets, in particular those of the Union, by deepening the reflections on the constraints identified and by drawing inspiration from successful models and experiences of the capital markets.

AFD and CREPMF have committed to a more The exchanges during these two days allowed us to competitive market in West Africa region – 6th measure the significant progress but also to have February 2020 the humility to recognize that there is still a lot to accomplish. CREPMF partnered with AFD in an agreement to implement the Project to Accelerate the To this end, the CREPMF intends during this year Sustainability Development of the Regional and the next few to come: Financial Market (PACDEM). The partnership aims to consolidate financial supervision, consumer protection and investors education in the WAMU’s market. This initiative is part of the new priorities for the

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- Finalize, with the assistance of the World Bank Group, the proposal for a harmonized fiscal framework during 2020; - Speed up discussions on the pricing applicable on the regional financial market for a review in 2021; - Launch the financial education program for investors and establish a certification program for market operators; - undertake reflections with a view to relaxing regulations for a better contribution by the Institutions to long-term financing of infrastructure; - finalization of the Investor Protection Fund in order to increase the robustness and attractiveness of the regional financial market..

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IRAN UPDATE FROM THE SECURITIES EXCHANGE ORGANIZATION

ANNOUNCEMENT ON ADVISORY SERVICES IRAN CAPITAL MARKET ENJOYS ALL ISLAMIC FINANCIAL INSTRUMENTS According to the Securities Market Act of the Islamic Republic of Iran, all investment advisors, portfolio The Chairman of the SEO in an interview said, “Iran managers and capital market participants in general capital market enjoys all globally-known Islamic must obtain the necessary licenses from the SEO financial instruments. Currently Ijarah, Murabaha, to provide specialized and investment services to Vekalah, Istisna, Manfa’ah, and asset-backed (Dayn) investors. Therefore, their professional and financial Sukuks are being utilized in Iran capital market. background and qualifications are observed and These instruments, along with some others on the perused by the SEO beforehand. way, add more diversity and depth to the Iranian market. Mass communication networks including social networking are one way, among others, to He also touched upon different ways of financing circulate and disseminate capital market relevant one of which is crowdfunding. “Crowdfunding” is a information, more often mis-information, to incite recent and modern financing method developed investors to mis-buy or mis-sell. These types of by the SEO, while “Project Fund” is another method advisory services, which do not meet the SEO that can act as a large-scale financing instrument requirements, are considered criminal offenses and to make projects operational. It can help us not to subject to penalties. found a state-owned company.

The SEO advises fresh investors, who do not have the In another part of the interview, he advised the proper financial literacy, to invest indirectly. Direct investors to form a diverse portfolio of stocks, investment requires consultation only with the SEO follow valid stock analysis, disregard rumors, adopt licensed and qualified members and institutions. a long-term investment strategy, enhance financial The complete list of the licensed advisory companies literacy, and capabilities so as to enjoy a high- is available on https://cfi.codal.ir. yielding investment.

OFFICE FOR WHISTLEBLOWERS Finally, regarding the importance of transparency of information in the capital market, Mohammadi The main field of the activities of this office in the pointed out that currently, 91% of information is SEO are as follows: disclosed in a timely manner, 8% delayed and only 1% not disclosed. These one percent violators will • To set a platform to report capital market be prosecuted accordingly so that we reach the misconducts; perfect state of disclosure and transparency. • To identify current legal gaps and to propose how to amend; AMENDMENT TO THE “CAPITAL RAISE” • To study, follow up, and report the received BYLAW complaints regarding capital market misbehaviors, and The Cabinet has approved the amendment to the • Legal protection and dedicating rewards to executive bylaw of the Direct Taxation Law regarding whistleblowers, based on the authenticity, capital raise.Based on this bylaw, companies may helpfulness and relevance of the report. raise capital through the revaluation of their assets. This kind of capital raise is available every five years, and the companies can only raise capital based on this method just one year after the revaluation

12 AMERC Quarterly Review of their assets. Hence, companies may benefit mechanism will be defined in other transactional from tax exemptions only every five years for each ticker symbols. asset class. Based on the relative law and bylaws, if a company, for example, raises capital via “land BANKS’ SURPLUS ASSETS TO OFFER IN THE valuation”, it may not be authorized to raise capital MARKET based on ‘land valuation” for the next five years; while it can be done via other asset classes, for Following the meeting with Ministry of Finance and instance via long term investment or machinery Economic Affairs, Chairman of the SEO revealed and equipment. This is a great opportunity for the that the surplus assets of the banks are to be offered companies for financing. in the commodity market of the capital market. Mr. Mohammadi added that parts of the “Product ACCRUAL SALE’S TRANSACTIONS TO BE Barriers Removal Act” homes in on the sales of IMPLEMENTED surplus assets of the banks, hence, legal frameworks and legal enforcement guarantees for the project The SEO announced that from February 23rd have been prepared. Under this instruction, all two-way transactions has set up. Based on the the banks and credit institutions and their affiliate announcement, the Tehran Stock Exchange (TSE) companies shall offer 33% of the assets, including checked and tested systems related to accrual sale’s movable, immovable and goodwill, fathomed to be transactions; held multiple training sessions about surplus by the Money and Credit High Council of this transactional mechanism for stockbrokers and the CBI in the capital market. active financial institutions, holding coordinating sessions with the capital market corroborative FINEX 2020: A WAY TO PROMOTE FINANCIAL bodies, responsiveness to questions and ambiguities INCLUSION of participants and investors, provided the platform to run this mechanism. The SEO is to organize and hold the 13th International Exhibition of Bank, Exchange and Insurance (FINEX) Furthermore, regarding the studies related to the in 2020 in Tehran. process of choosing marketable ticker symbols for The ultimate objective of FINEX is to upgrade and short selling in selected markets worldwide and enhance the level of financial literacy in society considering circumstances and features of the by acquainting the visitors with the services the Tehran Stock Exchange, the measures for selecting financial sector offers to different parts of society. accrual sale’s transaction are as follows: There are a slew of diverse programs to be exhibited during FINEX by the organizer which will ultimately • Turnover in the last 3 months, lead to the expansion of financial inclusion, in one • Average daily transaction in the last 3 months, form or another. The entire sectors of financial • Percentage of permissible active days of the industry, namely, money, insurance and capital ticker symbol in the last year, market will be present in FINEX 2020. • Percentage of free floating shares, The SEO of Iran extends its invitation to the • Current value of the company. members of IOSCO to partake at FINEX 2020 and • According to the mentioned criteria and the will be offering promotions for a better exhibition. value of each one, the qualified companies will be rated and then observing the variety of ISLAMIC CAPITAL MARKET (ICM) 2020 industries and the kind of active traders (natural and legal entities) and spending a one-year The Islamic Capital Market Forum (ICM) is the period from the date of the first transacting of most famous international Islamic finance event the ticker symbol on the Exchange, the ticker organized by the SEO, and sponsored by the symbol will be chosen. “Islamic Research Training Institute (IRTI)” – the educational arm of the Islamic Development At the onset of this transactional mechanism, Bank (IDB). This prestigious annual event gathers the number of the defined ticker symbols, which together practitioners and scholars all around the are able to execute accrual sale’s transactions, is world, and prepares the platform for knowledge circumscribed and after the requisite checks, this sharing regarding the latest updates in the field

13 AMERC Quarterly Review of Islamic capital market. The aim of this year is to tackle with Islamic Finance issues across the globe, including but not limited to: Fintech (blockchain, tokenization, artificial intelligence, etc.), ESG & SRI (green Sukuk, etc.), SMEs, and regulatory issues.

The 12th International Forum on Islamic Capital Market will be scheduled to hold in Tehran, 13 and 14 September 2020. This year and for the first time, Redmoney Group (IFN) will be the media partner of ICM 2020 here in Iran. So far and during previous 11 courses, around 500 international professionals took part from 46 countries.

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KENYA UPDATE FROM THE CAPITAL MARKETS AUTHORITY

and the Capital Markets Authority (CMA) as well as extensive stakeholder engagement at the County, CDSC Admitted as the Fourth Firm to the National and Parliamentary levels. CMA Regulatory Sandbox The regulations give effect to Section 12(1) (ka) of The Central Depository and Settlement Corporation the Capital Markets Act on regulation of commodity (CDSC) was on 07 April 2020 admitted to the exchanges. In order to address historical and market Regulatory Sandbox to test its proposed screen- structure challenges in the coffee sub-sector, based Securities Lending and Borrowing (SLB) the Coffee Sub-Sector reforms Implementation platform for a period of five months from 07 April Committee (CSIC), where CMA is a member, 2020. While the Capital Markets (Securities Lending, developed the Capital Markets (Coffee Exchange) Borrowing and Short-Selling) Regulations 2017 Regulations 2020 for the sector to reinforce envisages a bilateral model of SLB, the test of the successful reform initiatives for the Coffee Exchange Screen-based model will ensure that any investor anchored in a legal framework. can perform an SLB transaction through approved Central Depository Agents. If the test is successful, The Capital Markets (Coffee Exchange) Regulations the current Securities Lending and Borrowing 2020 provide for; incorporation of the coffee Regulations will be amended to include the screen- exchange; licensing of brokers; establishment and based model and address other issues which have operationalization of a direct settlement system for hampered the uptake of the bilateral SLB product. expedited and transparent payment of coffee sales This initiative is aligned to the Authority’s mandate proceeds; conducting of trading in a secure, stable of promoting the development of Kenya’s capital and transparent manner in an environment of fair market to be an investment destination of choice competition; and protection of the interests of the through facilitative regulation and innovation grower, the buyer and other stakeholders at an anchored in the Strategic Plan (2018-2023) and the exchange. The Coffee Exchange Regulations were Capital Market Master Plan (2014-2023). harmonized with the Capital Markets (Commodity Markets) Regulations 2020. Commodities Markets and Coffee Exchange Regulations Gazetted The Capital Markets Act was amended in 2016 to To facilitate the setting up of structured commodities expand its mandate to regulate Spot Commodities trading in Kenya, by establishing commodities Exchanges. The Authority, in consultation with markets, the Capital Markets (Commodities the National Taskforce on establishment of a Markets) Regulations 2020 and Capital Markets Commodities Exchange in Kenya and the Coffee (Coffee Exchange), Regulations 2020 were gazetted Sector Reforms Implementation Committee (CSIC), by the Cabinet Secretary for the National Treasury developed the Commodity Markets and Coffee and Planning on 3 April 2020. The Capital Markets Exchange Regulations to support the establishment (Commodities Markets) Regulations 2020 will of structured Commodities Exchange(s) in Kenya. facilitate the licensing of commodity exchanges, commodity brokers and approval of clearing houses. Cautionary Statement: Online Forex Trading The regulations further provide for the governance, by Unlicensed Entities trading and conduct of business of commodity In line with its investor protection mandate, the exchanges and commodity brokers, including the Capital Markets Authority (CMA) warned Kenyans disclosure, compliance and reporting requirements. against engaging in online foreign exchange The regulations were developed after a trading through platforms of unlicensed entities as comprehensive consultation process including they risk losing their investments and may not be benchmarking with regional and international protected by the law. CMA also requires all online jurisdictions; expert review by consultants foreign exchange brokers or money managers not commissioned by the State Department for Trade licensed by the Authority to cease and desist from

15 AMERC Quarterly Review trading, conducting sensitizations in Kenya and Leveraging Technology onboarding Kenyan investors or managing online The Authority has continued to leverage on foreign exchange portfolios. technology through posting of infographics on investment opportunities and investor protection CMA has issued three non-dealing online foreign on social media as well as ensuring relevant and exchange brokers licenses to EGM Securities Ltd, current information is accessible to the public SCFM Limited, and Pepperstone Markets Kenya through the Resource Centre Portal, given the Ltd in line with the Capital Markets Act and the prevailing Covid 19 pandemic. In addition, the Capital Markets (Online Foreign Exchange Trading) Authority in partnership with the Chartered Institute Regulations, 2017. The Authority has also granted for Securities and Investments (CISI) collaborated a Money Manager license to Standard Investment on rolling out more online CPD content at lower Bank (SIB) Limited. According to the Capital costs utilizing various mediums.It is worth noting Markets Act, section 23 (1), ‘’ No person shall carry that during the quarter, many of the scheduled on business as online forex broker or hold himself events had to be postponed indefinitely given the out as carrying on such a business unless he holds prevailing circumstances across the globe. a valid license issued under this Act or under the authority of this Act’’. Gazettement of a new class of licensees Pursuant to the powers conferred by section 29 The Authority noted that offshore firms are (7) (e) of the Capital Markets Act, the Authority advertising online foreign exchange products prescribed a new class of licensees under Gazette during this Covid 19 crisis in Kenya without a notice No. 30 dated February 14, 2020 which license. This is illegal and such firms are directed to comprises of: the dealing online foreign exchange cease advertising their services locally unless they broker, non-dealing online foreign exchange broker, are licensed. REIT Trustee and REIT Manager. The gazettement was necessitated by the coming into force of the Strategic Partnerships Capital Markets (Online Foreign Exchange Trading) The Authority hosted an Ethiopian delegation Regulations, 2017 and the Capital Markets (Real facilitated by the Financial Sector Deepening Estate Investment Trust Collective Investment Africa (FSDA) between 7th to 9th February 2020 Schemes) Regulations, 2013. to undertake experiential learning prior to setting up of a capital markets and securities exchange in White Paper on Consumer Financial their jurisdiction. Further on 27th February 2020, Education Strategy on Capital Markets the Authority hosted a team comprising ten (10) The Capital Markets Master Plan (CMMP) stipulates staff from the Awash Bank, the 2nd largest private domestic market accessibility and prosperity as bank in Ethiopia. The objective of the visit was one of the building blocks for Pillar 1, i.e. Support geared towards receiving pertinent information for Developmental and Economic Transformation, with respect to raising capital through the capital through enhancing consumer education and markets as the Country gears up to roll out a stock literacy amongst other action steps. Towards this exchange. end, the Authority through a consultant facilitated development of ‘A White Paper for Consumer Financial Education Strategy on Capital Markets: A guide to inform the Kenya National Consumer Financial Education Strategy.’ The White Paper proposes the development of a National Consumer Financial Education Policy and Strategy (NCFEPS) through a taskforce. The NCFEPS will help to provide focus, momentum and help to avoid unplanned gaps and unnecessary duplication which adversely affect the impact of consumer education initiatives. Staff of the Capital Markets Authority, Financial Deepening Africa with a delegation from Ethiopia Financial Services. The proposed taskforce will be mandated to undertake diagnostic studies, data collection,

16 AMERC Quarterly Review stakeholder engagement, and develop the companies and market intermediaries address the NCFEPS. The NCFEPS is proposed to have an inbuilt challenges posed the need for social distancing implementation plan specifying the role of each occasioned by COVID-19 while ensuring that stakeholder as well as a monitoring and evaluation market integrity and investor protection principles (M&E) framework. The membership of the task force are maintained. is proposed to a clearly defined structure involving financial service regulators and providers and In order to build financial resilience in Kenya’s capital other stakeholders like researchers, the academia, markets, the Capital Markets Authority (CMA), Nairobi development partners and government entities. Securities Exchange (NSE), the Central Depository and Settlement Corporation (CDSC) and the Kenya It is envisaged that once implemented, the NCFEPS Association of Stockbrokers and Investment Banks will bring about the requisite financial education (KASIB) have respectively put in place necessary which will lead to an increase, and well informed, measures and robust business continuity plans usage of the full range of financial services by to ensure normal market operations, securities households, which will then lead to enhanced trading, enhanced surveillance, market oversight financial health, and significantly have a positive and consumer protection amidst the COVID 19 impact in enhancing domestic market accessibility pandemic. The need to ensure that the trading and and prosperity. It will also reduce loses by retail settlement systems continue functioning to support investors while undertaking saving and investments. transactions is a key priority for the industry during The White paper is geared at triggering discussions this period. among the Joint Financial Sector Regulators (JFSR) comprising of capital markets, insurance, retirement, To ensure market activity and trading is sustained saccos as well as the banking sectors that will lead during this period other key measures that the to a financial sector common approach towards NSE, CMA and CDSC have put in place include; the development of a National Consumer Financial remote trading for market participants via internet Education Policy and Strategy for Kenya. virtual private networks (VPN), trading of bonds and derivatives is availed through a web based CMA Response to COVID system enabling trading participants, mobile and As the pandemic revolves, regulatory expectations online trading for investors, normal trading hours are continuously evolving with more reliance on maintained, market wide Business Continuity Plans, Risk Based Supervision Systems and infrastructure, enhanced surveillance, risk mitigation, remote ecommerce, Regulatory Technology, Supervisory working of staff and joint market response. To Technology and Regulatory sandboxes. Amidst ensure timely and seamless flow of the required the pandemic, capital markets firms continue to information to the investing public, CMA directed reexamine their crisis readiness, run tests, reexamine that all required disclosures be published on the governance, and streamline decision-making and issuers and licensees own websites and social communication approaches. media platforms; the NSE website for all issuers and trading participants; and the CMA website by all The capital markets industry stakeholders have entities affected by this guidance. unveiled a raft of measures designed to ensure business continuity and support the national The Authority has also issued Cautionary Notices to strategy to manage the impact of the Coronavirus. the public and investors on dealing with unlicensed In this regard, the industry players have collaborated entities and scams. The Central Depository and to mitigate disruption in capital markets by Settlement Corporation (CDSC) have put in place ensuring that the trading and settlement systems sound Business Continuity Plans to ensure seamless continue functioning to support transactions. In settlement of all securities traded at the exchange. meeting this objective, the focus has been on the Stakeholders were also encouraged to leverage operational resilience of market infrastructure, the alternative channels in providing alternative operational capability of market intermediaries and channels to be used for delivery of physical the continued flow of information to the market. The documents to minimize physical contact. Capital Markets Authority (CMA) has also provided the appropriate regulatory flexibility to help listed

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More recently on May 1, 2020, the Court allowed listed companies to hold online AGMs allowing for online voting on decisions that require shareholder approval. Listed companies whose internal rules do not provide for virtual Annual General Meetings (AGMs) have been allowed to hold online shareholder meetings. The Authority will also consider the possibility of testing virtual AGM/EGM on sandbox for value addition in virtual meetings. Further, the Authority has been at the forefront of encouraging the potential applicants with novel innovations to test the most transformative Financial Technology (FinTech) business models, products, and innovations in the CMA Regulatory Sandbox environment, building on MPESA’s success. Market intermediaries and fund managers have also utilized technology through use of virtual AGMS and auto account opening options.

The Authority has also implemented a working from home policy for its staff as part of its responses towards the COVID 19 scourge.

18 AMERC Quarterly Review MOROCCO

UPDATE FROM AMMC MOROCCO

UPDATE FROM AMMC MOROCCO 2. Investor Profiles Q4-2019:

1. Stock market indicators During the fourth quarter of 2019, Moroccan legal entities were responsible for 43% of the transac- Main stock market indicators tion volume of shares on the central stock market, followed by UCITS and foreign legal entities with respective shares of 36% and 10%.

In terms of development, the UCITS saw their weight appreciate by 15 points, going from 21% in Q4-2018 to 36% in Q4-2019, in the same wake, the share of foreign legal persons rose by 3 points (from 7% to 10%). However, the share of Moroccan legal persons fell by 24 percentage points.

Source: Casablanca Stock Exchange

During the month of December 2019, the index of all the shares listed on the Casablanca Stock Ex- change surpassed the bar of 12,000 points record- ing an annual performance of 7.11%. The market capitalization rose by 7.65% over a rolling year to reach $ 63.6 billion at the end of December 2019. Source: Brokerage Firms In terms of volume, the central and block markets recorded for the year 2019, an annual transaction 3. Debt Market: volume of around $ 5.9 billion, up 24.5% compared to 2018, or more than $1.1 billion. In addition, the Outstanding bonds and marketable debt se- liquidity ratio recorded a positive increase to settle curities (million dollars): at 9.73% for the month of December 2019, against 7.55% a year earlier.

Market capitalization and turnover velocity evolution

Source: Maroclear- Central Depository

Source: Casablanca Stock Exchange

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Legal and regulatory texts under discussion

II- Legal developments

Bill to amend and supplement law No 1-93- 213 on UCITS :

The aforementioned draft is in the proofreading phase under the coordination of the Treasury and External Finance Department. This bill aims to Source: Maroclear- Central Depository modernize the legislative framework governing UCITS and to bring the Moroccan financial market The share of treasury bills in the debt market re- into line with international standards. In particu- mains preponderant, representing 70% of the lar, it provides: total outstanding. The raising of the Treasury reached $ 2.3 billion in the fourth quarter of 2019. • The creation of UCITS with compartments; The issues were up to 59% on long maturities, • The introduction of UCITS with simplified incor- 33% on short maturities and 8% in the medium poration and operating rules; term with rates oscillating between 2.15% and • Admission of UCITS securities to trading on a reg- 4.85%. At the level of the market for negotiable ulated market; debt securities, issues amounted to $ 1.8 billion • Expansion of investment opportunities for UCITS drained, up to 70%, by bank drafts. Concerning abroad. the bond market, issues came to 1.7 billion dol- lars bringing their outstanding to 14.08 billion at Bill to amend and supplement law No 17-95 the end of December 2019. on public limited companies :

4. Securities lending: Q4-2019 The above-mentioned bill is part of Morocco’s ac- cession to the World Forum on Transparency and Exchange of Information for Tax Purposes and na- tional efforts to fight money laundering.

The amendment is based on the principle of de- leting “bearer” shares and only reserves their issue to public limited companies listed on the stock exchange and the sanction in case of non-compli- ance with this restriction.

Thus, the project sanctions:

• Issues of bearer shares in violation of the provi- sions introduced; • Public limited companies and / or their govern- ing bodies and / or their shareholders who do not convert bearer shares issued prior to the entry into force of the bill into registered shares.

Source: Account Keepers

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Draft law No 15-18 on crowdfunding :

The bill was adopted unanimously by the house of representatives in February 2020. The purpose of this bill is to establish a legal framework gov- erning crowdfunding activities operating through internet platforms allowing direct and transpar- ent contact between project leaders and contrib- utors. These activities take three forms of financ- ing, namely, lending, equity and donation. AMMC and the Central Bank are designated as regulatory authorities empowered to approve management companies of crowdfunding platforms, according to the respective field of each of them.

Bill No 12-18 modifying and supplementing law 43-05 relating to the fight against mon- ey laundering

Regulatory texts endorsed and published in the Official Bulletin :

Decree No 4195-19 implementing article 30 of the law no 44-12 on public offering :

The decree was published in the Official Bulletin on february 6th 2020.

The decree stipulated the list of newspapers for announcements provided for by article 30 of law n ° 44-12 on public offering.

Draft Decree for the application of the law No 17- 95 on public limited companies

The draft decree fixes the forms and conditions under which public limited companies can repur- chase their own shares.

Circular on crowdfunding

AMMC, the Central Bank and the Ministry of Fi- nance are currently preparing circulars governing the exercise of the activity of managing crowd- funding platforms.

21 AMERC Quarterly Review

NIGERIA

UPDATE FROM THE SECURITIES AND EXCHANGE COMMISSION NIGERIA

She said further, “while it is clear that FinTech has already made huge inroads into many aspects of the financial industry, what is perhaps even clearer is that the surface has barely been scratched in relation to what FinTech can do for us in the future.

According to her “The awareness of customers that their data might be prone to cyber-attacks could make them lose trust in digital channels until strong consumer protection frameworks are in place. These frameworks for digital financial services will be critical in building confidence for consumers. We L-R: Technical Specialist, Financial Conduct Authority (FCA), have come up with ways to monitor the risks that Barr. Alicia Kedzierski; Nigeria Lead, FCA, Mr. Parma Bains; Acting Director General, Securities and Exchange Commission, Ms. Mary may come up. It’s like a sandbox, but not an enclave. Uduk and Acting Executive Commissioner, Operations, SEC, Mr. We are building capacity to train young people that Isyaku Tilde, during a Meeting between SEC and FCA in Abuja on would be able to drive the process. We hope that Friday, February 7th, 2020. this year will be a turning point. We are trying to gather as much information as we can to be able to DFID, FCA to collaborate with SEC on Fintech contextualize and synthesize regulation in Nigeria. The Department for International Development, Young people are beginning to get interested in DFID, Financial Conduct Authority, FCA and the investment and they are doing this via Fintech and Securities and Exchange Commission, SEC Nigeria that is why we are doing all that we can to develop have agreed to collaborate to develop the Fintech rules around it so that the risk will be mitigated and space in Nigeria. it will further develop the market.

Speaking when she received officials of both Senior Adviser, UK DFID, Mr. Richard Sandall, said organizations in Abuja, the Acting Director General DFID and FCA have a partnership to support FCA to of SEC, Ms. Mary Uduk said the SEC was enthusiastic step into new jurisdictions to deliver DFID objectives about the collaboration as it would encourage in certain areas. responsible use of new technologies and digital finance, influence increased internationalHe said, “We are in Nigeria to look at the FinTech participation and cooperation as well as provide environment, regulatory environment and see if investors with more choices in the Nigerian Capital there are ways the Fintech environment can be built. Market. We are very interested in the impacts that Fintech in Nigeria would have in the UK. We know that Nigeria She said the SEC is looking to adopt regulatory has Fintech and the FCA has already established and supervisory practices for orderly development international network. He said the agreement with and stability of Fintech, as the Commission will FCA is for up to two years, during which modalities pay close attention to sustaining confidence and would be put in place to work with regulators and safeguarding the integrity of the market. that is why they have come to the SEC. We know the SEC has enthusiasm for Fintech and we want to help “In this way, our policies will facilitate the safe entry develop it as much as we can” Sandall added. of new products, activities and intermediaries. In addition, we will ensure that regulation does not stand in the way of innovation”. Also speaking, Nigeria Lead, FCA, Mr. Parma Bains,

22 AMERC Quarterly Review said they have done some work with the SEC in harmonious partnership and our continuous the past and are very comfortable working with cooperation,” she stated. the Commission. Brains expressed appreciation to the SEC for the opportunity to collaborate and She noted that the various initiatives being expressed the belief that it is the beginning of many implemented in the 10- year Capital Market Master- collaborative relationships that will span for the plan have made the capital markets more attractive next two years of the project. to investors.

“We are available to provide collaboration and The SEC boss commended operators and assistance in the area of Fintech and we are also open stakeholders for their immense efforts and to learn how you regulate the market and some contribution towards developing the Nigerian other roles you perform” Bains added. On her part, capital market and enjoined them to remain Technical Specialist, FCA, Barr Alicia Kedzierski said committed, adding that it is time to ensure that she was impressed by the depth the Commission’s vision of a world-class market is made a reality.“The research has taken and the fact that the SEC have year 2019 saw us record tremendous results in a gone to various jurisdictions to try to find out what number of initiatives largely derived from the 10- is happening is a good step. Barr. Alicia Kedzierski year Capital Market Master Plan. These initiatives went on to say that “SEC Nigeria is the first regulator have helped make the market more attractive, that we have seen that looks into the millennial and efficient and properly positioned to harness its the risks that could lead to long term issues. true potential. Through the implementation of interventions such as the Electronic Dividend The idea behind the UK-Africa Fintech partnership Mandate Management System (E-DMMS) and is to connect African entrepreneurs with British the Identity Management System, we have made fintech investors and business mentors to access the reasonable success in reducing the huge quantum finance and advice needed to start and grow their of unclaimed dividends,” she said. companies. The UK’s Financial Conduct Authority (FCA) plans to work with its regulatory counterparts Derivatives Trading, one of our Top Priorities in Africa, dedicating up to £2m to support Nigerian –SEC start-ups. The Securities and Exchange Commission, SEC, has stated that developing an efficient derivatives SEC DG Calls for Partnership, Cooperation trading market is one of its top priorities in 2020. for Capital Market Growth The Acting Director General of Securities and Acting Director General of the SEC, Ms. Mary Exchange Commission (SEC), Ms. Mary Uduk has Uduk who stated this in an interview, identified called for more partnership and cooperation derivatives as some of the investable products among regulators and operators in the nation’s capable of boosting liquidity in the Nigerian capital capital in order to take the market to lofty heights. market. Derivatives are securities that derive their Ms. Uduk stated this in a New Year message to value from an underlying security or asset. market operators and all stakeholders. According to her, 2020 will see SEC embark on a number of According to her, “Derivatives are traded in all the programmes geared towards taking the market big markets around the world and they are used in to new levels, saying all hands must be on deck to risk management. They are also used to hedge the make that happen.“The new year 2020, which also trade in other securities. We believe this is a good signifies the commencement of a new decade, will time to have derivatives in our market. They are see us embark on a number of programmes geared currently being traded in our markets but they are towards taking our market to lofty heights. I enjoin traded over the counter. Now we want to introduce us all to see this as a call to renew our passion and exchange traded derivatives so that people can now commitment to building the capital market of our hedge their positions in the market. The number dreams: a world-class capital market – founded one advantage apart from the risk management is on the values of partnership and cooperation that that it gives traders and investors more instruments has helped us stand the test of time. The capital to invest in” market of our dreams can only be achieved through

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Uduk said this about the newly-introduced after the promoters of these illegal schemes. derivatives rules, “these rules cover in addition to the registration requirements, the derivatives She said “we are stepping up our enforcement contract themselves and also the participants in the mechanisms to ensure that they are apprehended derivatives market” she said. and their offices sealed off. So many of them are being prosecuted in courts, we have secured Uduk said the rules also specify the risk management convictions for some, and we have closed down framework that the SEC expects every participant in many others”. the derivatives market to have. These participants include the exchanges, the central counterparties “We verify ownership and return monies collected and the dealing members. She added that the by them to the owners. It’s a problem around the Commission expects that the exchanges make world and we can tackle the problem by educating rules around on the type of investors can invest in the public, telling them the right investments to derivatives and those that cannot. We are watching make and the right places to put in their money”. from every part of it, having learnt from countries Ponzi scheme (also a Ponzi game or a Ponzi) is that have done this for 40 to 50 years, so we are a fraudulent investment operation where the not re-inventing the wheel. We have also learnt operator, an individual or organization, pays from mistakes that these countries made and I can returns to its investors from new capital paid to the assure you that we are taking every necessary steps operators by new investors, rather than from profit to ensure that this market is safe. We believe that earned through legitimate sources. this is the time to have derivatives in the market and we can introduce them in a way and manner that is Uduk, however, advised the investing public to be beneficial to the entire market” she stated. wary of any investment that is promising return levels that are unreasonably high and advised Recall that the SEC, in partnership with the Republic investors to ensure that the fund managers and the of Korea, recently had a Knowledge Sharing products they are offering are registered with the Programme on boosting derivatives trading and Commission.So when people come to you and say creating a derivative market place that will be useful that you can invest N50,000 today and get N200,000 for the Nigerian economy and the Sub- Saharan tomorrow or get a 50per cent returns in two hours, region. know that it’s a lie. No legal investment pays that much. So what they are likely doing is using your She said that on all counts, the Commission made a money to pay someone else and using someone’s lot of strides in implementing some of the initiatives money to pay you. It is important that we don’t of the 10-year capital market master plan in 2019, engage in such investments”. adding that this year the Commission will continue a few other things like derivatives trading and “These fraudsters or promoters of Ponzi schemes are strengthening the Collective Investment Schemes the false prophets of the investment environment; (CIS) segment of the market. “Aside from derivatives they are the ill wind that blows no good and at trading and CIS, we shall also continue with other whose sight you must flee. The SEC boss, who ongoing initiatives like the e-dividend issue, restated the Commission’s resolve to make the resolving the unclaimed dividend problems as well capital market more user-friendly to boost investors’ as regularization of multiple shareholders’ accounts” participation, said the Commission had been doing Uduk added. a lot to increase investors’ knowledge of the capital market and enable them make informed investment SEC Goes Tough on Ponzi Schemes decisions.“There are new investible products in the The Securities and Exchange Commission (SEC) has Nigerian capital market. We have a lot of ethical restated its determination to go after Ponzi scheme funds. One of the safest areas to invest in is in mutual operators and ensure they are made to face the full funds, and collective investment schemes and we wrath of the law.The Acting Director-General of the encourage Nigerians to be part of these and others. SEC, Mary Uduk, in an interview with journalists in The Securities and Exchange Commission (SEC) Abuja, stated that what the SEC had done apart and the Independent Corrupt Practices and from continuing to educate people, is to also go other Related Offences Commission (ICPC) are to

24 AMERC Quarterly Review collaborate in combating crime in the Nigerian operations while we encourage those we regulate capital market. to embrace Fintech, not as competitor, but as enablers to their existing operations and processes.’’ This agreement was reached when the management of SEC the ICPC met in Abuja. The acting Director- “Specifically, we are looking into the area of General of SEC, Ms. Mary Uduk, said the meeting crowdfunding, crypto assets, robo advisory and was necessary in order to seek collaboration, as well distribution of collective investment schemes as leverage on the expertise and mandate of the products through fintechs. We need to be able to ICPC in tackling corrupt practices especially fraud, balance our objective of protecting investors and which has been prevalent in the Nigerian capital encouraging innovation and development in the market, adding that it is a major obstacle to the market” actualization of the objectives of the Commission. Why We Encourage Retail Investors –SEC Market Regulation Now More Efficient with The Securities and Exchange Commission (SEC) Technology, SEC said it has stepped up efforts to encourage retail The Securities and Exchange Commission (SEC) has investors in the Nigerian capital market in a bid to noted that it is leveraging technology to make its create wealth, deepen the market and grow the market regulation investor protection mandates nation’s economy. more efficient Acting Director General of the SEC, Ms. Mary Uduk, while speaking with newsmen in Mary Uduk, acting Director General of the SEC a recent event, said, “Our regulation is becoming who spoke to journalists in Lagos on the sidelines better and more efficient with technology. of the recently held This Day Awards 2020, urged investors to look into the capital market for future “We also continue to encourage the members investments as various products abound that would of the capital market community to embrace suit their needs. According to her, “You don’t need technology to make it easier for their operations, to have so much money to be able to tap into the compliance and investors. These days we have a opportunities available in the capital market. For lot of improvements; currently, most stock broking instance, with the government bond, the minimum firms have platforms you can just log in and buy investable amount is N10,000 and you can buy in stocks on your own. subsequent amounts of N1,000. “We have Collective Investments Schemes (CIS), “As technology is improving access to the market, it we have the stocks that you can buy through the is also improving the ability of the regulator to better stockbrokers and those you can invest in with regulate the market” she added.Uduk said it is based as little as N5,000. So you don’t necessarily have on the foregoing that the Capital Market Committee to have a lot of money to invest, all you need is decided to embrace financial technology for easy to approach the stockbrokers. They can open an accessibility.She said, “One of the major reasons account for you and whatever you have you can pay for the acceptance of technology in the financial into the account and give instructions in what kind sector is that it makes things very easy to access and of investments you want to make.” Uduk said it is also to achieve. FINTECH has come to stay and the important for people to understand the workings of sooner we acknowledge and accept it the better for the capital market and not have the misconception everyone. SEC constituted a Market-Wide FinTech that they must have a lot of money before they can Roadmap Committee because we have realized invest. We have to disabuse our minds of it. I think that we live in a technologically driven era, and it that is what is leading people into putting money is only important that the Commission embraces into Ponzi schemes and lose their money. So all you this trend and create an enabling environment for need to do is to go to SEC website, see the list of technology to positively impact on our market. capital market operators and approach one of them to open an account” she said. “We support FinTech by engaging and guiding The Acting DG assured investors that the SEC will Fintech start-ups that seek to operate in the Nigerian continue to play its role of providing a good playing capital market. As the regulator, we are also working ground for investors to ensure that they get the on adopting Fintech and Regtech in our regulatory benefits of their investments.“ The SEC is very

25 AMERC Quarterly Review interested in investor protection and that is why we exchange would change with demutualization. have rules that the players must obey and all these On delisting, he said the exchange would continue are channeled towards ensuring that our market is to provide value for listed firms to enable them find safe for investors a compelling case to list or to stay listed.

“The smaller the investors the more he/she is “The life of an exchange is such that some companies protected. We don’t want any investor to go into leave and other companies come on board.“ If you the market and lose money; that will not be good look at the market capitalization of the exchange, for our market. we have got a number of heavyweights and we also Uduk said the SEC has continued to educate lost a number of companies. What the exchange is and enlighten Nigerians about the investment actually trying to do is that we have to be positive opportunities available in the market and urged in terms of number of companies listed and market potential investors to engage professionals who capitalization. will guide them on relevant products to invest in. “We cannot force anybody to stay listed or even list Demutualization: NSE obtains SEC’s ‘no in the first place. objection’ Nod “We have to provide the value and we hope they Mr Oscar Onyema, the Nigerian Stock Exchange (NSE) continue to extract that value and find a compelling Chief Executive Officer, at the 2019 Market Recap and case to list or to stay listed.’’ 2020 Outlook held in Lagos, said the NSE received a letter of ‘no objection’ from SEC in December 2019 According to him, the exchange will continue to for the final stage of the demutualization process. develop new strategic partnerships with the goal Demutualization of a stock exchange is a process of delivering better products and services to its by which a non-profit, member/brokers owned customers and maintain momentum in executing mutual exchange is converted into a profit-seeking its corporate strategy shareholder corporation, open to members of the public. SEC Gives Stockbrokers Deadline to File Liquidity Position Demutualizing an exchange therefore transforms Brokers and dealers in the Nigerian capital market it from being owned by members or brokers, to have been directed to compute and file their one with a different governance structure where monthly net liquid capital position not later than members of the public can buy shares.“ Now that five days after end of the month. we have seen the ‘No objection’ letter from the SEC In a recent directive, the SEC stated that for the 2020 in December, we are now putting in place final returns, brokers must file their net liquid capital to touches to have the court ordered meeting and the the Commission and the Nigerian Stock Exchange Extra Ordinary General Meeting (EGM). (NSE).

“There will be significant engagement with It was stated that failure to file the returns as required investors, press and our primary constituency, the would attract appropriate sanctions and they must brokers and other members of the exchange and be submitted, according to SEC, the computation the general public. So there is a very robust plan must reflect the true and fair position of all assets already in place. We are working as quickly as we and liabilities of the broker/dealer, while material can to complete it and we hope that very soon, we mis-statement or omission would be regarded will put out the notices for the EGM. as misleading the Commission and shall attract appropriate sanction. “There is statutory requirement, you have to wait for 28 days for the court ordered meeting and 21 SEC seizes N2.35b ‘ponzi’ Assets days for EGM.“ We are following the process and The Securities and Exchange Commission (SEC) we worked through the holiday period to see how has blocked assets valued at about N2.35 billion quickly we can bring in these meetings,” he said. belonging to ponzi schemes as the Commission vows to further confiscate illegal assets and Onyema said that the corporate structure of the prosecute operators of unapproved schemes.

26 AMERC Quarterly Review

Ponzi scheme refers to illegal phony savings and adopt a more proactive inspection and market investment scheme often run by unapproved surveillance regime to nip unethical practices persons in violation of extant rules and guidelines. and misconduct in the bud. We shall be referring Ponzi scheme is also known as “wonder bank”. more cases of infractions for hearing before the SEC stated that it blocked four bank accounts SEC Administrative Proceedings Committee. and real estate properties linked to operators of Furthermore, we shall be referring more matters for ponzi schemes while the Commission also sealed criminal prosecution to the office of the Attorney – premises of four operators. The blocked assets General of the Federation in line with the provisions included N1.12 billion in various bank accounts and of Section 304 of the Investments and Securities Act real estate properties valued at N1.23 billion. 2007,” Uduk said.

Acting Director-General, Securities and Exchange Commission (SEC), Ms Mary Uduk, who presented the Commission’s scorecard for last year and plan for 2020 in Lagos, said the Commission recorded significant successes in its efforts to protect the Nigerian public from unscrupulous persons. She explained that 2019 saw an upsurge in the activities of ponzi schemes in Nigeria and the Commission had to step up its enforcement actions to safeguard the public and deter the illegal operators. According to her, the Commission went after many of the promoters and directors of such schemes, securing a conviction last year while many others are presently being prosecuted.

“We will continue to combat ponzi schemes this year. We intend to continue leveraging on the Memoranda of Understanding that were signed between the Commission and key stakeholders like the Nigeria Financial Intelligence Unit (NFIU) and the Economic and Financial Crimes Commission (EFCC) to strengthen our ability to do this,” Uduk said.

On the other areas of enforcement and investor’s protection, Uduk outlined that the Commission received 167 complaints and resolved 102 complaints in 2019 with N100.11 million and 8,848 shares recovered for investors. SEC is also prosecuting eight capital market fraud cases while it generated N194.48 million from penalties during the period. She said the focus of the Commission enforcement program-me in 2020 will continue to be the protection of investors with particular attention to retail and unsophisticated investors in the Nigerian capital market.

“The Commission will continue to adopt a zero- tolerance policy on unethical practices by in the capital market with a view to promoting a culture of compliance and enhanced reporting. We will

27 AMERC Quarterly Review

OMAN UPDATE FROM CAPITAL MARKET AUTHORITY OMAN

The CMA announces end of subscription of Aman REIT, approves listing The CMA joins an extraordinary meeting of GCC regulators The Capital Market Authority (CMA) has announced that subscriptions into Aman Real Estate Investment The extraordinary meeting was held via Trust closed on 1 March 2020 and approved it to videoconference on April 5, 2020, to discuss be listed on Muscat Securities Market (MSM) for possible regulatory facilities to ensure sustainability public trading. Five million units were subscribed of stock exchanges and continuity of operations of and listed on MSM effective Sunday, 15 March 2020. the markets at large in the region amid the COVID19 Aman REIT is the first sharia-compliant Real Estate pandemic crisis, through all possible and available Investment Trust introduced in the Sultanate and means. will distribute 90% of the net income to investors holding Trust units at 7% dividends in two semi- annual payments.

The CMA issues number of decisions within the pursuit to curb the spread of COVID-19

The CMA has issued a number of decisions in a bid to help curb the spread of the Covid19 coronavirus. Stemming from CMA’s belief that the health and safety of people are top priorities, employees were allowed to work from home. To make this a successful experience all resources were made available so that all duties can be carried out remotely using electronic means. The CMA has also issued a circular suspending AGMs of SAOGs and investment funds until further notice. AGMs should convene within 90 days maximum from end of the financial year of the company as per Article 172 of the Commercial Companies Law. The CMA has, in addition, distributed a circular approving proposed dividend as per the approved agendas that have been sent to shareholders. The circular made it clear that dividend ex-date is the date which has been disclosed in the AGM invitation. This decision stems from the CMA’s understanding and appreciation for the circumstances of the shareholders and its commitment to meet the expectations they already have vis-à-vis dividends distributions, as well as to facilitate the flow of these funds into the national economy. Moreover, the CMA allowed SAOGs and auditors an extension to disclose their financial data for Q1 until end of June 2020.

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PALESTINE UPDATE FROM PALESTINE CAPITAL MARKET AUTHORITY

PCMA and the International Finance signed a joint memorandum of understanding that Corporation IFC, singed an agreement to aims at enhancing the economic media, specifically, develop the Islamic finance industry in regarding the non-banking financial sector in Palestine. Palestine. For the purpose of enhancing Islamic financial PCMA is focusing on upgrading the media services in Palestine, PCMA signed an agreement capabilities specially with non-banking financial with the International Financial Corporation IFC. sectors, to raise the public awareness, the media is The agreement aims at putting a road map to a main target for PCMA according to the financial develop Islamic Finance in Palestine. In cooperation inclusion strategy due to its sensitive role in with the partners, the agreement also entails an transmitting the financial information to the public. assessment of the current situation and the future vision to develop Islamic financial services in accordance with best practices and international standards, as well as strengthening the regulatory framework over the Islamic financial institutions and considering the challenges they face.

IFC’s support to the PCMA aims at expanding Islamic financial services role in financial inclusion, part of a broader effort to support the growth of financial services across the Middle East and North Africa.

PMCA issued precaution protective measures against the Coronavirus COVID-19.

During the state of emergency in Palestine and according to the presidential decree issued by his excellency President Mahmoud Abbas. PCMA has issued a decision toward facing the Coronavirus, which includes a number of instructions directed to the sectors that work under PCMAs supervision. This decision is to guaranty the safety and the continuity of work for the non-banking financial sector in Palestine especially in this emergency status. PCMA and Palestine Economy Portal -the media arm of Palestinian Economic Council PCMA issued a decision concerning for Development and Reconstruction extending the period of the validity of motor (PECDAR)- signed a memorandum of insurance. understanding to develop the Economic Media Based on the presidential decree issued by his excellency President Mahmoud Abbas regarding PCMA and the Palestine Economy Portal -the the declaration of the emergency status in Palestine media arm of Palestinian Economic Council for to counter Coronavirus (COVID-19) and based Development and Reconstruction (PECDAR) -

29 AMERC Quarterly Review on the Cabinet decision declaring the curfew in 23/3/2020. PCMA issued a decision regarding extending the validity of motor insurance (for those insurance policies that expires during the emergency status), this decision identifies insurance companies’ commitment to cover all risks that might occur during this extension period, and emphasized the payment methods after this period.

PCMA suspends trading on stock exchange

PCMA issued a decision regarding suspending the trading on Palestine Stock exchange (PEX). The closure will be in effect until further notice, to ensure the safety of employees and traders in accordance with the decision by the President of declaring a state of emergency in the State of Palestine, and in light of the urgent health conditions regarding the Coronavirus (COVID-19).

PCMA issued a decision concerning the extending the date of disclosure of the audited annual financial statements

In accordance with the decision by the President of declaring a state of emergency in the State of Palestine, and in light of the urgent health conditions regarding the Coronavirus (COVID-19), PCMA has issued decision on to extend the deadline for submitting the disclosures of the audited financial statements of companies for 2019 to be on 30/4/2020.

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QATAR UPDATE FROM THE QATAR FINANCIAL CENTRE REGULATORY AUTHORITY

requirements which will require QFC authorised firms and QFC licensed firms (that are DNFBPs) to make minor adjustments to their existing AML/CFT control frameworks.

The Rules l commenced on 1 February 2020.

QFC Regulatory Authority introduces To access the updated Rules: updated Anti-Money Laundering and Combating the Financing of Terrorism Rules Anti-Money Laundering and Combating the Financing of Terrorism Rules 2019, please click here The QFC Regulatory Authority (Regulatory (Word) and here (PDF). Authority) issued, on 7 January 2020, the following updated Rules: Anti-Money Laundering and Combating the Financing of Terrorism (General Insurance) Rules -Anti-Money Laundering and Combating the 2019 . Financing of Terrorism Rules 2019; and

-Anti-Money Laundering and Combating the Financing of Terrorism (General Insurance) Rules 2019.

The updated Rules apply to QFC authorised firms and to QFC licensed firms that are Designated Non- Financial Businesses and Professions (DNFBPs).

On 11 September 2019, the State of Qatar announced the adoption of Law No. (20) of 2019 on Anti- Money Laundering and Combating the Financing of Terrorism (AML/CFT Law), which amends and replaces Qatar’s existing law (Law No. (4) of 2010 on Combating Money Laundering and Terrorism Financing Law). Further AML/CFT legislation was announced on 26 December 2019 through the adoption of the Implementing Regulations to the new AML/CFT Law.

On 26 December 2019, the State of Qatar also announced the adoption of Law No. (27) of 2019 on Combating Terrorism (CT Law).

The updated Rules have been finalised to align with the new AML/CFT Law, the Implementing Regulations and relevant sections of the CT Law. The updated Rules introduce a limited range of new

31 AMERC Quarterly Review

QATAR UPDATE FROM THE QATAR FINANCIAL MARKETS AUTHORITY

As part of the preventive actions and precautionary the Financing of Terrorism reflects our commitment measures to control spread of coronavirus “COVID- to fight all forms of these illegal activities and 19” support Qatar’s economic diversification and development.” QFMA announces the start of receiving all its Mr. Al Jaida added that money laundering could correspondence at [email protected]. The QFMA damage an otherwise upstanding financial system continues to provide all its services electronically, as and corrode a country’s social, political and usual, via its official website. economic fabric.

QFMA and QFC Sign MOU on Anti-Money In accordance with this MOU, the parties agree Laundering/Combating the Financing the to form a working group for the purpose of Terrorism “AML/CFT” coordinating and cooperating among themselves in respect of AML/CFT. The working group shall Qatar Financial Markets Authority (QFMA) and provide an effective mechanism to exchange Qatar Financial Center Authority (QFCA) signed, on information, enhance the co-ordination and the Thursday, February 13, 2020, a Memorandum of co-operation between the parties in the field of Understanding (MOU) on Anti-Money laundering/ AML/CFT subject to this being within its powers. Combating the Financing of Terrorism (AML/CFT). The working group shall submit bi-annual reports The MOU was signed by Mr. Nasser Ahmed Al- and when needed on the results of coordination, Shaibi, CEO of the QFMA, and Mr. Yousuf Mohamed cooperation and ways of development. Al-Jaida, CEO and Board Member of the QFCA. The signing of the MOU between QFMA and QFCA Mr. Nasser Al-Shaibi said, “The MOU signed comes in accordance with the local legislations and with the QFCA comes within the framework of the enforcement of the provisions of the AML/CFT enhancing joint cooperation and efforts among Law No. (20) of 2019 regarding cooperation between the various national entities and institutions in the national authorities on exchange of information State in respect of AML/CFT, which contributes to concerning AML/CFT and the importance of laying a solid ground for continued cooperation applying international agreements and the FATF and coordination among the various national recommendations (recommendation 2 – National authorities. cooperation and coordination); and in fulfilment of Mr. Al-Shaibi pointed out that the continued the objectives and the strategic co-operation and cooperation among the national authorities on co-ordination between national authorities in the AML/CFT would reflect Qatar’s firm commitment field of AML/CFT. in this field and contribute to highlighting its leadership and influential role at the level of the The MOU provides that the parties shall in region and the world with regard to the control accordance with applicable laws share with each process, in addition to advancing national efforts other AML/CFT information as considered necessary aimed at strengthening and developing the and appropriate in order to assist with detection, efficiency of AML/CFT system in the State. monitoring and supervision of AML/CFT risk that fall within its responsibilities. Mr. Yousuf Al-Jaida said, “The QFC’s partnership with The parties shall co-ordinate with regard to AML/ QFMA on Anti-Money Laundering and Combating CFT efforts where required including in relation

32 AMERC Quarterly Review to responses to national and international He added that there is no doubt that the financial organizations on AML/CFT matters. The parties markets today face many challenges whether shall prepare and execute AML/CFT training to related to innovation, technology and sustainable enhance and build the capabilities of both parties development, or legislation, governance and in coordination with NAMLC so that efforts are not investor protection, and many other issues that duplicated, and the desired outcome is achieved. we hope, through your fruitful proposals and discussions and through this conference, to find The QFMA holds its 3rd Annual Conference a perception and the best ways to move forward with Participation of Experts and Specialists in developing the work system and activities of from Financial Services Sector our financial markets, in a manner that ensures continuity in keeping pace with all competencies Mr. Al-Shaibi: We proceed depending on the capital and abilities of the developments of the global market successes supported by the strengths of the capital market. This matter would contribute to economy creating a stimulating and attractive investment We are moving forward with developing procedures environment for local and foreign investments, and regulations to enhance the capital market and provides many options to enhance their attractiveness. competitiveness in a way that leads to improve the quality of financial activities and services provided Mr. Andrews: an important role of technology and to the capital markets participants, and increases artificial intelligence in the development of the the growth rates of those markets, thus increasing activities of financial market regulators. their role in the economic development process in general. Mr. Jalil Tarif: The capitalization of Arab markets jumped to $ 94 trillion at the end of 2019. Mr. Al-Shaibi said that despite the challenges we are addressing, many of our financial markets have The conference highlights the enhancement of managed to keep pace with the development liquidity and the social role of capital markets and required to meet these challenges. We at QFMA are ways of protecting minority rights continuing to develop procedures and regulations Financial market regulators shall strike a balance to enhance the performance of the Qatari capital between facilitating innovation and protecting market and improve its attractiveness, as well as investors. increase investment opportunities provided for investors and interested persons. Thursday, January 30, 2020, the 3rd annual conference of Qatar Financial Markets Authority Mr. Al-Shaibi said: I am sure that we are doing all the (QFMA) was held in Doha, in the presence of H.E best to improve the capital markets performance Governor of the Qatar Central Bank, the Deputy to new levels of success, growth and development. Governor, Chairman of the Board of Directors of the We also work hard to deliver many of the QFMA, and with the participation of a large number achievements that keep our markets in competitive of specialists, experts and concerned participants and sustainable. In order to ensure sustainability from the capital market sector, as well as speakers and continuity of competitiveness, performance representing institutions in the field of financial development, upgrading activities and pushing services sector from a number of Arab and foreign them to move forward to keep pace with all global countries. developments, we need to work together and join efforts to face the challenges ahead, continue to Mr. Nasser Ahmed Al-Shaibi, CEO of the QFMA, in consolidate the principles of governance, disclosure the opining address of the conference, said that and transparency in financial markets, and support the Qatari capital market managed during the and promote the rights of minorities in such markets, past period to continue its successes and proceed as well as adopt the best international standards more, as it achieved more growth and development and practices in this regard. Thus, work together as under the international and regional conditions one team to achieve further development of the supported by the strengths of the national economy capital market sector. in overcoming any challenges that may facing.

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The Secretary General, Mr. Paul Andrews, in his dollars, achieving about 3.4% of the total market speech stated that the issues for discussion in the value of global financial markets and growth of 15% conference around sustainability and financial of the market value of the countries of Europe and inclusion and around development of smart capital the Middle East according to the classification of the market regulations using financial technology are of World Federation of Exchanges (WFE). great importance in light of the rapid developments in the financial sector in the world. He also said that Mr. Tarif said that the UASA has made great the conference is a great opportunity to learn from strides towards enhancing cooperation and joint each other, expressing his pride in participating coordination among Arab securities regulators. in the conference to listen to the opinions and Since the establishment of the union in 2007, the proposals of the participants and experts then take Arab regulators (15 UASA member states) have advantage of these views in strengthening the made progress on adopting common general IOSCO work. guidelines covering most of the aspects related to the Arab capital markets, especially those related to Mr. Andrews talked about the importance of the issuance of an approved code of governance by investor protection to ensure the financial markets Arab securities regulators, as well as the issuance of development, in light of strengthening the role of a guide for the transactions of the relevant parties the regulatory and regulatory authorities of those in cooperation with the Organization for Economic markets. Cooperation and Development (OECD).

Mr. Andrews said that another important aspect Mr. During the conference, five panels were held during Al-Shaibi touched upon in his speech relating to which the speakers addressed many topics and the important role of technology in the regulators issues related to the capital market. activities, and to cope with developments and changes taking place every day. The first panel was held on “Smart Regulations & Innovation”, during which the speakers ensured on Mr. Andrews also touched on other issues such the importance of focusing on the “Characteristics as crypto assets, artificial intelligence, asset and Principles” involved in ensuring that the Smart management, market digitalization, especially in role of the regulator in supporting innovation with the retail sector, and lending markets, as well as the legal clarity concerning the entire policy, and shared social role of investors and investment markets. responsibilities between institutions and state, with the flexibility to accommodate new technologies Mr. Jalil Tarif. Secretary General of the Union of Arab with fairness, while ensuring taking account of Securities Authorities (UASA), said in his speech that those most effected. the 3rd QFMA annual conference is held in light of the rapid international developments in the global The second panel dealt with “Crypto-Assets financial markets in various fields; and despite the Risks & and Regulatory Challenges”, where it was fluctuations in the performance of global financial emphasized that the growth of crypto-assets and markets which reflects the volatile economic and increasing interest by retail investors raises concern political conditions, especially those related to the about the implications of these assets on the market exacerbation of the international trade crisis and integrity and investor protection. The speakers said the uncertainty about the effects of Britain’s exit that securities regulators need to be equipped from the European Union and the developments with a deeper understanding of the underlying of international interest rates and oil prices. These technology to find a balance between facilitating markets have continued in the long term from innovation and protecting investors. achieving important gains in their key indicators, where the market value rose to capital markets in The discussion during this session focused on the the world last year to reach more than 94 trillion fundamentals, opportunities, risks, trading and dollars. approaches in the secondary market, blockchain Mr. Tarif added that the Arab financial markets have technology, developments and regulation methods. achieved a growth in their capitalization, so that The third panel was held under the title “How to at the end of last year it reached about 3.2 trillion Enhance Capital Market Listing & Liquidity”.

34 AMERC Quarterly Review

to overcome all challenges facing the capital As for the fourth panel, it was held under the title markets in member jurisdictions, to ensure the “ Capital Markets’ Social Role - Financial Inclusion continued development and keep pace with all the and Sustainability”, during which speakers ensured global developments in the financial sector. that the role of securities regulators is not restricted within legislation, but should be more socially Qatar Stock Exchange Performance (QSE) driven to ensure the grander gain of investor (1 USD = QAR 3.65) protection is invested in for the long term and future investors, through disseminating financial literacy At the end of 1st Quarter 2020, Qatar Stock and capacity building of the financial sector, wealth Exchange (QSE) General Index closed at 8,207.24 distribution initiatives and implementations and decreased by 2,218.27 points, reflecting a drop of relevant tools to boost investor confidence and 21.28% compared to the performance of the index create the opportunity for a prosperous society at the end of 2019. across both public and private sectors, to provide accessibility to market industry: World Bank Group’s Universal Financial Access 2020 Initiative”, Environmental and Social and Governance (ESG) contribution to the Sustainability of the capital markets: Principles of Sustainable Development, Importance of Reporting, Performance Indicators, How to Make a Business sustainable and profit from it.

As for the fifth and last panel, it was entitled “Means to Protection Minority Rights”. Qatar and other countries’ jurisdictions mechanisms were discussed with regard to protecting minority rights, as well as Market Capitalization relevant international standards and best practices. Total equity market capitalization at the end of 1st quarter 2020 reached USD 126.18 Billion, showing QFMA Hosts the 44th AMERC Annual a decrease of 20.97% compared to the 2019 year- Meeting end results.

Ensuring on the importance of enhancing Daily Trading Average for Listed Securities cooperation among the securities regulators QFMA Hosts the 44th AMERC Annual Meeting, AMERC The results of the daily trading average for listed members discussed all challenges and issues securities at the end of 1st quarter 2020 compared related to the capital markets development. to the daily trading average of the previous year is as below: On Wednesday, January 29, 2020, Qatar Financial Markets Authority (QFMA) hosted and organized, 1. Daily Trading Average Value: Compared in coordination with the International Organization to 2019 results the Daily Trading Average Value at of Securities Commissions (IOSCO), the 43rd Africa the end of 1st quarter 2020 increased by 3.77 % to Middle East Regional Committee (AMERC) Annual reach USD 77.00 Million. Meeting, Mr. Nasser Ahmed Al-Shaibi, CEO of the QFMA, said that the QFMA’s hosting of the AMERC 2. .Daily Trading Average No. Transactions: annual meeting emphasizes the important position Compared to 2019 results the Daily Trading that the capital markets have reached and their Average No. Transactions at the end of 1st quarter advanced status in relation to the financial sector 2020 increased by 12.02 % to reach 6,851.34 development and the capital market attractiveness. transactions. He also said that the AMERC members discussed all means that would contribute to strengthening their efforts and their mutual cooperation in order

35 AMERC Quarterly Review

Government Debt Instrument & ETF

QCB Issues Treasury Bills Worth USD 493.15 Million until end of the first quarter.

Qatar Central Bank (QCB) listed Treasury Bills (T-Bills) until end of 1st quarter for the period of 3, 6 and 9 months, where the total amount of issu- ance is (USD 493.15 Million).

Listed & Traded T. Bills (USD Million)

ETF Traded Until End of the 1st Quarter

36 AMERC Quarterly Review

SAUDI ARABIA UPDATE FROM THE CAPITAL MARKETS AUTHORITY

CAPITAL MARKET AUTHORITY (CMA- to approve the Securities Central Counterparties K.S.A) Regulations (“Regulations”) and amend the Glossary of Defined Terms Used in the Regulations and Rules Launch of the Corporate Finance Technical of the Capital Market Authority, to be effective as of Foundations Certificate provided by (CISI) the date of their publication. This comes after the In continuation of CMA’s efforts to raise the level of CMA has published the Draft Regulations on its knowledge of the personnel in the field of corporate website for public consultation for a period of (14) finance and to enhance their technical capabilities, calendar days. taking into account the importance of qualified human capital in the development of the capital The Regulations aim to regulate securities market sector, CMA would like to announce that clearing activities in the Kingdom and specify the the BoC has approved the launch of the Corporate requirements for obtaining an authorisation to Finance Technical Foundations Certificatecarry out such activities, which will contribute provided by the Chartered Institute for Securities to introducing new securities classes such as & Investment (CISI). This is in cooperation with the derivatives, and guaranteeing the settlement and Financial Academy, which is mainly engaged in the fulfilment of obligations of transactions parties. This development of capabilities and skills of financial will in turn further strengthen the current market market personnel, and administering professional infrastructure and enhance its efficiency. examinations for the financial sector. The Regulations define clearing as the process of This certificate covers the fundamentals of establishing each party’s rights and obligations corporate finance. It shall be required from persons arising from securities trading, including the to be registered as corporate finance professional calculation of net obligations and ensuring that as of 01/01/2021 Currently Registered Persons must financial instruments or cash are available to secure obtain the above certificate prior to 01/01/2022. the exposures arising from such obligations.

The Capital Market Authority (CMA) licenses During the preparation of the Regulations, the Securities Clearing Center Company CMA took into consideration the best international (Muqassa), and designates it as a QCCP practices in this regard and the Principles for The CMA Board of Commissioners issued its Financial Market Infrastructures (PFMI) issued by the resolution to authorize Securities Clearing Center Committee on Payments and Market Infrastructures Company (Muqassa) to provide securities clearing (CPMI) and the International Organization of services in the Kingdom, and to be designated as a Securities Commissions (IOSCO). Qualified Central Counterparty. Launching a new service for Authorisation to The Capital Market Authority Announces Conduct Securities Business the Approval of the Securities Central Pursuant to the Capital Market Authority’s role in Counterparties Regulations developing and regulating the capital market, and As part of the Capital Market Authority’s (“CMA”) further to improve its services, the CMA has launched strategic objectives to develop the capital market, an electronic service for application of a new license and in pursuance to achieving the objectives of the to conduct Securities Business. This service aims Financial Sector Development Program, and in line to ease the submission for a securities business with the Saudi Vision 2030, and based on the Capital license in the Kingdom. It also enhances confidence Market Law issued by Royal Decree No. (M/30) dated through electronic linkage and integration with 02/06/1424 H, the CMA Board issued its Resolution the relevant authorities. CMA Recomposes its

37 AMERC Quarterly Review

Advisory Committee purpose of this resolution is to enable effective The Board of the Capital Market Authority (CMA) communication between the CMA and all different issued a resolution to recompose the Advisory market participants, and creating a regulated Committee for its seventh term to comprise of mechanism for such interaction in order to support 12 part-time members from market participants, the CMA in fulfilling its functions and achieving its experts, specialists and experienced college goals. professors. The Committee’s composition took into consideration a wider representation of market On this occasion, the CMA’s Board would like to participants. The members are as follows: express its appreciation to the previous Advisory Committee for their great efforts and contributions, 1. Mr. Amin bin Fahad Al Shady - Senior Vice as well as their transparent and unbiased views President, Finance Sector, STC and recommendations on all aspects which have develop the capital market and ensuring investors’ 2. Mr. Rashid S. Al Rashoud – Partner, Ernst & Young protection.

3. Mrs. Rania M. Nashar – CEO, Samba Financial The Board has also appreciated the role played Group by the Committee as an advisory body by making recommendations and suggestions on any issues 4. Dr. Roland Bellegarde - Senior Advisor to CEO, that might need to be explored at the request Tadawul of the CMA’s Board, deliberating topics and suggestions highlighted by market participants 5. Mr. Rayyan bin Mohammed Nagadi - CEO of the and seeking their feedback on any proposed new or National Center for Privatization amendments to policies which the CMA wishes to adopt, as well as any issues raised by the Committee 6. Dr. Saleh Bin Hamad Al Shinifi - Consultant of which are essential to the capital market industry. Internal Auditing, Saudi Telecommunications Co. During the previous term, the Advisory Committee (STC) had scrutinized on several important issues and had provided with their valuable views and 7. Mr. Tariq Z. Al Sudairy - Managing Director & CEO, recommendations, amongst others: Jadwa Investment Company -CMA’s strategic plan and the most important 8. Mr. Abdullah Bin Nasser Al Dawood - CEO of Serra achievements Holding Group -Dual listing -Financial derivatives market 9. Mr. Ali F. Almarzouki - Head of Compliance, NCB -Financial Technology (FinTech) Experimental Capital Laboratory and Robo-Advisory Business Model

10. Mr. Emad S. Al Kharashi – Governor, General -Authorized Persons Regulations & Securities Authority for Awqaf Business Regulations development project

11. Mr. Fahad Al Dehais Almalki - Managing Partner, -Capital Markets Law Amendment AlDhabaan and Partners in association with -REITs Eversheds Sutherland -The policy of suspending the shares of listed companies 12. Dr. Mulhim H. Al Mulhim – Lawyer & Legal -Allow the Listed companies use the fair value consultant, Founder of Al Mulhim Lawyers & model or revaluation to measure property and Consultants investment property -Credit rating agencies The CMA’s Board had previously issued a resolution on 2/11/1434H (corresponding to 8/9/2013G) to Brief information of the Advisory Committee’s approve the CMA’s Advisory Committee Regulations members for the seventh term can be viewed on pursuant to the Capital Market Law (CML). The main the CMA’s website.

38 AMERC Quarterly Review

SCA DUBAI UPDATE FROM THE SECURITIES AND COMMODITIES AUTHORITY

tools, corporate governance, transparency and 1. SCA organizes a workshop on sustainable disclosure, and awards and incentives. investment In this context, Shyrose Osman, Head of Corporate As part of its efforts to achieve the country’s Communications and Chair of the Sustainability sustainability agenda and sustainable development Committee at DFM, reviewed DFM’s initiatives and goals, the Securities and Commodities Authority efforts to promote the concept of sustainability and (SCA), in collaboration with the Dubai Financial to encourage expansion in the implementation of Market (DFM), organized a workshop titled “Public green projects. Osman highlighted the importance Companies and the Road to Achieving Sustainability of disclosing such projects and of preparing Goals”. corporate performance reports in accordance with the recognized principles. Held under the patronage of H.E. Eng. Sultan bin Saeed Al Mansoori, Minister of Economy and For his part, Raji Hattar, Chief Sustainability Chairman of the SCA Board, the workshop—which Officer at Aramex, reviewed Aramex’s experience took place in SCA’s Dubai office—was attended by in implementing sustainability standards and H.E. Dr. Obaid Al Zaabi, SCA’s CEO; members of the principles being one of the region’s leading senior management; investor relations managers; companies that embedded in its operations policies, financial managers; and an elite group of experts strategies, and practices that helped to mitigate and specialists in sustainable investing from negative environmental impacts, which effectively the Dubai Financial Market (DFM), Aramex, and improved the environment in which the company Standard & Poor’s. operates. Dr. Al Zaabi delivered the opening speech in Timucin Engin, Senior Director at Standard and which he stressed the importance of SCA’s role in Poor’s, displayed the advantages of sustainable supporting the sustainability agenda, thus ensuring investing and talked about how to assess companies the country’s financial stability and economic that embed environmental, social, and governance growth. He shed light on SCA’s sustainability (ESG) principles in their conduction of business. All initiatives, particularly the comprehensive roadmap lecturers indicated that there is an increased interest announced early 2019, which constitutes the general among investors across the globe in sustainable framework through which SCA communicates investing and a rise in the volume and value of assets its vision to its audience and industry actors and invested in accordance with the ESG principles. works with stakeholders and concerned parties to implement the roadmap. SCA intends to complete the Sustainable Capital Markets Master Plan by mid-2020. The plan’s Dr. Al Zaabi said that the workshop comes as part completion requires the combined effort of all of the initiatives outlined under the awareness and relevant actors to improve the UAE financial markets. education pillar of the roadmap. Such initiatives aim to raise awareness across listed companies of sustainability standards and the importance of their 2. PTEC’s board of trustees discuss new implementation and of how to assess compliance year’s plans and approves the launch of an with the internationally-recognized standards in e-training platform this regard. He said that the roadmap focuses on Chaired by H.E. Dr. Obaid Al Zaabi, CEO of the seven pillars, including education and awareness, Securities and Commodities Authority (SCA), the rating and standard setting, legal and regulatory meeting of the board of trustees of the Professional frameworks, market platforms and investment

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Training and Examinations Centre (PTEC) discussed Market and Nasdaq Dubai. the PTEC’s 2020 marketing plan, its strategic plan, and its training programs for this year, which will These Guiding Principles will serve as a gateway be delivered in cooperation with the Union of Arab to the increased implementation and integration Securities Authorities (UASA). of sustainable practices among the UAE’s financial entities and will secure the health and longevity The board of trustees adopted a roadmap for of the nation’s economy. The voluntary principles launching an e-training platform, called Al Majlis, represent the first stage of collaboration among and approved five mandatory hours for the training participating entities to ensure a strong and courses delivered by the PTEC and five training hours frictionless transition to a sustainable framework. for the cybersecurity and anti-money laundering The contributing authorities will implement course taken through this platform. appropriate measures to encourage UAE financial firms to develop strategies to incorporate The board viewed the PTEC’s performance reports sustainable practice considerations in their business that included results of the professional exams activities, decision making, risk management and administered in 2019 (measured against global in the context of exploring new businesses. As a indexes). Participants in the meeting included H.E. leading international financial centre, the growth Mohammed Khalifa Al Hadari, Deputy CEO for and development of the UAE’s economy remains a Supporting Services; Prof. Abdullah Mohammed Al key focus across ADGM’s initiatives and efforts. Shamsi, member and academic advisor; Abdullah Salem Al Nuaimi, representing the Abu Dhabi ADSFF was comprised of a series of events including Securities Exchange; Hassan Al Serkal, representing a number of other announcements, key addresses, the Dubai Financial Market; Mohammed Ali Yasin, panel discussions and live ceremonies. In attendance representing the financial services industry; and were many leading international institutional Yousef Mohammed Al Wahhabi, the PTEC Head. investors, regulators, international agencies, development finance institutions and project 3. Media ReleaseFirst Set of Guiding developers who showcased concrete progress and Principles on Sustainable Finance Published actions that aim to develop sustainable finance in by Leading Financial Authorities in the UAE the MENA region and around the world.

Leading financial authorities in the UAE have ADSFF also hosted a myriad of speakers, including published the UAE’s first set of Guiding Principles H.E. Ahmed Ali Al Sayegh, Minister of State and on Sustainable Finance, which serves as a catalyst Chairman of ADGM; The Right Honourable The in the implementation of the UAE’s sustainability Lord Mayor of the City of London Alderman William priorities. The launch of the initiative was unveiled Russell; Sheikha Shamma bint Sultan bin Khalifa Al during the second edition of the Abu Dhabi Nahyan, CEO of Alliances for Global Sustainability Sustainable Finance Forum (ADSFF), a prominent and Founder of the Circle of Hope Foundation; H.E. event organized by Abu Dhabi Global Market Dr. Thani Al Zeyoudi, Minister of Climate Change (ADGM) and held during Abu Dhabi Sustainability and Environment; Laurent Fabius, President of the Week. COP21; H.E. Salama Al Ameemi, Director General of the Abu Dhabi Authority for Social Contribution Premised on the United Nations Agenda for (Ma’an); Ahmed Jasim Al Zaabi, Group CFO of Sustainable Development, the initiative was ADNOC Group, and many other world leaders. implemented as a result of collaborative efforts among a number of financial services authorities in 4. H.E. Sultan Al Mansoori issues new decisions the UAE, including: Abu Dhabi Global Market; the Ministry of Climate Change and Environment; the The Guide to the Governance of Public Joint- Central Bank of the UAE; the Insurance Authority of Stock Companies provides a legal framework that the UAE; the Securities and Commodities Authority; regulates corporate affairs. the Dubai Financial Services Authority; the Dubai Islamic Economy Development Centre; the Abu H.E. Eng. Sultan bin Saeed Al Mansoori, Minister Dhabi Securities Exchange, the Dubai Financial of Economy and Chairman of the Board of the

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Securities and Commodities Authority (SCA), statement, that it has introduced exemptions for introduced new legislation comprising two new public joint-stock companies wanting to buy back decisions and a third decision amending an existing their shares. The statement said that this is aimed at regulation. The decisions, already approved by the providing further support and flexibility to domestic board, are as follows: securities markets without adversely affecting the trades taking place there. H.E. Eng. Sultan bin Saeed 1. The Chairman of the Authority’s Board of Director’s Al Mansoori, Minister of Economy and Chairman of Decision No. (03/Chairman) of 2020 Approving SCA, said that “ever since the latest developments the Guide to the Governance of Public Joint-Stock related to the coronavirus outbreak started taking Companies their toll on the world’s financial markets, SCA has been keen to remain in constant coordination and 2. The Chairman of the Authority’s Board of Director’s communication with financial market institutions Decision No. (05/Chairman) of 2020 concerning the and other regulatory authorities. It responded to Fit and Proper Criteria. the developments with a series of measures that aim to promote confidence and reassure investors 3. The Chairman of the Authority’s Board of in an effort to mitigate the impacts of the crisis and Director’s Decision No. (04/Chairman) of 2020 support the stability of financial markets being a amending the Chairman of the Authority’s Board pillar of financial stability and the backbone of the of Director’s Decision No. (157/Chairman) of 2005 national economy”. concerning the Regulations on Listing and Trading Commodities and Commodity Contracts. “SCA has approved a range of exemptions to facilitate share buybacks,” H.E. Al Mansoori said, adding that The decision approving the guide to corporate “the exemptions will remain in effect until June 30 governance provides a framework for the regulation and public joint-stock companies wanting to enjoy of corporate affairs. Its provisions are based on the exemptions should submit a request to SCA”. the provisions of Federal Law No. (2) of 2015 on The exemptions, outlined in a circular sent to public Commercial Companies. joint-stock companies, include: First, exemption from the provisions of Article (1/Third/3), which All public joint-stock companies are expected states that: “A company shall not buyback its own to comply with the decision while SCA, being shares within 15 days before and 3 days after the a regulator of such companies, will oversee disclosure of its financial statements or any other compliance. It is worth noting that the main material information that may affect the share price, pillars of corporate governance are accountability, driving it upwards or downwards” on the condition fairness, disclosure, transparency, and responsibility. that no board member, executive director, or Corporate governance includes a set of rules employee with insider information is party to the and controls by which companies are directed purchase or sale transaction, directly or indirectly. and controlled and institutional discipline in Second, exemption from the provisions of Article corporate relations is ensured. The framework (1/Third/1), which reads: “Announce to the public follows international standards as it identifies the the buyback transaction in two widely circulated obligations and duties of board members and the local daily newspapers, at least one in Arabic. executive management. It ensures the protection of the rights of shareholders and stakeholders while The period between the date of the announcement achieving corporate sustainability. of the company’s buyback intention and the date of the actual buyback shall not be less than 14 days”. 5. SCA develops mechanism to facilitate Third, exemption from the provisions of Article (1/ share buybacks for listed companies First/2), which states that: “The approval of the . General Meeting of the company under a special “The measures approved by SCA provide support resolution on the buyback for resale transaction and flexibility to domestic securities markets and …”. SCA’s management also agreed to facilitate the promote investor confidence,” disposition of the bought-back shares, under Article 219 of Federal Law No. 2 of 2015 on Commercial H.E. Sultan Al Mansoori The Securities and Companies concerning share buyback, in the

41 AMERC Quarterly Review following ways:1.To shareholders in exchange for standardized disclosure forms posted on their cash dividends if the general meeting approves websites, in Arabic and English. (The forms can be the distribution of treasury shares in exchange for found on ADX’s “Services and Products” webpage cash dividends. 2.To shareholders wanting to make and on DFM’s disclosure system, IFSAH). SCA also a purchase when the company offers them the obliged listed companies to use these forms when shares. 3.To an investor or more in exchange for posting disclosures. There are 22 standardized cash payment. 4.To company staff under the share disclosure forms for: incentive scheme.Public joint-stock companies that bought back their shares and want to dispose 1. Disclosing the purchase of assets in the company’s of them in any of the ways referred to above must first fiscal year. contact SCA in this regard. It is worth noting that these exemptions from some of the provisions of 2. Disclosing the resignation of the chief executive SCA’s Board of Directors’ Decision No. 40 of 2015 /managing director. Concerning Controls and Procedures Related to Companies Buying Back Their Shares to Resell Them 3. Disclosing the resignation of a board member is part of a series of measures that SCA introduced and the appointment of a new board member. lately, one of which was the 5% limit down cap. 4. Disclosing the resignation of a board member 6. SCA issues circular on standardized disclosure forms for listed joint-stock 5. Disclosing the appointment of the chief executive/ companies managing director.

As part of its role in enhancing financial market 6. Disclosing the appointment of a new board transparency and disclosures and its efforts to member standardize disclosure-related procedures and requirements across the country’s financial markets, 7. Disclosing projects. the Securities and Commodities Authority (SCA) adopted an initiative to introduce standardized 8. Disclosing detailed analysis of accumulated disclosure forms for the use of listed companies and losses. circulated the forms among these companies and the financial markets on which they are listed. 9. Disclosing board meetings.

Dr. Obaid Saif Al Zaabi, SCA’s CEO, said that “the new 10. Disclosing acquisition/exist/mortgage/lease initiative is intended to improve the level of services agreements. provided to investors and market participants, thus ensuring the quality of the disclosures posted on 11. Disclosing the preliminary results of public joint- financial market websites and enhancing financial stock companies. market competitiveness”. 12. Disclosing changes to the administrative “The initiative to standardize disclosure forms aims structure. to raise the efficiency and quality of transparency and disclosures and to make sure that no 13. Disclosing lawsuits initiated. material information is left out and that no major discrepancies exist between the disclosures made 14. Disclosing the names of insiders. by companies listed on either ADX or DFM or between those made by companies listed on both 15. Disclosing credit ratings or relevant amendments. of them,” he added. Dr. Al Zaabi said that “SCA will hold awareness-raising workshops to explain what 16. Disclosing transactions or deals with related content to be included in the forms and to respond parties. to corporate questions in this regard”. 17. Disclosing material information. SCA coordinated with ADX and DFM to have the

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18. Disclosing the results of the general meetings of convertible bonds, excluding the preemptive rights shareholders. of shareholders. Participants praised the mechanism that SCA developed last year to deal with listed 19. Disclosing the results of board meetings companies whose accumulated losses amount to 20 percent or more of the capital. 20. Disclosing reports discussing and analyzing the board of directors. The meeting also discussed other actions that would serve to support the balance between sale and 21. Guiding plan to address accumulated losses. purchase. Participants explained that short-selling activity, blamed for declines in the world’s financial 22. Request for “temporarily” hiding disclosures. markets and banned by supervisory authorities, will be halted in the country’s markets. Financial markets are currently considering the feasibility of 7. SCA, ADX, and DFM take initiatives to deal cutting the maintenance margin in accordance with with financial market conditions the international practices in this respect.

SCA implemented mechanisms to help contain SCA is using its powers to facilitate buybacks, in corporate losses. Positive macroeconomic accordance with international practices, in times indicators, corporate results, and the performance of declining markets and is communicating with of financial markets in the last year all signal the the UAE Central Bank to consider the introduction strength and soundness of the investment climate of mechanisms by which banks liquidate shares in the country. provided as collateral when prices fall. The Securities and Commodities Authority (SCA) held a meeting with the Abu Dhabi Securities 8. SCA stresses that short selling is not Exchange (ADX) and the Dubai Financial Market permitted in the UAE financial markets (DFM) to discuss the conditions prevailing in the financial markets operating in the country, to H.E. Eng. Sultan bin Saeed Al Mansoori, Minister contain the consequences of the falling market of Economy and Chairman of the Securities and indexes, and to take immediate actions to deal with Commodities Authority (SCA), chaired a meeting fall. attended by SCA’s executive management team. The meeting was presided over by H.E. Dr. Obaid H.E. Al Mansoori started the meeting by stressing Saif Al Zaabi, SCA’s CEO. Present at the meeting the government’s efforts in providing strong were Ghanem Al Dhaheri, Deputy Chief Executive at stimulus packages to deal with the impacts of the ADX, and Khalifa Rabba, Deputy Head of Operations current global crisis, saying that other packages will Division at DFM, in addition to technical and legal follow to empower recovery from these impacts. specialists from the two stock exchanges and The meeting discussed financial market conditions representatives from SCA’s technical departments. and latest developments, in addition to proposals, initiatives, and mechanisms for coordinating with The meeting participants emphasized the financial markets and other official authorities. soundness and strength of the foundations on The meeting also stressed that short selling is not which the country’s economy is built in light of the permitted at present in the UAE and that coordination positive macroeconomic indicators, citing the good is under way with financial markets to ensure that profits that listed local public joint-stock companies the online voting mechanism for shareholders has made compared to last year and the increased net already been put into effect. Participants at the profit growth rate, up to 9 percent, compared with meeting also considered a proposal to postpone that of the year before. the annual general meetings of shareholders and They pointed to the mechanisms that SCA to speed up buyback procedures, in addition to introduced—in collaboration with ADX and DFM— another proposal concerning stock limit down. At to address negative corporate results, whether in the end of the meeting, H.E. Al Mansoori emphasized relation to the acquisition of existing companies that all actions have been taken to maintain the and entry of strategic partners, the transformation soundness of financial markets and to safeguard the of loans into equity shares, and the issuance of rights of investors, in line with the best international

43 AMERC Quarterly Review practices. continuity in line with international standards.

H.E. Dr. Obaid Al Zaabi, SCA’s CEO, received the 9. Statement by H.E. Dr. Obaid Al Zaabi on certificate from Ayman Ktaily, Business Development the Abu Dhabi Executive Council’s stimulus Manager for the Middle East, Africa, and India at package and the establishment of a market LRQA, in the presence of Othman Al Ali, Manager maker fund of SCA’s Future and Strategy Department.SCA is the Deputy Supreme Commander of the UAE Armed first federal authority to receive such certification Forces, for the strategic initiative launched by the from LRQA for the full implementation of the risk Abu Dhabi Executive Council to allocate Dh1bn to management guidelines across all of its sectors and establish a market maker fund to provide liquidity to different types of risks, including financial risks, and ensure ongoing balance between the supply operational risks, risks arising from strategic and and demand for stocks. There is no doubt that the operational objectives, legal and regulatory risks, Abu Dhabi Executive Council’s allocation of a billion corporate governance risks, in addition to other dirhams to establish a market maker fund will meet risks associated with customers, business continuity, one of the requirements for having the UAE markets crisis and disaster management, and professional upgraded to the “advanced market” status. health and safety.

This exceptional initiative will also attract capital and In this context, Dr. Al Zaabi said: “We are proud that investments from home and abroad and will help SCA received this certification for complying with the capital markets industry to rebound and get the ISO international standard on risk management. back its momentum. It goes without saying that the This reflects the relentless efforts by our team investment policy of such funds is based on long- to meet the conditions and criteria set out by term investments in stocks that provide lucrative this standard and to implement the standard’s returns, thus reducing the high volatility of trading guidelines across SCA’s operations in a systematic values and financial market indicators. The market and highly transparent manner”, adding that maker fund will provide hedging tools against “implementing the highest global standards on risk market decline, in addition to achieving returns on management emphasizes SCA’s ability to identify, investments in stocks, bonds, and other instruments assess, and analyze anticipated risks; understand listed on the UAE high-yielding markets. risk factors and potential impacts; and develop risk management scenarios. This will help keep risks at appropriate levels, promote the implementation of 10. H.E. Sultan Al Mansoori issues a decision preventive measures, and make effective and timely to amend stock price limit down decisions, thus ensuring the continuity of business H.E. Eng. Sultan bin Saeed Al Mansoori, Minister and the achievement of objectives in line with the of Economy and Chairman of the Securities and strategic and operational plans in place”. Commodities Authority (SCA), issued a decision amending the limit down on stock prices. Under He stressed that “receiving this certification surely the decision, stocks will have a limit down cap of 5% enhances confidence in SCA’s performance as the as of Wednesday, March, 18, until further notice.The supervisory body overseeing the country’s financial markets may increase the limit to 7% for a number and commodities markets and promotes its status of stocks selected based on criteria determined by among local and international counterparts. The the markets and approved by SCA. adoption of the best, internationally-recognized standards and practices will bring benefits to all related parties in the securities sector, including 11. SCA obtains certification for complying investors and market participants”. with ISO international standard on risk management

The Securities and Commodities Authority (SCA) For his part, Ktaily said: “We are glad to be part of received certification for complying with ISO SCA’s achievements and successes that are driven international standard on risk management by its spirit of competitiveness and creativity. SCA’s (ISO 31000:2018) from Lloyd’s Register Quality most recent achievement is to be the first federal Assurance (LRQA) for its efforts in implementing authority in the UAE to receive such certification

44 AMERC Quarterly Review after being assessed by LRQA for identifying, evaluating, and addressing risks arising from the operations of its sectors. We look forward to further collaborations in the future”.

It is worth noting that the International Organization for Standardization (ISO) is a non-governmental organization and an international standard-setter based in Switzerland with offices in 195 countries. ISO 31000:2018 provides guidelines to help organizations develop a risk management strategy to effectively identify and mitigate risks. Its goal is to foster a risk management culture and help organizations make more effective decisions and improve their governance and performance.

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TUNISIA UPDATE FROM FINANCIAL MARKET COUNCIL

LEGISLATION IFRS. To do so, they are encouraged to set immedi- ately, among other things, actions plans to specify - Posting, on the CMF website, the CMF General the steps necessary to the implementation of the Decision draft on the nomination criteria and oper- new accounting benchmark to be adopted. The ating methods of the independent members within plan has to be endorsed by the company’ board the Board and of the minority shareholders’ repre- supported by the audit committee. The CMF is to sentative, for public consultation purposes up to be regularly informed of the work progress in a April 6th, 2020. connection with this aspect.

- Closing of the public consultation posted on the INTERNATIONAL COOPERATION CMF website and relating to the amendment of the CMF Regulation on the Public offering for savings. - Cancellation and postponement of the 14 th This amendment aims at: annual meeting of the Union of Arab Securities Authorities (UASA) initially scheduled for 25 § Implementing the Law dated July 30th, 2013 re- March 2020 in Oman because of the COVID-19 lating to the Islamic sukuk and more particularly to pandemic and the precautionary measures taken the prospectus template in case of public offering in this context. of sukuk, & - Sharing with our counterparts of the French § Harmonizing the regulatory rules subsequent to Speaking Institute for Financial Regulation ( IFRE- the changes brought to the CMF Regulation on the FI) the measures taken by the securities regulator Tunis stock exchange and particularly specific to the to respond to the COVID-19 crisis. As a matter of alternative market regulatory framework review. fact, the measures taken by the Tunisian securities regulator, CMF Tunisia, are mainly the following: - Closing of the public consultation posted on the CMF website and relating to the CMF draft Regu- A. Emergency measures regarding the Tunis lation specific to the Sukuk mutual funds and the stock exchange and relating to the trading ex- management companies of these funds. ceptional rules, set to ensure the market activities continuation and to protect investors and issuers - Enactment of the Central Bank of Tunisia Circular interests. They are into force since 18 March 2020. n°2020-01 dated January 29th, 2020 and relating to the preliminary measures for IFRS adoption. B. Supporting & transparency measures aimed at public companies. SUPERVISION C. Measures relating to the holding of share- - Launch of the yield curve’s new version since 06 holders general meetings of public companies March 2020 after being tested in last February. This taking into account the COVID-19 context. new version has been designed to address the defi- ciencies identified within the old version and to re- D. Measures targeting auditors, listing spon- spond to the market participants’ requests. sors and other stakeholders,

- Issuing, on the CMF website on 11 February 2020, E. Measures specific to the CMF activities’ a press release targeting listed companies, banks, fi- continuation. nancial institutions as well as insurance and reinsur- ance companies and inviting them to mainly com- ply, starting from January 1st, 2021, with the

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All these measures are specified within the CMF communiqués posted on the website: https:// www.cmf.tn/?q=avis-et-d-cisions-du-cmf

Number of Listed TUNINDEX MARKETCAP No. of CISs CISs NAV Companies

81 companies 6483.38 21830.13 M 120 1338.9M US $

68 listed on the main TND (7796.4 M US $) market

13 listed on the alter- native market

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