| Market
Committee’s Resolution No. (5) for year 2005
Concerning Control and Surveillance Over Managing
Others Portfolios
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After
perusal of the amended Decree issued on 14/8/1983 organizing the Kuwait
Stock Exchange.
And the decision of the Minister of Commerce and Industry No. 35 for
year 1983 to issue the internal bylaws for Kuwait Stock Exchange.
And the resolution of the Market Committee No. 3 for year 2000 concerning
stocks trading controls through the companies that manage others’
portfolios.
And the resolution of the Market Committee No. 1 for year 2001 concerning
the amendment of stocks dealing controls through the companies that
manage others’ portfolios.
And according to the Market Director proposal,
And after the consent of the Market Committee
The following has been decided:
Article (1)
These resolutions shall be applied to companies which
invest in local securities and other securities listed in Kuwait Stock
Exchange for others account if the market’s administration permits
the exercise of it’s activity.
Companies who already manage portfolios of others the
date this resolution was effective shall be exempted from attaining
the approval of it’s existing activity yet they shall adhere to
all the resolutions listed in this resolutions and to any other decisions
issued by the market.
Article (2)
Companies
that manage and invest portfolios of others are permitted to apply to
Kuwait Stock Exchange to register in the companies registrar that exercise
this activity in the market. They must enclose with this application
the following documents and information:
1. A copy of contract of
establishment and companies bylaws.
2. The approval of the Central
Bank of Kuwait.
3. Name
of Chairman and Directors of the Board and managing director and declare
what they own themselves their wives and their minors of listed securities
in the market on the date they submit the application and any changes
that may occur on it.
4. Name
of the Companies Director and the employees who are authorized to manage
portfolios and as well the name of their wives and their minors and
to declare what they each own of listed securities in the market on
the date they submit the application.
5. Statement
showing the scientific qualification and experience for any one authorized
to manage portfolios of others.
6. Any
other statements information or documents requested by the market’s
administration.
Article (3)
Companies
who have attained the approval from the market’s administration
to manage portfolios of others and companies who already exercise this
activity the date this resolution was issued: shall provide the market
administration with the regulation they plan to follow in managing the
portfolios of their clients. The regulations should comprise the following:
1. Investment
policies they plan to follow and the standards applied.
2. Purposes they plan to invest clients capital.
3. Sample of proof of contract between company and it’s
clients. It should comprise at least the minimum of the endorsed requirements
stated by the market’s administration.
4. Method taken for issuance and receiving orders name
of or names of authorized persons who manage portfolios of others.
5. Register method taken for verification and follow
up on investments.
6. Statement showing duties and responsibilities exercised
by persons authorized to manage investments.
7. System taken concerning registering letters between
the company and it’s clients.
8. Registrations preserved by the company.
9. Method taken to secure ownership documents and capital
of the clients, as well as, where it is taken place in.
10. Procedures for internal surveillance.
11. Any
other statements or instructions requested by market’s administration.
This system
shall be subjected to the approval of the market’s administration
all concerned companies shall obtain the approval from the market’s
administration for any changes that tray any occur..
Article (4)
Companies
managing portfolios of others must abide to any restriction subjected
by law on its units investment in securities in or out of the market;
be it on the traded securities or on their clients employment position
or the position they occupy in the sector of the issued securities;
or also concerning the maximum of ownership as well as obtaining the
compulsory prior approval to any action.
Article (5)
Companies that
manage portfolio of others are forbidden from using the managed capital
to obtain any form of credit facilities or to offer finance to others.
They are also forbidden
from using the managed portfolios as guarantees to obtain credit facilities
or to finance others.
Article
(6)
Companies
that manage portfolios of others are subjected to the identical rules
and regulations applied to investors who manage their investments directly.
Also, the transaction contracts executed for the benefit of their clients
must comprise the reference of each trader.
Article (7)
Companies
that manage portfolio of others are forbidden from concealing any vital
facts or information that may effect sound decision taking. They are
also forbidden from offering any false or exaggerated statements or
information on any actual or possible investments to attempt them to
invest in or to keep or to sell whether this information in offered
personally or through publishing it or through advertisement.
These
companies are also forbidden from offering any statements or information
concerning their managed portfolios other than what is stated by law
unless approved by the market’s administration.
Article (8)
The company
that manage other’s portfolios has to separate the client’s
accounts than the company’s accounts and shall keep records that
clearly shows the size and the value of each client’s investment
separately from other clients.
Article (9)
All securities
and cash kept with the company has to be delivered to its owners as
soon as the managing company receives a request from them, and the company
is not allowed to delay such request without any reasonable reasons
or prior notice to the market’s administration.
Article (10)
Companies
managing other’s portfolios are forbidden from arranging transactions
using their clients accounts with the intention of defining the closing
traded securities prices. They are also forbidden from entering into
deals they know or they may know they will be the other part. Such deals
will not be taken into account in calculating commission or in the value
of the portfolio or in the closing price.
Article (11)
The companies
managing other’s portfolios are not allowed to execute inside
deals between portfolios it manages and should carry out all its securities
transactions according to the applied rules in the market. These companies
should obtain a prior written approval from the client in order to buy
its shares or the shares belonging to its subsidiaries or its affiliated
companies for its account with the importance of adhering to the permissible
buying percent of its shares or the shares of the companies referred
to.
Article (12)
The companies
managing other’s portfolios are not allowed to participate in
Initial Public offering for new established companies in its name on
behalf of the owners of the portfolios which it manages and furthermore,
it has to present the IPO’s request forms and issue share certificates
individually for each participant.
Article (13)
The companies
managing other’s portfolios has to adhere with its client’s
instructions when using their rights raising from their ownership of
the securities and even in voting, nominating and recruiting in the
board members of the companies.
Article (14)
The companies
managing other’s portfolios should provide the market’s
administration with the reports it requests and should mention in it
the buying and selling reports of its clients accounts and the market’s
administration is authorized to request any other details concerned
with the names of such portfolios including those trading online by
using the E-Trade.
Article (15)
The companies
managing other’s portfolios shall manage its clients portfolios
by itself and not to authorize other companies to manage the same. It
is also not permissible for companies that manages other’s portfolios
to open portfolios for itself in other companies.
Article (16)
The companies managing
other’s portfolios should abide not to have any conflict of interest
between its employees who handle managing the portfolios with the owners
of such portfolios, furthermore, these companies shall hold the full
responsibility which raises accordingly in facing the owners of these
portfolios or the others.
The companies managing
other’s portfolios should not assign a single employee to manage
its portfolio and its clients portfolios at the same time and it is
also forbidden for its employees managing portfolios to handle portfolios
belonging to their relatives accounts and this will apply till second
grade relatives.
The market’s
administration has the right to request the company to dismiss any of
its employee who infract this article.
Article (17)
The companies
managing other’s portfolios shall adhere with the rules of the
law No. 2 for the year 1999 concerning the announcement of ownership
in listed companies if the owner of a portfolio has to announce his
ownership in one of the companies within the portfolio. Also, those
companies should inform the market’s administration about the
securities belonging to the concerned persons in article 15 (repeated
A) of the decree No. 158 (The amendment of the decree concerning organizing
the Kuwait Stock Market).
Article (18)
All the
traded transactions by the companies managing other’s portfolios
shall be supervised by KSE. Such companies are not allowed to conceal
any information, records, documents or details requested by the market’s
administration or to prevent the administration of reaching to such
information. The market’s administration has the right to do field
office investigation for the safety and accuracy of such details and
records and the company shall return back to the managing company with
any notices or dissents founded and ways to avoid them in future and
the time period needed for that. The disciplinary procedures shall be
applied on the uncorrected dissents.
Article (19)
The companies managing other’s portfolios shall
get the assistance of one of the auditors to prepare a report at the
end of the months April and October of each year. Such report shall
include a clarification stating how such companies are adhering in managing
these portfolios according to the rules of this article and the regulation
applied by KSE and to state clearly and the reasons for such dissents
if founded.
The auditor has to present such report to the market’s
administration within 15 days from the end of each period and shall
be prepared according to the international auditing standards issued
by (IFAC).
Article (20)
The rules
of law, decisions, regulation and systems applied in KSE shall be adhered
on all those issues not stated in this article.
Article (21)
This article
shall be published in the official newspaper and shall be effective
from 9/11/2005, the KSE director should execute it and cancel all articles
which contradict with such article.
Minister of Commerce and Industry
President of the Kuwait Stock Exchange’s Committee
Abdullah
Abdul Rahman Al-Taweel
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