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EXECUTIVE REGULATIONS

Of Law No. 7 of 2010 concerning Establishment of Capital Markets Authority and Organization of Securities Activity

Chapter One “Definitions”

Article (1)

In implementation hereof, the following terms and expressions shall have the meanings ascribed to them:

Concerned Minister : The Minister of Commerce & Industry.

Authority : Capital Markets Authority.

Board : The Authority’s Board of Commissioners.

Stock Market : Stock Exchange Market.

Stock Market Members : Companies and funds listed in stock exchange market and the brokers.

Clearing Agency : The entity that clears and settle securities trading and handles the centralized placement of securities.

Person : Natural persons or corporate body.

Licensee : A natural person or corporate body having a license from the Authority to carry out one of the securities activities stated in Article (124).

Registered Person : A natural person registered with the Authority to carry out a function that should be registered with the Authority.

Issuer : The corporate body that has the right to issue securities.

Listed Company : Any shareholding company listed in stock exchange market.

Security : Any bond of whatever legal form that proves a share in a marketable finance licensed by the authority such as:

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A. Shares issued or proposed to be issued in a company’s capital.

B. Any instrument that originates or proves indebtedness that has been, or shall be, issued by a company.

C. Loans, bonds and other instruments that could be convertible into shares in a company’s capital.

D. All marketable general debt issued by various government entities or the public authorities and institutions.

E. The sukuk issued under the applicable Shari’a-compliant contract forms.

F. Any right, option or derivative relating to any of the securities.

G. Units in any collective investment scheme.

H. It should not be considered as securities the commercial papers such as promissory notes, letters of credit, fund transfers, exclusively inter-bank traded instruments, insurance policies and the rights of beneficiaries on pension schemes.

Broker : A person carrying out purchase and sale of securities on behalf of others for commission.

Trader : A person carrying out purchase and sale of securities for his own account.

Investment Portfolio Manager

: The person entrusted with management of the investment portfolio on behalf of customer or for the company in which he is working.

Investment Advisor : A corporate body providing investment advisory services relating to securities for commission.

Collective Investment Scheme

: An entity engaged in placement of investors’ funds therein under different types of investment.

Investment Trustee : A corporate body licensed by the authority to carry out monitoring and supervision over collective investment schemes.

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Custodian : A corporate body licensed by the authority to carry out the activity of asset custody in accordance with the Law No. 7 of 2010 and these Executive Regulations.

Placement Agent : The person, who offers or sells securities for the issuer thereof or its ally, or receives securities from the issuer or its ally for re-marketing purpose.

Shari’a Auditor : A person undertaking the supervision of the licensee’s business to assure their compliance with the Shari’a rulings and regulations issued by the Authority.

Insider : Any person who has access by virtue of his/her position to material non-public information or data on a listed company.

Public Offering : A process of invitation to the public for subscription in the securities through various published announcements.

Private Placement : An invitation addressed to specific category or specific person for subscription in a closed shareholding company or upon increase of capital of an existing company in accordance with the terms and requirements determined by the Authority.

Ally : The person, who is affiliated to other person(s) or subject to his/their control.

Associate Company : A company in which a person owns a share exceeding 20% of its capital, or which is similar to another company being a subsidiary of the same third person.

Subsidiary Company : A company in which a person owns a share exceeding 50% of its capital.

Competent Court : The court set forth in Law No. 7 of 2010 and these Regulations.

Effective Control : Any position, agreement, equity stake or interest, of whatever percentage, that leads to control in appointment of the majority of the members of the Board of Directors or over the resolutions passed by the

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board of directors or by any general assembly of the respective company.

Market Maker : The person, who ensures availability of forces of supply and demand on one security or more as per the controls and regulations preset by the Authority.

Option Contracts : A contract or an agreement that grants a person the right, but not a commitment, to purchase or sell a security or a group of securities or an index of securities to another person. However, such right does not entail possession of securities.

Sale Offer : A desire to assign the title of a security listed in stock exchange market and through it for cash consideration.

Purchase Offer : A desire to own a security listed in stock exchange market and through it for cash consideration.

Credit Rating Agency : A corporate body licensed to carry out the activity of credit rating or credit information classification.

Related Party : A person, who is a member in the board of directors, executive management or supervisory board for a broker or investment advisor; a manager or holder of a supervisory position in any of the aforesaid entities; or an employee or representative of any of those entities dealing with the public or having the discretion to act upon the securities or funds as a part of his job with the entity licensed to carry out securities activity.

Primary Market : The market in which subscriptions and issuance of securities are processed.

Secondary Market : The market in which purchases and sales of securities are processed and the related titles are transferred in accordance with the governing laws and regulations.

Main Market : It is that part of the secondary market in which companies that meet specific criteria set by the market are listed.

Parallel Market : It is that part of the secondary market in which companies that meet lower criteria set by the market

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are listed.

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Chapter Two “Capital Markets Authority”

Article (2)

The Authority shall exercise its authorities in accordance with Law No. 7 of 2010 and these Regulations as well as the resolutions and regulations promulgated by the Board of Commissioners in application of the Law and its Executive Regulations.

Article (3)

The Authority aims to:

1. Organize the securities business in line with the principles of equity, efficiency, competitiveness and transparency.

2. Make the public aware of the securities business and its benefits, risks and obligations associated with the investment in securities, and encourage development thereof.

3. Provide protection for those involved in the securities business.

4. Minimize the typical risks expected to occur in the securities business.

5. Implement the full disclosure policy in a way to realize equity and transparency and prevent conflict of interest and any insider trading.

6. Seek to ensure compliance with the laws and regulations related to securities activity.

Article (4)

Board of Commissioners shall be responsible for:

1. Issuing the regulations and instructions required for implementation of the law, and the recommendations and studies necessary to develop the laws that help to realize the Authority’s objectives.

2. Issuing the licenses for stock exchange markets and the related activities, and monitoring their activity.

3. Issuing the licenses for memberships of the stock exchange markets and permits for the employees therein and everybody working in the securities activity including asset management entities, investment funds, brokerage companies, securities and investment custody companies, advisory services firms, etc.

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4. Organizing promotion of investment funds and the other collective investment schemes.

5. Organizing the public offering and private placement of Kuwaiti and Non-Kuwaiti securities, and monitoring and supervision over the same.

6. Organizing mergers and acquisitions and monitoring and supervision over the same.

7. Setting rules of self-control and organization in the securities activity.

8. Approval of all rules and regulations established by stock market management to carry out its operation and endorsement thereof.

9. Setting rules for compliance with the profession’s ethics, efficiency and integrity of the licensees and endorsement thereof.

10. Providing the proper systems to protect the dealers and minimize the improper, illegal and unfair practices.

11. Cooperating with regulatory authorities and the similar foreign institutions with respect to the organization and coordination of, and participation in, the mutual activities.

12. Conducting all duties and responsibilities assigned to it, as stipulated in the Law No. 7 of 2010 or any other Law in order to avoid market fluctuations.

13. Issuing all resolutions, which fall within the Authority’s competences and are deemed necessary to implement the provisions of the Law No. 7 of 2010 and these Executive Regulations, any delegating, at his its discretion, some of its competences.

14. Setting the rules, processes and procedures required for the activity of each person carrying our business in accordance with Islamic Shari’a.

Article (5)

The Authority shall carry out what follows:

1. File the civil and commercial lawsuits related to violation of the provisions of Law No. 7 of 2010 and the regulations issued thereby, or those lawsuits where the Authority has interest therein.

2. Receive complaints filed regarding violations and crimes set forth in the present Law, the administrative investigation thereof and referral thereof to the disciplinary board, should it deem so necessary.

3. Carry out all procedures that may lead to reveal crimes set forth by Law No. 7 of 2010, and refer penal complaints to the public prosecution in every incident suspected to be a crime, whether it occurred against the Authority or the dealers in the securities activity.

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4. Conduct inspections and control over the activities of licensees by virtue of Law No. 7 of 2010.

5. Purchase, acquire and dispose of properties of whatever type, and carry out all legal actions.

6. Publish materials related to the securities activity.

7. The Authority is entitled to impose charges and collect fines within the scope of implementation of the Law. Further, It may carry out all the necessary actions that enable it to perform its duties and realize its objectives set forth in Law No. 7 of 2010.

Authority’s Board of Commissioners

Article (6)

The Authority shall be managed by a Board named The Authority’s Board of Commissioners that comprises of five dedicated commissioners appointed by a decree upon the nomination of the concerned Minister. The decree shall appoint the chairman and vice-chairman of the Board from the Board members.

Article (7)

Board of Commissioners is the highest power in the Authority and responsible for all resolutions issued by it whether legislative, regulatory or executive. The Board of Commissioners shall set forth the competences of each commissioner and the limits of his responsibilities in the authority matrix to be issued by the Board upon finalization of the Authority’s organizational structure.

Article (8)

The chairman shall represent the Authority before third parties and courts. He shall carry out the duties of the Executive Director and execute all resolutions of the Authority. He shall also supervise all technical and administrative departments related thereto. He shall exercise his competences in accordance with the laws, regulations and resolutions endorsed by the Board of Commissioners, as set forth in the authority matrix approved by the Board. He shall be liable together with the other commissioners for the management of the Authority, and may delegate some of his administrative authorities to one of the commissioners or to an administrative unit within the Authority.

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Article (9)

Should the chairman be absent or the position thereof becomes vacant, the Vice-chairman shall replace the Chairman in all of his authorities and preside all of the Board meetings.

Article (10)

Should the chairman be absent or the position thereof becomes vacant, and should the vice-chairman not be able to perform his duties for any reason whatsoever, the Board shall convene within two weeks and commission a member to carry out the duties of the Chairman of the Board by proxy.

Article (11)

Should the Executive Director be absent or the position thereof becomes vacant, the Board shall convene and commission one of the commissioners or the Authority’s Executive Management to carry out the Executive Director’s duties.

Article (12)

The commissioner should be a Kuwaiti natural person known for his integrity, experience and specialization related to the Authority’s business and no final verdict of bankruptcy or of a crime of breach of honor or trust should be issued against him.

Article (13)

The commissioner, in carrying out his duties in the Authority, may not be engaged in any trading business for his own account or in his capacity as attorney, custodian or guardian. He may not carry out any job, occupation or any other work in the public or private sectors, provide any services or consultation, whether directly or indirectly, or take part in the membership of any Board of an entity subject to the supervision of the Authority or any of its related entity.

Article (14)

The term of membership of the Commissioner is five years, renewable for one term, except for the members of the first board, where the term of three thereof only may be renewed for a third term. The seat of the Commissioner shall become vacant by death, incapacity or resignation. Furthermore, the Commissioner shall lose his capacity and the seat thereof become vacant in the following cases:

1. Should a final verdict of bankruptcy be issued against him.

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2. Should he be convicted with a final verdict of a crime of breach of honor or trust.

3. Should he be absent for three consecutive meetings or six non-consecutive meetings without a reason accepted by the Board of Commissioners.

4. Should he breach the provisions of Articles 27 or 30 of the Law No. 7 of 2010.

5. Should he intentionally breach the code of conduct set by the Board of Commissioners.

A resolution thereon should be issued by the Board of Commissioners to set out the reason for vacancy of the seat.

Article (15)

The Board of Commissioners shall meet at least eight times a years based on an invitation by the Chairman or a written request by at least two Commissioners setting out the subject and date of the meeting. In such case, the meeting shall be held in the scheduled date to discuss only the subject of the invitation.

Article (16)

Meeting of the Board of Commissioners shall be valid if attended by the majority of the Commissioners, provided that the Chairman or the Vice-Chairman should be among the attendees, except for the meeting as stipulated in Article (9) of the Law No. 7 of 2010. The Board resolutions shall be passed by the majority of members’ votes. The Board may accept attendance of some of its members via the advanced communication methods.

Article (17)

Meetings of the Board of Commissioners shall be held in the Authority’s Headquarter or any other premises to be determined by the Board.

Article (18)

In case of any contingency, the Chairman may seek approval of the Commissioners on a resolution given the character of urgency via fax or any other communication method that produces a written evidence of the Commissioner’s approval. Such resolution shall be valid and effective by virtue of approval of the majority of the Commissioners. All such resolutions should be presented to the Board in its first meeting for endorsement thereof.

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Article (19)

The Board may establish permanent or temporary advisory committees and entrust them with studying a certain subject within its jurisdictions stipulated under the Law No. 7 of 2010. The Board may outsource the duties of the committees to expert from outside the Authority.

Article (20)

The Board of Commissioners shall be solely authorized to establish and approve the Authority’s organization structure and the administrative and financial authority matrixes, and may make the necessary amendments thereof, whenever required.

Article (21)

The Authority’s Board shall set the administrative and financial bylaws of the Authority’s personnel affairs without conforming to the rules stipulated under the Civil Service Law and System, provided that the Civil Service Law and System shall be applicable to all matters not provided for in the Authority’s bylaws. The Chairman of the Authority’s Board of Commissioners shall have the jurisdictions of the Civil Service Commission and Minister with respect to the Authority’s personnel.

Legal Department

Article (22)

With observation to the Second Article of the Amiri Decree No. 12 for 1960 regulating the Fatwa & Legislation Department, the Authority shall have a Legal Department reporting to the Authority’s Chairman to handle all lawsuits, appear before all courts and arbitration panels, express legal opinion and conduct investigations. The Legal Department shall also prepare projects and propositions for the laws, regulations and resolutions relating to the stock market system.

The Board of Commissioners shall pass the resolutions necessary for regulating the Legal Department.

The Authority’s Finance & Budget

Article (23)

The Authority shall have an independent budget to be prepared in accordance with the rules stipulated under the Authority’s Budgeting & Financial Position Policy issued by a resolution of the Board of Commissioners.

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Article (24)

The financial year of the Authority shall commence of April 1st and end on March 31st of each year, except for the first financial year of the Authority that shall commence from the date on which Law No. 7/2010 comes into effect and end on March 31st.

Article (25)

The Authority’s income comprises of the funds of charges and fines that the Law and its regulations stipulate collection thereof for the Authority’s account, or any other resources collected as a result of practicing its activity or employment of its reserves. The Authority shall not receive any funds from the Public Treasury.

Article (26)

The Authority’s revenues shall include the service charges and fines imposed by the Law No. 7/2010 and the regulations issues in implementation thereof, in particular:

1. Charges relating to practice of its activity and authorities, e.g. charges on license, registration, etc in accordance with these regulations and resolutions of the Board of Commissioners.

2. Proceedings of fines whether by virtue of a court ruling or otherwise.

3. Proceedings on settlement in case of violations and crimes as per the provisions of Article (131) of the Law No. 7/2010.

A resolution is to be issued by the Board of Commissioners for a schedule of charges.

Article (27)

The Authority should establish, from its annual surplus, cash reserves that secure its financial stability on the long run. The Board of Commissioners shall determine and specify, by virtue of a resolution to be passed by it, the nature and amount of such reserves, where the amount in excess of the specified limit shall be deposited in the Public Treasury of the State.

Article (28)

The Authority shall maintain proper records and books of accounts to accurately disclose its assets, liabilities and financial position at the end of each financial year in accordance with the International Accounting Standards and in line of an overall framework of internal control.

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Article (29)

The Authority shall have one or more of independent auditors of the audit firms approved by the Authority.

Article (30)

The auditors may access, at any time, all information and data maintained by the Authority or any of its directors, officers or employees for reporting purpose.

Article (31)

The Authority shall be subject to the succeeding supervision of the State Audit Bureau, and shall be subject to neither the preceding supervision of the State Audit Bureau nor the provisions of Public Tenders Law No. 37 for 1964 and the amendment thereto.

Article (32)

Any funds due to the Authority shall be considered as public funds and shall be treated in the same manner as the debts due to the Public Treasury. Such funds should be collected in accordance with the procedures applicable to collection of the debts due to the Public Treasury.

Article (33)

The Authority may not be engaged in any commercial business. It may not lend monies or issue securities or invest therein.

Article (34)

The Authority shall submit to the concerned minister an annual report to be presented to the Ministers’ Council within 120 days of the end of each financial year on its activities and business throughout the last year, provided such report should include the Authority’s accounts and the auditors’ report.

Adherence to Neutralism, Disclosure & Confidentiality Article (35)

Any person invited to a meeting within the Authority’s jurisdiction and had an direct or indirect interest in the topics under discussing in that meeting may not participate in the discussion thereof or express an opinion or vote thereon. Such person should disclose that

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interest at the outset of the meeting and leave the meeting before discussion of the topics starts.

Article (36)

The Authority’s Commissioners are committed to disclose in writing upon commencement of their duties of the securities listed in Kuwait Stock Exchange, which are possessed by any of them, his spouse or his minors, and of any change thereto. The Board of Commissioners shall establish a special system of disclosure rules and procedures for the persons mentioned in this Article.

Article (37)

The Commissioner or any person working in and with the Authority’s Committees, with or without pay, must maintain confidentiality of the information he obtained by virtue of his aforesaid position and the documentation under his custody, and must disclose the same only to the Authority’s concerned persons, unless otherwise stipulated by the Law No. 7/2010 or any other law, or required by a ruling or order issued by a judicial entity to oblige him to disclose or provide any information or documentation he obtained by virtue of his aforesaid position.

The person required to disclose the confidential information or documentation must inform the Authority, in advance, of the information and documentation to be disclosed and the entity to which disclosure shall be made.

Article (38)

All data and information relating to the Authority’s activity shall be confidential and may not be revealed without the Authority’s approval or by a court order.

Data and information of the persons, being licensees or traders in Stock Exchange Market, shall be duly protected and treated as personal and confidential information that may not divulged except in the cases permitted by the law or by a judicial order.

Special Rules & Systems

Article (39)

The Authority shall establish a special system for listing in Stock Exchange Markets.

Article (40)

The Authority shall issue a special systems for governance of the companies and licensees.

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Article (41)

The Authority shall set the rules and terms that the auditors should fulfill to be enrolled in the relevant register maintained by the Authority.

Article (42)

Activity of a credit rating agency may not be practiced without obtaining the related license from the Authority, which shall establish a special system to license and accreditation of credit rating agencies and enrolling them in the relevant register maintained by the Authority.

Article (43)

The Board of Commissioners shall develop, at its first formation, the Code of Honor, whereby all rules and codes ethics shall be specified for the Authority’s Commissioners.

Article (44)

The Authority shall enact the rules for compliance with the ethics of professional practice, efficiency and integrity of the licensees.

Supervision & Inspection

Article (45)

All licensees and all persons enrolled in the Authority’s registers shall be subject to rules, regulations and instructions of supervisions laid by the Authority. In addition, all the persons registered in the Authority’s records shall be subject to its supervision.

Article (46)

The Authority may inspect on the licensees, who are subject to its supervision to ensure their compliance with the provisions of the law, regulations, orders and resolutions issued by the Authority. To this end, the Authority may conduct regular inspections by giving a prior notice.

The Authority may conduct sudden inspections to realize its supervisory objectives or investigate any complaint or violations raised to its attention.

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Complaint & Grievance Committee

Article (47)

The Board of Commissioner shall form a committee to handle the complaints and grievance. The aforesaid committee shall comprise of three members including the Chairperson of the committee, who should be elected among the three members. The grievance committee shall receive the complaints from any party against any error committed by a licensee and the complaints presented to it regarding the violations and crimes mentioned in the Law.

Article (48)

The complaints should be submitted to the committee’s secretary and recorded in a designated register. The secretary should present the complaints to the Authority’s Executive Director.

Article (49)

The complaint should be written and include the following particulars:

1. Name of the complainant/grievant and his title, profession and address including phone no., fax no. and email.

2. Substance of the complaint and the supporting documents.

3. Grievant signature and date of submission.

4. The complained against person and his address including phone no., fax no. and email.

Article (50)

The complainant should deposit into the Authority’s treasury a non-refundable amount of KD 100, and shall give to the depositor a dated receipt thereof.

Article (51)

The Committee should conduct an administrative investigation on the complaints presented against violations and decide on or file the same. The committee may refer the complaints, at its own discretion, to the Disciplinary Board. If the committee, having conducted the required investigation, became satisfied that there is a quasi crime, it may recommend to refer the complaint to the Public Prosecution.

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Article (52)

The Committee shall decide on the complaints within thirty days of the date of submission thereof. Prior to issuing its resolution, the committee may hear the testimony of anybody if deemed necessary or request any missing documents or request completion thereof.

Article (53)

The Committee shall inform the complainant of its resolution within a week of the date thereof. Such resolution may be complained against within a week of the date of being served by a notice or notified of the resolution.

Article (54)

The same complaint may not be submitted by the same person and for the same reasons.

Article (55)

The Committee shall receive the complaints from the concerned persons against the resolutions issued by the Capital Markets Authority in accordance with the provisions of the Law and these regulations and the orders issued in implementation thereof. The complainant should deposit the stipulated charge. Complaint against all matters not provided for in the law should be made before the committee within thirty days of the date on which the concerned person has been served by a notice of the resolution.

Article (56)

The complaint should include the following particulars:

1. Name of the complainant, his profession and address including phone no., fax no. and email address.

2. Date if issuing the complained against resolution and the date of notifying the complainant.

3. The subject of the complaint and reasons thereof. The supporting documents should be enclosed with the complaint.

Article (57)

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Complaint shall be recorded in a designated registered on the date of receipt thereof. The complainant shall receive a copy of his complaint on which the entry no. and date thereof shall be recorded.

Article (58)

The complaint shall be presented, upon receipt thereof, to the executive Director of the Authority to refer the same to the committee, take the procedures for presentation of the complaint to the committee and fix a date to discuss the complaint, and, accordingly, inform the complainant to appear before the committee in principal, by proxy or through a representative. The committee may request any necessary clarifications and documentation from the concerned persons. The Committee’s Secretary shall notify the Authority’s Executive Director of the complaint immediately upon receipt thereof.

Article (59)

The committee shall decide on the complaint by a reasoned resolution within thirty days of the date of presentation thereof to the committee or of the date of receiving the required clarification, as the case may be. All discussions of the committee shall be confidential and issued by the majority. Resolutions of the committee on the complaints shall be considered by the committee as final.

Article (60)

The concerned person shall be notified of the committee’s resolution and the reasons thereof.

Article (61)

The complainant against the administrative resolutions issued by the Authority in accordance with the law or these regulations or the orders issued in implementation thereof should deposit in the Authority’s treasury an amount of KD 500 to be refunded to him in case of issuing a resolution in his favor subject, however, to a deduction of 10% of the aforesaid amount as charges.

Judicial Control

Article (62)

The concerned minister shall grant the capacity of Judicial Controller (Officer) to the Authority’s personnel based on nominations by the Board of Commissioners in evidencing

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the crimes in violation of the provisions of the Law No. 7/2010 and these regulations and the resolutions issued in implementation thereof.

Article (63)

In carrying out their duties, those given the capacity of Judicial Controller shall have the following authorities:

1. Access to the premises of the companies working in securities or inside the headquarters of Stock Exchange Markets or in any other entity in which they exist.

2. Inspection on the entities subject to the Law no. 7/2010 to ensure their compliance with the provisions of the Law and the regulations, rules and resolutions issued in implementation thereof.

3. Access the records, books, documents and information or computer documentation, tapes or systems or any other storage or processing media in the premises of the companies working in securities or inside the headquarters of Stock Exchange Markets or in any other entity in which they exist, or placed in its possession or under its control.

4. Right to obtain information and justification when requested.

They may call witnesses and hear their testimonies, or ask any person, who has technical experience, to express an opinion on any matter within their duties and recording the same in the minutes.

Article (64)

Officers in the entities mentioned in the preceding article should provide the Judicial Controllers with the information and documents they request for this purpose. Those employees may retain such documents or place them under their custody and refer the same to the concerned body for action, if the case so required.

Article (65)

The Judicial Controllers should maintain a record of tasks they have completed and illustrate the proof of fact in case of any violation summary of which should be included in the record that should be presented to the Authority’s Executive Director. The Judicial Controllers should prepare written reports on a regular basis on their assignments.

Article (66)

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No person may refrain from providing any information, data or documents requested by the Judicial Controllers under the allegation that such information, data or documents are subject to protection or confidentiality restrictions. Concerns by the person of being exposed to a penalty shall not be considered as an acceptable excuse for rejecting inspection on any information or documents or disclosure thereof, responding the questions or disallowing access to the premises requested by the Judicial Controllers.

Article (67)

No person may hamper, or provoke or assist, to hamper the Judicial Controllers from exercising their jurisdictions whether by destroying the documents, refraining from providing information or documents, giving false or misleading information or refusing to provide any possible assistance.

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Chapter Three

“Stock Exchange Markets”

Article (68)

A Stock Exchange Market is the place, where stocks and other securities are bought and sold. A Stock Exchange Market follows the procedures applicable to trading and carries out the usual functions of a stock market in accordance with the standards and regulations issued by the Authority.

Article (69)

No person may establish or operate, or assist to establish or operate, a stock market exchange without obtaining the license from Authority and as per the latter’s applicable procedures. The Authority shall be solely authorized to issue a stock exchange market license that should be announced in the Official Gazette.

Article (70)

A Stock exchange market license may not be given except to a shareholding company, provided that its share capital is fixed by a resolution of the Board of Commissioners, its activities are restricted to operating stock exchange market and its shares are allocated as follows:

1. 50% of shares to be offered in public auction among the companies registered with Kuwait Stock Exchange at tranches of 5% each. Auction is awarded to the highest bidder for each share above the par value plus incorporation expense, if any.

2. 50% of shares to be publicly offered to all nationals.

3. The difference between the nominal value of the total shares offered in the auction plus the incorporation expenses, and the proceeds of the sale of shares shall be transferred to the State’s General Reserve.

4. Founders’ Committee delegated by the Board of Commissioners shall incorporate the company and allocate all the shares of public offering pari passu to all Kuwaiti nationals whose names are registered with the Public Authority for Civil Information on the subscription date. Share fractions shall not be allocated. Amounts of subscriptions by the nationals shall be paid to the State as per the procedures and in the manner to be determined by the Authority without any interest, charge or increase over the share price, provided that such payment should be made on a date

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not exceeding the expiry date of sixty day period commencing from the first day of the next month in which the Founders’ Committee initiated invitation of the national through Kuwait printed and audio video media to pay the subscription receivable amounts.

5. Share fractions, which are not allocated to the nationals, shall be transferred to the State. All shares whose values are not paid by the national to the State on the due date for any reason, whatsoever, shall be transferred to the State on the next day of the expiry date of the period specified for payment of such subscriptions.

6. The State may offer the shares transferred to it as per the preceding item in a public auctions at tranches of max. 5% of the company’s shares.

7. In all cases, no natural person or corporate body may own, except by inheritance, a 5% stake of the company’s shares whether directly or indirectly, or through associates, subsidiaries or companies over which that natural person or corporate body exercises effective influence.

8. Titles of the company’s shares may not be transferred without approval of the Authority as per the applicable rules.

Article (71)

The following conditions should be fulfilled by a Board Member of Stock Exchange Market and should be applicable also in case of continued filling of this position:

1. He should not be condemned of a crime of breach of honor or trust.

2. He should not be bankrupt.

3. He should be of good conduct.

4. He should have sufficient experience in the financial, economic and legal affairs in line with the rules and regulations issued by a resolution of the Authority.

Article (72)

A Stock Exchange Market is managed by a Board of Directors to be formed as follows:

Chairman and a Vice-Chairman to replace the Chairman in case of the latter’s absence, and six members to be elected in the company’s general assembly and subject to approval of the Authority’s Board of Commissioners. Chairman of Stock Exchange Market of his deputy should inform the Authority’s Board of Commissioners of the name of the nominees for the memberships of the Stock Exchange Market’s Board of Directors at least thirty days before the date of the company’s general assembly meeting for election of the Board of Directors. The Board of Commissioners, within fifteen days of being notified, may

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object by a reasoned letter to any of such nominees for not fulfilling the required conditions.

Such objection shall entail elimination of the nominee. No nominee should be proposed to the Stock Exchange Market’s Board of Directors if the Board of Commissioners has not been notified of that nominee or in case of any objection against that nominee as per the provisions of this Article.

The Board of Commissioners may request from Stock Exchange Market’s Board of Directors to dismiss any member if the latter no longer meets a condition of those stipulated under this Article, or this action is deemed appropriate to maintain safety of the traders’ funds or for Stock Exchange Market’s interest. In case of failure to dismiss that member, the Board of Commissioners may issue a reasoned order to dismiss any member and notate that order in the Authority’s records.

Article (73)

The Chairman of Stock Exchange Market shall carry out the duties of the Executive Director and shall exercise his jurisdictions as per the Stock Exchange Market’s Articles of Association and the resolutions passed by the Board of Directors. The Chairman of Stock Exchange Market shall be responsible for monitoring all the administrative and technical boards and shall represent the Stock Exchange Market before the courts.

Article (74)

All the Stock Exchange Market employees and Executive Director, during their work there, are prohibited from trading in the securities for his account or as an attorney, guardian or custodian, working in any job in the public or private sector, provision of any services or consultations, whether directly or indirectly, or participating as a member in the Board of Directors of any listed company or any company carrying out the securities activity, inside or outside Kuwait.

Article (75)

The Stock Exchange Market should:

1. Ensure existence of a fair, transparent and efficient stock exchange market.

2. Ensure existence of a management being aware of the risks associated with its business and operations.

3. Prioritize the public interest in case of a conflict with that of the stock exchange market or its members, shareholders or management.

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4. Adhere to provide and operate its services as per the rules and regulations stipulated by the Authority.

5. Adhere to organize its operations, standards of its practices and its members’ behaviors as per the rules, policies and procedures of the Stock Exchange Market.

6. Adhere to the organize the operations and standards of practices of the companies listed therein as well as its employees as per the relevant governing regulations.

7. Adhere to provide its services as per the most recent techniques and automated applications and systems in line with the international standards approved or resolved by the Authority.

8. Maintain the confidentiality of the information under its custody with respect to its members and customers, unless it is required by the law or the regulations to publish or disclose. It may not divulge such information to anybody other than the Authority or by an order from the Authority or the court.

9. Abidance by the instructions of the Authority.

Article (76)

The Stock Exchange Market should establish a system for confidentiality of the trading related information and data or any other information and data related to the Stock Exchange Market’s members in a manner to ensure restricted access thereto except for the authorized persons. Neither the stock exchange market’s member of the Board of Directors nor any member of the Executive Management, other than those authorized, may access such information except within the limits of the system approved by the Authority.

Article (77)

The Stock Exchange Market should cooperate with the Authority whenever deemed necessary by the Authority to accomplish the Authority’s functions and duties including providing the Authority with the reports, data and other information relating to the Stock Exchange Market’s business, securities trading or any other information, as request by the Authority to ensure the proper application of the law.

Article (78)

The stock exchange market is committed to inform the Authority, at the earliest, of the following:

1. If it found that one of its members is no longer able to adhere to any of the stock exchange market’s rules of the financial resources controls.

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2. If it deemed there is a financial irregularity or any other situation that may indicate inappropriateness of the member of his incapacity to fulfill his obligations.

3. Any disciplinary action it takes against any member or any of his subordinates.

Article (79)

The Stock Exchange Market should establish rules and regulations for organization of trading and activity of Stock Exchange Market as well as its reliance on the Authority, in particular:

1. Listing of securities in the Stock Exchange Market.

2. Trading system.

3. Rules for announcement of disclosures.

4. Risk Management System.

5. Complaint & Grievance System.

6. Dispute Settlement System.

7. Code of Professional Conduct applicable to members of the Board of Directors of Stock Exchange Market and employee therein.

Article (80)

Titles of the securities not listed in Stock Exchange Market may not be transferred or traded before the lapse of three calendar years of the date of completing incorporation, except in the cases is inheritance or execution of a final court ruling.

Article (81)

The following procedures should be followed in transfer of the securities not listed in Stock Exchange Market:

1. The concerned person should submit the application to the Stock Exchange Market’s management, which should ensure appearance of the concerned persons or their legal representatives.

2. Payment of the required charges.

3. Upon approval of Stock Exchange Market on the application, the Stock Exchange Market’s management refer the same to the clearing agency, which maintain the shareholder’s register of the related company.

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4. The clearing agency shall record the transfer of the title in the shareholder’s register maintained by it.

5. The clearing agency shall issue a new share certificate and deliver it to the new owner after payment of the charge thereon.

Article (82)

The Board of Commissioners may request from the Stock Exchange Market to prepare specific rules within the scope of its work or amend the same within specific period. If the Stock Exchange Market fails to abide by the request or to meet the request within the specific period, the Authority may prepare the rules or amend them on behalf of the Stock Exchange Market at the expense of the latter.

Article (83)

No rules issued by the Stock Exchange Market or any amendment thereof through removal, replacement or change thereof or addition thereto, shall be valid unless they are approved by the Authority. The Stock Exchange Market should provide the Authority with the reasons and objectives for proposing such rules or amendment thereof and set out the desired effects thereof, and, thereupon, the Authority may give its approval, disapproval or amendment and notify the Stock Exchange Market of its resolution within a period not exceeding three month of the date of notification of proposal.

Article (84)

A committee shall be formed in the Stock Exchange Market to be entrusted with consideration of the violations committed by any of its members to the Stock Exchange market’s regulations and systems. The Committee may impose the following penalties:

1. Warning.

2. Issuing and order to the violator to discontinue.

3. Subjecting the violator to further supervision.

4. Suspension of profession practice for a period not exceeding one year.

5. Imposing restrictions on the violator’s activities.

6. Cancellation of the transaction related to the violation and its resultant effects, if possible.

7. Suspension of trading of a security for specific period.

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Article (85)

The Stock Exchange Market’s Management should inform the Authority of any disciplinary action taken against any of its members, details of the committed violation, the taken procedures and the penalty imposed. The Authority may, by virtue of a resolution to be issued by it or based on a complaint filed by the complainant within fifteen days of notifying him in writing of the resolution, may refer the subject to the Disciplinary Board to review the disciplinary action in accordance with its approved review System. The Disciplinary Board may confirm the Stock Exchange Market’s resolution or amend or cancel the same by a reasoned resolution.

Article (86)

In case of disaster, crises and disturbance that may result in adverse effects in the market and in giving by some traders of misleading indications, the Authority shall then have the widest powers to issue the instructions that mail to regain the equitability, transparency and efficiency of the market. The Authority may take any of the following precautions:

1. Suspend trading in the stock market or trading of any listed security for limited period.

2. Cancel trading in the stock market for specific period or cancel transactions on certain stock.

3. Issue resolutions to liquidate all or part of balances or reduction thereof.

4. Amend the trading days or hours.

5. Amendment or suspension of any of the stock market rules.

Article (87)

In case of incompliance by the Stock Exchange Market with the Authority’s resolutions or instructions issued within its jurisdictions stipulated under the preceding article, the Authority may take any proper procedure to ensure the systematic trading or liquidate any position relating to the securities.

Article (88)

By virtue of a written notification to the Stock Exchange Market, the Authority may cancel the license as of the date specified in the Authority’s resolution in the following cases:

1. If the company is no longer able to meet one of the conditions by which the company was qualified for the license.

2. If operations in the Stock Exchange Market ceased for more than five working days.

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3. In case of closure of Stock Exchange Market.

4. If the Stock Exchange Market did not abide by the Authority’s instructions regardless of warnings by the Authority.

5. If it did not provide the Authority with the information requested by the latter, or provided incorrect or misleading information.

The Authority should publish the resolution of license cancellation and reasons thereof in the official gazette.

Article (88)

The Authority, of its own accord, may grant the Stock Exchange Market time extension or extend the given period after the date of license cancellation if the Authority deemed it necessary for the public interest or based on a request by the Stock Exchange Market’s company till closure of the operations therein or to hand over its activities to another licensed Stock Exchange Market.

Article (89)

The Authority, of its own accord, may grant the Stock Exchange Market time extension or extend the given period after the date of license cancellation if the Authority deemed it necessary for the public interest or based on a request by the Stock Exchange Market’s company till closure of the operations therein or to hand over its activities to another licensed Stock Exchange Market.

Article (90)

A listed company may submit a complaint to the Complaints and Grievances Committee of the Authority with respect to the resolution passed to cancel its license, within fifteen days from the date of receiving a written notice thereof or publication of the same in the official gazette, and the Committee shall give a reasoned decision on the complaint within twenty days from submission thereof.

Article (91)

Members of Stock Exchange Market should abide by its systems, rules and procedures.

Article (92)

Stock Exchange Market shall adhere to the rules of accounts and review as follows:

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1. Stock Exchange Market shall adhere to application of internal accounting system in accordance with the international standards approved by the Authority.

2. Stock Exchange Market shall provide the Authority with a comprehensive annual report including statement of income, audited balance sheet and the external auditor’s report within forty five days of the end of the financial year.

3. Stock Exchange Market should have one or more external auditor and should enable that auditor to access all data and records as well as the other requirements for external audit assignments.

Article (93)

Stock Exchange Market shall apply a comprehensive system for risk management to identify, assess, manage and address the risk associated with its activities, and provide the Authority with a risk report on a semiannual basis.

Article (94)

The Authority may appoint an auditor for the Stock Exchange Market, by virtue of a written notification, at the latter’s expense to examine and audit the Stock Exchange Market’s accounts, statements and records, and submit a general or special report on a certain matter, if the Authority deemed it appropriate for the public interest.

Article (95)

The Stock Exchange Market shall provide the Authority with an annual report within forty five days of the end of the financial year to particularly include the following:

1. The management report, which includes description of the activities carried out by the Stock Exchange Market throughout the last year with respect to the financial, intellectual and human resources made available to the Stock Exchange Market.

2. The financial report including the external auditor’s report and evaluation of efficiency of the internal control system.

3. Governance report.

4. Any other ad hoc reports required by the Authority.

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Chapter Four “Clearing Agency”

Article (95)

A clearing agency means any entity that provides facilities for carrying out settlement and clearing operations among the securities traders with respect to payment and/or delivery and provides the related services including securities placement within a central system for custody and title transfer.

Article (96)

No person may incorporate or manage a clearing agency or assist in incorporation of management thereof or announcement thereof without obtaining a clearing agency license issued by the Authority as per the following terms:

1. It should be a shareholding company whose share capital is not less than twenty million Kuwaiti Dinars and whose activities should include management of operations of clearing and settlement and the central placement of securities, custody thereof and the related and associated matters necessary for the good running of the agency.

2. It should have experience in the clearing field and the members of the management thereof should have the relevant specialization.

3. It should provide a bank guarantee of not less than eight million Kuwaiti Dinars.

4. Entry of a foreign strategic partner experienced in clearing management is not allowed except by approval of the Authority.

5. Any other terms determined by the Authority.

Article (98)

All the clearing agency employees and executive officer, during their work there, are prohibited from trading in the securities for his account or as an attorney, guardian or custodian, working in any job in the public or private sector, provision of any services or consultations, whether directly or indirectly, or participating as a member in the Board of Directors of any listed company or any company carrying out the securities activity, inside or outside Kuwait.

Article (99)

The clearing agency should abide by the following obligations:

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1. Taking the arrangements and measures for the fair and effective clearing and settlement of any trading transactions of securities.

2. Management of risks associated with its activity and operation at the highest levels of professionalism.

3. Prioritization of the public and traders’ interests over the company’s.

4. Management of its services as per the related rules approved by the Authority.

5. Maintaining confidentiality of all information and data under its custody unless it is required by the Authority or the courts.

6. Providing its services in line with the most recent techniques and automated applications and systems

Article (100)

The listed companies, brokers and the other clearing agency members should abide by the settlement and clearings rules applicable in the clearing agency as per the system approved by the Authority.

Article (101)

Each Kuwaiti shareholding company shall place its shareholders’ register, upon completion of incorporation, with a clearing agency licensed by the Authority, and the existing companies shall place their shareholders’ registers with a clearing agency licensed by the Authority within six months from the date of publishing hereof.

Article (102)

The clearing agency is committed to provide all data and information requested by the Authority to enable the latter to carry out its functions and duties including the reports, data and information relating to the clearing agency’s operations or trading in securities.

Article (103)

The clearing agency shall adhere to the rules of accounts and review as follows:

1. The clearing agency shall adhere to application of internal accounting system in accordance with the international standards approved by the Authority.

2. The clearing agency shall provide the Authority with a comprehensive annual report including statement of income, audited balance sheet and the external auditor’s report within forty-five days of the end of the financial year.

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3. The clearing agency should have one or more external auditor and should enable that auditor to access all data and records as well as the other requirements for external audit assignments.

Article (104)

The clearing agency shall apply a comprehensive system for risk management to identify, assess, manage and address the risk associated with its activities, and provide the Authority with a risk report on a semiannual basis.

Article (105)

The Authority may appoint an auditor, at the expense of the clearing agency, and inform the latter, in writing, of appointment of the auditor to examine and review the agency’s records, books and accounts and provide a general or special report on a certain matter, if the Authority deemed it necessary.

Article (106)

The clearing agency shall provide the Authority with an annual report within forty five days of the end of the financial year to particularly include the following:

1. The management report, which includes description of the activities carried out by the clearing agency throughout the last year with respect to the financial, intellectual and human resources made available to the clearing agency.

2. The financial report including the external auditor’s report and evaluation of efficiency of the internal control system.

3. Governance report.

4. Any other ad hoc reports required by the Authority.

Article (107)

The clearing agency should inform the authority at the earliest of the following:

1. If it found that any of its counterparty became unable to abide by any of the rules applicable to operations of clearing, settlement and placement.

2. If it deemed that the financial position of a counterparty and his ability to fulfill obligations gave signs of instability, or his ability to fulfill obligation has already become unstable.

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Article (108)

Upon completion of any procedures on default in repayment, the clearing agency shall prepare a report on these procedures setting out the following with respect to each defaulting customer:

1. Information of the defaulting customer and the procedures taken against him.

2. The net receivable amount as per the clearing agency certificate, or absence of any receivable balance.

Article (109)

The clearing agency shall send a copy of its report prepared as per the following article to:

1. The Authority.

2. Stock Exchange Market.

3. The defaulting entity.

Article (110)

The Authority, in case of receipt of default in payments, may resolve to publish a notice thereof in the manner deemed appropriate by the Authority to draw attentions of the creditors of the defaulting entity mentioned in the report.

Article (111)

In case of publishing by the Authority of the default notice, any creditor of the defaulting entity may submit an application to the Authority to peruse the report. In such case, the Authority may:

1. Make available the report the creditor within two days as of the receipt of the applications.

2. Provide the creditor with all or part of the report, as requested, subject to payment of the required charges.

Article (112)

The Authority may require the clearing agency to set rules and regulations relating to clearing and settlement operations, registration of securities and the other activities that relate to the agency’s business or amend the same within a specific period. If the clearing agency did not adhere to the requirements or the specific period, the Authority may sect

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such rules and regulations or amend them on behalf of the clearing agency at the latter’s expense.

Article (113)

The clearing agency provide the Authority with its internal bylaws and instructions and amendment thereof for approval before validity thereof particularly including:

1. Procedures for registration of securities and transfer of titles thereof, and clearing and settlement of the related trading contracts.

2. Defining rights and obligations of the related parties to operations of clearing and settlement of securities as well as transfer of the titles thereof.

3. The time at which the rights of the creditors of security trading parties arise, including those rights relating to cash consideration or its equivalent and the related securities as a result of sales, purchases or title transfer.

4. Information, data and records, which are confidential and the persons, who have access thereto.

5. Information, data and records that the clearing agency should disclose and those thee public may access and obtain copies thereof.

6. Standards of the professional ethics applicable to each of the clearing agency’s members, board of directors, chief executive officer and employees.

Article (114)

No rules issued by the clearing agency nor amendments thereto, either by withdrawal, replacement or change thereof, or addition thereof, shall be valid and effective unless they are endorsed by the Authority. The clearing agency should provide the Authority with the reasons and objectives for proposing such rules or amendments thereto, and highlight the desired effects thereof and, thereupon, the Authority may resolve its approval, disapproval or amendment thereof and inform the clearing agency in writing of its resolution within at latest one week of the resolution date.

Article (115)

In case of incompliance by any trader with the clearing rules, the clearing agency may force that trader to pay the charges arising out of his incompliance. The clearing agency should prepare a schedule of charges on cases of incompliance with the regulations, provided that such schedule should be approved by the Authority before it comes into effect or making any amendment thereto.

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Article (116)

The Authority may issue any instructions to the clearing agency to ensure the fair, efficient and appropriate settlement of security transactions and maintain integrity of comprehensive risk management in Stock Exchange Markets. The Authority may, in particular, issue instructions with respect to settlement of securities contracts and make amendments to the contractual obligations that may arise from the securities contract or any other matters deemed necessary by the Authority to implement the provisions of the law.

Article (117)

In case of disasters, crises and disturbance that may result in adverse effects in the market, the Authority may issue instructions of amendment or suspend any of the clearing agency rules.

Article (118)

If the clearing agency failed to comply with the resolutions or instructions of the Authority issued under its powers specified in the preceding article, the Authority may take any procedure deemed necessary to maintain the fair settlement and efficiency of the commercial transactions of securities or any category thereof.

Article (119)

The Authority may, by a written notice, cancel the clearing agency’s license granted to it in accordance with the provisions of the Law No. 7/2010 as of the date specified in the Authority’s resolution, in any of the following cases:

1. If the clearing agency is no longer able to meet one of the conditions by which it was qualified for the license.

2. If clearing agency ceased to undertake the duties, which the clearing agency is assigned to or licensed for management thereof.

3. Liquidation of the clearing agency.

4. Failure to fulfill any obligation required under the Law No. 7/2010.

5. Failure to provide the information requested by the Authority, or providing incorrect or misleading information.

6. Making any amendments by the clearing agency to its objectives in its memorandum or articles of association without obtaining a prior approval of the Authority.

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7. If the agency requested cancellation of its license.

The Authority should publish the resolution of license cancellation and reasons thereof in the official gazette.

Article (120)

The Authority may grant the clearing agency a specific time extension or extend the given period after the date of license cancellation if the Authority deemed it necessary for the public interest or based on a request by the agency to suspend its operations or to hand over its activities to another licensed agency.

Article (121)

The agency may submit a complaint to the Authority’s Compliant & Grievance Committee against the resolution of cancellation of its license, within fifteen days of the date on which it has been notified thereof in writing or the date of publishing the resolution in the official gazette. The Authority should decide on the complaint by a reasoned resolution within twenty days of submission date.

Article (122)

If a person is subject to insolvency, bankruptcy or liquidation, or in case of appointing a receiver on his properties, the clearing and settlement procedures of the clearing agency shall take priority over any procedure or usual debts.

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Chapter Five “Regulated Securities Activities and the Licensees”

Scope of Application

Article (123)

Activities, which are practiced by the licensee inside the State of Kuwait or outside Kuwait with a customer in the State of Kuwait, or for his own account, shall be subject to the law and these regulations.

Definition of the Securities Activities

Article (124)

The following operations are considered as securities activities for the purpose of application of the law and these regulations:

1. Brokerage in purchase of securities and sale thereof on behalf of others for a commission.

2. Purchase and sale by a person of securities for his own account.

3. Providing the investment consultations relating to securities for commission.

4. Management of investment portfolio.

5. Origination and management of collective investment schemes.

6. Custody of assets composing collective investment schemes.

7. Offer or sale of securities on behalf of its issuer or its ally, or getting securities from the issuer or its ally for remarketing thereof.

8. Credit rating agency.

9. Any other activity considered by the Authority as securities activities.

License

Article (125)

1. No person may practice securities activities in the State of Kuwait unless he is licensed by the Authority to practice the same.

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2. Excluding from paragraph (1) of this Article, it is not required to obtain a license from the Authority to practice the activity by a person of purchase and sale of securities for his own account if he did not introduce himself as practicing securities business and has never been a market maker.

3. A single corporate body may practice two or more of the securities activities.

4. Companies and branches of the foreign companies carrying on business in the State of Kuwait and willing to practice the securities activities should submit a license application from the Authority as per the terms and conditions preset by the Authority for each activity.

Headquarter of the Licensee

Article (126)

The licensee is required to have his headquarter of management in the State of Kuwait.

License Applicant

Article (127)

For the purpose of application of these regulations, the license applicant means the person, who submits to the Authority an application to obtain a license to practice any of the securities activities. A license application may be submitted by those, who intend to establish a corporate body for this purpose. The license applicant is subject to the law and these regulations effective from the date of application submission.

License Application

Article (128)

The license application is to be submitted on the form designed by Authority as per the activity type of the license. The application should be accompanied with the following information and documents:

1. Name of the license applicant and his address, identity no. of the natural person or the commercial register no. of the corporate body.

2. Names and nationalities of the founders and their equity stakes in the corporate applicant.

3. Names, nationalities, identity nos., qualifications and experiences of the managers of the corporate body.

4. Applications of registration of all to be registered functions on the forms designated and approved by the Authority.

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5. A copy of the company’s memorandum and articles of association and any amendments made thereto.

6. A declaration by the license applicant’s legal representative including his approval on the application and contents thereof, wherein he declares accuracy and completeness of information included therein and the documents accompanied therewith.

7. Sufficient information about any effective control or allied person.

8. Amount of license applicant’s capital or proposed capital.

9. Approval of the Central Bank of Kuwait if the applicant is a bank licensed to carry out investment activities.

10. Sufficient information, as per the standards and forms designated by the Authority, about license applicant’s systems, control procedures relating to policies and systems of risk management, procedures of combating money laundering and terror financing, compliance systems and code of conduct.

11. Details of the procedures and systems to be followed for all work procedures and the significant administrative procedures including opening and operation of customers’ account, executing and recording orders, executing, settlement and confirmation of trading deals, providing appropriate consultation and services for customers, handling and custody of customers’ assets and funds, providing reports to the customers and adherence to all requirements of records maintenance.

12. Terms of services and schedule of proposed fees, commissions, charges and expenses.

13. Any other agreements or arrangements with other parties to provide any material services or operations.

14. Financial statements audited by an auditor approved by the Authority to be submitted in the manner determined by the Authority including the current financial position of the license applicant along with the projected financial position after twelve months of the date of business commencement.

15. Declarations as per the forms designed by the Authority to be signed by the corporate body or managers thereof, or by the persons, who intend to establish a corporate body to carry out securities activities, wherein they declare that no verdict of bankruptcy, penalty on a crime of breach of honor or trust or penalty on one of the crimes specified in the Companies Law, Law of Commerce or Capital Authority Markets Law has been issued against them over the five year period preceding the license application unless they were discharged.

16. A detailed statement of the activities the license applicant is willing to practice.

17. A proof for payment of charges on application review by the Authority.

18. Any other statements or documents requested by the Authority.

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19. A list of requirements, which the applicant deems non-applicable and the reasons therefor.

To be registered Functions and Qualifying Tests

Article (129)

To be registered functions mean the functions, which the Authority requires the applicant to find and register with the Authority as per the activity type of the subject securities.

Article (130)

The following functions with the license applicant or any licensee are considered as to be registered functions that should be performed by persons resident in the State of Kuwait:

1. Chief Executive Officer and similar

2. Financial Manager and Similar

3. Executive Managers or Managers and similar

4. Risk Manager and similar

5. Chief Internal Audit and similar

6. Compliance Officer

7. Money Laundering and Terror Finance Reporting Officer

8. All Customer Service Officers including promoters, investment advisors, investment portfolio managers and corporate finance specialists

9. Any other functions deemed by the Authority as to be registered

Article (131)

No person, except for a licensee, may perform a to be registered function unless otherwise approved by the Authority in writing and in advance.

Article (132)

On employee may perform more than one to be registered function for the account of a licensee, except for dual jobholding of compliance officer and any of customer service functions. Functions of the chief executive officer, financial manager and compliance officers should be performed by different persons.

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Article (133)

The Authority may require passing a qualifying test to fill and of the to be registered functions. The Authority may also preset the test requirements and the general guidelines relating to the acceptable qualifications as well as the required conditions and duties, as deemed by the Authority.

Article (134)

The registered person shall be under the Authority’s power for two years as of the date of cancelation of this registration with respect to any act or omission took place before cancelation of his registration. In case of initiating any investigation or taking any action during this period, the registered person shall remain under the Authority’s power till completion of the investigation or actions.

License Application Consideration

Article (135)

The Authority shall consider the license application and may request any additional information or documents or any clarifications to ensure that:

1. The license applicant has the required ability and efficiency to carry out the type and volume of the subject securities activities as per the rules determined by the Authority.

2. The license applicant has the experience and resources sufficient to practice the type of the subject securities activities as per the rules determined by the Authority.

3. The license applicant has the administrative experience, financial systems, risk management policies and systems, technical resources and the operating systems sufficient to fulfill his commercial and regulatory obligations to practice the type of securities activities, being the subject of license application.

4. The license applicant’s board members, officers, staff and agents, who are practicing or shall practice the subject securities activities, have the necessary qualifications, skills and experience determined by the Authority and are distinguished by honesty and integrity required to practice such activities.

Initial Approval

Article (136)

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The Authority may issue an initial approval on the license application to enable the license applicant complete legal formalities or fulfill certain criteria, provided that the license requirement should be finalized within at latest six months of the approval date.

Resolution of License and Tenure thereof

Article (137)

The Authority shall decide on the license application within a month of completion of the requisite information and documents and inform the applicant of the resolution to be issued in this respect. In case of rejection of the application, the related resolution should be reasoned. The tenure of license shall be three years.

Carrying out the Activity

Article (138)

The licensee should start carrying out the licensed activity within six months of receipt of the Authority’s letter to practice the activity.

Terms for License Validity

Article (139)

Continued validity of the license requires the licensee to meet the following conditions at all times:

1. The ability and efficiency to practice the securities activities he is licensed to practice.

2. The regulations stipulated in Article (135) and any criteria determined by the Authority.

3. Maintaining a sufficient capital in line with the capital adequacy requirements set by the Authority.

Amending the list of the licensed activities

Article (140)

The licensee may apply to make an amendment to the list of licensed activities and the Authority should decide on that application within thirty days of completion of all documents deemed necessary by the Authority. The applicant should provide all the required information and documents on the designated form and pay the charges.

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License Renewal

Article (141)

1. After payment of the related charges, the license renewal application is submitted at least two months before expiry date of the license, on the form designated by the Authority for this purpose and as per the type of the licensed activity.

2. The Authority shall consider the license renewal application and may require additional information and documents to ensure that the license applicant still maintains ability and efficiency to practice the activity as per Article (120). The Authority shall decide on the renewal application within thirty days of completion of the required information and documents and inform the applicant of the resolution to be issued in this respect. In case of rejection of the application, the related resolution should be reasoned.

Share Capital

Article (142)

The Authority’s Board of Commissioners determines, by a resolution, the minimum share capital of the licensee’s share capital as per the type of the licensed securities activity, and the legal form required to carry out the activity.

Notice Requirements

Article (143)

The licensee should:

1. Notify the Authority in writing at least thirty days as of the date of any change of his commercial name under which he practices the securities activity in the State of Kuwait, address of the head office or address to which notices or documents should be addressed, if it is different.

2. Notify the Authority in writing within seven days as of establishment, possession, sale or dissolution of any allied person or in case of any change in the information submitted to the Authority with respect to the offices of branches through which the licensee practices its securities activities and any material changes in the information submitted to the Authority for obtaining the license.

3. Notify the Authority in seven days as of the date on which the licensee ceased performing a to be registered function and notify the Authority in writing upon his resignation, dismissal or termination of his relationship with him.

4. Notify the Authority in writing within seven days as of appointment of an auditor, or his resignation or replacement thereof.

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5. Notify the Authority in writing upon any change relating to insolvency or liquidation of the licensee, any controlling company or his allied person, investigation by regulatory authority, imposing precautions or disciplinary actions against the licensee relating to securities activity, pronouncement of verdict against the licensee, any other violation relating to fraud or act in violation of integrity or trust or imposing any penalty as a result of tax evasion.

6. Notify the Authority in writing upon issuance of any resolution or action in any country or region outside the State of Kuwait with respect to grant of cancellation of any license to practice the securities activity, banking business or insurance business.

7. Notify the Authority in writing upon withdrawal or rejection of membership or cancellation of a membership in a stock exchange market or in a clearing agency.

8. Notify the Authority upon knowing of occurrence of any noticeable failure in his control systems or procedures including any failure reported by the auditor or decrease of capital below the minimum required to practice the activity.

Controlling the licensee

Article (144)

1. The licensee should obtain the Authority’s approval upon entry into arrangements or agreements, which result in effective control by or over him or discontinuation of existing control.

2. The Authority shall approve the actual controller after completion of any information or documents required by the Authority and after ensuring that any control over a licensee shall not impede the actual supervision over him or his operations or compliance with the law or these regulations.

3. The provisions relating to the actual control, as stipulated in this article shall apply to the ally of the licensee, wherever the provision is applicable.

Maintenance and Inspection of Records

Article (145)

1. The licensee should record and maintain sufficient information about the securities activities he carries out to evidence his compliance with these regulations and maintain the records determined by the Authority by any mean that makes them available for inspection and perusal at any time for five years unless the Authority determines longer period.

2. The Authority may inspect the records of the licensee at any time by its employees or through a person delegated by the Authority for this purpose.

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Internal Systems and Bylaws

Article (146)

The licensee should the Authority’s approval of all of the systems and bylaws relating to organization of his works and supervision over them to ensure compliance with the law and these regulations and avoidance of conflict of interests. Such bylaws should cover, as a minimum, the following aspects:

1. The licensee’s organization structure setting out the authorities, duties and responsibilities of the executive management and the various functions as well as the reporting lines.

2. The documentary cycle to be followed in work accomplishment.

3. Setting the responsibilities and authorities relating to approval of expenses.

4. Policies, systems and procedures of the internal audit.

5. Systems and policies of human resources, development and training.

6. His investment policies.

7. Procedures of transactions with related parties.

8. Policies and procedures, which are preventive of information leakage between the licensed activities.

9. Procedures of handling investors’ complaints.

10. Risk management policies and procedures.

11. Procedures of combating money laundering and terror finance.

12. Compliance manual and program.

13. Code of conduct.

14. Manual of operating procedures.

15. Manual and plans of work follow up.

The Authority may require the licensee to get other bylaws approved, or exempt certain activities from some of these bylaws.

Gifts and Incentives

Article (147)

The licensee or his ally, or any third party directed by him may not urge any customer to enter into deal by offering or giving gifts or incentives, or accept gifts or incentives.

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Loss Sharing

Article (148)

The licensee may not offer sharing in loss to which the customer would be exposed.

Information Confidentiality

Article (149)

1. The licensee should maintain confidentiality of information obtained from the customers.

2. The licensee should get approval of the policies and procedures for maintaining confidentiality of information or insider information he obtains in the course of his practicing of securities activity to ensure that acquaintance with such information is available only to his authorized personnel.

Using Customer’s Properties

Article (150)

The licensee may not use the assets and funds or information or opportunities of the customer for his own benefit or for the benefit or another person without disclosing the same in full to the customer under a mutual written agreement.

Discharge from Responsibility

Article (151)

Any condition to discharge the licensee from responsibility or limit it shall be null and void if such discharge or limitation contradicts with the obligations of the licensee as per the law or these regulations.

Temporary discontinuation of practicing activity

Article (152)

The licensee, who intends to temporarily discontinue practicing securities activity, should send a prior and written notice to the Authority of the date of discontinuation and reasons for his resolutions at least forty five days of that date. The licensee should ensure accomplishment of any pending works or transfer the same to any other licensee and notify his customer within reasonable period before discontinuation.

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License Cancellation

Article (153)

The Authority may suspend or cancel the license or restrict the activity of any licensee or any of his related parties, if proved that he perpetrated any of the following:

1. Committing a material error, giving misleading information, omission of material fact upon submission of his license application or omission of any required information to the Authority.

2. Non fulfillment of the criteria applied by the law or these regulations.

3. Breach of any provisions, rule, system or regulations issued under the law or another law of securities or rule of regulations of another country.

4. Negligence in monitoring any of his subordinates or the persons registered with him to prevent them from any acting in violation of the law and these regulations.

Article (154)

The Authority may cancel the license of the licensee if he did not practice the securities activity or stop the same for six consecutive months after receipt of activity initiation letter.

Article (155)

The licensee shall remain subject to the power of the Authority for two years as of cancellation of the license with respect to any act or omission occurred before cancellation of his license. In case of investigation or taking any actions during this period, the licensee shall remain subject to the Authority’s power till the investigation or actions are completed.

Article (156)

The licensee may submit a reasoned application to the Authority to cancel his license at least three months as of the proposed date of license cancellation. The Authority may approve cancellation or postpone the date thereof, or request other precautions deemed necessary to protect the customers of the licensee.

Article (157)

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The Authority may reject the application of license cancellation if it deemed that continuity of the license is necessary to investigate in any case relating to the licensee, to protect his customers’ interests, impose attachment or meet requirements on the licensee under the law or these Regulations.

Advertisements of Securities

Article (158)

No person may fix or send an invitation or advertisement for securities to a person in the State of Kuwait unless the advertiser is licensed or the contents of the invitation or the advertisement are approved by a licensee an on the condition that any procedures, requirements or terms set by the Authority should be fulfilled.

Article (159)

The licensee may set a code of conduct to force the individuals seeking to gain business on his behalf not to follow ways of pressure or giving any misleading or false statements and urge them to disclose their objectives and identities to the customers.

Providing the Customer with Terms of Service

Article (160)

The licensee should provide his customer with the terms of services, which determines the bases of practicing securities activity with the customer or for his account. This should be done before practicing any securities activity with the customer or for his account. Such terms should be in an agreement form to be valid and effective immediately after obtaining a copy thereof signed by the customer. Terms should be in line with any requirements approved by the Authority.

Knowing Customers

Article (161)

1. The licensee should obtain information from the customer about his financial position, his experience in investment, his investment objectives relating to the services he provides and any information specified by the Authority before he provides brokerage, investment consultation or investment portfolio services.

2. The licensee should request from his customer to update the information mentioned in Article (1) of this Article at least once a year.

Care of Customer’s Interests

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Article (162)

The licensee should ensure the proper care of his customer’s interests and avoidance of any conflict of interests between his own interests and the customer’s interests with respect to the deals or services provided to the customer. The licensee should disclose to the customer in writing of any conflict of interest, unless this would be a disclosure of insider information. In such case, the licensee should take the necessary steps to ensure fair treatment of the customer.

Article (163)

The licensee may not collect high commissions from his customers or provide high discounts on transactions or be involved in excessive purchases and sales in a customer’s account.

Risk Clarification to the Customer

Article (164)

The licensee should enable the customer in a sufficient and clear manner to understand the nature of risks associated with the type of deal to be entered into.

Lending the Customer

Article (165)

As for the securities activity, and notwithstanding the provisions of Law No. 32 of 1968 on Cash, the Central Bank of Kuwait and Organization of the Banking Profession and amendments thereto, no person licensed for lending and regulated by the Central Bank of Kuwait, may lend or provide credit facilities to a customer, unless the following two conditions are met:

1. The licensee should evaluate and document the customer’s financial position based on the information disclosed by that customer. Such evaluation should be made by one of the licensee’s employees, provided that such employee should be independent of brokerage or marketing activities.

2. The customer should give his prior and written approval on the loan or credit facilities setting out the maximum limit of the loan or credit facilities and details of the amount we well as any reimbursed expenses.

Article (166)

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The following actions by the licensee shall not be deemed as lending under the previous Article:

1. Settlement of a deal in case of delinquency or default of the customer, or

2. Payment of an amount to fulfill a margin call sent to the customer within a period not exceeding five working days.

Margin Deals

Article (167)

Margin deals are those deals made by the broker by funding part of the securities value in the customer’s account by guaranteeing the securities in such account. The margin shall be the minimum limit of funding that the investor shall pay of his funds to execute the deal.

Article (168)

The licensee may not execute margin deal with a customer or for the latter’s account unless the customer approves the terms of services, which should specifically provide for the following:

1. The circumstances in which the customer may be requested to provide a margin.

2. Details of the method of providing a margin.

3. Details of the steps the licensee may take if the customer failed to provide the required margin including the method(s) of the margin call to the customer.

4. Explanation of risks associated with the margin deals and risks arising from customer’s failure to meet the margin calls to the extent that the licensee may close the customer’s investment position after a period specified by the licensee and that the licensee shall have the right to close the investment position in all cases after lapse of five working days from customer’s failure to fulfill.

5. Except for failure to provide margin, explanation of any cases that may result in closure of the customer’s investment position without sending a prior notice thereof.

Margin Limits and Monitoring

Article (169)

The licensee upon execute a margin deal with the customer or for the customer’s account, should do the following:

1. request the customer to pay a margin of not less than 25% of the deal value before execution thereof.

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2. The margin should be in cash or in the mode of investment positions in securities fully paid up or by acceptable guarantee.

3. Monitor, on a daily basis, the margin provided by the customer and ensure that the margin remains equal to the minimum percentage of 25% of the current value of each investment position in the related security.

Authority’s Powers relating to the Margin

Article (170)

The Authority may fix a higher or less percentage for the margin to be provided for the deals in any security or any class or category of securities. The Authority may prohibit margin deals on any security or any class or category of securities.

Disclosure of Fees and Charges

Article (171)

Before providing any services, the licensee should fully disclose to his customers the fees and commission he receives.

Customers’ Notices and Reporting

Article (172)

1. Upon executing any purchase or sale of security with a customer or for his account, the licensee should promptly send to the customer a deal execution notice, which should include all of the information determined by the Authority.

2. The deal execution notice mentioned in paragraph (1) of this Article should not be sent if the licensee acts as a manager of the customer’s investment portfolio and the customer confirmed non-requirement of obtaining a written deal execution notice.

Article (173)

The licensee acting in his capacity as manger of investment portfolio for an customer should send to the customer a monthly evaluation report on the securities or the cash balances relating to the securities in the customer’s portfolio. The report should include any information required by the Authority.

Customers’ Records

Article (174)

The licensee may prepare and maintain correct records for each executed deal. All records should be updated and sufficient to prove compliance with these Regulations at all times.

Article (175)

The licensee should prepare and maintain correct records for the customers’ accounts, provided that they:

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1. Should accurately and timely demonstrate the assets and liabilities of all customers severally and collectively.

2. Include all the information necessary to enable the licensee to prepare a statement of the assets and liabilities of each customer and details of deals executed for each customer’s account.

3. Highlight all of the customer’s funds and assets for which the licensee is responsible.

Article (176)

The licensee’s records should include the following:

1. Details of all orders posted by any customer with respect to a security.

2. Details of all purchase and sale deals of securities done by the licensee for the customer or executed by the licensee for his own account.

3. A record of revenues and expenses for each customer with explanation of nature thereof.

4. Details of all receipts and payments on the customer’s funds and assets.

5. A record of the customer’s funds and assets.

Article (177)

The licensee should set specific procedures for the transactions on the customers’ personal accounts in wine with what endorsed by the Authority in this respect.

Phone Call Recording

Article (178)

The licensee should not make or accept any phone calls from customers or potential customers relating to any acts in the field of securities activity unless the licensee records such phone calls. The licensee should disclose, to his customers or potential customers, recording of phone calls and maintain such recordings for three years after making the phone calls. If a phone call relates to a dispute with a customer, that phone call recording should be maintained till the final settlement of the dispute and completion of investigation thereof.

Arrangements of Management and Supervision

Article (179)

The licensee should make the proper arrangements to maintain the clean and appropriate allocation of key responsibilities among his board members, partners or senior management to determine the person, who should be entrusted with each function, and provide the adequate supervision over and monitoring of his works and affairs.

Article (180)

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The licensee should set the proper arrangements to ensure that carrying out operations and disposal of assets are made in accordance with a general or special authorization by the concerned department.

Article (181)

The licensee should set the arrangements preventive of information leakage between the various securities activities he is licensed to practice and ensure that perusal of and access to the various information is available only to the related persons.

Compliance

Article (182)

The licensee should appoint one of his executive officers to act as a compliance officer.

Article (183)

The Authority may require the licensee to form a compliance committee as per the instructions and controls preset by the Authority.

Article (184)

The licensee may assign to an outsourcer specific functions relating to compliance and other functions, provided that the licensee shall remain responsible before the Authority for such functions.

Money Laundering & Terror Finance

Article (185)

The licensee should ensure that his customer has fulfilled all obligations under the rules and regulations relating to combating money laundering and terror finance applicable in the State of Kuwait.

Article (186)

The licensee should appoint one of his key executive persons to act as “Money Laundering & Terror Finance Reporting Officer” to be responsible for reporting any suspect of money laundering or terror finance as per the instructions approved by the Authority with respect thereto.

Audit of Accounts

Article (187)

The licensee should appoint an external auditor, who should be one of the offices registered with the Authority, provided that such auditor should not be a manager, officer, employee, shareholder or partner of the licensee.

Article (188)

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The licensee should maintain, in a separate manner, all accounts, records, terms of services and the other agreements to which the licensee is a party for five years, and the auditor should be given access thereto.

Article (189)

The Authority may require the licensee, as per the type of the licensed activity, to submit periodical reports on all of his operations including an annual report of the audited financial statements.

Article (190)

The licensee should apply a risk management system and appoint an officer to be approved by the Authority to handle the duties of managing and addressing risks associated with his activities and submit a special risk report to the Authority on a semiannual basis.

Customers’ Complaints

Article (191)

The licensee should have written procedures to ensure the proper and prompt handling of customers’ complaints and taking the corrective and timely procedures thereon.

Article (192)

The licensee should set procedures for settlement of complaints in a clear manner that ensures keeping each employee dealing with customers familiar with these procedures, immediate investigation of the complaint, keeping a record of the written complaints and documentation of the taken actions with respect thereto.

Business Continuity

Article (193)

The licensee should set the proper arrangements to ensure his ability to continue in practicing his activities and fulfilling his legal obligations upon occurrence of any unexpected interruption of his business taking into consideration the nature, volume and diversity of his business. These arrangements should be documented, regularly updated and reviewed to ensure effectiveness thereof.

Article (194)

The proper records relating to the arrangements of business continuity should be maintained for five years after discontinuity of using or updating thereof.

Authorization on Account in the Name of the Customer

Article (195)

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The licensee should prepare and maintain proper internal control records and procedures with respect to any authorization on an account in the name of the customer and ensure that all deals executed under the authorization are within the scope of granted authorities and he has proper procedures to give and receive instructions under the authorization.

Employee’s personal Dealings

Article (196)

No employee of a licensee may:

1. Be a party to any deal on a security to which a customer of the licensee is a party.

2. Open a trading account with another licensee unless the licensee for which the employee works does not provide a service similar to the services provided by the other licensee.

Article (197)

Any employee of a licensee must disclose to the compliance officer all the securities deals he is executing through another licensee.

Article (198)

The compliance officer should establish the proper procedures to monitor the employees’ personal dealings in securities in a way that ensures compliance with the law and these Regulations.

The Persons licensed to operate in accordance with the Islamic Shari’a

Advisory Council of Shari’a Supervision

Article (199)

An Advisory Council of Shari’a Supervision “ACSS” reporting to the Board of Commissioners shall be formed by a resolution of the Authority’s Board of Commissioners. ACSS shall be the reference in all matters relating to the Authority’s resolution in the Shari’a compliant activities.

Article (200)

The ACSS shall comprise of five members of the experts specialized in the jurisprudence of Islamic Finance, law, economy and administrative science. Islamic scholars shall form the majority of ACSS and the Board of Commissioners shall issue a resolution of the names thereof.

Article (201)

The ACSS may seek assistance of experts from outside the Authority subject to approval of the Executive Director.

Article (202)

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The ACSS shall have the following jurisdictions:

1. Express the Shari’a opinion on the matters relating to the Authority’s business with respect to the persons licensed to operate in accordance with the Islamic Shari’a.

2. Express the Shari’a opinion on the new Islamic financial products and instruments launched in the markets by the Authority or approved by the Authority.

3. Expressing the opinion in the matters referred to it by the Board of Commissioners.

4. Expressing the Shari’a opinion on the complaints submitted by the traders against the licensees with respect to incompliance with Islamic Shari’a.

5. Directing the supervisory executive department in the Authority to implement the Shari’a standards, resolutions and systems to organize the business of the licensees.

6. Proposing regulations and systems of establishment of Shari’a supervision boards, their formation, objectives, appointment entity, dismissal and terms of appointing their members, method of performing their Shari’a duties, responsibilities, commitments and the reports issued by them.

7. Proposing regulations and systems governing the internal and external Shari’a audit profession of the licensees.

8. Proposing the regulations and systems with respect to the terms to be met by the executive managers of the licensees operating in accordance with the Islamic Shari’a and their commitments and responsibilities.

9. Proposing the rules and supervisory controls governing the Shari’a compliant capital markets in all of the instructions and resolutions issued by the Authority with respect to organization and monitoring of business of the licensees operating in accordance with the Islamic Shari’a.

10. Proposing the standards necessary for application any investment index of the Shari’a compliant listed companies and the collective investment schemes launched by the Capital Markets Authority or any of the licensed stock exchange markets.

11. Expressing the reference opinion on the activities of the Shari’a compliance licensees.

12. Proposing the plans and methodologies that contribute to development of Shari’a compliant capital market in the State of Kuwait.

13. Conducting the researches and studies that contribute to development of Shari’a compliant capital market composition.

14. Proposing templates of contracts and financial instruments approved by the Authority for the purpose of operating in accordance with the Islamic Shari’a.

Article (203)

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In addition to the terms and conditions applicable to the licensees, as provided for in these Regulations, the Board of Commissioners sets the other terms and standards that should be met by the persons licensed to operate in accordance with the Islamic Shari’a.

Article (204)

Subject to the provisions of Law No. 32 of 1968 on Cash, the Central Bank of Kuwait and Organizing the Banking profession, and amendments thereto, and in addition to the terms stated for applying for a license for each activity, the persons carrying out their activities in compliance with Shari’a shall fulfill the following conditions to be licensed:

1. The Articles and Memorandum of Association thereof shall stipulate the practice of the activity, especially the securities activity, in compliance with Shari’a.

2. The internal organization thereof shall include a Shari’a supervision and audit system regulated by a by-law to ensure the professional, efficient and effective performance pursuant to the Authority’s approved standards.

Article (205)

The companies’ Shari’a supervision system shall consist of an external Shari’a audit firm and an internal Shari’a audit unit.

Article (206)

The external Shari’a audit firm shall be an independent institution entrusted with supervision of all the company’s commercial and investment transactions to verify their compliance with the Authority’s resolutions, and shall submit its reports in this respect to the company’s general assembly.

Article (207)

The general assembly shall be entrusted with appointing, removal of the external Shari’a audit firm as well as calling it to account and determining its remuneration.

Article (208)

The internal Shari’a audit is a an administrative unit of the audit committee, which is entrusted with supervision of the company’s commercial and investment transactions to verify their compliance with the resolutions and Shari’a standards issued by the Authority.

Article (209)

The persons licensed to work in compliance with Shar’ia shall fulfill the following conditions:

1. Compliance with the Shari’a terms, restrictions and standards approved by the Capital Markets Authority.

2. Having a Shari’a-compliant code of ethics.

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3. The by-laws, contracts, agreements and forms used by it, the investment funds and portfolios set up by it and the instruments issued by it shall be Shari’a-compliant.

Article (210)

The Board of Commissioners shall set the terms and standards that should be met by the executive managers and the similar positions responsible for managing the persons licensed to operate in accordance with the Islamic Shari’a.

Article (211)

The Board of Commissioners shall issue the specific policy of the terms to be met by the persons licensed to practice Shari’a audit profession and / or deliverance of Shari’a opinions as well the standards for practice of the profession.

Article (212)

The Authority shall maintain a special record of Shari’a audit and consultation offices approved by it. Any licensee may not seek assistance of entities not registered with the Authority for providing Shari’a audit.

Article (213)

The Authority shall issue a resolution to govern a transitional period of three years for the licensee to settle down their positions in accordance with the rules of Shari’a supervision.

Definition of Customers’ Funds and Assets

Article (214)

1. A customer’s funds means all funds received by any licensee from a customer or on behalf of a customer in the course of performing securities activity. As an exception, funds shall not be considered as a customer’s funds if they are payable and falling due on a prompt basis to the licensee for his own account including the fees and commissions, which are legally due to the licensee.

2. A customer’s assets means all assets that include or may include securities received by the licensee in the course of performing securities activity.

3. The customer’s assets include the collateral obtained by the licensee as a pledge to fulfill an obligation arising from that pledge till it would be used to fulfill that obligation.

Separation of customers’ funds and assets

Article (215)

The licensee should separate his funds and assets from those of the customer.

Article (216)

The licensee should use the funds and assets of his customers for their interests only.

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Article (217)

The licensee may not use the funds of a customer for the account of another customer.

Rules for customers’ funds

Article (218)

The licensee’s creditor shall not have any right to any claim or dues from the customer’s funds and assets.

Article (219)

All funds paid in a customer’s account by the licensee shall be considered as customer’s funds. Only the customer’s funds should be maintained in the customer’s account unless such funds are required to open an account or keep the same open or are kept temporarily in the account.

Article (220)

The licensee may transfer a customer’s funds to another person for the purpose of settlement of securities deal entered into with or through the other person or to provide a guarantee to a customer, as per the agreement between them.

Article (221)

Immediately after receipt of the customer’s funds, the licensee should deposit the same into that customer’ account.

Compliance with Rules for Customers’ Funds

Article (222)

The licensee should maintain sufficient records to clarify his compliance with the rules for customers’ funds.

Article (223)

Each auditor of the licensee should ensure, on an annual basis, compliance by the licensee of the rules for the customers’ funds and prepare a report of the same.

Article (224)

The licensee should abide by any instructions issued by the Authority with respect to the amounts to be kept in the bank accounts of the customers’ funds.

Settlement of the Customers’ Accounts

Article (225)

The licensee should settle the balance of each of his customers’ accounts as per the instructions endorsed by the Authority.

Article (226)

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The licensee should notify the Authority at the earliest if he became unable to make any of the required settlements or found out that he needs an amount more than that kept in his customers’ accounts as per the instructions issued by the Authority.

Article (227)

If it became difficult for the licensee to correct the variance arising from settlement, and in order to reach a final correction, he should assume that the records are correct and pay the difference from his own funds into the customer’s account and consider the paid amount as customer’s funds.

Custody of Customers’ Assets

Article (228)

The licensee should make a risk assessment before raising a recommendation of, or taking a decision for, custody of a customer’s assets with the investment trustee or custodian to ensure that are proper information available with him to protect the assets.

Article (229)

The licensee should notify the customer before custody of the customer’s assets with an investment trustee or a custodian of the licensee’s group. The licensee may not keep such assets with an investment trustee or a custodian of the same group in case of an objection by the customer thereto.

Article (230)

The licensee may not keep his customer’s assets with an external custodian or recommend a customer to do so unless it is necessary to do so for the purpose of possession or custody of securities outside the State of Kuwait.

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Settlement of Customers’ Assets

Article (231)

The licensee should, at least once every five working days, update and audit his records in which he records his customers’ assets, which are not under his physical custody compared to the statements he receives from the clearing agency or the custodians.

Article (232)

The licensee should, at least once a month, do the following:

1. Prepare a statement of all customers’ assets under his physical custody and update and audit that statement against the record of those assets maintained by him.

2. Update and audit the licensee’s register of the securities owned by the customers compared to his register for custody of customers’ assets.

The statement and update mentioned in this article should cover all books and records of the licensee along with all the other securities and assets of the customer as at the same date.

Article (233)

The licensee should, within three working days, rectify any variance found during the update and audit conducted by him. In case the licensee found out that such variance implies a deficit, he should pay this deficit within three working days subject to approval of the Authority.

Lending Securities

Article (234)

Any securities activity should be subject to the prior approval of the Authority as per the terms and conditions approved by the Authority.

Reports of the Customers’ Assets and Funds

Article (235)

The licensee should, at least once every six months, provide each customer with a statement setting out all of the customers’ assets along with the other collaterals and assets owned by him for management of which the licensee is responsible.

Transfer of Funds, Assets and Collaterals to A Third Party

Article (236)

Whenever the licensee maintains collaterals, provides collaterals to a third party of transfer the customers’ funds or assets to settlement agents, he should take the steps

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necessary to provide the adequate protection for the collateral and the customer’s funds and assets, ensure segregation thereof from those of the third party and consider them as a customer’s funds and assets, assess the risks associated with possession thereof by a third party and continuously ensure the due care of customer’s interest.

Article (237)

The Authority shall have the authority to take any steps its deems appropriate to ensure the proper protection for the licensee’s customers under liquidation.

Settlement Procedures

Article (238)

Before filing a case of settlement against insolvency, the licensee should notify the Authority of the subject of the case at least 14 days before filing thereof and provide any documents required by the Authority and coordinate with the latter before initiating the proceedings.

Article (239)

The licensee is prohibited from the starting date of settlement against insolvency case till the end thereof and without the prior approval of the Authority, from accepting any customers’ funds and other customers’ assets, disposal of customers’ funds or assets, making any mortgage, assuming any burden, giving any guarantee, donating any part of his assets or making any transfer of the title of any of his assets.

Liquidation Procedures

Article (240)

Any resolution of appointment of any liquidator for the licensee shall not be valid or effective without a court ruling unless it is approved by the Authority. The Authority may instruct the liquidator to take the steps it deems appropriate to prove the dues of the licensee’s customers at any time, or appoint a third party to take such steps.

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Chapter Six “Review of the licensees’ Account”

Article (241)

Each licensee shall maintain an integrated accounting system and maintain records, books and accounts that in reflect in details and in an accurate manner the financial statements and statements of income in accordance with the accounting standards approved by the Authority.

The licensee shall keep these records, books and accounts for at least five years from the date of preparation thereof, during which they should be available for access if requested.

Article (242)

Within a month of obtaining the license, each licensee shall appoint an auditor to be approved by the Authority, provided that such auditor should not be a manager, officer, employee, shareholder or partner of the licensee.

The licensee shall notify the Authority of the same within seven days of such appointment. He should also notify the Authority within the same period in case of resignation or replacement of the auditor.

Article (243)

The Authority may appoint an auditor for the licensee at the latter’s expense to examine and review his books, records and accounts whenever the licensee fails to provide his audited financial statements with the time extensions specified under the systems of the stock exchange market he is listed in or the Authority’s resolutions and instructions, or whenever the Authority has the reasons that do so.

Article (244)

The licensees listed in stock exchange market shall disclose their interim, semiannual and annual financial statements as per the regulations issued by the stock exchange market and approved by the Authority.

Article (245)

The stock exchange market shall take all the necessary steps to urge the licensees listed therein to disclose any material changes relating to their activities and management.

Article (246)

Subject to payment of the charges fixed by the Authority, the public may peruse in the stock exchange market, or get a copy of, the any information or statements announced, disclosed or placed in the stock exchange market.

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Chapter Seven “Acquisitions and Protection of Minority Interests”

Definitions

Article (247)

The acquisition offer mean the offer or solicitation to offer, or request to own:

1. All shares of a listed company or all shares of any class (s) in a listed company, other than the shares owned by the offering person, his subsidiaries or related parties as on the offer date.

2. All of the remaining shares in the company subject of the offer, which are requested to be acquired from all the other shareholders in that company as a result of acquisition by the offering person and his subsidiaries and related parties of a major equity stake in the company that enables him to control the board of directors.

Article (248)

For the purpose of application of these regulations, the offering party means any person, who submits, or intends to submit, an acquisition offer.

The company subject of the offer means, for the purpose of application of these regulations, a listed company or, in case of a reverse acquisition, a non-listed company, for which an acquisition offer has been submitted.

General Provisions

Article (249)

Any person may, after obtaining a prior approval of the Authority, submit an acquisition offer at any time as per the provisions of these Regulations.

Article (250)

The board of directors of the offering person and the board of directors of the company subject of the offer and their advisors should endeavor to realize the interests of their shareholders.

Article (251)

Each offering person should treat all the company’s shareholders of the same class on equal terms. Neither the offering person nor the company subject of the offer or their advisors may provide, during the offer term or study thereof, information to certain shareholders without making such information available to all other shareholders.

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Article (252)

The offer may not be subject to terms that depend only on non-objective resolutions by the board of directors of the offering person or the board of directors of the company subject of the offer.

Article (253)

The investment advisor of any of the offer parties should be independent, non-interested party and licensed by the Authority.

Article (254)

The board of directors of the offering person and the board of directors of the company subject of the offer shall provide their shareholders with the information and recommendations, which are sufficient to enable them reach a sound decision to accept or reject the offer at least fifteen days before the general assembly of the shareholders.

Article (255)

The board of directors of the officering person and the board of directors of the company subject of the offer, upon providing recommendations to their shareholder with respect to any offer, should act in their capacities as board members without taking into consideration the amount of shares they or their families own or any personal relationship with the offering person or the company subject of the offer, and should seek an independent and specialized advice relating to the offer from an investment advisor and inform the shareholders of the details of such advice.

Article (256)

The offering person shall obtain approval of Competition Protection Body, before initiating any acquisition procedures, as per the Law No. 10 for 2007 regarding competition protection.

Disclosure of Acquisition Offer

Article (257)

The offering person and the company subject of the offer should disclose the acquisition offer in any of the following cases:

1. If the two parties reached an initial agreement to submit the offer.

2. If a person acquired the shares of a listed company giving rise to an obligation by that person to submit an offer under the provisions of the compulsory offering in these regulations. Disclosure should not be delayed even if the related information is not available. However, such information should be included in a subsequent disclosure.

3. Any other cases as determined by the Authority.

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Contents of the Offer Document

Article (258)

The offer document should include, as a minimum, the following information:

1. Sufficient information on the offering person and the company subject of the offer.

2. Details of the securities under offer and any other related right or restrictions.

3. The total amount of the offer.

4. A full description of the method of financing the offer and source of finance along with the names of the main lenders or the finance arranger.

5. Details of all required documents and the procedures to be followed to accept the offer.

6. A statement of any terms or restrictions to which the offer is subject and any related procedures.

7. The time schedule of acquisition.

8. Equity stakes and amount of controlling shares attributable to the offering person in the company subject of the offer.

9. Equity stakes and amount of controlling shares attributable to the offering person in case of swap of securities only.

10. Equity stakes and amount of controlling shares in the company subject of the offer in which the board members of the offering person have interest, or which are owned or controlled by related parties of the offering person or allied therewith, whose names should be mentioned, or owned or controlled by persons irrevocably committed to accept the offer before publishing the offer whose names should be also mentioned.

11. Any other information required by the Authority.

Article (259)

The offer document shall include a statement setting out existence or non-existence of any agreement, arrangements or understanding between the offering person or any subsidiary or allied person and any of the board members of the company subject of the offer or its shareholders along with the full details of any of such agreements or any other arrangements.

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Article (260)

The offer document shall contain a statement illustrating whether the securities acquired as per the offer will be converted to other people or not, and mention the names of parties in any related agreement, arrangement or understanding, if any, and the details of the securities owned by those persons in the company subject of the offer, or a statement denoting the lack of any securities owned likewise.

Article (261)

If the offer includes issuance of unlisted securities, the offer documentation should include an estimation of the value of these securities issued by an investment advisor.

Article (262)

If the payment of offer amount includes the issuance of securities, and the bidder is an unlisted company, then the offer documentation shall include sufficient financial information of the bidder, including the audited financial statements for the past three financial years, if available.

Approving and publishing the offer document

Article (263)

The bidder shall submit the offer documentation to the Authority to obtain its approval thereupon, and it may not be published before the approval of the Authority.

Article (264)

The Authority, during a maximum period of ten working days from the receipt of the offer documentation and all other documents, data and information required by the Authority, may issue its approval on the offer or refrain to issue its approval in the following cases:

1. If the offer doesn’t comply with the provisions of the Law No. 7 of 2010 and these regulations.

2. If the offer is not accompanied by the required charges.

3. The bidder’s failure to present the required data in accordance with the provisions of the Law No. 7 of 2010 and these regulations.

4. If the offer contains incorrect or in complete statement that may affect the decision of shareholders.

Article (265)

If the Authority approved the offer, the offer documentation should be published by the bidder or on his behalf pursuant to the schedule determined by the Authority.

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The recommendation of the board of directors of the company subject of the offer

Article (266)

The board of directors of the company subject of the offer should, within seven working days from the receipt of the offer, raise a response to the Authority showing his opinion and recommendation to the shareholders, and publish its recommendation to the shareholders regarding the offer after the Authority’s approval of the offer.

Documents available for review

Article (267)

The copies of the following documents shall be available for review from the date of publishing the offer document till the end of the offer period:

1. The recommendation of the board of directors of the company subject of the offer concerning the offer.

2. Articles and Memorandum of Association of the bidder and the company subject of the offer or any other similar documents.

3. The audited financial statements of the bidder and the company subject of the offer for the last three financial years, if any.

4. Any other report, letter, evaluation or document presented or referred to in the offer documentation.

5. Any report proving irrecoverable commitment to accept the offer.

6. The documents of the financial arrangements concerning the financing of the offer if these arrangements are included within the offer documentation.

7. Any other documents required by the Authority.

The offer documentation shall indicate the place where the documents can be reviewed.

Prospectus

Article (268)

If the payment of the offer value includes issuance of securities that will be listed, or securities issued by listed company, a prospectus should be prepared for the new securities in accordance with these regulations.

Possession of a percentage not less than 5% and not more than 30% from the shares of a listed company

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Article (269)

When a person owns, alone or with related or allied parties, 5% or more of the shares of any listed company, and intends to increase his ownership to not more than 30% of the shares of the company, he must disclose this intention upon the disclosure of the interest according to the provisions of chapter ten of the Law No. 7 of 2010, and provide the Authority with the information required in this regard.

Article (270)

If the person owns, alone or with related or allied parties, 5% or more of the shares of any listed company, and wants to increase this percentage to not more than 30% of the shares of the same company, he can achieve that by any of the following ways:

1. Purchasing shares directly through the stock market.

2. Applying to the stock exchange market to hold an auction to buy a certain number of shares. The submission of such application requires a preliminary agreement with a one or group of the company’s shareholders who want to sale a specific number of shares at a price agreed upon previously. The holding of the auction requires an advance approval from the Authority and complying with terms and conditions prescribed by the Authority and the stock market in this regard.

3. Announcing the submission of an offer to the shareholders to buy a specific number of shares at a fixed price and within a specified period, provided that they obtain the approval of the Authority in advance in this respect and adhere to the terms and conditions applied by the Authority in this regard.

Obligatory offer

Article (271)

Any person, or a group of his related or allied parties, should within thirty days of owning, directly or indirectly, an ownership more than 30% of voting securities of a listed company, submit acquisition proposal of all securities remaining from the same category, as per the terms prescribed by these regulations and the instructions issued by the Authority, except for the acquisition exempted by the Authority for the public interest and the interests of the remaining shareholders. The exemption resolution is issued in writing and reasoned.

Article (272)

It’s not permitted to own shares resulting in an obligation to submit an obligatory offer under this Article if the submission or implementation of the offer depends on issuance of a resolution from the General Assembly of shareholders about the bidder, or on any other condition, approval or arrangement.

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Article (273)

The bidder, in case of obligatory offer, shall submit his offer to the shareholders of the company subject of the offer immediately, without the need to convene the general assembly of the shareholders, and each shareholder shall have the right to sale his shares to the bidder or to keep them, during the offer period to be determined by the Authority.

Article (274)

The offer submitted pursuant to the obligatory offer should be in cash and not less than the average of share price in the stock market of the company subject of the offer within the last six months of the beginning of the offer period, and the stock market shall define the average of share price.

Dealing based on confidential information relating to the offer

Article (275)

Except for the transactions of the bidder, no person that has access to the confidential information (insider) which may affect the price of the securities subject of the offer shall carry out any transaction in any kind of the securities of the company subject of the offer or its subsidiaries or affiliates, within the period from the beginning of preliminary negotiations till the disclosure of the preliminary negotiations in the offer.

This prohibition includes also dealing in any security of the bidder or its subsidiaries or affiliates.

Article (276)

No person that has access to the confidential information which affects the price of shares relating to any offer may submit a recommendation to any other person concerning dealing in related securities. The persons who has access on this confidential information should prevent its leakage.

Restrictions and provisions of trading in securities relating to the offer

Article (277)

The bidder and his related or allied parties during the period of the offer may not sell the shares of the company subject of the offer without obtaining a prior consent from the Authority, and in all cases it’s not allowed to sell with a value less than the value of the offer.

Article (278)

The company subject of the offer and its related or allied parties - during the offer period – may not purchase the shares of the company subject of the offer.

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Article (279)

If the bidder, or any its related or allied parties, has purchased shares in the company subject of the offer at a price more than the offer price during the period that begins from the date of disclosure of the offer till the end of the defined period for the acceptance of the offer, he should increase the value of its offer to not less than the highest price paid for the shares that it owned during this period, and it must disclose immediately after the purchase that the offer will be amended, and the disclosure should include the number of shares purchased and the paid price.

Article (280)

The investment advisor of the company subject of the offer, or the investment advisor of any other person within the group of the company subject of the offer, or any of its related or allied parties or any subsidiary or affiliated party to the investment advisor, may not do any of the following acts during the offer period:

1. Purchase the shares of the company subject of the offer or deal in financial derivatives of these shares for his own account or on behalf of an account in which its administrator has discretion, or to submit a loan to a person to help him in carrying out these acts.

2. To agree on any compensation arrangement or option or adherence to any arrangement, agreement or understanding - formally or informally and whatever its nature – that may be an incentive to any person to maintain or deal, or refrain to deal, in securities related to the company subject of the offer.

Restrictions on the board of directors of the company subject of the offer

Article (281)

The board of directors of the company subject of the offer may not without the approval of the General Assembly of shareholders, excluding what is stipulated in a previous contract, submit an offer during the period of the offer or during the period of initial negotiations of any of the following:

1. Issue any shares authorized as unissued.

2. Issue or grant any options pertaining to any unissued shares.

3. Create or issue or allow creating or issuing any securities convertible to shares or subscription rights in shares.

4. Disposal or approve to dispose of any assets of significant value.

5. Conclude contracts outside the normal activity of the company

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6. Take any action relating to the company, that may lead to non acceptance of the offer or depriving the shareholders from the opportunity to take a decision thereof.

7. To burden the company with any significant material obligations.

The memorandum of invitation to convene the General Assembly of shareholders should include adequate information about the offer.

Conflict of interests of the Board of Directors

Article (282)

The Board members of any of the offer parties – at the Board meeting or at any of its committees or at the General Assembly – may not vote on a decision relating to an offer carried out based on this regulation, or any relevant matter, involving a conflict of interest to the Board member or any of his first degree relatives or his spouse, as well as being a shareholder in the bidder and at the same time a member in the Board of directors of the company subject of the offer or vice versa, or to be a member in the board of directors of the bidder and at the same time a member in the Board of directors or a director in the company subject of the offer or vice versa.

Acquisition when there are parties with effective control

Article (283)

In case of submitting an offer meeting these regulations and the existence of a person with effective control at the bidder and the company subject of the offer “party with effective control”, the offer shall be subject to the additional requirements set forth in the following Articles.

Article (284)

The shareholders shall be informed with the interests of the parties with effective control in the transaction before concluding it.

Article (285)

The disclosure of any offer involving a party with effective control should include the following:

1. The offer shall be subject to the voting of shareholders as required by these regulations, and the party with effective control should undertake not to vote on the decision relating to the offer which is taken at the meeting of General Assembly and assure non-voting of his related or allied parties on this decision.

2. The name of the party with the effective control, and the name of his related or allied parties, with reference that he is a party with effective control.

3. The details of the current ownership of the party with effective control in the bidder and the company subject of the offer, including any shares owned or controlled by this party, or any his related or allied parties, or to have the option to purchase it.

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4. The details of the position of the party with effective control in the bidder or the company subject of the offer.

5. Details of the derivatives in the securities of the bidder or the company subject of the offer, or any of their subsidiaries, to which the party with effective control has an obligation.

6. A statement showing the opinion of the Board of Directors about the proposed offer and whether it was fair and reasonable for the rest of the shareholders other than the party with the effective control, and whether the Directors have reached this opinion, without any role in such decision for the party with effective control.

Article (286)

The board of directors shall ensure not counting the votes of the party with the effective control, or its related or allied parties, when making a decision concerning the offer in the meeting of the shareholders’ General Assembly.

Non cash offer for acquisition

Article (287)

If the bidder is a company, it may submit an offer that includes issuing of shares to the shareholders of the company subject of the offer according to the following:

1. The bidder shall treat all the shareholders from the same category in the company subject of the offer with the same treatment.

2. When the bidder submits an offer to the shareholders of the company subject of the offer to acquire shares in the bidder at a discount of more than 20% on the market price of the shares specified in the offer date, the bidder shall pay no less than 50% of the amount due to the shareholders in cash.

Article (288)

In exclusion from the previous Article, the bidder may submit a non-cash offer wholly consisting of shares issued to the shareholders of the company subject of the offer, provided that the bidder is able to prove that the shareholders, or their related or allied parties, who severally or collectively have a percentage not less than (5%) of the voting rights in the company subject of the offer, had undertaken not to sell or dispose of their shares in the bidder for a period not less than (12) months from the date of listing these shares.

Reverse acquisition

Article (289)

Reverse acquisition means any arrangement whereby a listed company offers new shares to shareholders of unlisted company instead of their shares, so that the new shares represent more than 50% of the voting shares in the listed company after acquisition.

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Article (290)

In case of disclosing of any reverse acquisition, the listing of the bidder’s securities is suspended until the conclusion of the transaction, and upon such conclusion, the listing of bidder securities is canceled, and the bidder will be entitled to submit a new listing request provided that he meets the requirements of listing in accordance with the relevant rules.

Resolution of the shareholders of the company subject of the offer

Article (291)

The acquisition offer will be considered acceptable only when a majority resolution is issued by the General Assembly of shareholders of the company subject of the offer for approval, and the offer shall be considered as expired when the general assembly of shareholders issue a resolution not approving it, with the exception of the obligatory offer which is submitted to the shareholders of the company subject of the offer immediately and not voted in the General Assembly of shareholders of the company subject of the offer.

Article (292)

The bidder shall disclose the resolution of the shareholders on the offer, and this is at least one hour before the determined time to open the stock market and no later than the following day of the date fixed for the expiration of the offer period. Disclosure should define the total number of shares and the rights resulting thereof and the percentages of all classes of related share capital.

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Chapter Eight

Investment funds

Definition of investment funds

Article (293)

The investment fund, for the purpose of applying the law No 7 of 2010 and these regulations, is a collective investment scheme that aims to collect funds from investors in order to invest it on their behalf in the various fields in accordance with the principles of the professional management of collective investment, and it’s managed by the investment manager for fixed fees.

Types of investment funds

Article (294)

The investment fund takes one of the following two forms:

1. Open-end fund, a fund with a variable capital, which its capital is increased by issuing new investment units or decreased by recovering some of its units during the specified period in its Articles of Association.

2. Closed-end fund, a fund with fixed capital. Its investment units may be recovered only at the end of the period of the investment fund, and its capital may be increased as per its Articles of Association, and its units may be included in the stock exchange market.

Investment fund capital

Article (295)

The capital of the investment fund is divided into units with equal rights, and the liability of the investors is limited to the value of their contribution, and the unit value is paid upon subscription thereto.

Definition of units

Article (296)

The unit is a divisible security representing a share in the investment fund, which entitles its holder to exercise all the rights arising therefrom being a common owner in such fund.

Requirements for the establishment of investment fund

Article (297)

No investment fund will be established without obtaining a license from the Authority and recording it in the funds register.

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Article (298)

The establishment of investment funds is limited to the person who is licensed to practice the activity of establishing and managing the systems of collective investment.

Article (299)

The requests of the establishment of investment funds shall be submitted to the Authority in accordance with the forms adopted for that, and the draft of the Articles of Associations, the draft of prospectus and any other documents required by the Authority shall be attached to the request.

Article (300)

The Authority shall study the request of establishing the investment fund and issue its decision thereon within thirty days from the date of the completion of the required papers and data, and the Authority may include in the resolution of approval any terms or restrictions it deems necessary.

Article (301)

The applicant for the establishment of investment fund shall fulfill the whole capital of the fund and issue the ownership units within three months from the date of issuing the license; otherwise the license will be considered cancelled.

Offering the units of the investment fund

Article (302)

Offering the units of investment funds will be a private placement in any of the following cases:

1. When the required amount to be paid by each investor is not less than hundred thousand dinars or its equivalent, and the offering shall be directed to any of the following persons:

Government of the State of Kuwait.

Central Bank of Kuwait.

The stock exchange market and any other stock exchange market recognized by the Authority.

Authorized persons acting for their own account.

Investment companies acting for their own accounts.

Any other persons that the Authority agrees to direct the offer thereto.

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2. If the units are offered on no more than (200) investors in the State of Kuwait, and the amount due from each investor is less than one hundred thousand Kuwaiti Dinars or equivalent. The fund manager may offer new units in the same fund by a private placement under during 12 months from the date of approval of the offer.

3. If the units are issued by the government of the State of Kuwait or by an international authority recognized by the Authority.

4. Any other cases determined by the Authority and in accordance with terms and conditions set thereby.

Article (303)

Offering the units of investment funds will be deemed as a public offering if it doesn’t meet the requirements of the private placement set out in the previous Article, therefore, the investment funds publicly offered shall be subject to any additional terms and restrictions set by the Authority for public offering.

Corporate body

Article (304)

Each investment fund shall have a corporate body and a separate financial entity.

The relationship between the fund manager and unit holders

Article (305)

The Articles of Association of the investment fund shall govern the relationship between the fund manager and unit holders, and the unit holders should express their approval on the Articles of Association of the fund by signing a copy thereof.

Articles of Association

Article (306)

The Articles of Association of the investment fund shall include the necessary information that would help the investors to take a sound and well planned decision regarding the proposed investment, and it should include the following data at minimum:

1. Fund type (closed or open)

2. Fund name

3. Fund capital

4. Fund currency

5. Provisions of unit holders’ assembly

6. Formation and the structure of the Board of directors of the fund

7. The investment objectives of the fund

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8. Way of transfer, issuance and redemption of fund units

9. The duration for redemption (if any)

10. The cases of fund liquidation

11. The beginning and the end of the financial year of the fund

12. Any other data required by the Authority

13. The Shari’a supervision firm for the funds licensed to work in compliance with Shari’a.

14. Investment methods and risks.

15. Method of calculating net unit value.

The Articles of Association of the investment fund should be in Arabic language and available for free upon request.

Article (307)

The manager of the investment fund shall obtain the approval of the Authority before carrying out any change in the Articles of Association of the fund, and send a summary of such change to all the unit holders before the date of applying it by 60 days at least. If the Authority found that the proposed amendments affect the vested rights of the unit holders, it shall ask the fund manager to take the approval of more than 50% of unit holders on these amendments.

Prospects

Article (308)

The prospectus shall include all the necessary information to enable the investor to evaluate the investment fund and its management and prospected opportunities, and include a brief of the investment trustee and adequate information of any obligations, rights or benefits, in the form approved by the Authority.

Investment funds established outside the State of Kuwait

Article (309)

No licensee may establish an investment fund outside the State of Kuwait without the approval of the Authority, and the units of this fund may not be offered in the State of Kuwait without the approval of the Authority.

Article (310)

It’s not allowed to market units in the State of Kuwait of an investment fund established outside it without obtaining the approval of the Authority, with commitment to the following terms and conditions as a minimum:

1. Offering the units of the fund in the State of Kuwait by private placement

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2. To offer the units of the fund in the State of Kuwait through a person licensed by the Authority

3. To fulfill all the requirements necessary for investment funds established in the State of Kuwait except for the requirements that the Authority decides to release such person therefrom

4. To fulfill any other terms and conditions required by the Authority

Article (311)

The Authority may cancel the marketing permission of an investment fund established outside the State of Kuwait in any of the following conditions:

1. If the terms of granting the permission are not met

2. If that protects the interests of the local investors

3. If the fund manager or the investment trustee has violated the provisions of law No. 7 of 2010 and these Regulations, or provided the Authority with incorrect, inaccurate or misleading information.

Obligations of the investment fund manager

Article (312)

The investment fund manager shall comply with the following:

1. Managing the assets of the investment fund to achieve its investment objectives specified in its Articles of Association.

2. Taking all investment decisions and other decisions for the benefit of the investment fund and the unit holders.

3. Registering the purchases and sales that are done for the benefit of the investment fund accurately and according to its time sequence and date.

4. Representing the investment fund in its relation with others and before the courts and having the right to sign on his behalf.

5. Providing an accounting system to measure events and financial transactions of the fund, and ensure the availability of an adequate audit trail of transactions that were entered into the system.

6. Ensuring the existence of an adequate system to settle the transactions that were entered into the accounting system along with the cash accounts and securities opened by the name of the investment fund with the investment trustee.

7. Providing the sufficient liquidity for the fund to fulfill any obligations that may arise.

8. Not exposing the investment fund to any unnecessary investment risks in the light of the Articles of Association of the fund.

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9. Providing the board members of the fund with all the necessary information about the fund to enable them to perform their duties efficiently.

10. Notifying the Authority immediately of any development in the works of the fund which may expose the interests of the unit holders to risk.

The formation of the board of directors of the investment fund

Article (313)

Each investment fund has a Board of Directors appointed by the assembly of the unit holders in the fund after obtaining the approval of the Authority. The board meetings are held and managed in accordance with the Articles of Association of the fund.

Article (314)

At least, third of the members of the fund Board of Directors shall be independent, and in all cases, the number of the independent members shouldn’t be less than two members.

The fund manager shall obtain the approval of the Authority on any change in the Board of Directors.

Article (315)

The members of the Board of Directors of the fund shall receive fees for their services as fixed by the unit holders’ assembly.

Responsibilities of the directors of the investment fund

Article (316)

The responsibilities of the members of the Board of Directors of the investment fund shall include the following:

1. Exercising due diligence and work honestly for the benefit of the fund and the unit holders.

2. Approving all the essential contracts, resolutions and reports in which the fund is a party.

3. Declaration of any transactions involving conflict of interests.

4. Ensuring that the fund manager is complying with the law and these regulations and the resolutions and instructions of the Authority and the Articles of Association and the prospectus and any other documents issued by the fund manager.

5. Ensuring that the fund manager is carrying out his responsibilities for the benefit of the unit holders in accordance with the Articles of Association of the fund and the provisions of these regulations.

Conflict of interests

Article (317)

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The staff and officers of the fund manager may not fill the membership of the Board of Directors or hold any position in a company or other entity which its securities form a part from the assets of any investment fund managed by the manager of the investment fund, and the independent members of the fund Board of Directors may not work as Board members or hold any position in a company or other entity which its securities form part of the assets of investment fund.

Article (318)

In case of employment of any member of the Board of Directors or officers of any company or entity by the investment fund manager as mentioned in the previous Article, or appointment as independent member in the Board of Directors of the investment fund, that person shall resign from that entity.

Article (319)

When an authorized person manages more than one investment fund, he shall separate between the management of each fund and separate between the operations associated with these funds.

The advisor of the investment fund

Article (320)

Each person working as an advisor of investment fund shall comply with the following:

1. To be licensed by the Authority to work as investment advisor

2. To work in accordance with the regulations and procedures governing the investment funds

3. To exercise the due care in providing investment advices for the benefit of the unit holders.

4. To keep regular books and records in accordance with the accounting systems with regard to the systems of collective investment, and providing the Authority with periodic reports, as required by the Authority.

Promotion and sale of units

Article (321)

When making a call or disclosure to promote the units of the investment fund, this should be subject to revealing all facts and related information without exaggeration, and in all cases the promotional or marketing advertisements are subject to the controls set by the Authority.

No amount of the assets of the investment fund may be paid for the promotion or selling expenses of the units, including, but not limited to the expenses of preparing the Articles of Association of the investment fund, copying and distributing it, and the fund manager shall bear such expenses.

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Listing and trading of units

Article (322)

The units of investment funds licensed by the Authority may be listed and traded in the stock exchange pursuant to instructions issued by the Authority. The investment funds established outside the State of Kuwait, and recognized by the Authority, may also require to be listed in the stock exchange in accordance with the terms and conditions prescribed the regulations of the Authority.

Registration of issued and redeemed units

Article (323)

The process of issuance or redemption of units shall be reflected in the first calculation of the net asset value of the investment fund after issuance or redemption.

Pricing, evaluation and redemption

Article (324)

The provisions of pricing, evaluation and redemption contained in the following Articles shall be applied only on open-end funds.

Article (325)

The fund manager shall specify the days of trading in the fund units, the date of evaluation and the deadline for submitting applications for purchase and redemption of the investment fund units, subject to the approval of the fund’s board of directors.

Article (326)

The assets of the investment fund shall be evaluated in each trading day no later than one day after the deadline of the submitting the purchasing and redemption applications.

Article (327)

The price of units shall be calculated for both sales and redemptions based on the net asset value of the investment fund at the evaluation point in any trading day. The prices of sale and (or) purchase of units may take into account the subscription fees, redemption fees or other expenses relevant to the sale or the fees of early redemption.

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Article (328)

The evaluation of the assets of the investment fund may be delayed for a period not exceeding two days from the deadline of submitting the requests for purchase and redemption, if the fund manager reasonably decides that it is not possible to evaluate a large part of the assets of the fund, subject to the prior approval of the fund’s board of directors on such delay in evaluation.

Article (329)

The fund manager shall pay the appropriate amount of the redemption to the unit holder before the close of working in the fourth day following the evaluation point where the redemption price was determined.

Article (330)

The fund manager may postpone any redemption application until the next trading day, and this in any of the following cases:

1. If the total ratio of all redemption requests of the unit holders which is required to be fulfilled in any trading day reached 10% or more than the net asset value of the investment fund.

2. If trading is suspended in the main market in which they are dealing in securities or other assets owned by the investment fund, or suspending the trading of securities which represent an effective value in its assets.

Article (331)

The manager of the open-ended investment fund may collect the fees of the early redemption from any unit holder requiring the redemption of his units within (30) days of purchase. The Articles of Association define conditions of the early redemption and how to calculate its fees, and the Authority may set ceiling to these fees.

Article (332)

The fees of early redemption shall be discounted from the redemption returns, and to be paid only to the investment fund, and may not be paid to the fund manager.

Article (333)

If the funds available in the account of the investment fund are not sufficient to cover the redemption applications, the fund manger may use its private resources or the resources of any subsidiary to cover these requests. In such case, these funds may be paid to the fund manager or its subsidiary from the account of the investment fund specified for the redemption, in addition to a commission calculated based on the market price.

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Register of unit holders

Article (334)

The manager of the unlisted investment fund shall prepare a register of the unit holders and maintain it, and other parties may be assigned, under a written contract, to prepare and maintain the referred register, but this will not absolve the fund manager of this responsibility.

Article (335)

The manager of the investment fund should maintain the following information in the register of unit holders for each unit holder:

1. His name, address and Civil ID number, or the number of his commercial register and his nationality

2. The number of units owned by him

3. Date of his registration in the register

Article (336)

The register of the unit holders is a conclusive evidence of the ownership of persons to the units therein listed.

Units Statement

Article (337)

The manager of the investment fund shall maintain a statement indicating the balance of the remaining units and the units that have been issued, redeemed, updated or eliminated, and provide the investment controller with a copy of such statement.

Equality between unit holders

Article (338)

The same terms and conditions shall apply to all the holders of units of the same category in the fund.

Maintenance of the assets of the investment fund

Article (339)

The assets of the investment fund established in the State of Kuwait shall be maintained with an independent custodian whose headquarter shall be in the State of Kuwait and approved by the Authority, and the custodian may maintain it outside the state of Kuwait to facilitate the offshore operations by appointing a sub-custodian to maintain the assets outside the State of Kuwait. Contracting with the sub-custodian will not absolve him from his responsibilities.

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Article (340)

A written consent shall be obtained from the manager of the investment fund on all the contracts concluded between the main custodian and the sub-custodian, provided that it provides the adequate protection to the assets in accordance with terms complying with the concluded contract with the main custodian.

Article (341)

All the contracts concluded whether with the main custodian or the sub-custodian shall regulate the following matters:

1. Requirements that enable the investment fund to exercise the rights relating to the assets kept with the custodian.

2. Requirements relating to the place of maintaining the assets of the investment fund.

3. The method used in the maintenance of the assets

4. The level of care and responsibility for the loss

5. Conformity and compliance reports

6. Fees and method of calculation thereof

Article (342)

The contracts concluded with the main or the sub-custodian may not include any provision that allows any type of mortgage over the investment fund assets or payment of any charges or expenses to any of them against transferring the title of certain assets pertaining to the investment fund.

Article (343)

The main or the sub-custodian should conduct the due care in his custody of the investment fund’s assets as it should be conducted by the a cautious person, and work to protect the interests of investment fund in each action or behavior, and each of them should bear the full responsibility of any loss of assets pertaining to the investment fund resulting from negligence or willful misconduct by them or by any of their affiliates.

Evaluation of investment fund assets

Article (344)

The Articles of Association of the investment fund should include the method of evaluating the listed or unlisted securities or other illiquid assets that are not traded during the twenty working days prior to the evaluation day.

Restrictions on investment funds

Article (345)

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The investment funds are prohibited from doing any of the following:

1. Granting of credit

2. Purchasing any security issued by the company that managing the fund or any of its subsidiaries except within the limits of the rules set by the Authority in this regard.

3. Purchasing any security for the entity in which the fund manager is the subscription manager or sale agent except within the limits of the rules set by the Authority in this regard.

Investment rules

Article (346)

The investment fund shall invest at least 75% of its capital to achieve its main investment objectives.

Article (347)

The investment fund investing in securities shall comply with the following rules:

1. Not to own more than 10% of securities of one source.

2. The investments of the investment fund in securities issued by one source may not exceed 10% from the net asset value of the investment fund.

3. Not to borrow, or enter in operations resulting in liabilities of, more than 10% from its net asset value

Article (348)

The funds that are borrowed by the investment fund working in real estate field may not exceed (30%) of its net asset value, and no entry may be made to transactions resulting in liabilities exceeding this percentage.

Financial statements

Article (349)

The manager of the investment fund shall prepare financial statements for the fund on a quarterly basis at least, as per the accounting standards approved by the Authority, and publishing it within fifteen days from the end of the period, and send a copy thereof to the Authority.

Article (350)

The investment fund manager shall provide the Authority with the annual audited financial statements of the investment fund within a period not exceeding thirty days from the of the financial year of the fund.

External auditor

Article (351)

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The manager of the investment fund shall, immediately after establishing the fund, appoint a licensed external auditor from the offices approved by the Authority to review the quarterly financial statements and audit the annual financial statements of the fund as per the auditing standards approved by the Authority.

Article (352)

The external auditor of the investment fund is appointed for one financial year renewable annually for a period not exceeding three consecutive years.

Article (353)

The external auditor of the investment fund may not be the auditor of the fund manager.

Periodic reports to the unit holders

Article (354)

The manager of the investment fund shall submit reports to the unit holders every three months at maximum including the following information:

1. Net asset value of the assets of the fund

2. Number of units of the fund owned by the unit holder and its net worth

3. A register stating the movement of the account of each unit holder, such as any distributions paid subsequent to the last report submitted to the unit holders.

Periodic information to the public

Article (355)

The manager of the investment fund, whether listed or unlisted, should publish monthly information about the fund to the public through the stock exchange, within seven working days from the end of each month as per the form specified by the Authority.

The Authority’s power to request information

Article (356)

The manager of the investment fund and the investment trustee shall provide all the information, documents and data required by the Authority during the specified period. The Authority may audit and review the accounts and records of the investment fund, and take the data and information necessary to conduct audits and inspections.

Termination of the investment fund

Article (357)

The manager of the investment fund shall obtain the approval of the unit holders and the approval of the Authority when it wishes to terminate the fund before the end of its term fixed in the Articles of Association.

Article (358)

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The approval of the Authority is unnecessary if the termination of the investment fund is a result of the expiry of its term fixed in the Articles of Association, or if the Articles of Association stipulate termination thereof when a particular event occurs, provided that it occurs. The fund manager shall be responsible for notifying the Authority and unit holders as soon as possible upon the occurrence of such event and the termination of the investment fund.

Cancelation of license

Article (359)

The Authority may cancel the license of any investment fund in any of the following circumstances:

1. In case of non compliance with the terms pertaining to licensing.

2. If it is made to protect the interests of the unit holders in the fund.

3. If the fund manager or the investment trustee violates any of the provisions of law or the regulations, or provides the Authority with incorrect, inaccurate or misleading information.

4. If the fund manager requests to cancel the license. And the Authority may reject the request if it found a need to investigate a matter relating to the fund or the interest of the unit holders.

Article (360)

The Authority should inform the fund manager or the investment trustee in writing of its intention to cancel the license of the fund and the reasons for doing so, and the manager or the investment trustee should give undertakings during fifteen days from the date of notification to avoid cancellation of the fund license.

Article (361)

If the Authority issued a decision to cancel a license of an investment fund, it may assign a licensee to liquidate the fund, and in this case it should inform the fund manager and the investment controller and the custodian immediately and in writing of the action taken.

Appointment of an alternative manager or liquidator of the investment fund

Article (362)

Unit holders owning no less than 10% of the fund units may request the fund’s board of directors to convene a unit holders’ assembly to discuss the appointment of an alternative fund manager or liquidator.

Article (363)

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The unit holders’ assembly convened to discuss the appointment of an alternative fund manager or liquidation will decide the same based on the voting of unit holders representing 50% of the fund’s capital in any of the following cases:

1. Investment fund manager’s refraining from practicing the activity of securities, or its failure to fulfill its obligations in a manner exposes the interests of the unit holders to risks.

2. Investment fund manager’s committing a material violation to the law, these Regulations or the fund’s Articles of Association.

Article (364)

The fund’s board of directors shall submit an application to the Authority to appoint an alternative fund manager or liquidator based on the resolution of unit holders’ assembly, stating the content and grounds for such resolution.

In this case, the Authority may deem an alternative fund manager or liquidator, or take whatever action or measure it deems fit.

Article (365)

The Authority shall notify the fund’s Board of directors of its resolution regarding the request of the appointment of an alternative manager of the fund or the liquidation of the fund stating the grounds for such resolution, within thirty days from the date of receipt of the application.

Article (366)

If the Authority takes a decision to appoint a liquidator for the investment fund, it shall specify the fees and charges of liquidation to be paid from the fund’s assets.

Article (367)

The liquidator will not bear the liability of any loss or decrease in the asset value of the investment fund whether towards the investment fund manager or unit holders, unless the loss or decline is a result of negligence or willful default by the liquidator.

Article (368)

Appointment of an alternative Investment Controller for the Fund

The Authority may appoint an alternative investment controller for the fund based on the application of the fund manager, board of directors, or if it deems this fit in any of the following cases:

1. Investment controller’s failure to fulfill its obligations in a manner that exposes the interests of the unit holders to risks.

2. Investment controller’s committing a material violation to the law, these Regulations or the fund’s Articles of Association.

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3. Any other circumstances that the Authority – based on reasonable grounds – deems of a fundamental importance.

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Chapter Nine

The Prospectus of the Securities Issued by the Companies

Article (369)

The provisions of this chapter shall apply to the securities issued by the companies whatever the form of these securities and whatever its purpose.

Article (370)

No person may offer securities for public offering or private placement without providing a prospectus consistent with the information and procedures set forth in these Regulations and approved by the Authority. And the approval of the Central Bank of Kuwait shall be obtained if the issuer is any of the entities subject to its control.

General Requirements

Article (371)

The prospectus shall include the following data:

1. Name of the issuer and the address of its registered office and the date and place of establishment

2. Name and address of the placement agent if the issuer is not the placement agent

3. Names and positions of the members of the issuer’s Board of Directors.

4. Subscription period

5. A statement that the prospectus has been prepared in accordance with the law and these regulations and approved by the Authority.

6. Documents evidencing obtaining the approval of the Central Bank of Kuwait to the issuance, for entities subject to its control.

7. A statement showing that the Authority will not be a party in any case pertaining to the damages resulting from any prospectus registered by the Authority.

8. If the prospectus contains a statement from an expert or a statement based on an opinion prepared by an expert, the prospectus must indicate that the expert has given his approval and such approval has been submitted to the Authority and the expert didn’t withdraw this approval before submitting the prospectus for registration in the Authority.

9. To include explicitly the following caution: “With regard to the contents of this document, we recommend that you consult a licensee as per the law and specialized in giving advices about the purchase of shares and other securities before making the subscription decision.”

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Persons Responsible for the Prospectus and the Experts

Article (372)

The prospectus shall include information of the persons responsible for the prospectus as follows:

1. Names, addresses and functions of the persons responsible for the prospectus.

2. A declaration by the Board of Directors of the issuer, or the Board of Directors of the placement agent, that they bear the responsibility for the contents of the prospects, and to the extent of their knowledge and belief that the information contained in the prospectus has been prepared according to the facts and that the prospectus didn’t omit any information that could affect the content.

Statements Relating to the Securities Subject of the Prospectus

Article (373)

The prospectus should include the statements relating to the securities in the following breakdown:

1. The number of offered securities and the category of each of them

2. Statement of rights relating to it as per the details contained in the following Article.

3. Statement of profit distribution of the issuer during the past five years, including the value and forms of distributions

4. Procedures of exercising the priority rights relating to securities. Any restrictions on the ability of the offered securities to be transferred to another form of securities

5. Statement of whether the offered securities are listed in the stock market or not, and in case the listing request has been rejected, the reasons shall be mentioned.

6. Extend a brief description of any future arrangements of trading the offered securities

7. Purpose of issuing the securities

8. The authority of issuing and offering the securities

9. The total of expected return from offering and the expected net revenue after deduction of expenses

10. Details of the use of the returns of issuance and in particular the statement of its use in capital expenditures, debt reduction, acquisition and working capital or any other uses.

11. Names of any persons responsible for covering the offering in case of non-subscribed securities.

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12. The value of offering expenses or its estimated value, and the responsible for paying.

13. The procedures of refunding to subscribers in case of rejecting their requests wholly or partially and the statement of the schedule of that.

14. Name and address the transfer or registration agent, if any.

15. The duration of delivering the securities after allocation.

16. A statement of the Shari’a opinion approving the security, for persons licensed to work in compliance with Shari’a.

Article (374)

The rights related to the security, on case by case basis, are as follows:

A. If the securities are shares, the related rights shall be as follows:

1. The price of offering the securities or the method of determining the price and the time table for that.

2. Voting

3. Rate of earnings per share for the short term

4. ROC at the liquidation of the issuer

5. Redemption of value and a summary of all the necessary approvals on the difference in any of these rights

6. The method of subscription in non-subscribed shares

B. If the securities are bonds or sukuk, the related rights shall be as follows:

1. Payable return.

2. Date of payment.

3. Date of payment of the principal amount.

C. If the securities are transferable:

1. Terms and maturities of securities holder which are transferable to get the promised securities.

2. Procedures of exercising the rights pertaining to the promised securities.

3. Any information concerning the promised securities as required in the paragraphs (A) and (B).

Article (375)

The prospectus shall include the following information of the issuer:

1. Legal form of the issuer, the legislation under which it was established and the legislation under which it works.

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2. Summary of the provisions set by the Articles of Association or the regulations of the issuer that specify its objectives.

3. The volume of the authorized capital and the paid up capital, and the number of shares distributed on each of them.

4. In case of issuance of bonds, stating borrowing limits allowed to the issuer.

5. Number and details of any securities, issued by the issuer, whether listed or unlisted, and indicating the terms and procedures of transferring them and the number of promised shares after the conversion.

6. Number and details of any listed or unlisted securities, issued by the issuer and do not represent the capital shares.

7. If the issuer is a member in a group, a brief description of the group is provided and the relationship of the issuer with it.

8. Any information about the persons who exercise direct or indirect control over the issuer

9. Statement of the names of shareholders owning more than 5% of securities and have voting rights in the capital of the issuer and the percentage of ownership of each of them.

10. Audited and approved financial statements from the General Assembly of the issuer during the seven years preceding the subscription date.

11. A statement provided by the members of the issuer’s Board of Directors confirming the commitment of the issuer to prepare the mentioned financial statements in accordance with the law of the commercial companies and the acceptance of responsibility thereto.

12. After a period more than nine months from the date of preparing the last auditors report, a new report by the auditors is included for the mentioned period, involving the course of business and the status of earnings and losses with the issuer and a statement of its approval on publishing this report in the prospectus and that it bears the full responsibility of it.

13. A brief description of the current or prospected contracts for the members of the Board of Directors with the issuer or any of its subsidiaries.

14. Disclosure of the contracts in which any member of the Board of Directors of the issuer has a personal interest and which is effective during the issuance of the prospectus.

15. Total financial and in kind benefits granted to the members of the Board of Directors of the issuer during the financial year preceding the date of issuing the prospectus, plus the estimated value of these benefits to be awarded to the members of the Board of Directors for the financial year of subscription.

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16. The number and percentage of the shares owned by each member of the issuer’s Board of Directors in its capital, and identifying the type of these shares, if any.

17. The C.V. of each of the current or proposed members of the issuer’s Board of Directors, and the nature of any family relationships between the Board members.

18. Disclosure of any other administrative position occupied by any member of the Board of Directors or proposed member.

Article (376)

The prospectus shall include a statement of the major activities of the issuer as follows:

1. Description of the major activities of the issuer and any exceptional factors affecting its activities.

2. A statement of the issuer’s dependence on specified customers or suppliers or on any patent rights or other intellectual property rights or special licenses or contracts, when any of which has a great importance in the activity of the issuer.

3. A statement of the factors that the issuer considers as risks facing any investor in that offering.

4. Information relating to the current investments, if any.

5. Information of any judicial proceedings or arbitration proceedings, whether applicable, outstanding, imminent, or is taken by or against the issuer or any member in the group of the issuer which have or may have a significant impact on the financial position of the issuer.

6. Basic information of all major contracts and their parties, whether pertaining to the issuer or its subsidiaries during two years from the date of the issuance of the prospectus, and these contracts don’t include the normal contracts to exercise its activities.

Article (377)

The Authority, upon the submission of the draft prospectus by the issuer, may delete information from the prospectus which its inclusion is required according to this regulation, if the Authority estimated that the disclosure of this information would conflict with the public interest.

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Article (378)

The prospectus shall be effective after thirty days from the date of submitting it to the Authority with complete documents, information, and data, unless the Authority has announced its approval or rejection in writing before that date, and the said review period may be extended at the consent of the issuer of securities.

The issuer shall provide the prospectus to the public for free and on a clear address in the State of Kuwait.

Article (379)

The Authority may reject the prospectus in any of the following cases:

1. If the prospectus doesn’t comply with the provisions of this law and the Executive Regulations

2. Submitting the prospectus without any evidence of the payment of the determined fees.

3. The failure of the issuer to provide the required financial statements under law no. 7 of 2010 or any rules or regulations hereby issued.

4. If the prospectus contains incorrect or incomplete statement which would influence the decision of the subscriber.

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Chapter Ten

Disclosure of Interests

The definition of the interested person

Article (380)

The interested person means each person who has an interest representing five percent (5%) or more of any category of voting shares in a company listed in the stock market, whether directly or indirectly or in alliance with others.

Article (381)

When calculating the total number of shares in which the interested person has an interest, we should take into account any shares owned or controlled by his wife, minor children, any company in which he owns a percentage of (30%) or more of the voting rights, and any shares owned by other persons with whom that person agreed to get an interest in the shares of the issuer.

Article (382)

If the ownerships of subsidiaries or associates of the shares of a listed company have collectively exceeded 5% or more, they should be treated on the basis that they represent the interest of an interested person subject to the provisions of chapter ten from the law No. 7 of 2010.

Definition of Other Interests

Article (383)

The other interests that the interested person shall disclose are as follows:

1. Making an agreement with third parties to use the voting right resulting from the ownership of this percentage for the benefit of specified person or persons.

2. Purchase or agree to purchase the percentage referred to by credit or agreeing to purchase it in the future.

3. The person’s direct or indirect, by portfolios managed by others, ownership of 30% or more of the capital any corporate body or holding an interest equals this percentage if this person owns 5% or more of the capital of a shareholding company listed in the stock market.

4. Owing the percentage referred to above for others account either for the benefit of one person or several persons.

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The Obligations of the Interested Person

Article (384)

The interested person should inform the Authority, the stock market and the issuer of achieving the interest within five working days of the achievement of the interest.

Article (385)

The interested person should inform the Authority, the stock market and the issuer of any change in this interest exceeding one-half percent of the capital of the issuer, within a period not exceeding five working days from the end of the trading day in which the change has reached this percentage. This notification remains necessary when the change leads to reducing the interest lower than five percent of the capital.

Article (386)

In event of changing the purpose of ownership that has been disclosed previously, the concerned person should notify the Authority, the stock market and the issuer immediately of that change, and he may not dispose of any of the shares of the issuer except after this disclosure.

Disclosure after statutory notice

Article (387)

Each interested person may inform the Authority, the stock market and the issuer of any interests that had to be disclosed under the law and not disclosed during the statutory notice.

Disclosure form

Article (388)

The disclosure of interests by the interested person shall be in accordance with the forms determined by the Authority for this purpose, which includes the following as a minimum:

1. The name of the interested person and the names of any other persons who contributed in achieving the interest.

2. The details of any financial support from another person for the acquisition or funding loans.

3. Indicate whether the purpose of ownership is to acquire the company, or to invest in it or otherwise.

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4. The total of related shares with details of what he owned before the disposal and total number of shares that he acquired after the disposal and their percentage of the share capital.

5. Nature of disposal and the legal basis for disclosure.

Article (389)

The interested person or the company should provide the Authority at the soonest with any information or explanations required to verify the validity and accuracy of disclosure data.

Duties of the Stock Exchange Market

Article (390)

The stock exchange shall take the necessary procedures to verify the accuracy of the data that it receives from the shareholding companies or stakeholders. And it may ask any of them to provide it with any other data.

Article (391)

The stock exchange in which the security is listed shall announce the information that it received on the disclosure of interests once it receives the information on the bulletin board of the stock and its website and any new media to declare the data in the stock exchange.

Article (392)

The stock exchange shall notify the Authority directly of any disclosure that it receives after verifying the validity of data.

Article (393)

The management of the stock exchange shall prepare a special register stating the disclosures it receives. The stakeholders may peruse this register based on a request provided to the management of the stock exchange after the payment of charges.

Obligations of Companies

Article (394)

Each listed shareholding company shall maintain a register for the disclosures of the members of the Board of Directors and the executive management, which contains all the data and information required to be disclosed in accordance with this regulation, and contains also all the data relating to the remunerations, salaries and incentives and other financial benefits and included within the reports of the General Assembly, and the stakeholders may peruse this register during normal working hours.

Article (395)

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The shareholding companies which are listed in the stock market should disclose the name of any of its shareholders whose ownership reaches 5% or more of its capital at any time and every change occurring to this percentage.

Article (396)

Every listed company should nominate an officer to reply to the inquires of the Authority in this regard.

Obligations of the Members of the Executive Management

Article (397)

The Managing Director, Chief Executive Officer, his deputies, the financial manager and the like shall disclose to the Authority, the stock exchange and the company after assuming his duties of the following:

1. Any interest belonging to him or his wife and minor children, in the securities of the company for which he works or any of its subsidiaries or associates regardless of the percentage of such interest to the company’s capital.

2. Any change in this interest, and must be disclosed prior to any disposal of securities.

3. Exercising a right granted to him by the company or any of its subsidiaries or associates in any subscription in the securities of the company or its subsidiaries or associates.

4. Exercising any right, granted to him by any other company, in subscription in the securities of this company.

Article (398)

The disclosure referred to in the preceding article shall be provided within five working days from the date of disposal, provided that it should include the following:

1. The name of the director of the company or any related person and the degree of kinship.

2. The reason of disclosing the disposal.

3. The amount and nature of the disclosed securities and its price, if any.

4. Nature of disposal

5. Date and place of disposal

Special Disclosure

Article (399)

The Authority may require any person concerned with securities to give public or special disclosure and to submit any information relevant to his activity, and in order to carry out

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its duties, the Authority may order to conduct any investigation deemed necessary in application of the provisions of law and these Regulations.

Responsibility for damages

Article (400)

The person who is bound to disclose shall bear the responsibility for any damages to the Authority or the stock exchange or third parties as a consequence of non-disclosing of his interests in accordance with the provisions of the law No. 7 of 2010 and these Regulations.

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Chapter Eleven

Penalties and Disciplinary Actions

Capital Markets Court

Article (401)

Under the Court of First Instance, a court named “Capital Markets Court” shall be established, and headquarter of which shall be announced by a resolution of the Minister of Justice by approval of the Supreme Judicial Council, and this court shall comprise of the following:

1. Penal circuits which exclusively decide on penal actions concerning the crimes stipulated in the law No. 7 of 2010. The felonies circuit shall be formed of three judges, one of them is a chancellor at least. The misdemeanors circuit shall be formed of a judge of first instance at least. The proceeding of the penal actions and filing it before those circuits shall follow the rules and procedures prescribed in the Code of Penal Procedures and Trials, and this is in case there are no special provisions in the law No. 7 of 2010.

2. Non-penal circuits which exclusively decide on non-penal actions concerning the commercial, civil and administrative disputes arising from the application of the provision of the law No. 7 of 2010 and the rules and regulations of the Capital Markets Authority, and the implementation disputes relating to the provisions issued by it regardless of the value of such disputes, and these circuits shall consist of three judges one of them is at least a chancellor.

3. One judge or more delegated by the court of first instance on a temporary basis, without prejudice to the origin of right, in the matters of concern about lapse of time and for which this court is competent, and also the provisional execution complaints and issuing orders on the provisional petitions and order as well as the related performance orders.

The Civil and Commercial Pleadings Law and its complementary laws shall be applicable on non penal actions that are filed in accordance with the provisions of law No. 7 of 2010 where there is no special provision.

Article (402)

The judicial papers and writ of summons issued by the investigator or the court shall by notified to the defendant by the competent representatives of Capital Markets Authority, according to the rules prescribed in the second section of the First Chapter of the Code of Penal Procedures and Trials, and he may be notified in his place of work by delivering a copy to one of the administrators or staff of the place.

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These documents and a writ of summons may be notified to the non-defendant by facsimile or e-mail.

Judicial Service of Process

Article (403)

The following terms shall have the meanings ascribed to them as per the following:

1. E-mail Process: the process served by the electronic data message through an electronic information system approved by the Authority which takes into account the data required by the law.

2. Data message: the information that is created, sent, received or stored by electronic or optical means or by similar means.

3. Electronic information system: a system for generating the data messages or sending, receiving, storing or processing.

4. Fax Process: the process that is served out by fax.

Article (404)

The person – other than the defendant – are served with the process by the Authority and its devices and electronic system which is prepared for that purpose as per the forms approved in this regard.

Article (405)

The process form should include the following data as a minimum:

1. The date including: hour, day, month and year.

2. The full name of the person served with the process and his profession or job and his address and place of work, and if his address or place of work was not known at the time of the process serving, his latest address or place of work at the state of Kuwait shall be taken.

3. The names of the concerned persons with the process.

4. The subject of the process.

5. Case number and the date of session and its place.

Article (406)

The process shall be served within the working days from seven o’clock a.m. to seven p.m.

Article (407)

The Authority may obtain the data pertaining to the fax number and the e-mail of the notified party by any party in the case or the complainant, as the case may be, according to the data declaration that is signed by him and placed with the Authority and the authorized persons.

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Article (408)

The e-mail process will be considered complete and legally effective from the date of the process being sent from the electronic information system of the Authority and receiving a report from the system confirming that it is fully sent.

Article (409)

The fax process will be considered complete and legally effective from the date and time of printing a report by the fax on the sent process notifying that it is fully sent accompanied by a copy of it.

Article (410)

The time and date of receiving the process shall be determined via e-mail from the time of its issuance from the Authority’s electronic information system, while the time and date of receiving the process shall be determined by the fax from the date and time of the report that is generated by the fax after sending.

The place where the person served with the process received it shall be considered as his residence domicile or his elected domicile as the case may be.

Article (411)

The Authority is committed to maintain the processes via fax and e-mail in a paper or electronic register.

Article (412)

As an exception from the rules concerning the process serving of the judicial documents stipulated in Civil & Commercial Procedure Code, the judicial documents concerning the civil, commercial and administrative disputes which are stipulated in the law No. 7 of 2010 may be served via fax or e-mail.

The Minister of Justice – in coordination with the Ministry of Communication and Capital Markets Authority – shall issue a decision of the terms and conditions for the regulation of process procedures and the type of hardware and software used in serving this process, and the forms and formats of the documents of the writ of summons, notifications, and their replies, and the method of paying the prescribed judicial fees. The invalidity shall result from the violation of the provisions of this Article.

Judicial Proceedings

Article (413)

As an exception from the provision of the Articles 49, 59, 91 from the Civil & Commercial Pleadings Law, the following shall be taken into account:

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1- The case – at the request of the defendant - shall be deemed void, as if it did not exit, if the defendant wasn’t summoned within thirty days from the date of submission of the claim memorandum to the clerks’ department and it was due to the plaintiff act.

2- If the plaintiff or the defendant does not appear in the first or any other session, the court shall rule in the case or decide to cancel it after verifying the validity of the process. The court shall decide cancellation if the two parts attended and agreed to cancel the case, and in case of default of the plaintiff or the appellant for the second time the court instead of cancelling the case shall consider it void as if it did not exit. If the absent litigant appeared before the end of the session, the cancellation shall be considered void. The court rules that the case is void, if the two parties didn’t attend after proceeding in it or if a litigant didn’t inform the other of the proceeding in the case within thirty days from the cancellation, and the duration of the cancellation shall be included within this period if it repeated even if it wasn’t consecutive. The time shall not be deemed observed without serving the process to the litigant before its expiry.

3- The case may be suspended on the basis of an agreement by the litigants not to proceed with it for a maximum of two months from the date the court approves the agreement. Such suspension shall have no effect on any mandatory time limit prescribed by the law for an action.

If the litigants do not resume the case proceedings within the fifteen days that follow the end of the specified period, whatever the period of the suspension, the plaintiff shall be deemed to have abandoned his case and the appellant shall be deemed to have abandoned his appeal.

Article (414)

A penal and a non-penal circuit shall be created in the Court of Appeal specialized in what is appealed from the court of capital markets and its judgment shall be final and may not be challenged by any method of appeal.

The appeals circuit in the Court of Appeal and in the Court of first instance shall continue considering the appeals filed to them about the judgments in the cases that are within the jurisdiction of the Capital Market Court or those filed to it after the implementation of the law No. 7/2010 until issuing a conclusive judgment on their matter.

Article (415)

The chief judge of the competent court, when the judgments are challenged by objection or appeal, shall set a session to consider the appeal which shall be recorded in the appeal petition when submitting it, and this shall be considered as a process to the objector even if the appeal filed by his legal representative, and the clerks’ department shall serve the summons to the rest of the litigants via fax by the Authority.

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Capital Market Prosecution

Article (416)

A competent prosecution named Capital Market Prosecution shall be established and be exclusively specialized in investigating, acting and prosecuting in crimes considered by the Capital Markets Court and objecting to the judgments issued in it.

Article (417)

The Authority and the Administration of the Stock Exchange shall execute the orders of investigating authorities and the court and help them search for the evidences pertaining to the crimes arising from the application of the provision of law No. 7 of 2010.

Article (418)

The non-penal circuits in the Court of First Instance shall refer, on its own, the cases pending before it which has become within the jurisdiction of the Capital Market Court in accordance with the provisions of the law No. 7 of 2010 to the latter as the case stands, and in the absence of one of the litigants the clerks’ department shall serve the process of referral to him mandating him to attend at the fixed dates before the circuits to which the cases have been referred.

The provisions of the preceding paragraph will not be applied on the cases that a part of which was judged and the cases that a sub judgment has promulgated thereof and the cases that was postponed to serve the process of the judgment even with authorization to submit memorandums.

The penal courts shall continue to consider the pending cases before it at the date of working with law No. 7/2010 for the crimes that have become within the jurisdiction of the Capital Markets Court.

Reconciliation

Article (419)

The Authority may, at any stage of the penal action and until a conclusive judgment is passed on it, offer reconciliation or accept it with any person who has committed one of the crimes stipulated in the law No. 7 of 2010 against payment of an amount not less than the minimum of the prescribed fine and not more than its maximum; and to settle the crimes stipulated in the Articles 122, 124, 126 and 127 from the law number 7 of 2010 in addition to the payment of the referred consideration, it is required to return the value of any realized benefit or losses avoided, and that defendant has not been convicted of the same accusation before.

The Authority shall fix the deadline during which the defendant shall fulfill the terms of reconciliation as per the aforesaid rules, and in case of completing the reconciliation, the penal action will shall be considered void.

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Violations and Discipline

Article (420)

The submission of accusation, handling the investigation by the Public Prosecution, and filing the penal action will not preclude the Authority’s right to carry out the disciplinary questioning. The Disciplinary Board may defer the decision on disciplinary questioning till determining the penal action. In all cases, the penal provision shall be binding over all.

Article (421)

It shall be deemed as violation, any act which contradicts the provisions of Law No. 7 of 2010 or any rule, regulation, resolution or instructions issued by the Authority.

Article (422)

The legal department of the Authority shall conduct the administrative investigation in the violations mentioned in the law 7 of 2010 and these regulations, which are referred to it by the executive manager of the Authority. The investigator, in order to exercise the investigation duty and perform hi work, shall have the following powers:

1. The right to request any data or documents from any government entity or an entity dealing with the Authority.

2. The right to hear testimony of the witnesses.

3. The right to summon all those whose statements he deems necessary to hear.

4. The right to move and review any record or statements with any governmental entity or an entity related to the Authority’s activity.

Article (423)

If the investigations revealed a violation, the Authority may refer the violation to the Disciplinary Board, and the Authority may warn the offender to stop committing such violation with a promise not to repeat it in the future.

Article (424)

Any person under investigation or summoned before the Disciplinary Board shall have the full right to defend himself, and retain a lawyer to defend him.

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The Disciplinary Board

Article (425)

A Disciplinary Board or more shall be established in the Authority by a decision from the Board of Commissioners, and it shall consist of three members headed by a judge delegated by the Supreme Judicial Council and two members with experience in financial, economic and legal affairs that are selected by the Board of Commissioners. And the Board shall appoint a secretary from the legal staff of the Authority.

Article (426)

The duration of the membership in the Disciplinary Board is three years and subject to renewal.

Article (427)

The members of the Disciplinary Board are prohibited to have personal interests either directly or indirectly with any entity subject to the provisions of the Law No. 7/2010 or be allied with it.

Article (428)

The Disciplinary Board shall consider the following matters:

1. Deciding the disciplinary matters referred to it and filed by the Authority concerning the violation of the provisions of the law No. 7/2010 or these Regulations or any decisions or instructions hereby issued.

2. Deciding the complaints filed against the resolutions of the stock exchange and the its committee for considering the violations. The Disciplinary Board, when considering the complaints of the decisions of that committee, shall serve as an appellate body and its decision shall be final.

Article (429)

The secretary shall receive the violations referred to the Disciplinary Board and complaints of the decisions of the stock exchange and its committee for considering the violations therein by the concerned persons and present them to the head of the Disciplinary Board and inform the concerned persons of the dates of holding the board and what is assigned by the head.

Article (430)

The secretary shall notify the offender of the time specified by the Disciplinary Board to consider the violation pertaining to him and its content, and he should notify the complainant of the date of considering his complaint. The notification shall be before the deadline by three working days at least.

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Article (431)

No complaints will be accepted about the decisions of the stock exchange and the committee for considering the violations after the lapse of the date specified in the Article (43) from the law No. 7 of 2010.

Article (432)

The secretary shall enable the person referred to the Disciplinary Board or his proxy to go through all papers pertaining to the violation and provide him with a copy of the papers required after the payment of the prescribed fee.

Article (433)

The Disciplinary Board should face the offender with the violation attributable to him and enable him to defend himself in principal or by proxy.

Article (434)

The Disciplinary Board may hear those it deems necessary to hear their statements or benefit from their experience by its own decision or at the request of the person referred to it or his proxy.

Article (435)

The absence of the offender or complainant who was notified with the date will not preclude the continuation of the board to consider the violation or the complaint and the issuance of a decision thereof.

Article (436)

The deliberations of the Disciplinary Board shall be confidential and its decisions shall be by majority to impose the following disciplinary penalties:

1. Alert the offender to stop committing the violation.

2. Warning

3. Subject the offender to further monitoring

4. Requiring the offender to re-pass the qualifying tests

5. Suspension from work or practicing the profession for a period not exceeding one year.

6. Suspension from practicing work or profession in final.

7. Suspend the license for a period not exceeding six months.

8. Revoke the license.

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9. To cancel the transactions relating to the violation and its consequent effects without damaging the rights of the good faith third parties.

10. Cancel any vote from his owner or power of attorney or authorization that is obtained and violating the provisions of the law No. 7 of 2010.

11. Request to suspend or cancel any acquisition offer or purchase transactions outside the scope of acquisition offer in violation of the provisions of Chapter seven of the law No. 7 of 2010 or any related provision in these regulations.

12. Prohibit the exercise of voting right for a term not exceeding three years for a shareholder who refrained to submit any statement or submitted an incomplete statement or on contrary with the truth that is in violation of the provisions of the law No. 7 2010 or the relevant regulations.

13. Promulgate an order for every person or group who that acquired ownership exceeding 30% of the value of the trading securities of a listed company obligating him to submit a purchase offer for all shares traded and referring him to the competent court in case of non-compliance.

14. Suspend the effectiveness of an applicable prospectus in accordance with the provisions of law No. 7 of 2010 and these regulations.

15. Stop the trading of a security for a limited period, or suspend or cancel the decision of listing a security before it becomes affective.

16. Remove the manager or the investment controller of a collective investment scheme who failed to execute the responsibilities set forth in the law No. 7 of 2010 or these regulations.

Article (437)

The Disciplinary Board may impose one or more restrictions of the following restrictions on the activity or activities of the offender:

1. Prevent the licensee or the person registered in the Authority to conclude certain types of transactions.

2. Prevent the licensee or the person registered in the Authority to practice certain types of transactions for a specified period.

3. Suspend the licensee’s activity for a specific period or cancel an activity for the licensee.

4. Prevent the person licensed in the Authority to perform some specific works or suspend, amend or cancel one or more of the registered functions.

Article (438)

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The Secretary shall notify the Board of Commissioners and the concerned persons in writing with all the decisions that are issued by the Disciplinary Board within seven working days from the date of its issuance.

Article (439)

The Disciplinary Board, when it consider the complaints referred to it by the Authority in accordance with the provision of the Article 43 from the law number 7 of 2011, may support the decision of the stock exchange or the committee which considers the violations or modify or cancel it with a reasoned decision.

Article (440)

The Disciplinary Board may defer the determination in the disciplinary questioning until the penal action is resolved.

Article (441)

The decisions of the Disciplinary Board are effective once it is issued unless the decision determines a date for execution. And the Authority shall execute the decision of the Disciplinary Board.

Article (442)

Anyone against whom a penalty from those penalties set forth in the Article (146) of the law No. 7 of 2010 has been issued may complain in writing to the Authority within fifteen working days from the date of informing him in writing of the decision. In case of accepting the complaint, the Authority shall refer it to the Disciplinary Board to reconsider its decision.

Article (443)

The person against whom the Authority issued a decision of rejecting his complaint or not responding to him within thirty working days from the date of filing the complaint may appeal before the competent court.

Article (444)

Settlement of Disputes through Arbitration

The disputes arising from the obligations prescribed in the law No. 7 of 2010 or any other law if they related to the transactions of the capital markets may be settled by arbitration. The Board of Commissioners shall establish, by its decision, a special arbitration system whose procedures shall be supervised by the Authority.