AMIRI DECREE'S & BY-LAW'S ORGANIZING KUWAIT STOCK EXCHANGE

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1 AMIRI DECREE'S & BY-LAW'S ORGANIZING KUWAIT STOCK EXCHANGE 1

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3 C O N T E N T S Page Amiri Decree Bodyizing Kuwait Stock Exchange Ministerial Resolution Promulgating the Kuwait Stock Exchange By-Law CHAPTER I Stock Exchange Objectives CHAPTER II Listing and Acceptance of Securities CHAPTER III Stock Exchange Membership CHAPTER IV Dealing in Securities CHAPTER V Stock Exchange Administration CHAPTER VI Stock Exchange Budget & Financial Accounts CHAPTER VII Disputes & Arbitrations CHAPTER VIII Disciplinary Action CHAPTER IX Final & Transitional Provisions Kuwait Stock Exchange Committee Resolution Resolution No. 2 of 1984 Constituting the Arbitration Panel with its Rules and Applicable Procedure Resolution No. 3 of 1984 Constituting a Disciplinary Board and its Observed Procedure

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5 -1- AMIRI DECREE ORGANIZING KUWAIT STOCK EXCHANGE 5

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7 AMIRI DECREE ORGANIZING KUWAIT STOCK EXCHANGE Having perused the Constitution and Law No. 15 of 1960 concerning the Commercial Companies and all amending Laws thereto and Law No. 32 of 1970 regulating the negotiation and transaction of company securities and Commercial Law no. 68 of 1980 and Pursuant to the proposal made by the Ministry of Commerce & Industry; and After ratification of Council of Ministries, We here by decree the following: Article (1) The Kuwaiti Stock Exchange shall exercise its activity in accordance with the provision of this Decree. The said Stock Exchange shall enjoy an independent judicial entity, with competence and capacity to dispose of its property and funds, besides managing the same and shall have the right of litigation. Article (2) In application of the provisions of this Law Decree, the term Securities means shares and stocks of Kuwaiti Joint Stock Companies as well as bonds, promissory notes and instruments, duly issued by the Government or any Kuwaiti public corporation or institution, and/or any other Kuwaiti or non-kuwaiti securities, negotiation and transaction which are duly licensed by the Stock Exchange Committee. Moreover, the by-law of the Stock Exchange shall specify the rules and provisions regulating the registration and acceptance of such securities. Article (3)* Article (4) The KSE holds the responsibility of Bodyizing and surveilling the financial market emphasizing on the following: 1 - Organizing and protecting trading securities. 2 - Organizing the announcement of interests and issuing and declaring the financial reports. 3 - Specifying the methods of dealing with securities insuring the soundness of information and protecting the traders. 4 - Developing the financial market to serve the goals of the economic development. 5 - Developing the market links with other regional and global markets to keep pace with the standards followed in those markets. Dealing in securities listed in the Stock Exchange and accepted for negotiation therein shall be made in accordance with conditions and rules determined by *Article (3) was amended by Decree no. 158 for year 2005 concerning the amendment of some articles of the Decree Bodyizing Kuwait Stock Exchange. 7

8 the Stock Exchange Committee. The transactions of such securities shall be made at the Stock Exchange Floor through any middleman (stock-broker) who is registered at the Stock Exchange. In the event of any securities transacted outside the Stock Exchange Floor, such transactions shall be made in conformity with the prescribed rules and criteria specified by the Stock Exchange Committee. However, in all cases, it is inevitable that all transactions or securities made shall, at the time of transferring their ownership, be registered in the Stock Exchange shall be liable to notify the Stock Exchange Committee of the transactions made regarding such stocks. Article (5) Article (6)* The Stock Exchange shall be managed by a Committee, to be constituted under the Chairmanship of the Minister of Commerce and Industry, and membership of each of the following: 1. The Stock Exchange Director who shall be a full-time deputy to the Chairman, and entirely dedicated to the said office. 2. A member representing the Ministry of Commerce & Industry. 3. A member representing the Ministry of Finance. 4. A member representing the Central Bank of Kuwait. 5. Two competent and experienced experts, duly selected by the Council of Ministers, on nomination by the Minister of Commerce & Industry. 6. Four members, duly selected by Kuwait Chamber of Commerce & Industry, including a middleman (Stock-broker). A Resolution shall be issued by the Council of Ministers constituting the Stock Exchange Committee, pursuant to a proposal made by the Minister of Commerce and Industry for a period of three years, subject to renewal. Moreover, the Council of Ministers shall under a Resolution issued by the same fix the remunerations of the Stock Exchange Committee members and the Director of the Stock Exchange shall be appointed by a Decree, upon a submission made by the Minister of Finance & Economy for a renewable term of four years. All his remunerations and financial entitlements shall be fixed by a Resolution from the Council of Ministers. The market committee is responsible for setting the general rules and policies for KSE within the goals mentioned in article (3) of this decree especially in setting the following rules and procedures: 1- Dealing with securities, supervising and surveilling its activities. 2- Central depositary, settlement and clearing, and surveilling its activities. 3- Registration of brokers and the stocks of the listed companies. 4- Surveilling the dealing of funds and investment portfolios with securities listed in the market. 5- Preparing, disclosing and surveilling the financial reports of the listed companies and investment funds. 6- Regulations for acquiring effective percentage of the company s capital. 8

9 7- Regulations for banning trading based on internal or unannounced information or conflict of interest. 8- Regulations regarding professional conduct and confidentiality of the market s employees and the companies dealing with securities. 9- Preparing reports and analysis as well as stating the regulations that should be abided with in preparing the above. 10- Procedures that the market administration has to take for any exceptional circumstances including the decision of suspension of a company or more from trading its stocks in the market for a period set by the market administration. 11- Approval of the market projected annual budget and probating the final accounts and assigning a financial auditor. Article (7) Article (8) The Chairman of the Stock Exchange Committee shall submit to the Council of Ministers a detailed report every three months, duly covering the Stock Exchange activities, and the status of investors, besides the performance realized in the light of the long-range Public State Policy. The Stock Exchange Committee shall assume the responsibility of establishing the competent technical staff-system required by the Stock Exchange to exercise its activities, namely: 1. The price follow up staff which shall be responsible for the follow up and analysis of price movements of shares and stocks (bonds) duly listed in the Stock Exchange. 2. The Credit Sale Staff which shall be responsible for the follow up and evaluation of credit sale transactions in relation to spot sale operations. 3. Information Compilation, data analysis and publication staff which shall be responsible for compiling, analyzing and publishing the information relating to the Stock Exchange and the securities transacted therein as well as the names of the companies registered in the Stock Exchange for the said purpose. The By-laws shall stipulate the rules regulating the operations of the Technical Staff-System. Article (9) The Stock Exchange Director shall implement the Resolutions adopted by the Stock Exchange Committee. He may, however, propose to the said Committee any suggestions and/or instructions regarding the regulations deemed appropriate, besides assuming the management of the Stock Exchange Committee, with supervision of all technical and administrative staff of the Stock Exchange; and he may further give any necessary instructions, in order to perform his functions in conformity with powers conferred to him by the Stock Exchange By-law and the Resolutions adopted by the Stock Exchange Committee. Article (6) was amended by Decree no. 158 for year 2005 concerning the amendment of some articles of the Decree organizing Kuwait Stock Exchange. 9

10 The Director shall represent the Stock Exchange before the judiciary as well as in its relations with third parties, and he shall have the right to sign for and on behalf of the Stock Exchange. Article (10) The Stock Exchange membership shall include the following: 1. Kuwaiti companies whose shares are offered to public subscription. 2. Kuwaiti Joint Stock companies, (closed) membership of which is accepted by the Stock Exchange. 3. Middlemen (Stock-brokers) of the Stock Exchange. The relevant bylaw shall specify the procedures for registration of the stock-brokers and their assistants, together with the regulation of their functions and the tight control over them. The Stock Exchange members are bound to pay the registration fees and the annual subscription as stipulated in the Stock Exchange By-law. Article (11) The Stock Exchange shall have a budget to be prepared in conformity with the rules prescribed in the By-law; and its fiscal year shall commence to run 1 st July and expire at the end of June every year. Consequently, the By-law of the Stock Exchange shall specify the financial rules and procedures governing the disposal of its funds, the books to be kept for control of its operations and the manner of controlling its accounts. As exception to the provision of this Article, the first fiscal year of the Stock Exchange shall commence to run the date of enforcing this Law-Decree and expire at the end of June next year. Article (12) Article (13) The Stock Exchange revenues are derived from: 1. Proceeds of the services rendered by the Stock Exchange. 2. The income of the funds invested by the Stock Exchange. 3. The proceeds of the penalties imposed in accordance with the provisions of this Law Decree. 4. Any fees or charges imposed or levied for the benefit of the Stock Exchange. 5. Any other revenues approved by the Stock Exchange Committee. An Arbitration Committee, under the Chairmanship of a judiciary man (judge), duly elected by the Supreme Council of Judiciary shall be constituted pursuant to a resolution passed by the Stock Exchange Committee. The function of the said Arbitration Committee is to decide on the disputes relating to the transaction concluded in the Stock Exchange. However, dealing within the Stock Exchange is deemed to be a recognition to the arbitration in question which shall be stated in all papers and instruments of such transactions. The resolutions passed by the Arbitration Committee shall be binding to both parties of the dispute, and the resolution adopted, duly constituting the 10

11 same shall specify the procedures to be followed regarding dispute filing and determination. Article (14) Article (15) The Stock Exchange shall have a committee to decide on any violation of provisions of the Decree and the law and regulations Bodyizing the Market, which are imputed to traders, brokers and companies whose securities are listed in the Market, as well as breaches affecting the work process, the Market guidelines and the rules and principles governing the ethics of the profession and its practices. The committee shall comprise of five members nominated by the Market committee, and may take any of the following penalties: 1. Notification. 2. Warning. 3. Suspension of the violator work for a period set by the Market Committee and taking the appropriate procedures regarding the benefits he got. 4. Confiscation of all the Bank Guarantee or part of it. 5. Suspension of trading in securities issued by the violating companies or parties until the violation cause is eliminated or corrected. 6. Cancellation of membership. 7. Compulsory advance deposit of the underlying stocks or money for the trader. Except the penalties of notification or warning, the Committee decisions mentioned in the previous article are appealable within 15 days form the date of notification in front of a Board chaired by a consultant nominated by the Upper Jurisdiction Board and four members nominated by the Market Committee, and the issued resolution constituting the board shall stipulate its applicable procedures. Article (15) repeated Article (15) repeated A Data and information related to traders names and their trading volumes shall not be announced or disclosed to other than the market and the specialised monitoring parties, except upon a judicial judgement, wether this information is being kept at the market administration or the clearing house or the brokerage companies or the listed companies or the investment funds or the companies that manage others portfolios The Market Committee members and all employees of the Kuwait Stock Exchange, Kuwait Clearing Company, the Brokerage Companies and companies Articles (14) and (15) were amended and article (15) repeated was added by Decree no. 158 for year 2005 concerning the amendment of some articles of the Decree organizing Kuwait Stock Exchange. Article (15) repeated A was added by Decree no. 158 for year 2005 concerning the amendment of some articles of the Decree organizing Kuwait Stock 11

12 that manage others portfolios and Investment Funds must declare what they, their spouses and minor children own of securities listed in the market either directly or indirectly, and it is prohibited to deal with those securities while they are employed at the Kuwait Stock Exchange unless authorized by the Market Administration. The only exception is the inherited shares, and a prior approval should be gotten from the Market Administration before dealing with these stocks. Article (16) The Stock Exchange By-Law shall be issued within a period of three months from the operative date of this Decree, under a resolution made by the Minister of Commerce & Industry, pursuant to a proposal from the Stock Exchange Committee, However, the Minister of Commerce and Industry assumes the responsibility of laying down the proposal rules necessary for the process of work in the Stock Exchange until the said by- law is issued. The by-law shall in particular specify the powers of both, the Stock Exchange Committee Chairman and the Director of the Stock Exchange besides prescribing the rules and procedures of its meetings the majority of the quorum required for the validity of its sessions and the resolutions adopted. Article (17) Article (18) The Stock Exchange Committee shall, within a period not exceeding three months from the date of enforcing this Decree, study and prepare the other regulations conditions of the Stock brokers and their assistants, and then submit its relevant suggestions to the Minister of Commerce and Industry for promulgation of a law-decree accordingly. All Ministers, each within his jurisdiction, shall implement this Decree which shall come into force the date of its publication in the Official Gazette. Amir of Kuwait Jaber Al-Ahmed Prime Minister Saad Al-Abdulla Al-Sabah Minister of Commerce & Industry Jassem Khalid Al-Marzouq Issued at Sief Palace On 5th Zul Qaida, 1403 H. Corresponding to 14th August, 1983 A.D. 12

13 -2- MINISTERIAL RESOLUTION NO. 35 OF 1983 Promulgating the Kuwait Stock Exchange by-law 13

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15 MINISTERIAL RESOLUTION NO. 35 OF 1983 Promulgating the Kuwait Stock Exchange by-law The Minister of Commerce & Industry, Having perused Law No. 15 of 1960, concerning commercial companies and amending laws thereto; and Law No. 32 of 1970, regulating the dealings (transactions) in companies securities; and The Commercial Law, promulgated under Law No. 68 of 1980; and The Decree Organizing Kuwait Stock Exchange; and Pursuant to the proposal of Kuwait Stock Exchange Committee, Hereby orders the following: Article (1) The by-law of Kuwait Stock Exchange, accompanying this Resolution is hereby promulgated. Article (2) This Resolution shall be published in the Official Gazette and shall be operative in conformity with the Stock Exchange Committee decision, provided that it does not exceed six months from the date of its publication in the Official Gazette. The Stock Exchange Committee may exclude certain provisions of the by-law hereof according to the Stock Exchange circumstances. Minister of Commerce & Industry 15

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17 CHAPTER 1 Stock Exchange Objectives Article (1) The Kuwait Stock Exchange shall enjoy an independent judicial personality with the right of litigation in a mode facilitating the performance of its functions for the purpose of realizing the objectives of its organisation in the best manner within the scope of regulations and laws governing the Stock Exchange operations. Article (2) The Stock Exchange shall, within its activity, act to direct and rationalise dealings in stocks and securities within the scope of its powers in order to develop and stabilise dealing in securities in a manner securing safe, easy and accurate transactions so as to avoid any confusion in dealings. Article (3) The Stock Exchange, in pursuance of its researches and studies and its follow up of the security dealing process shall render appropriate advice and opinion to the government authorities regarding the financial status of the Stock Exchange member-companies and means of promoting their efficiency for the realisation of their relevant objectives. Article (4) Article (5) The Stock Exchange shall participate with the competent authorities in order to realise coordination and integration among the financial and economic activities and the capital movement so as to assist in achieving the economical development, financial and economical stability of the State. The Stock Exchange staff shall continue to develop the systems and methods of dealing in securities ; besides introducing modern techniques such as those applied in advanced stock markets for the purpose of achieving a sound financial position for the Kuwait Stock Exchange on both, the regional and international levels. Article (6) The Stock Exchange shall act to encourage saving, promote investment awareness among citizens, protect depositors and create means for investment of funds in securities in a manner beneficial to the economy. 17

18 Article (7) CHAPTER II Listing and Acceptance of securities Dealing in securities shall be confirmed to the following: a - Stocks of Kuwait Joint- Stock Companies( Kuwait Share holding Companies ) which are members of the Stock Exchange, duly offering their shares for public subscription. b - Stocks of closed Kuwaiti Joint- Stock Companies whose membership is accepted by the Stock Exchange Committee. c - Stocks of non-kuwaiti Joint - Stock Companies whose shares are licenced by the Stock Exchange Committee to be dealt in at the Stock Exchange. d - e - Debentures accepted for dealing by the Stock Exchange Committee. Any other Kuwaiti or non- Kuwaiti securities licenced by the Stock Exchange Committee to be dealt in. Article (8) Article (9) Article (10) Article (11) Article (12) Bills and bonds duly issued by Kuwait Government or any Kuwaiti public corporation or institution shall virtually be accepted for dealing in the Stock Exchange. Without prejudice to the provision of the preceding article debentures may be accepted for dealing in the Stock Exchange under a Resolution from the Stock Exchange Committee, particularly the following: a - Bonds issued by Kuwaiti Joint-Stock Companies. b - Certificates of deposits issued by Kuwaiti banks. c - Bonds issued by Kuwaiti companies for the account of foreign bodies. d - Commercial instruments acceptable by banks. Dealing in such instruments shall be accepted in accordance with the rules laid by the Stock Exchange Committee after payment of the prescribed fees. Any Kuwaiti Joint -Stock Company offering its shares for public subscription, where dealing in such shares is not prohibited under the provisions of the Commercial Companies Law, and the Kuwaiti Joint- Stock Companies (closed) which are accepted as Stock Exchange members may apply to the Stock Exchange Committee for listing of their shares therein, duly attaching with their applications all relevant documents, data and information required by the Stock Exchange Administration. The Stock Exchange Committee shall consider the applications submitted according to the rules, provisions and criteria regulating the listing of securities therein. The Resolutions passed by the Committee in this respect whether covering acceptance or rejection shall be final: and a further application may not be submitted by the same company, save after one year from the date of such rejection. At the time of application s consideration for the listing of securities in the Stock Exchange or acceptance of the same for dealing therein, the Stock Exchange Committee shall take into account the financial position of the company concerned, its importance to the national economy, the extent of success realised to achieve its relevant objectives, besides its profitability and any other fundamental issues as deemed appropriate by the said Committee. 18

19 CHAPTER III Stock Exchange Membership Article (13) Kuwait Joint-Stock Companies (Kuwait Share holding Companies) offering their shares for public subscription as well as Closed Kuwaiti Joint-Stock Companies, whose acceptance of membership is determined by the Stock Exchange Committee and securities middlemen (brokers) who are licenced to practice brokerage shall all be considered members in the Stock Exchange. Article (14) 1st : Companies All Stock Exchange member companies whose shares are accepted for dealing therein by the Stock Exchange Committee shall abide by all regulations and instructions laid down by the Stock Exchange. Administration, besides undertaking to provide all information and data required by the Stock Exchange Administration. Such data and information shall be authentic and conforming with the relevant facts. The Stock Exchange Administration may delegate whomever it deems appropriate to ascertain the authenticity of the data and information submitted. Article (15) All documents and records of shareholders in member - Companies whose shares are traded in the Stock Exchange are subject to the surveillance of the Market Administration Control which shall have the right to verify its authenticity and soundness by any means it deems appropriate. Article (16) Member Companies as well as the companies whose shares have been accepted by the Market Committee to be traded in the Market, shall abide by the instructions of the Market Administration upon Stocks ownership transfer. Article (17) All Stock Exchange member-companies and companies whose shares are transacted in the Stock Exchange shall keep the Stock Exchange Administration informed of all data, particulars and resolutions which may affect the value of their securities. Such companies shall be held responsible for the authenticity of information and data given, without any liability on the part of the Stock Exchange in this respect. Article (18) Stock Exchange member - Companies are bound to pay the fixed registration fee and annual subscription, where other companies whose shares are only listed and accepted for dealing in the Stock Exchange shall pay the fees prescribed for the dealing of their shares at the relevant dates and in the manner determined by the Stock Exchange Administration. Article (19) Stock Exchange member -Companies and other companies whose shares are dealt in therein shall furnish the Stock Exchange Administration with statement showing any securities or shares held by any member of their Boards of Directors in the capital-stock of companies whose management is entrusted to such board 19

20 -members, within one month from the date of their appointment to the Board of Directors or the effective date of dealing the said shares in the Stock Exchange. Article (20) Article (21) Article (22) 2nd: Middlemen ( Brokers) Within the scope of this by-law application, a Broker denotes the person who acts as a middleman on behalf of a company licenced to carry on brokerage, concerning securities dealt in the Stock Exchange. An Assistant Broker denotes the adherent, i.e., the person belonging to the company represented by the broker, who may assist the broker in conducting transaction of securities. Any of those accepted as a company licenced to carry on brokerage shall as a condition satisfy the following: a - It shall be a Kuwaiti company and all partners thereof shall be Kuwaiti nationals. b - The middlemen performing the function of brokerage in the company shall be Kuwaitis, having attained educational qualifications not lower than Kuwaiti General Secondary School Certificate or its equivalent, or having secured an adequate experience with satisfactory training to a level acceptable to the Committee. Such brokers shall be well reputed and operating as full time middlemen. c - The director of the company, the partners authorised to perform management functions, or those acting as brokers (middlemen) should have not been declared bankrupt whether in Kuwait or abroad nor they are proved to be convicted of any felony or imprisoned for any crime of immoral act or breach of trust, unless they are rehabilitated. d - The Company s paid up capital shall not be less than the amount fixed by the Stock Exchange Committee. e - The company shall provide a valid bank guarantee, covering the amount fixed by the Stock Exchange Committee. f - The company shall satisfy the requirements of any further conditions laid down by the Stock Exchange Committee. Applications submitted for registration in the Brokers Register shall be accompanied with the documents proving the satisfaction of the conditions referred to in the proceeding article. The said applications shall be considered by the Stock Exchange Committee whose decision in this respect shall be final and unvindicated (indicating no reasons). A company whose listing has been rejected by the Committee may not renew its application, save at least after a lapse of one year from the date of its notification of such rejection. The said Committee shall specify the number of brokers from time to time, pursuant to the requirements of the Stock Exchange. Every company accepted as a broker under the decision of the Stock Exchange Committee shall pay the prescribed registration fee as well as the annual subscription. 20

21 Article (23) Article (24) Article (25) The brokerage activities in the Stock Exchange shall be restricted to the companies licenced to practice the same. Every such company shall appoint its own representative to conduct brokerage on its behalf in the Stock Exchange, and it may appoint one or more assistants to the broker. The broker and the assistant/s shall, as a condition satisfy the following requirements: 1. He shall be Kuwaiti national. 2. He shall be not less than 25 years old. 3. He shall be of good conduct and behavior. 4. His educational qualification shall not be below the General Secondary School Certificate or its equivalent, or he has acquired previous experience in financial or commercial affairs, duly acceptable to the Stock Exchange Committee. The stock - broker shall submit a list showing the names of all those working with him, including his assistant or assistants, besides submitting the specimen signatures of those assistants, together with a written undertaking to the extent that he is held responsible for all acts and behaviors of such assistant or assistants. Brokers shall comply with the following at the time of practising the profession of stock-brokering: a - To abide by the provisions of the Decree regulating the activities of Kuwaiti Stock Exchange,its by-laws (internal rules & regulations), as well as all resolutions and instructions issued by the Stock Exchange. b - To strictly observe that all transactions are executed within the Stock Exchange hall during the fixed official working hours, and meanwhile refrain from practising any brokerage business outside the said hall or during non- official working hours. c - To refrain from carrying out any business which may effect the reputation of the Stock Exchange,its members and dealers. d - A broker may not conclude any deals for his own account, save through another broker and in accordance with the conditions stipulated by the Stock Exchange Committee. e - He may not conduct any business that may prejudice his duties as a broker responsible to execute securities transactions for his clients at the best terms of sale or purchase available, duly based on the information secured by him at the time of dealing. f - To refrain from carrying out any work that may result in arranging or participating in the creation of fictitious transactions not leading to a real exchange of the securities under dealing. g - He shall not disclose any confidential information, to which he has access by virtue of his work. h - He shall not publish any comments or options relating to securities and their trends in any manner whatsoever. 21

22 i - He shall exert adequate efforts, duly cooperating with all brokers for serving the best interest of the Stock Exchange and the smooth running of its dealings. Article (26) Brokers shall keep commercial books and records for registration of all dealings made by them in chronological order (data-wise) in the manner specified by the Stock Exchange Administration. Such books shall be approved by the Stock Exchange and subject to its control. Article (27) Brokers shall undertake to furnish the Stock Exchange Administration with all data, information and statistics required in the form and dates specified by the said Administration. The Stock Exchange Administration shall have the right to ascertain the authenticity and accuracy of such statement and information in any manner it deems appropriate. Article (28) The bank guarantee presented by the broker shall remain valid in full. If the value of the said guarantee is reduced for any reason whatsoever, the broker shall complete it within the period specified by the Stock Exchange Committee. The Committee may suspend the broker from dealing during such a period. Article (29) Brokers shall act on behalf of dealers in securities in accordance with the orders and instructions received from such dealers. Brokers shall ascertain the accuracy of the said instructions and ensure that dealers are in possession of the securities or the funds required for concluding the deal. Article (30) A broker shall be deleted from the Brokers Register in the event of the following: a - If he fails to satisfy any of the conditions stipulated in Articles 21 and 24 of this by-law. b - If a disciplinary resolution is adopted to strike off his name. c - In case of his failure to pay the registration fees or settle the annual subscription. d - If he fails to complete the bank guarantee within the grace period determined by the Stock Exchange Committee. e - In case of seriously violating any of the duties or obligations prescribed in the preceding articles. 22

23 CHAPTER IV Dealing in Securities Article (31) Article (32) Article (33) Article (34) Article (35) Article (36) The resolution striking his name off shall be adopted by the Stock Exchange Committee. Securities listed and accepted for dealing in the Stock Exchange shall be transacted within the Stock Exchange Hall through a registered broker, save cases of inheritance, legacies or any other cases approved by the Stock Exchange Committee. However, in all such cases, all transactions of securities shall be entered in the Stock Exchange records at the time of transferring their title (ownership). The company whose shares are transacted outside the Stock Exchange shall, in accordance with the provisions of this article, notify the Stock Exchange Committee of any dealings concluded in respect of such shares. The Stock Exchange Committee shall specify the rules, procedures and regulations governing the transactions of securities within the Stock Exchange. One or more controllers from the Stock Exchange Administration shall constantly be available at the Stock Exchange Hall during the working sessions. The Controller shall keep the Stock Exchange Director or his appointee informed of any disputed transactions for the purpose of taking any necessary decisions or measures. The Stock Exchange pricing system shall control the movement of dealings and trends of prices in a manner securing regular and stable transactions in the light of brokers reports. The Stock Exchange Committee shall, whenever necessary, fix the rate of price fluctuations in order to ensure the stability of Stock Exchange dealings.in the event of exceeding the said fixed rates, the Stock Exchange Director may suspend the dealings-operations for a maximum period of three days in respect of each case. The Stock Exchange Administration shall assume the responsibility of announcing the dealing and the relevant volume transacted in each of the securities listed or accepted for dealing therein, besides any other information and data deemed necessary to serve the interest of the Stock Exchange dealers. 23

24 CHAPTER V Stock Exchange Administration Article (37) 1st: The Stock Exchange Committee Upon the invitation of the Chairman or his Deputy, the Stock Exchange Committee shall at least hold six meetings every year. The pertinent invitation shall be extended to members in writing in adequate time prior to the fixed date of the assembly, duly accompanied with the relevant agenda. The Committee shall also be called to convene whenever requested by at least four of its members; and in the event of emergency, invitations may be extended by telephone. Article (38) Article (39) Article (40) Article (41) Article (42) In extra-ordinary cases of emergency where the Chairman or his deputy deems it necessary to take decisions in matters within the jurisdiction of the Stock Exchange Committee, while it is difficult to call for a Committee meeting, the Chairman or his deputy may adopt the necessary decision which shall be presented to the said Committee in its immediate following meeting for final consideration. The Committee shall be called to convene within a period not exceeding one week; and it may recall, confirm or amend the said resolution. A quorum for any meeting of the Committee shall be the majority of members constituting the said Committee, provided that its Chairman or Deputy Chairman is present. Resolutions of the Committee shall be passed by a majority vote of the present members; and in the event of a tie the Chairman shall have a casting vote. The Stock Exchange Committee may constitute from among its members permanent or provisional sub-committees duly identifying their relevant powers. The Stock Exchange Committee and/or the sub-committees emanating therefrom may, whenever they deem necessary, call to their meetings any person whose advisory opinion is required on a certain specific issue. Such persons called shall not have the right to vote. The Stock Exchange Committee shall issue all by-laws, internal rules, rules and regulations of the Stock Exchange including the Stock Exchange Bodyisational structure, the personnel system, purchasing rules, financial regulations, besides the rules governing the registration fees, membership, Stock Exchange dealings, and the annual subscriptions. 2nd: Stock Exchange Director The Stock Exchange Director shall be vested with all powers required for managing the Stock Exchange and for issuing the relevant instructions. He 24

25 shall be responsible for the implementation of the Stock Exchange Committee resolutions, and he is the legal representative of the Stock Exchange, duly vested with a right to sign for and on behalf of the Stock Exchange. Article (43) Article (44) Article (45) Article (46) The Stock Exchange Director shall furnish the Stock Exchange Committee with proposals, studies and systems necessary for the Stock Exchange to participate with the concerned authorities in realising coordination and integration among the various financial and economical activities/the capital movement and any other issue leading to the Stock Exchange prosperity and realisation of its objective in the best manner. The Stock Exchange Director shall have the right to take any measures he deems appropriate to suspend, cancel or amend any dealings transacted violating the laws, rules, regulations or instructions applicable in the Stock Exchange. Moreover, the Stock Exchange shall not be held responsible for any consequential affect as a result of such act, and the issue shall be submitted to the Stock Exchange Committee in its immediate following meeting for final determination. The Stock Exchange Director may, after securing the consent of the Stock Exchange Committee, delegate any of the Stock Exchange employees to exercise some of his powers. 3rd: Specialised Technical Bodies A Financial & Economical Studies Department shall be established in the Stock Exchange, comprising all professional (specialised) technical Bodys which shall assist the Stock Exchange in performing its functions and realising its objectives, provided it includes the following: 1. Prices Follow-up Body It shall, in particular, assume the responsibilites of collecting the data relating to all securities whether listed or transacted in the Stock Exchange, besides preparing the statistical indicators showing the movement and fluctuation of prices of such securities. 2. Credit-Sale-Control Body (Deferred Payment Control Body) It shall assume the duties of following up the traffic of credit sales, besides proposing the appropriate basis and rules required for rationalising and directing the credit sale transactions regarding the volume of dealings their maturity date, prices, trends and variations in comparison with the spot prices. 3. Information Compilation, Analysis & Publication Body It shall assume the responsibility of compiling and analysing the data and 25

26 information concerning the Stock Exchange, the securities and pertinent companies, besides preparing the relevant studies and issuing the daily bulletins on transactions, prices and returns as well as all periodical publications comprising the data compiled in respect of the pertinent dealings, the prices and companies whose securities are transacted within the Stock Exchange in addition to the publication of the financial indicators, showing the financial standing of the said companies. 4. Investigation Body An Investigation Body shall be set up in the Stock Exchange to assume the responsibilities of investigating all issues and matters the Stock Exchange Director may entrust it with, in order to verify the extent of accuracy and authenticity of the information and data issued by the companies whose securities are under dealing in the Stock Exchange. The said Body shall further conduct all necessary investigations on the disputes committed to the Arbitration Committee, and then submit a detailed report covering its findings on the disputable issue, duly supported by all necessary documents. This Body shall also carry out any further functions assigned to it by the Stock Exchange Director. 26

27 CHAPTER VI Stock Exchange Budget & Financial Accounts Article (47) The Stock Exchange shall have a budget typically prepared on a commercial basis, and its fiscal year shall commence to run 1st of July and expires at the end of June every year. In exception to the provisions of this article the first fiscal year of the Stock Exchange shall commence to run the date of enforcing the Decree regulating Kuwait Stock Exchange and expires at the end of June, the following year. Article (48) The Stock Exchange Administration shall prepare the annual budget estimates, duly covering its income and expenditure. The Stock Exchange Committee shall approve the said estimated budget at least three months prior to the commencement of the fiscal year. Article (49) The Stock Exchange Committee income is derived from the following sources : 1. Proceeds of the services rendered. 2. Proceeds of the Stock Exchange funds invested. 3. Proceeds of the penalties determined by the Stock Exchange Committee. 4. The fees fixed by the Stock Exchange Committee for registration, listing, acceptance of dealings, the annual subscriptions of companies and brokers besides the commission of securities transactions. 5. Any other proceeds approved by the Stock Exchange Committee. Article (50) For payment of any expenses, the Stock Exchange Administration shall abide by the expenditure estimates specified in the budget items. Moreover, the expenditure procedures shall comply with the rules prescribed in the financial regulations issued by the Stock Exchange Committee. Article (51) The Stock Exchange shall keep proper books of account to control its operations and give a true and fair view of its financial position. Article (52) The Stock Exchange shall have one or more auditors who shall be chartered accountants, duly registered with the Ministry of Commerce and Industry.*The appointment of the said auditors and fixing of their relevant remunerations shall be made under an annual resolution passed by the Stock Exchange Committee for the purpose of controlling the accounts of the financial year for which they are appointed. The auditors shall audit the balance sheet and income & expenditure account which shall be presented to the Stock Exchange Committee, duly accompanied with their pertinent report for approval, within a maximum period of three months from the date of the financial year expiry. 27

28 Article (53) The Stock Exchange shall hold a general reserve fund and any surplus realised in any financial year shall be deposited therein. The said reserve shall be disposed of in the manner determined by the Stock Exchange Committee. * The term Minister of Commerce & Industry was replaced by Minister of Finance & Economy according to Article 3 of the Amiri Decree issued on March 11, 1985 concerning the Ministry of Finance & Industry. 28

29 CHAPTER VI1 Disputes & Arbitrations Article (54) An Arbitration Panel shall be established in the Stock Exchange by a resolution from the Stock Exchange Committee, under the chairmanship of a judge, duly nominated by the Supreme Judiciary Council. It shall have the duties of rendering verdicts (determining) on all disputes relating to the transactions concluded in the Stock Exchange. Dealing within the Stock Exchange shall constitute an undertaking to accept the said arbitration which shall be stated in all relevant documents. Article (55) The Arbitration Panel shall be constituted in the following manner: A judge nominated by the Supreme Judiciary Council (Chairman) Two members of the Stock Exchange Committee (Members) The resolution forming the Panel shall specify the procedures to be followed for dispute filing and determination. 29

30 Article (56)* CHAPTER VIII Disciplinary Action A Disciplinary Board shall be constituted in the Stock Exchange under a resolution from the Stock Exchange Committee. The function of the said Board is to determine in all cases related to the brokers and companies whose securities are accepted for dealing in the Stock Exchange, regarding any violations made to the provisions of the Decree regulating Kuwait Stock Exchange and all rules and regulations Bodyising the same, as well as any contraventions affecting the smooth process of the Stock Exchange business, the ethics of the brokerage profession or the rules and principles governing its practice. Article (57) Article (58) Article (59) Article (60) Article (61) The Disciplinary Board shall be composed in the following manner: The Stock Exchange Director or any person assigned by him (Chairman) Four members nominated by the Stock Exchange Committee (Members) The resolution constituting the said Board shall set forth its applicable procedure, the manner of passing its decisions and notifying the same to the concerned parties. The Disciplinary Board shall exercise its powers upon a request from the Stock Exchange Committee or the Stock Exchange Administration. Deliberations of the Disciplinary Board shall be confidential and its resolutions shall be passed by a majority vote. In the event of a tie, the Chairman shall have the casting vote. The Disciplinary Board may impose any of the following penalties: 1. Caution. 2. Warning. 3. Full or partial confiscation of the broker s guarantee. 4. Suspension of dealings in the securities of the company or suspension of the broker involved for a period not exceeding four months. 5. Deletion of membership or cancellation of licence for securities trading in the Stock Exchange or dealing in such business. In case the Disciplinary Board realised that the contravention attributed to the violator constitutes a criminal offence, the case shall be committed to the Public Prosecution, without prejudice to application of the relevant disciplinary action. The verdict rendered in respect of the said suspensions, non-dealing in securities of the involved company or deletion of the membership may be appealed to a Disciplinary Council of Appeal, to constitute under a decision from the Stock Exchange Committee in the following manner: A Justice (Counsellor) from the Department of Legal Advice & Legislation (Chairman) Two members, duly nominated by the Stock Exchange Committ (Members) The resolution forming the said council shall specify the procedure to be applied for rendering the relevant verdicts and notifying the same to the parties concerned. The verdicts rendered by the Disciplinary Council of Appeal shall be final and conclusive. * The name of the " Disciplinary Board " has been changed to the Committee looking into disputes, according to the Decree No. 158 for year

31 CHAPTER IX Final & Transitional Provisions Article (62) The Stock Exchange members shall form a General Assembly which shall elect its Chairman and Deputy Chairman. The Assembly shall hold a meeting once every year by invitation of its Chairman or his Deputy. The Assembly s duty is to discuss and submit to the Stock Exchange Administration whatever proposals it deems appropriate to promote the performance and efficiency of the Stock Exchange business. The Chairman of the Stock Exchange or his Deputy may call the said General Assembly for a meeting whenever necessary. Article (63) The Stock Exchange Committee shall fix the date for enforcement of these rules and regulations (by-laws) provided that it does not exceed six months from the date of their promulgation. The Committee may exclude application of any provisions of these regulations pursuant to the circumstances of the Stock Exchange. Article (64) Kuwaiti joint-stock companies (Kuwaiti shareholding companies) currently registered with the Stock Exchange, shall apply to the Stock Exchange Committee for Stock Exchange membership within a maximum period of two months from the operative date of the by-laws hereof. As for the new companies, they shall submit their applications for such membership to the Stock Exchange Committee one month prior to the date of the legal dealing of their shares. Article (65) Article (66) Kuwaiti closed joint stock companies (closed shareholding companies) whose shares may legally be dealt in within the Stock Exchange shall submit their applications for membership to the Stock Exchange Committee for consideration in accordance with the provisions of these rules, regulations, criteria, and measures laid down by the Stock Exchange Committee. The said applications shall be submitted within a maximum period of two months from the operative date of the (by-laws) hereof. As for the new closed companies, they may submit their applications for membership to the Stock Exchange Committee one month before the date set for their shares to be legally dealt in within the Stock Exchange. Non-Kuwaiti companies desirous of having their shares be dealt in within the Stock Exchange shall apply to the Stock Exchange Committee for listing of such shares. Article (67) For practising stock brokerage business, fresh applications are required to be submitted to the Stock Exchange Committee within one month prior to the application of these by-laws provisions. The Stock Exchange Committee shall 31

32 consider such applications in accordance with the provisions of Article 21 hereof. Article (68) The Stock Exchange Committee shall lay down the rules, regulations and procedures required to ensure the realisation of the Stock Exchange objectives and the smooth running of its operation in compliance with the provisions of the Decree Bodyising the Stock Exchange and the provisions of the by-laws hereof. Article (69) Any person, whether he is a member of the Stock Exchange Committee or an employee of the Stock Exchange Administration is strictly prohibited from disclosing any confidential information available to him by the virtue of his office, save cases permissible under law. 32

33 -3- KUWAIT STOCK EXCHANGE COMMITTEE RESOLUTIONS No. 2 of 1984, Consti tuting the Arbitration Panel with Its Rules and Applicable Procedures No. 3 of 1964 Constituting a Disciplinary Board and Its Observed Procedures 33

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35 STATE OF KUWAIT KUWAIT STOCK EXCHANGE Date: Corresponding to: 20th Muharam, 1405 H Kuwait Stock Exchange Resolution No. 2 of 1984, Consti tuting the Arbitration Panel with Its Rules and Applicable Procedures Having perused the Decree promulgated on 14th August, 1983, duly organizing Kuwait Stock Exchange: and The Resolution issued by the Minister of Commerce & Industry No. 35 of 1983, concerning the Stock Exchange By law; and The Decree promulgated on 8th August, 1984, concerning registration of brokers and their assistants with the Stock Exchange; The following is hereby decided: Article (1) The rules accompanying this Resolution shall be enforceable regard ing the formation of an Arbitration Panel and its procedures to be followed for dispute filing and determination. Article (2) This Resolution shall be published in the Official Gazette and shall be operative the date of its publication. MINISTER OF COMMERCE & INDUSTRY AND THE CHAIRMAN OF STOCK EXCHANGE COMMITTEE. 35