Chapter 2 - Associated Markets and Securities Legislation

Question 1

What constitutes legal evidence of trading and ownership?

Answer 1

Entries registered in the market’s records, whether entered manually or electronically, and any documents issued by the market

Question 2

What are the key responsibilities of a Market’s Board?

Answer 2

• Appoint the market’s director general and his deputy,
• Establish the market’s organisational structure, the internal regulations
• draw up the necessary proposals in relation to the amending of the regulations and to present them to the SCA;
• monitor trading transactions in securities and commodities
• present reports and data to the SCA and to issue the press releases necessary
• approve the annual balance sheet of the market’s income and expenditure;
• levy penalties on brokers pursuant to the provisions of the law, and to recommend to the SCA the
  removal of them
• consult with the SCA in respect of the fees charged
• handle applications for the entering of brokers and the listing of securities
• deal with any other matters to ensure the proper and regular working of the market.

Question 3

What is the General Assembly?

Answer 3

The members of the market who have paid the registration and renewal fees constitute its General
Assembly. Each member has one vote in the meetings of this assembly. Its meetings will be attended by
a representative of the SCA as an observer

Question 4

Who lays down the rules of the General Assembly?

Answer 4

The Market’s Board of Directors

Question 5

How often must trading occur on a Market?

Answer 5

At least 5 days a week. At least 2 hours each day

Question 6

What must the electronic trading system ensure?

Answer 6

• The automatic stopping of purchase orders which exceed the limits of the broker’s bank guarantee
• The enabling of all companies whose securities are listed in the market to view the register of their own shares.

Question 7

On what basis may an executed trade be cancelled?

Answer 7

The director general of the market may cancel an executed transaction after a written request from the
two brokers to the transaction is submitted to him

Question 8

What is a special order?

Answer 8

A special order is defined as any order approved in advance by the market for a securities transaction in
excess of 80% of the amount of the broker’s bank guarantee.

Question 9

How soon after Year End must a Market give SCA its accounts?

Answer 9

1 month

Question 10

What is the definition of Capital Base?

Answer 10

The sum of Tier 1 capital and Tier 2 capital, after

making certain deductions from the total of tier 1 capital and tier 2 capital

Question 11

Tier 1 Capital

Answer 11

Paid-up share capital and published reserves of a bank, including minority interests

Question 12

Tier 1 Capital Deductions

Answer 12

• goodwill and other intangible assets;
• own shares held;
• shortfall in provisions;
• current year loss;

Question 13

Tier 2 Capital

Answer 13

• undisclosed reserves;
• revaluation of assets, but limited to a maximum of 45% of the excess of the market value over their
  net book value. Revaluation reserves in respect of a bank’s property assets are not to be included;
• hybrid (debt/equity) capital instruments;
• subordinated term loans

Question 14

Tier 2 Deductions

Answer 14

• Investments in unconsolidated subsidiaries;
• Investments in associate companies;
• Investments in other banks or financial institutions;

Question 15

UAE Capital Ratios

Answer 15

Total Capital = 10%
Tier 1 Capital = 6%
Tier 2 Capital = 67% of Tier 1

Question 16

How frequently do Banks report Capital Adequacy?

Answer 16

Quarterly. 14 days after end of each Quarter

Question 17

What is the Capital Requirement for a Money Changing Business?

Answer 17

Not less than AED 1,000,000

If the application includes handling of remittance business then at least AED 2,000,000.

The opening of each additional branch will require an increase in the paid-up capital by 10%.

Question 18

Local ownership % for a Money Changing Business?

Answer 18

60%

Question 19

What assets must a Money Changing Business maintain?

Answer 19

Total assets shall not, at any time, exceed ten times the paid up capital, and the capital shall not, at any time, be less than the limits outlined above (AED one million or AED two million depending on the activities undertaken)

Question 20

What rules apply to the constituents of a Joint-Stock Company’s Board of Directors?

Answer 20

At least one-third of members shall be independent members and a majority of members shall be non-executive

Question 21

How often must a Joint-Stock Company’s Board of Directors meet?

Answer 21

Every 2 months, or if requested by at least 2 members

Question 22

Quorum obligations for a Joint-Stock Company’s Board of Directors

Answer 22

Majority both for quorum and for passing resolutions

Question 23

How long will a licence to perform money changing business be granted for?

Answer 23

1 year. Must apply for renewal 2 months before expiry

Question 24

Who can form a Committee under the Board?

Answer 24

Committees shall consist of at least three non-executive board members, of whom at least two shall
be independent members, and shall be chaired by one of these independent members

Question 25

What limits are there on renumeration of board members?

Answer 25

Remuneration of board members may not exceed 10% of net profits, after deduction of depreciation and reserves and distribution of a dividend of not less than 5% of capital to shareholders

Question 26

What are the requiremenets for constituting an audit committee?

Answer 26

The board of directors shall form an audit committee consisting of non-executive board members, with the proviso that a majority of committee members shall be independent members. The committee shall consist of not less than three members, of whom one member must be an expert in financial and accounting affairs

Question 27

How often does the Audit Committee meet?

Answer 27

Once every three months, or as necessary

Question 28

What does the Corporate Governance Report include?

Answer 28

- Requirements and principles for completion of the corporate governance system and manner of application. - Violations committed during the financial year, stating the reasons for these, the manner of addressing them and how to avoid repetition in the future. - The manner of formation of the board of directors in terms of classes of member, period of membership and the manner of determining their remuneration

Question 29

How dooes a company nominate new boad members?

Answer 29

Declaration in two daily newspapers (including one Arabic). Nominations must be open for one month. Shareholders may nominate themselves, and the company must publish a list of candidates 2 weeks prior to the AGM