Regulatory Infrastructure of the SCA

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Questions and Answers

What is required before an employee of a listed company can buy or sell shares?

Investing a minimum amount of capital

Obtaining external legal advice

Waiting for a specified period after the public disclosure

Approval from the board of directors (correct)

What actions are permitted concerning insider information related to securities transactions?

Buying shares based on it without disclosure

Manipulating security prices using it

Using it for personal investment advice

None of these actions are permitted (correct)

Which of the following best describes the role of the board regarding securities activities?

To ensure confidentiality of sensitive information

To conduct public audits annually

To enforce disclosure and investigate activities (correct)

To manage the daily operations of the market

What type of company must a market take the form of as mandated by Federal Law No. 4 of 2000?

Local public establishment or public joint-stock company Signup and view all the answers

What must listed companies do with price sensitive information?

Publicly disclose it immediately to the market Signup and view all the answers

What consequences do transactions executed in breach of the stipulated provisions face?

They are considered void and invalid Signup and view all the answers

What is the purpose of the SCA appointing auditors?

To ensure compliance with statutory regulations Signup and view all the answers

Which of these actions is NOT permitted according to the rules for listed companies?

Rumor spreading about purchase transactions Signup and view all the answers

What is the primary objective of the Securities and Commodities Authority (SCA) in the UAE?

To protect investors and ensure the integrity of transactions Signup and view all the answers

Under Federal Law No. 4 of 2000, what is one power granted to the SCA?

To propose regulations concerning market operations Signup and view all the answers

Which of the following statements about the SCA is NOT correct?

The SCA can enter into commercial activities. Signup and view all the answers

What type of activities is the SCA not allowed to engage in?

Issuing its own securities Signup and view all the answers

What is one of the SCA's objectives related to market pricing?

To ensure prices are determined by supply and demand Signup and view all the answers

What document established the SCA and outlines its functions and powers?

Federal Law No. 4 of 2000 Signup and view all the answers

Which organization’s Code of Conduct is briefly considered by the SCA in its operation?

Chartered Institute for Securities & Investment (CISI) Signup and view all the answers

What can the SCA do in relation to the listing of securities and commodities?

Cancel or suspend the listing of securities or commodities Signup and view all the answers

What is one of the main responsibilities of the SCA according to its mission?

To promote sound practices Signup and view all the answers

Under which circumstances can the SCA temporarily suspend trading in the securities market?

In exceptional circumstances Signup and view all the answers

What is required for transactions in securities listed on the market?

They must be recorded according to established provisions Signup and view all the answers

What does the SCA board have the authority to do regarding penalties?

Impose penalties based on investigations Signup and view all the answers

What is one component of the organisational structure of the SCA?

A board of directors Signup and view all the answers

What should happen to transactions in listed securities that are not recorded according to the regulations?

They are considered null and void Signup and view all the answers

What authority does the SCA have concerning salaries and allowances for its employees?

It can unilaterally decide on salary scales Signup and view all the answers

What is a requirement for natural or juristic persons connected with securities activities?

They must publicly disclose information related to their activities Signup and view all the answers

What principle ensures fair treatment for all shareholders, including minority shareholders?

Equity Signup and view all the answers

Which principle focuses on the timely disclosure of material matters related to the company's governance?

Transparency and disclosure Signup and view all the answers

Who has the primary responsibility for implementing the Corporate Governance Guide?

Board of Directors Signup and view all the answers

What is required of the company regarding documentation related to governance?

Documents must be held at company headquarters for at least ten years. Signup and view all the answers

Which principle is aimed at raising awareness of professional and ethical behavior within the company?

Accountability Signup and view all the answers

What does the principle of responsibility advocate for regarding stakeholders?

Recognizing their rights according to laws and regulations Signup and view all the answers

What mechanism should the company have in place to deal with conflicts of interest?

Effective and balanced processes and procedures Signup and view all the answers

What is a key responsibility of the board of directors regarding corporate governance?

Monitoring adherence to principles and rules of governance Signup and view all the answers

What is required for members of a market's board after a conviction for an offense of dishonor?

They must step down immediately. Signup and view all the answers

Which of the following is NOT a reason for a board member's resignation?

Involvement in criminal activity. Signup and view all the answers

How must board members declare changes in their securities holdings?

Make a written declaration within one week. Signup and view all the answers

What is one duty of the market's board of directors?

Monitor daily trading transactions. Signup and view all the answers

What sources finance the markets?

Annual fees and fines levied on brokers and companies. Signup and view all the answers

If transactions in listed securities are not recorded according to the regulations, what is their status?

They are considered null and void. Signup and view all the answers

Who is responsible for appointing the market's general manager?

The market's board of directors. Signup and view all the answers

Which of the following statements is true regarding the board members' ownership declarations?

Declarations must include securities owned by minors. Signup and view all the answers

What is one of the primary responsibilities of the market's board of directors?

Approve the annual balance sheet of the market's income and expenditure Signup and view all the answers

Which condition must be met for a market to be granted a trading license by the SCA?

It must be in the form of a public institution or company Signup and view all the answers

Which of the following is NOT a function of the market according to the regulations?

Establish new financial regulations independently Signup and view all the answers

Who has the authority to recommend the removal of brokers from the licensed register?

The board of directors of the market Signup and view all the answers

What is necessary for a market to ensure proper electronic data processing?

Arrangements to recover data in case of system failure Signup and view all the answers

Which of the following statements is true regarding the board of directors of a market?

Members cannot be part of a public joint-stock company or broker Signup and view all the answers

What is the role of the SCA in relation to the markets?

To supervise and control market operations Signup and view all the answers

What must each market be equipped with to conduct its activities electronically?

Appropriate technology for electronic operations Signup and view all the answers

Study Notes

Introduction

This chapter introduces the regulatory infrastructure established by Federal Law No. 4
It covers the SCA's functions and powers
It includes requirements for membership and licensing of securities and commodities markets in the UAE
It briefly considers corporate governance and the CISI's Code of Conduct
The chapter concludes with considerations of the various categories of licences provided by the SCA

The Securities & Commodities Authority (SCA)

The SCA was established by Federal Law No. 4 of 2000
It was incorporated as a public authority in Abu Dhabi
It is a separate legal entity
It has financial and administrative independence
It reports to the Cabinet of Ministers
Its objectives include providing opportunities for investment in securities and commodities in a manner that protects the interests of the national economy, secures the integrity and accuracy of transactions, ensures prices are determined by supply and demand, and protects investors by establishing bases for sound and just dealings between market participants, developing investment awareness, ensuring financial and economic stability

The Organs of the SCA and their Competencies

The SCA is managed by a board of directors based on a Cabinet resolution
The Cabinet resolution determines the chairman, member remunerations, meeting mechanisms, and decision-making processes
Board members (except the chief executive) are appointed for four years, renewable once
In case of resignation before term end, a successor is appointed for the remaining period
Ownership of securities: Board members must declare their securities, spouse's and minor children's holdings, and broker holdings. Changes must be declared within a week of awareness
Immediate termination of membership: Requires conviction of dishonour or breach of trust, bankruptcy, or three consecutive meetings without acceptable excuse

Responsibilities of the Board of Directors

Ensuring application of Federal Law No. 4 regulations
Handling notifications and complaints about market or broker activities
Ensuring required balance sheets, profit/loss statements, and audited financial statements are submitted within one month of the year-end
Ensuring appropriate disclosures for substantial developments of listed companies
Ensuring transparency and disclosure as per the Law
Issuing and maintaining resolutions regarding market membership and trading
Undertaking acts to support the SCA's objectives

The Markets

Federal Law No. 4 enables trading of securities and commodities
Markets must be either local public establishments or public joint-stock companies, licensed by the SCA
Markets must be interconnected
Market boards are appointed by local authorities
Market board members may not be on the board of a public joint-stock company or broker
Members must declare their securities, spouse's, and minor children's holdings, and broker holdings in writing
Board members must step down for dishonor, breach of trust, bankruptcy, or three consecutive meetings without acceptable excuse

The SCA's Financial Affairs

The SCA's fiscal year runs from January to December
The chief executive drafts the budget and submits it to the board at least one month before the new fiscal year begins
The approved budget becomes an annex to the general State budget
The chief executive prepares the SCA's final accounts within 90 days of the fiscal year's end, submitting them to the board with the auditor's report
The auditor can review the SCA's records and financials
The SCA must maintain detailed financial records.

Market Licensing and Supervision

No market can operate in securities and commodities without an SCA license
The license is granted under certain conditions (public insitutions/companies, electronic equipment and linkages are required).

The Functioning of the Securities & Commodities Authority

The SCA is a public authority with specific legal personality and administration
The SCA's objectives include protecting investor rights, promoting sound practices, and creating an environment attractive to capital, utilizing innovative systems

Clearing, Settlement, Transfer of Ownership, and Custody

Securities and commodity prices must be displayed in accordance with the market's rules
Ownership transfer/registration/agreements to be regulated by the market
Initializers to complete their share transfer procedures expediently

SCA's Financial Affairs

The SCA's fiscal year runs from January 1 to December 31
The chief executive prepares the budget and submits it for board approval
Final accounts must be prepared within 90 days of year-end for submission to the board with external audits
The SCA is responsible for maintaining accurate financial records
Sources of funding are annual government allotments, market fees, trading fees, and fines.

Corporate Governance

The guide defines the relationships between management, board, shareholders, and stakeholders.
The guide provides a framework for managing and regulating public joint-stock companies
Key pillars include accountability, fairness, disclosure, transparency, and responsibility
The guide also outlines how to manage conflicts of interest, provide rules on gift-giving, and regulate transactions with related parties

Regulations for Securities and Commodities Markets

No market is allowed in the UAE without an SCA license
Each market must satisfy conditions(be an institution/company, utilize electronic equipment, and be connected to other markets in the state)
The SCA regulates all transactions and owns the ultimate regulatory power over all licensed markets and brokers in the UAE

Codes of Conduct

Principles outlining the responsibilities and duties of members

Accounting System Controls

Licensed firms must create an electronic accounting system adhering to specific technical conditions

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Description

This quiz explores the regulatory framework established by Federal Law No. 4, focusing on the functions and powers of the Securities & Commodities Authority in the UAE. It covers membership requirements, licensing, corporate governance, and the various categories of licences. Test your knowledge on the SCA's role in protecting national economic interests and ensuring market integrity.