Securities Markets Regulations 2014 PDF

SECURITIES MARKETS ORDER, 2013 (S 59/2013) SECURITIES MARKETS REGULATIONS, 2014 ARRANGEMENT OF REGULATIONS Regulation PART I PR...

SECURITIES MARKETS ORDER, 2013 (S 59/2013) SECURITIES MARKETS REGULATIONS, 2014 ARRANGEMENT OF REGULATIONS Regulation PART I PRELIMINARY 1. Citation, commencement and application. PART II SECURITIES REGISTRATION AND PROSPECTUS REQUIREMENTS 2. Registration statement and prospectus. 3. Short-form registration, shelf registration and prospectus. 4. Disclosure of information in prospectus. 5. Prospectus summary. 6. Omission of information from prospectus. 7. Final offer price and quantity of securities. 8. Use of proceeds from offering of securities. 9. Expenses of offering. 10. Incorporation by reference. 11. Approval of prospectus. 12. Filing and publication of prospectus. 13. Publication of list of prospectuses as Authority directs. 14. Advertisements. 15. New factor, material mistake and inaccuracy in prospectus. 16. Responsibility of experts. 17. Offer of asset-backed securities issued by special purpose vehicle. PART III CONTINUING DISCLOSURE OBLIGATIONS 18. Annual reports and financial statements. 19. Preliminary and interim financial results. 20. Disclosure of price sensitive information. 21. Types of price sensitive information. 22. Exemption to requirement to disclose. 23. Persons to whom price sensitive information may be disclosed. 24. Framework for handling of price sensitive information. 25. Inadvertent disclosure on selective basis. 26. Correction of inaccurate or misleading information. 27. Securities listed in more than one jurisdiction. PART IV CAPITAL MARKETS SERVICES LICENCES 28. Capital markets services licence and representative's licence applications. 29. Fit and proper requirements. 30. Honesty, integrity and reputation. 31. Competence and capability. 32. Financial soundness. 33. Minimum financial requirements for holder of capital markets services licence. 34. Organisational requirements for holder of capital markets services licence. 35. Systems and procedures. 36. Basic requirements for systems and procedures. 37. Appointment and responsibilities of compliance officer. 38. Risk management. ii  39. Internal audit. 40. Requirements for representative's licence. 41. General conditions and restrictions of holder of capital markets services licence. 42. Conditions and restrictions of holder of representative's licence. 43. Know your client's requirements. 44. Client-specific suitability. 45. Handling of client's complaints. 46. Safeguarding client's assets. 47. Use of third party holders of clients' money and other assets. 48. Use of clients' money and other assets. 49. Report to Authority regarding client's accounts. 50. Revocation of holder of capital markets services licence at its request. PART V MARKET OPERATORS AND MARKET INFRASTRUCTURE 51. Application for licence. 52. Application to change scope of licence, recognition or designation. 53. Determination of application for licence or recognition. 54. Revocation of licence, recognition or designation. 55. Significant influence and control over senior management. 56. Licence, recognition and designation requirements. 57. Financial resources. 58. Systems and controls. 59. Conduct of business. 60. Settlement. 61. Default provisions. 62. Listing regulations. 63. Continuing obligation of market operator. 64. Modification or amendment to market operator's regulations. 65. Supervision of market operators. 66. Amendment to memorandum and articles of association. 67. Annual reports and financial statements. iii  68. Removal or suspension from trading. 69. Changes to systems. 70. Enforcement actions. 71. Additional directions by Authority. 72. Market disclosure. 73. Appeals against decisions of market operators. PART VI COLLECTIVE INVESTMENT SCHEME Chapter I Application and Interpretation 74. Application. Chapter II Marketing and Transactions Involving Collective Investment Scheme 75. Application. 76. Prospectus of collective investment scheme. 77. Private collective investment scheme. 78. Recognised collective investment scheme. 79. Prospectus of foreign collective investment scheme. 80. Foreign property collective investment scheme. 81. Information to be provided to Authority. 82. Record keeping. Chapter III Collective Investment Scheme Administration 83. Application. 84. Compliance with anti-money laundering requirements. 85. Clients' money and assets. iv  86. Delegation and service agreements. 87. Record keeping. Chapter IV Core Regulations Applicable to Collective Investment Schemes 88. Application. 89. Written constitution requirement. 90. Name of collective investment scheme. Chapter V Operation and Administration of Collective Investment Scheme 91. General management duties. 92. Duties in relation to collective investment scheme property. 93. Conflict of interest. 94. Valuation of collective investment scheme. 95. Valuation and errors. 96. Determination of single price. 97. Rectification of incorrect pricing. 98. Issue and redemption of public collective investment scheme. 99. Register of unit holders. 100. Meetings of board of directors and unit holders. 101. Unit holders' meetings procedures for private collective investment scheme. 102. Unit holders' meeting procedures for public collective investment scheme. 103. Approval and notification. 104. Maintenance of records. 105. Capital.  Chapter VI Delegation and Outsourcing 106. Application. 107. Delegation by operator. 108. Delegation by trustee. 109. Delegation process and requirements. 110. Outsourcing process and requirements. 111. Systems and controls. 112. Review of activities. Chapter VII Accounting Standards 113. Duty to maintain financial accounts and statements. 114. Accounting records to be kept. Chapter VIII Periodic Reports 115. Application. 116. Annual and interim reports. 117. Annual report requirement. 118. Interim report requirement. 119. Operator's report. 120. Comparative table for public collective investment scheme. 121. Oversight report. 122. Auditor's report requirements. vi  Chapter IX Charges and Expenses 123. Application. 124. Remuneration and reimbursement of expenses. 125. Promotional payments, performance fees and set up costs. 126. Allocation of payments to capital or income. 127. Payments of liabilities on transfer of assets. Chapter X Responsibility for Prospectus 128. Responsibility to produce prospectus. 129. Persons responsible for prospectus. 130. Exemption from liability. 131. Expert's responsibility. Chapter XI Auditors 132. Application. 133. Appointment and termination of auditors. 134. Co-operation with auditor. 135. Functions of collective investment scheme's auditor. Chapter MI Specialist Funds Division I Fund of Funds 136. Application. vii  Division II Feeder Fund 137. Application. 138. Property of feeder fund. Division III Private Equity Fund 139. Application. 140. Investment purposes. Division IV Property Collective Investment Schemes 141. Application. 142. Permitted investment vehicles and listing. 143. Investment committee. 144. Investment requirements. 145. Borrowing limitation. 146. Joint ownership arrangement. 147. Use of special purpose vehicles. 148. Transactions with affected persons. 149. Appointment of independent valuer. 150. Valuation report of independent valuer. 151. Retirement of independent valuer. Division V Real Estate Investment Fund (REIT) 152. Real estate investment fund requirements. viii  Division VI Hedge Fund 153. Application. 154. Risk management, prime brokers and net asset value calculation. Chapter XIII Public Collective Investment Scheme Division I Registration of Public Collective Investment Scheme 155. Application. 156. Requirements for licence or recognition. 157. Revocation of licence or recognition. Division II Collective Investment Scheme Prospectus Requirements 158. Application. 159. Drawing up and availability of prospectus. 160. Mandatory statement for public collective investment scheme prospectuses. 161. Prospectus for feeder fund. 162. Prospectus for property collective investment scheme. Division III Investment and Borrowing Powers 163. Application. 164. Spread of risk and protection of public collective investment scheme property. 165. Investments in other collective investment schemes. 166. Transactions in derivatives. 167. Stock lending and borrowing. ix 168. Borrowing restrictions. 169. Investment in real property. Division IV Oversight Arrangements 170. Application. 171. Permitted arrangements for investment company. 172. Permitted arrangements for investment partnership. 173. Permitted arrangements for investment trust. 174. Independence of oversight functions. 175. General oversight duties. 176. Oversight principles. 177. Management systems and controls for oversight. 178. Reporting on effectiveness of systems and controls for oversight. 179. Duty to provide information and assistance for oversight. 180. Criteria for appointment of persons for oversight. 181. Custodian oversight functions. 182. Record keeping. Chapter XIV Private Collective Investment Scheme 183. Application. 184. Notification to Authority. 185. Criteria to be classified as private collective investment scheme. 186. Short form prospectus. 187. Supplementary prospectus. 188. Prospectus warning statement. 189. Contents of short form prospectus. 190. Prospectus for private feeder fund. 191. Prospectus for private property collective investment scheme. 192. Prospectus for private equity collective investment scheme. 193. Prospectus for hedge fund. Chapter XV General Enforcement 194. Application. 195. Suspension and termination. 196. Winding up collective investment scheme. 197. Accounting and reports during winding up. 198. Funds that are not commercially viable. 199. Fund transfer requirements. xi  SECURITIES MARKETS ORDER, 2013 (S 59/2013) SECURITIES MARKETS REGULATIONS, 2014 In exercise of the powers conferred by section 268 of the Securities Markets Order, the Authority, with the approval of His Majesty the Sultan and Yang Di-Pertuan, hereby makes the following Regulations — PART I PRELIMINARY Citation, commencement and application. 1. These Regulations may be cited as the Securities Markets Regulations, 2014 and shall commence on such date to be appointed by the Authority, with the approval of His Majesty the Sultan and Yang Di-Pertuan, by notification in the Gazette. PART II SECURITIES REGISTRATION AND PROSPECTUS REQUIREMENTS Registration statement and prospectus. 2. (1) Before making a public offering of securities or seeking admission of securities to trading on a regulated market in Brunei Darussalam, persons or entities, or any person or entity acting on their behalf, shall prepare and file — (a) a registration statement; and (b) a prospectus, that follow the instructions of the Authority and submit them for approval by the Authority as required under regulation 11.  (2) Any other documentation that may be required to be filed with the registration statement and prospectus shall be submitted to the Authority for approval. (3) The requirement to prepare a registration statement and prospectus and does not apply to public offerings of securities identified by the Authority by regulations. Short-form registration, shelf registration and prospectus. 3. (1) The Authority may permit, through issued instructions, the filing of a short- form registration and prospectus that may be used for ongoing or shelf registrations of securities, in which the eligible issuer may register a relatively large amount of different types of securities that it may then issue, or take down from the shelf, from time to time pursuant to the form for public offering as may be determined by the Authority. (2) A form for public offering or short-form registration statement that follows the Authority's instructions permits an eligible issuer to update disclosure prospectively through incorporation by reference into the registration statement of the subsequently filed current reports and periodic reports filed with the Authority by the issuer. (3) An eligible issuer may use a short-form registration statement for ongoing or shelf registrations of its securities, in which the issuer registers a relatively large amount of different types of securities that it may then issue from time to time as needed. (4) A shelf registration statement and a prospectus become effective upon approval of the Authority and permit take-downs of the securities without additional approval of the Authority provided the filing is updated with current required information as set forth in the Authority's instructions. Disclosure of information in prospectus. 4. (1) The prospectus shall disclose all the necessary information, depending on the particular nature of the issuer and of the securities being offered to the public, or for which admission to trading on a regulated market is sought, to enable investors to make an informed assessment of the assets and liabilities, financial position, profits and losses, and prospects of the issuer and of the guarantors, if any, of the securities being offered to the public or  admitted to trading, as well as the rights attaching to such securities and the conditions in which the securities are issued as set forth in the guidelines issued by the Authority. (2) The information in the registration statement must be presented in a structure that is comprehensible and easy to analyse and must comply with the requirements of these Regulations. (3) The prospectus may be drawn up as a single document or as separate documents. (4) A prospectus drawn up as a single document shall comprise parts in the following order — (a) a clear and detailed table of contents; (b) a prospectus summary provided for under these Regulations; (c) identified risk factors linked to the issuer and the type of security covered by the issue; g any information required by the Authority. (5) A prospectus drawn up as separate documents shall include — (a) a registration statement or, for the first admission to trading of equity securities, a base document containing information about the issuer; (b) a securities note which is a short form information document in any form whatsoever and which contains information on the securities being offered to the public or for which admission to trading on a regulated market is sought; and (c) a prospectus summary described in regulation 5. (6) An issuer, an offeror or a person requesting admission who already has a registration statement approved by the Authority, must prepare a securities note and a prospectus summary when securities are offered or a request is made for admission to trading. (7) When sub-regulation (6) applies, the securities note must provide information that would normally be provided in the registration statement if there has been a material 3 change or a recent development which could affect assessments by investors since the approval of the latest updated registration statement or any supplemental note to the prospectus. (8) If an issuer has filed a registration statement that has not been approved by the Authority, the entire documentation, including updated information, shall be subject to approval by the Authority. (9) The securities note and the prospectus summary must be submitted for approval by the Authority. (10) The prospectus must be drawn up in accordance with disclosures included in the guidelines issued by the Authority for the different categories of securities. (11) In situations where one or more of the information items referred to in the guidelines issued by the Authority or equivalent information is not pertinent to the issuer, to the offer or to the securities to which the prospectus relates, the information may be omitted. Prospectus summary. 5. (1) The prospectus shall include a summary, which shall, in a brief manner and in a non-technical language, convey the essential characteristics and main risks associated with the issuer, the guarantors, if any, and the securities being offered to the public or for which admission to trading on a regulated market is sought. (2) The prospectus summary shall contain a warning that — (a) the prospectus summary shall be read as an introduction to the prospectus; and (b) any decision by the investor to invest in the relevant securities shall be based on consideration of the prospectus as a whole. (3) The prospectus summary shall generally not exceed two thousand five hundred words. 4 Omission of information from prospectus. 6. (1) The Authority may authorise the omission from a prospectus of any information, the inclusion of which would otherwise be required, on the ground that — (a) the disclosure would be contrary to the public interest; (b) the disclosure would be seriously detrimental to the issuer, provided that the omission would be unlikely to mislead the public with regard to any facts or circumstances which are essential for an informed assessment; or (c) the information is only of minor importance for a specific offer to the public or admission to trading on a regulated market and unlikely to influence an informed assessment. (2) A request to the Authority to authorise the omission referred to in sub- regulation (1) must — (a) be in writing; (b) identify the specific information concerned and the specific reason for its omission; and (c) state why one or more of the grounds in sub-regulation (1) applies. Final offer price and quantity of securities. 7. (1) If a prospectus for which approval is sought does not include the final offer price and the quantity of securities to be offered — (a) the prospectus must disclose the criteria and the conditions in accordance with which the final offer price and the quantity of securities are determined or, in the case of price, the maximum price; and (b) the final offer price and the quantity of securities must, as soon as practicable, be filed with the Authority in accordance with the direction of the Authority. (2) Where either the final offer price or the quantity of securities to be offered in sub-regulation (1) is not stated in the prospectus, investors shall be entitled to withdraw their acceptance of the acquisition or subscription terms for the securities within 2 trading days following the publication of the final offer price and the quantity of the securities. 5 Use of proceeds from offering of securities. 8. (1) The prospectus shall disclose the estimated net amount and percentage of the proceeds broken down into each principal intended use thereof. (2) If the anticipated proceeds are not sufficient to fund all the proposed purposes, the order of priority of such purpose must be given, as well as the amount and sources of other funds needed. (3) The prospectus shall disclose how the proceeds will be used pending their eventual utilisation for the proposed purposes. (4) If the issuer has no specific plans for the proceeds and the Authority has allowed this, it shall discuss the principal reasons for the offering of the securities. (5) Where the offer is not fully underwritten on a firm commitment basis, the prospectus shall state the minimum amount that, in the reasonable opinion of the directors of the issuer, must be raised by the offer of securities. (6) If the proceeds are being used directly or indirectly to acquire assets, other than in the ordinary course of business, the prospectus shall briefly describe the assets and their costs. (7) If the assets have been or will be acquired from affiliates of the issuer or their associates, the prospectus shall disclose the persons from whom they will be acquired and how the cost to the issuer will be determined. (8) If the proceeds are to be used to finance acquisition of other businesses, the issuer shall give a brief description of such businesses and information on the status of the acquisition. (9) If any material part of the proceeds is to be used to discharge, reduce or retire indebtedness, the prospectus shall describe the interest rate and maturity of such indebtedness 6  and, for indebtedness incurred within the past year, the uses to which the proceeds of such indebtedness were put. Expenses of offering. 9. (1) The following information shall be provided in the registration statement pertaining to the expenses of the offering — (a) the total amount of the discounts or commissions agreed upon by the underwriters or other placement, or the selling agents, or the issuer or the offeror shall be disclosed, as well as the percentage such commissions represent of the total amount of the offering and the amount of discounts or commissions per share; (b) a reasonably itemised statement of the major categories of expenses incurred in connection with the issuance and distribution of the securities to be listed or offered (in absolute terms and as a percentage of the total amount of the offering) and by whom the expenses are payable, if other than the issuer; (c) if any of the securities are to be offered for the account of a selling shareholder, indication of the portion of such expenses to be borne by such shareholder and indication of the amount of any expenses specifically charged to the subscriber or purchaser of the securities being offered. (2) The information may be given subject to future contingencies. (3) If the amount of any items is not known, estimates (identified as such) shall be given. Incorporation by reference. 10. (1) Information may be incorporated in the prospectus by reference to one or more previously or simultaneously published documents, approved by or filed with the Authority. This information shall be the latest available to the issuer. (2) The summary note must not incorporate information by reference. (3) When information is incorporated by reference, a cross-reference list must be provided in order to enable investors to easily identify specific items of information. 7 Approval of prospectus. 11. (1) An applicant must submit the following information to the Authority — (a) a completed registration statement; (b) a prospectus; (c) if the order of items in the prospectus does not coincide with the order in the guidelines, a cross-reference list identifying the pages where each item can be found in the prospectus; (d) a letter identifying any items from the guidelines that have not been included because they are not applicable; if information is incorporated in the prospectus by reference to another document, a copy of the document (annotated to indicate which item of the guidelines it relates to); 09 if the issuer is requesting the Authority to authorise the omission of information, the requirements under regulation 6 shall apply. (2) An applicant must provide contact details of individuals who are — (a) sufficiently knowledgeable about the documentation to be able to answer questions from the Authority; and (b) available to answer questions during the normal business hours of the Authority. (3) Drafts of documents must be submitted to the Authority — (a) in a substantially complete form; (b) in duplicate hard copy or an agreed electronic format; (c) annotated in the margin to indicate compliance with all applicable requirements of these Regulations; and (d) such as may be required by the Authority. (4) If the Authority requires further drafts of documents, they must be submitted to the Authority — (a) marked to indicate all changes made since the last draft was reviewed by the Authority; 8  (b) marked to indicate all changes made to the documents as a consequence of the comments by the Authority; (c) in duplicate hard copy or an agreed electronic form; and (d) annotated in the margin to indicate compliance with all applicable requirements. (5) A prospectus must not be published unless the Authority has approved it. Filing and publication of prospectus. 12. (1) After a prospectus is approved by the Authority, it must be filed with the Authority and made available to the public as soon as practicable, and in any case, at a reasonable time, before the making of the public offering or before the admission to trading of the securities. (2) In the case of an initial public offering of a class of shares not already admitted to trading and that is to be admitted to trading for the first time, the prospectus must be made available to the public at least 6 business days before the end of the public offering. (3) A prospectus is deemed available to the public for the purposes of this regulation when published either — (a) by insertion in one or more newspapers widely circulated in Brunei Darussalam; (b) in a printed form to be made available, free of charge, to the public at the offices of the regulated market on which the securities are being admitted for trading; (c) at the registered office of the issuer and at the offices of any underwriter; or (d) in an electronic form on the website of the issuer, the underwriter or the regulated market. (4) If the prospectus is made available by publication in an electronic form, a hard copy must nevertheless be delivered to the investor by the issuer, upon his request and free of charge. 9  (5) A prospectus is valid for 12 months after its publication for a public offering or an admission to trading, provided the prospectus is updated by a supplementary prospectus, if required by these Regulations. (6) A registration form is valid for 12 months after it is filed provided that it has been updated in accordance with these Regulations. Publication of list of prospectuses as Authority directs. 13. (1) The Authority shall publish a list of prospectuses that it has approved over the previous 12 months. (2) The list shall specify how a prospectus is made available and where it can be obtained, including, if applicable, a hyperlink to the prospectus published on the website of the issuer and it must be possible for investors to download and print the prospectus. Advertisements. 14. (1) An advertisement relating to an offering or to an admission to trading under the Order, shall not be issued unless it has been approved by a holder of a capital markets services licence and — (a) it states that a prospectus has been or will be published and indicates where investors can obtain it; (b) it is clearly recognisable as an advertisement; (c) the information in the advertisement is accurate and not misleading; and (d) the information in the advertisement is consistent with the information contained in the prospectus, if already published, or with the information required to be in the prospectus, if the prospectus is to be published later. (2) A written advertisement must contain a bold and prominent statement to the effect that it is not a prospectus but an advertisement and investors should not subscribe for any securities referred to in the advertisement except on the basis of the information in the prospectus. 10  (3) In this regulation, "advertisement" includes all information concerning an offering or an admission to trading disclosed in an oral or written form (even if not for advertising purposes), and must be consistent with that contained in the prospectus. (4) Types of advertisements may include advertisements made through — (a) an addressed or an unaddressed printed matter; (b) an electronic message or advertisement received via a mobile telephone or pager; (c) a standard letter; (d) a press advertising with or without order form; (e) a catalogue; (f) a telephone with or without human intervention; (g) seminars and presentations; (h) radio and television; (i) electronic mail; 0) facsimile (fax); (k) brochure; and web posting including interne banners. New factor, material mistake and inaccuracy in prospectus. 15. (1) If there arises or is noted a significant new factor, material mistake or inaccuracy relating to information included in a prospectus approved by the Authority, the person on whose application the prospectus was approved must, in accordance with prospectus regulations, submit a supplementary prospectus containing details of the new factor, material mistake or inaccuracy to the Authority for its approval within a relevant period. (2) The relevant period begins when the prospectus is approved by the Authority and ends — (a) with the closure of the offering of the securities to which the prospectus relates; or (b) when trading in those securities on a regulated market begins. 11  (3) Any person responsible for the prospectus who is aware of any new factor, material mistake or inaccuracy that may require the submission of a supplementary prospectus must give notice of it to the issuer of the securities to which the prospectus relates, and the person on whose application the prospectus was approved. (4) A supplementary prospectus must provide sufficient information to address the new factor, correct any material mistake or inaccuracy that gave rise to the need for it. (5) An investor has a right to withdraw his acceptance after a supplementary prospectus is published. Responsibility of experts. 16. (1) For the purposes of the Order, an expert is deemed as having certified any part of the registration statement or any document and is responsible for any statement or report reproduced (in whole or in part) in a prospectus with his written consent. (2) A person responsible for filing a prospectus must — (a) include a statement in the prospectus that the expert has consented to the reproduction of his statement or report; (b) file the written consent of the expert with the Authority; and (c) keep a record of the written consent received from the expert. Offer of asset-backed securities issued by special purpose vehicle. 1.7. (1) An offer of asset-backed securities shall be made only if they are issued by — (a) a special purpose vehicle (SPV) other than a trust; or (b) the trustee of a trust that is a special purpose vehicle. (2) The Authority may exempt any person or class of persons from this regulation, subject to such conditions or restrictions as the Authority may determine. (3) In this regulation — 12  "asset-backed securities" means debentures or units of debentures issued pursuant to a securitisation transaction; "securitisation transaction" means an arrangement that involves the sale, transfer or assignment of assets to a special purpose vehicle where — (a) such sale, transfer or assignment is funded by the issue of debentures or units of debentures, whether by that special purpose vehicle or another special purpose vehicle; and (b) payments in respect of such debentures or units of debentures are or will be principally derived, directly or indirectly, from the cash flows generated by the assets; "special purpose vehicle" is an entity or a trust (for its trustee) that is established solely in order to do either or both of the following — (a) hold, whether as a legal or equitable owner, the assets from which payments to holders of any asset-backed securities are or will be primarily derived; or (b) issue any asset-backed securities. PART III CONTINUING DISCLOSURE OBLIGATIONS Annual reports and financial statements. 18. (1) Market disclosure of the annual report and annual financial statements by reporting entities (public companies and listed companies, including funds) must be made on a timely basis and include significant information about the operations and business results of the reporting entities. (2) The annual report and annual financial statements referred to in sub-regulation (1) must be made and filed with the Authority as soon as possible after the annual report and financial statements have been audited and approved but not later than 90 days after the end of the financial period, and save in exceptional circumstances, the Authority may consider an application for extension of this period. 13  (3) With respect to the financial year to which it relates, the annual report must include — (a) a review of operations during the financial year and the results of those operations; (b) the details of any significant changes in the state of affairs of the reporting entity during the financial year; (c) the principal activities of the reporting entity during the financial year and any significant changes in the nature of those activities during that financial year; (d) the details of any matter or circumstance that have arisen since the end of the financial year that have significantly affected or may significantly affect — (i) the reporting entity's operations in future financial years; (ii) the results of those operations in future financial years; or (iii) the reporting entity's state of affairs in future financial years; (e) the likely developments in the reporting entity's operations in future financial years and the expected results of those operations; and 09 a statement by the auditors that the accounts give a true and fair view of the state of affairs of the reporting entity, profit and loss and additional information as may be required. (4) An independent, competent and qualified auditor must audit the annual financial statements in accordance with the International Financial Reporting Standards or where applicable, the Accounting and Auditing Organisation for Islamic Financial Institutions Standards or such other international standards as may be applicable. Preliminary and interim financial results. 19. (1) A market disclosure of preliminary financial results must be made public without delay, but not later than 30 minutes before the market opens on the day after the board of directors' approval. (2) A reporting entity must publish a semi-annual financial statement for the first 6 months of each financial year, and if the accounts have either been audited or reviewed by the auditors, comments to this effect must be included. 14  (3) The semi-annual financial statement referred to in sub-regulation (2) must be made without delay and in any event not later than 60 days of the end of the period to which the statement relates. (4) A change of accounting reference date that includes a market disclosure of previous and proposed accounting reference date, and reasons for the change must be made without delay. Disclosure of price sensitive information. 20. (1) Reporting entities are required to disseminate unpublished price sensitive information without delay as part of a continuous reporting obligation. (2) Reporting entities must ensure that any price sensitive information is disclosed to the market as a whole and must take all reasonable care to ensure that such information is sufficiently detailed, accurate and not misleading or deceptive. (3) The price sensitive information must be released by the reporting entities without delay by way of an announcement or such other manner as the Authority may determine. (4) A short period before announcing price sensitive information is permitted where a reporting entity is affected by an unexpected event and the reporting entity needs to clarify the situation so that any information released is accurate and not misleading. (5) Where there is a danger of information leaking out in the meantime, the reporting entity must make a holding announcement, giving an outline of the subject matter of the announcement, the reasons why a full announcement cannot yet be made and undertaking to give a full announcement as soon as possible. (6) Price sensitive information that is already available to the market, such as interest rate changes, does not need to be announced unless it has an unexpected or unusual effect on the reporting entity. 15  (7) The obligation of a reporting entity to announce price sensitive information is not discharged where a fee must be paid for access to the information or it is not a matter of general knowledge that the information can be obtained and in cases of doubt, a reporting entity must consult with the Authority. Types of price sensitive information. 21. (1) Types of price sensitive information that must be reported by reporting entities may include — (a) transactions in the securities of the reporting entities, including derivative securities, made by their executive officers and directors; (b) defaults and other events that could trigger acceleration of direct or contingent obligations; (c) transactions that result in material direct or contingent obligations not included in a prospectus filed by the reporting entities with the Authority; (d) offerings of securities not included in a prospectus filed by the reporting entities with the Authority; (e) waivers of corporate ethics and conduct regulations for officers, directors and other key employees; material modification to rights of security holders; (g) departure of any of the senior management of the reporting entities (or persons in equivalent positions); (h) notices that reliance on a prior audit is no longer permissible, or that the auditor does not consent to the use of his report in a filing under the Order; (i) definitive agreement that is material to the reporting entities (negotiations of agreements would be excluded from this requirement unless and until a definitive agreement is entered into); any loss or gain of a material client or contract; any material write-offs, restructurings or impairments; any material change in accounting policy or estimates; (m) movement or de-listing of the securities of the reporting entities from one quotation system or securities exchange to another; 16  (n) changes in rating agency decisions and other rating agency contacts; and (o) any other material events. (2) Reporting entities must announce any of the events referred to in sub- regulation (1) not later than the second business day after the event occurs and, if possible, by the opening of business on the day after the event occurs. Exemption to requirement to disclose. 22. (1) The reporting entities must ensure that any price sensitive information is kept confidential within the reporting entities, if the disclosure of information would be unduly detrimental to the interests of the reporting entities or where the information to be disclosed is commercially sensitive. (2) In the circumstances referred to in sub-regulation (1), the reporting entities must deliver a notification requesting non-disclosure to the Authority without delay. Persons to whom price sensitive information may be disclosed. 23. (1) Reporting entities may only disclose price sensitive information, in strict confidence, to — (a) their advisers; (b) agents employed to release the information; (c) persons with whom they are negotiating with a view to effecting a transaction or raising finance, or where the information is disclosed in the necessary course of business of the reporting entities. (2) In the event that it is likely that price sensitive information will be made known to certain employees of the reporting entities, the reporting entities must put in place procedures to ensure that those employees do not disclose such information, whether or not inadvertently, and that those employees are adequately trained in the handling, distribution and announcement of price sensitive information. 17  Framework for handling of price sensitive information. 24. (1) The responsibility for an overall policy on the handling of price sensitive information lies with the directors and senior management of the reporting entities, who must be aware that they may be held personally liable for breach of these Regulations. (2) Reporting entities must have a consistent procedure for assessing whether information is price sensitive and should clearly identify the persons within the reporting entities who are responsible for the communication of the price sensitive information to the market. (3) Before making any announcement, reporting entities must put in place arrangements for maintaining the confidentiality of price sensitive information that must include adequate training for employees in the appropriate handling, distribution and announcement of price sensitive information. Inadvertent disclosure on selective basis. 25. (1) Where price sensitive information is provided by a reporting entity on a selective basis, that reporting entity is in breach of its continuing obligation of disclosure. (2) The reporting entity shall, as soon as it becomes aware of the inadvertent disclosure referred to in sub-regulation (1), ensure that a full announcement is made to the market. Correction of inaccurate or misleading information. 26. Where a reporting entity has made a market announcement (such as a profit forecast), and the reporting entity becomes aware that there is likely to be inaccurate or misleading information, the reporting entity must make an announcement correcting the information as soon as possible. Securities listed in more than one jurisdiction. 27. (1) A reporting entity that has securities listed in the same class in more than one jurisdiction must ensure that the release of announcements containing price sensitive information is coordinated across those jurisdictions. 18  (2) When the requirements for disclosure are stricter in another jurisdiction than in Brunei Darussalam, the reporting entity must ensure that the same information is released in Brunei Darussalam as in that jurisdiction. (3) A reporting entity shall not delay any reporting to the Authority in order to wait for a market to open in another jurisdiction. PART IV CAPITAL MARKETS SERVICES LICENCES Capital markets services licence and representative's licence applications. 28. (1) Part VII of the Order provides for two types of licences — (a) a capital markets services licence which entitles a person to carry on the business or hold himself out as doing by way of business in any one or more regulated activities; and (b) a representative's licence which entitles an individual to carry on any one or more regulated activities or holds himself out as doing so on behalf of holder of a capital markets services licence. (2) A holder of a capital markets services licence or a holder of a representative's licence may carry on any of the regulated activities in the Order as permitted by the Authority. (3) A holder of a representative's licence may only carry on any one or more regulated activities that a holder of a capital markets services licence is licensed to carry on. (4) The combination of regulated activities that a holder of a representative's licence is allowed to carry on depends on the nature of the regulated activities, and whether there are inherent conflicts arising from simultaneously carrying on the regulated activities, which are determined by the Authority. 19  (5) Although a capital markets services licence or a representative's licence is valid for a period of 12 months, the Authority may extend the licence tenure to 36 months for qualified holders of capital markets services licences and to 24 months for qualified holders of representative's licences as an incentive to holders of capital market services licences or representative's licences with high standards of corporate governance and market conduct. (6) The Authority may require applicants for capital markets services licences or representative's licences, or key management personnel to attend interviews to demonstrate credibility and knowledge in their regulated activities. (7) The Authority may, if it thinks fit, allow exemption or variation from any requirement based on the merits of the case, whether on a permanent basis or for a specified period of time. Fit and proper requirements. 29. (1) The purpose of fit and proper requirements is to set out and describe the criteria that the Authority takes into account when assessing the fitness and propriety of the person applying for a licence. The criteria are relevant in assessing the continuing fitness and propriety of licensed persons. (2) A person who applies to be licensed under the Order must be fit and proper, as set out in section 157 of the Order. In assessing whether the applicant is fit and proper, the following criteria are considered — (a) honesty, integrity and reputation; (b) competence and capability; (c) financial soundness; (d) requirements relating to competencies of representatives. Honesty, integrity and reputation. 30. (1) In determining honesty, integrity and reputation of a person, the Authority may have regard to all relevant matters including, but not limited to, those set out in the Order that may have arisen either in Brunei Darussalam or elsewhere, although conviction for a criminal offence does not automatically mean an application will be rejected. 20  (2) The Authority may treat an application of a person on a case-by-case basis, taking into account the seriousness of, and circumstances surrounding any offence, the explanation offered by the convicted person, the relevance of the offence to the proposed role, the passage of time since the offence was committed and evidence of the rehabilitation of the individual. (3) In considering the matters in sub-regulations (1) and (2), the Authority may consider whether the reputation of the person might have an adverse impact upon the person for which the function of the person is or is to be performed and on the responsibilities of the person. (4) The Authority may consider whether, in the past, the person has been candid and truthful in all his dealings with any regulatory body and whether the person demonstrates a readiness and willingness to comply with the requirements and standards of the regulatory system and other legal, regulatory and professional requirements and standards. Competence and capability. 31. (1) In determining the competence and capability of a person, the Authority may have regard to all relevant matters, including, but not limited to — (a) whether the person satisfies the relevant training and competence requirements of the Authority in relation to the function or the functions the person performs or intends to perform; and (b) whether the person has demonstrated by experience and training that the person is suitable, or will be suitable if approved, to perform the function or functions. (2) In considering the matter in sub-regulation (1)(b), the fact that a person may have been convicted of, or dismissed or suspended from employment for, drug or alcohol abuses or other abusive acts, will be considered only in relation to the continuing ability to perform the particular function for which the person is or is to be employed. 21  Financial soundness. 32. (1) In determining the financial soundness of a person, the Authority may have regard to any factors including, but not limited to — (a) whether the person has been the subject of any judgment debt or award, in Brunei Darussalam or elsewhere, that remains outstanding or was not satisfied within a reasonable period; (b) whether, in Brunei Darussalam or elsewhere, the person has — (i) made any arrangements with his creditors; (ii) filed for bankruptcy; (iii) had a bankruptcy petition served on him; (iv) been adjudged bankrupt; (v) been the subject of a bankruptcy restrictions order (including an interim bankruptcy restrictions order); (vi) offered a bankruptcy restrictions undertaking; (vii) had assets sequestrated; or (viii) been involved in proceedings relating to subparagraphs (i) to (vii). (2) In relation to sub-regulation (1), for the purpose of a representative's licence, the Authority will not normally require the person to supply a statement of assets or liabilities. The fact that a person may be of limited financial means does not, in itself, affect his suitability to perform a function. (3) Every applicant shall submit his business plan and scope of regulated activities that he intends to carry on or hold himself out to be carrying on. (4) If a matter comes to the attention of the Authority that suggests that the person is not fit and proper, the Authority may consider how relevant and important the matter is. Minimum financial requirements for holder of capital markets services licence. 33. (1) The minimum financial requirements for a holder of a capital markets services licence pertain to the following types of regulated activities under the Order which include — 22  (a) dealing and arranging deals in investments as principal or agent; (b) managing investments including collective investment scheme management and establishing, operating or winding up a collective investment scheme; (c) giving or offering investment advice in his capacity as an investment adviser or a financial planner; (d) using computer-based systems for giving investment instructions; (e) safekeeping and administration of assets including custodial services. (2) Unless otherwise specified by the Authority, the specific requirements include — (a) for any person who is licensed to carry out any regulated activity referred to in sub-regulation (1)(a) — (i) minimum base capital of $2,000,000 where the corporation is incorporated in Brunei Darussalam; or (ii) net head office funds of $2,000,000 where the corporation is a foreign branch; (b) for any person who is licensed to carry out the regulated activity referred to in sub-regulation (1)(b) — (i) minimum base capital of $300,000 where the corporation is incorporated in Brunei Darussalam; or (ii) net head office funds of $300,000 where the corporation is a foreign branch; or (iii) 10 per cent of aggregate margins required, whichever is the higher. (c) for any person who is licensed to carry out the regulated activity referred to in sub-regulation (1)(c) — (i) in the case of an investment adviser, minimum base capital of $250,000 where the corporation is incorporated in Brunei Darussalam, or net head office funds of $250,000 where the corporation is a foreign branch; or (ii) in the case of a financial planner, minimum base capital of $100,000 where the corporation is incorporated in Brunei 23  Darussalam or net head office funds of $100,000 where the corporation is a foreign branch; (d) for any person who is licensed to carry out the regulated activity referred to in sub-regulation (1)(d) or (e), the minimum base capital as determined by the Authority. (3) A holder of a capital markets services licence must maintain the minimum financial requirement throughout the validity of the licence. (4) If the financial condition of a holder of a capital markets services licence falls below the minimum financial requirement, the regulated activity may only be continued with the written consent of the Authority. (5) A holder of a capital markets services licence that is an Islamic investment business as defined under the Order shall not issue preference share. (6) In this regulation — "base capital" in relation to a holder of a capital markets services licence, means the sum of — (a) the following items in the latest account of the holder of the capital markets services licence — (i) paid-up ordinary share capital; (ii) paid-up irredeemable and non-cumulative preference share capital; and (iii) reserve fund; (b) any unappropriated profit or loss in the latest audited accounts of the holder of the capital markets services licence, less any interim loss in the latest accounts of the holder of the capital markets services licence, and any dividend that has been declared since the last audited accounts of the holder of the capital markets services licence; 24  "irredeemable and non-cumulative preference share capital" means preference share capital consisting of preference shares that satisfy all of the following requirements — (a) the principal of the shares is perpetual; (b) the shares are not callable at the initiative of the issuer of the shares of the shareholders, and the principal of the shares is never repaid outside of liquidation of the issuer, except in the case of a repurchase or other manner of reduction of share capital that is initiated by the issuer and permitted under any written laws; (c) the issuer has full discretion to cancel dividend payments, and — (i) the cancellation of dividend payments is not an event of default of the issuer under any agreement; (ii) the issuer has full access to cancelled dividend payments to meet its obligations as they fall due; and (iii) the cancellation of dividend payments does not result in any restriction being imposed on the issuer under any agreement, except in relation to dividend payments to ordinary shareholders; "net head office funds", in relation to a foreign company, means the net liability of the branch of that foreign company in Brunei Darussalam to its head office and any other branches outside of Brunei Darussalam; "reserve fund" means a fund amounting to a percentage of the audited net profits of each year, as may be determined by the Authority, which is required from a holder of a capital markets services licence that is permitted to deal in securities and is a member of an approved clearing house. Organisational requirements for holder of capital markets services licence. 34. (1) An applicant for a capital markets services licence must ensure that his business is properly established which includes the following — 25  (a) an organisational structure with clear lines of responsibility and authority; (b) necessary information technology systems and infrastructure; (c) adequate internal control systems; (d) risk management policies and processes; (e) policies and processes on conflict management and the monitoring of unethical conduct and market abuse; policies and procedures to ensure compliance with any written laws and regulations. (2) In order to carry on more than one regulated activity, an applicant for a capital markets services licence must have — (a) requisite systems and procedures to monitor all relevant activities within its organisation; and (b) control procedures in place to monitor any conflict of interest, unethical conduct and market abuse. Systems and procedures. 35. (1) The holder of a capital markets services licence must — (a) establish and maintain appropriate operational policies, procedures and measures to detect any risk and any subsequent risk of non-compliance with their obligations under the Order and these Regulations; and (b) take appropriate measures to manage those risks. (2) For the purposes of sub-regulation (1), a holder of a capital markets services licence shall consider the nature, scale, complexity and range of the regulated activities that the holder conducts and the businesses that the holder engages in. (3) The holder of a capital markets services licence must establish and maintain an effective compliance function that operates separately and independently from their other functions and activities, and has the following responsibilities — (a) to monitor and, on a regular basis, assess the adequacy and effectiveness of policies, procedures and measures implemented for the purposes of 26  sub-regulation (1), and actions taken to remedy any deficiency to ensure that the holder of the capital markets services licence and the relevant persons comply with their obligations; (b) to advise and assist the relevant persons responsible for the regulated activities so that they comply with the obligations of the holder of the capital markets services licence. (4) In these Regulations, a relevant person is any person who is — (a) a manager, member of the board of directors, any company officer of the holder of the capital markets services licence; (b) an employee of the holder of the capital markets services licence; (c) a natural person seconded to and placed under the authority of the holder of the capital markets services licence; or (d) a natural person who takes part, under the terms of an outsourcing agreement, in providing services to the holder of the capital markets services licence. Basic requirements for systems and procedures. 36. The holder of a capital markets services licence must ensure that the following requirements are met to enable the compliance function to perform its tasks properly and independently — (a) the compliance function must have the necessary authority, resources, expertise and access to all relevant information; (b) a compliance officer must be appointed and must be responsible for this function and for reporting as to compliance, including the preparation and filing of a report to the management, annually or more frequently as appropriate, concerning compliance, risk control, and the appropriate steps taken in the event of deficiencies; (c) the relevant persons involved in the compliance function are not involved in the performance of the services and activities that they monitor; (d) the method for determining the remuneration of the relevant persons involved in the compliance function must not or must not be likely to compromise their objectivity. 27 Appointment and responsibilities of compliance officer. 37. (1) The compliance officer referred to in regulation 36(b) must be authorised by the Authority. (2) The Authority shall specify the organisational procedures for the compliance function, the appropriate qualifications, the expertise and the requirement of a sufficient level of knowledge, of the compliance officer. (3) The management of the holder of the capital markets services licence must promptly inform the board of directors of the appointment of the compliance officer. Risk management. 38. (1) The holder of a capital markets services licence must take the following steps regarding risk management — (a) to establish and maintain effective risk management policies and procedures which identify the risks relating to its activities, processes and systems, and where appropriate, set the level of risk it tolerates; (b) to adopt effective arrangements, processes and mechanisms to manage the risks relating to their activities, processes and systems, in light of its level of risk tolerance; (c) to monitor — (i) the adequacy and effectiveness of its risk management policies and procedures; (ii) the level of its compliance and the compliance of the relevant persons with the arrangements, processes and mechanisms adopted; and (iii) the adequacy and effectiveness of measures taken to address any deficiencies in those systems and procedures, including failures by the relevant persons to comply with the requirements of those systems or procedures. 28  (2) The holder of a capital markets services licence shall, where appropriate and proportionate in view of the nature, scale and complexity of its business, and the nature and range of the services and activities undertaken in the course of that business, establish and maintain a risk management function that operates separately and independently from their other functions and activities and carries out the following tasks — (a) implementation of the policy and procedures referred to in sub-. regulation (1); (b) provision of advice and appropriate risk management reports to the senior management. Internal audit. 39. The holder of a capital markets services licence shall, where appropriate and proportionate in view of the nature, scale, complexity and range of its business, establish and maintain an effective internal audit function which is separate and independent from their other functions and activities and, has the following responsibilities — (a) to establish and maintain an effective audit plan to examine and evaluate the adequacy and effectiveness of the management systems of the holder of capital markets services licence and their internal control mechanisms and arrangements; (b) to issue recommendations based on the result of work carried out in accordance with paragraph (a); (c) to verify compliance with those recommendations; (d) to provide reports on internal audit issues to the board of directors and the management of the holder of capital market services licence. Requirements for representative's licence. 40. (1) Before the Authority grants a representative's licence, the applicant must satisfy the requirements of Part VII of the Order and the following conditions — (a) the applicant must be at least 21 years old; (b) the applicant must be a fit and proper person and must determine that none of the grounds for refusal specified under the Order or these Regulations apply; (c) the applicant must provide all the relevant information to his principal to enable the necessary due diligence to support the application and to ensure satisfaction of the minimum requirements for carrying on the regulated activities. 29  (2) The Authority shall assess the competency of the applicant to carry on a regulated activity that may include educational and professional background, work experience and previous track records of the applicant. (3) The applicant must pass the relevant licensing examination established by the Authority and the examination result is valid for 3 years from the date of passing the licensing examination. (4) A holder of a capital markets services representative's licence may be exempted from taking the licensing examination every 3 years by undertaking a minimum of 20 points of continuing professional development in a year, on or before the anniversary date of their licence. The continuing professional development must be in the form of a qualification, a course or an activity recognised by the Authority. (5) An applicant who has previously been granted a representative's licence under the Order and who has left the industry may reapply for a representative's licence to undertake the same regulated activity without having to retake the Authority's licensing examination, provided the application is made within 3 years from the date the applicant left the industry. (6) An applicant may apply for exemption from the relevant Authority's licensing examination requirements if the applicant has a distinguished service, which includes having — (a) a total of at least 20 years' working experience; (b) spent at least 10 years in the capital markets or the financial services industry or in a regulatory body which regulates the capital markets or the financial services industry, and the applicant was directly involved in the area in which exemption is applied for; or (c) held a senior management position during his tenure in the capital markets or the financial services industry, or in the regulatory body. 30 General conditions and restrictions of holder of capital markets services licence. 41. (1) A holder of a capital markets services licence must comply with any conditions and restrictions as long as the capital markets services licence and the representative's licence remain valid. The Authority may impose additional conditions or restrictions on the holder of a capital markets services licence at the time of granting or renewing a capital markets services licence and a representative's licence. (2) The conditions and restrictions pertaining to the holder of a capital market services licence include — (a) to remain fit and proper and comply with all the conditions under the Order and these Regulations; (b) to comply with the Order, these Regulations, any guidelines and any other written laws that may govern the business activities that are conducted; (c) to obtain the prior approval of the Authority if there are any changes to the regulated activities that he is licensed to carry on or hold himself out as doing, by way of business; (d) to notify the Authority of any change to company shareholding, paid- up capital or management within 14 days of the change; (e) to conduct the licensed business efficiently, honestly and fairly; 09 to supervise and monitor the licensed business to ensure compliance with the Order, these Regulations, any guidelines and any relevant code of conduct. Such supervision and monitoring should be able to prevent and identify breaches; (g) return any licence to the Authority if it has been cancelled upon variation, revoked or if the licensed regulated activities cease to be conducted; (h) ensure that the carrying on of any licensed regulated activity on its behalf is performed by persons who are appropriately licensed; (i) ensure that employees, including any holder of a representative's licence, where applicable, comply with the Order, these Regulations, any guidelines and any written laws that may govern the regulated activities; and ensure that its licensed representatives are — (i) adequately supervised in the performance of their duties; (ii) sufficiently trained for those duties; and 31  (iii) kept abreast of developments by means of continuing training. (3) The holder of a capital markets services licence must inform the Authority immediately of any occurrence of any of the following events — (a) any employee misappropriates client's funds or commits any act that is detrimental to the interests of clients; (b) any holder of representative's licence, where applicable, ceases to be fit and proper to hold a representative's licence; or (c) any holder of representative's licence, where applicable, fails or ceases to perform his functions. (4) A holder of a capital markets services licence that conducts the business of managing investments must immediately disclose to its clients — (a) any legal or disciplinary event that is material to an evaluation of the integrity and ability to meet its contractual commitments to clients; or (b) any material fact about the financial condition that will impair the ability to meet its contractual commitments to clients. (5) A holder of a capital markets services licence must — (a) not undertake the purchase or sale of securities or futures contracts which involves or potentially involves a conflict of interest between the holder of a capital markets services licence and the funds under its management; (b) not for its own account, undertake, directly or indirectly, the purchase or sale of securities from or to the funds under its management; (c) obtain the prior approval of the Authority for investments in assets other than conventional and syariah-compliant securities, futures contracts, money market instruments and deposits in conventional and syariah-compliant deposit accounts; and (d) submit any advertisement or promotional material to the Authority for purposes of post-vetting. Conditions and restrictions of holder of representative's licence. 42. The holder of a representative's licence must satisfy the following — 32  (a) remain fit and proper at all times as required by the Order and these Regulations; (b) comply with the Order, these Regulations, any guidelines and any written laws that may govern the business activities conducted; (c) does not allow any unlicensed person to perform any licensed regulated activities on his behalf; (d) ensure that licensed regulated activity is conducted efficiently, honestly and fairly; and (e) return his representative's licence to the Authority if it is cancelled upon variation, revoked or if he ceases to conduct licensed regulated activities. Know your client's requirements. 43. (1) A holder of a capital markets services licence shall — (a) use due diligence in regard to the opening and maintenance of its client's accounts; and (b) know and retain the essential facts concerning every client and concerning the authority of each person acting on behalf of such client. (2) The essential facts to be obtained from a client must include information concerning the client's — age; other investments; financial situation and needs; tax status; investment objectives; investment experience; investment time horizon; liquidity needs; risk tolerance; any other information as the holder of a capital markets services licence considers to be reasonable in recommending any transaction or investment strategy involving a security or securities; and (k) any other information as may be determined by the Authority. 33 Client-specific suitability. 44. (1) As required under the Order, a holder of a capital markets services licence must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the client, based on the facts known by the holder of the capital markets services licence or disclosed by the client in response to reasonable efforts by the holder of the capital markets services licence to obtain information concerning the client's information in regulation 43(2). (2) A holder of a capital markets services licence fulfils the client-specific suitability obligation for an institutional investor, if — (a) the institutional investor affirmatively indicates that it is willing to forego the protection of the client-specific suitability obligation rule; and (b) the holder of a capital markets services licence has a reasonable basis to believe that the institutional investor is capable of — (i) evaluating investment risks independently, both in general and with regard to particular transactions and investment strategies involving a security or securities; and (ii) exercising independent judgment in evaluating the recommendations of the holder of a capital markets services licence. (3) Sub-regulation (2) shall apply to agents to whom the decision-making authority of the institutional investor have been delegated. Handling of client's complaints. 45. (1) A holder of a capital markets services licence must establish and maintain effective and transparent procedures for reasonable and prompt handling of complaints received from retail clients or potential retail clients. (2) A holder of a capital markets services licence must keep a record of each complaint and the measures taken to deal with it. 34  (3) A holder of a capital markets services licence must prepare and transmit reports of complaints to the Authority when requested by the Authority. (4) A holder of a capital markets services licence must ensure that records referred to in sub-regulation (2) are retained for a minimum period of 7 years. Safeguarding client's assets. 46. (1) A holder of a capital markets services licence must comply with the following obligations to safeguard client's assets — (a) maintain such records and accounts as are necessary to enable them at any time and without delay to distinguish assets held for one client from assets held for other clients, and from their own money and other assets and ensure that such records and accounts are sufficient to reconstruct all transactions undertaken on behalf of any client; (b) maintain their records and accounts in a way that ensures their accuracy, and in particular, the correspondence of the records and accounts to the securities held by clients; (c) ensure that records and accounts referred to in paragraphs (a) and (b) are retained for a period of 7 years after they were made; (d) conduct periodic reconciliations between their internal records and accounts and those of the third parties with whom securities of clients are held and such internal reconciliations should be carried out as often as is necessary, and as soon as reasonably practicable after the date to which the reconciliation relates, to ensure the accuracy of the records and accounts of the holders of capital markets services licences; (e) take the necessary steps to ensure that clients' securities deposited with a third party can be identified separately from the securities belonging to the holders of capital markets services licences by means of differently titled accounts on the books of the third party or other equivalent measures that achieve the same level of protection; introduce adequate organisational arrangements to minimise the risk of loss or diminution of assets or rights of clients in connection with those financial 35  instruments resulting from misuse of money and other assets, fraud, poor administration, incorrect record-keeping or negligence. (2) For the avoidance of doubt, the obligations as to records and accounts under sub-regulation (1) shall include the following — (a) the identification of the client or the beneficial owner; (b) the address of the client or the beneficial owner; (c) the telephone and e-mail address of the client or the beneficial owner; (d) the date of birth of the client or the beneficial owner; (e) the employment information for the client or the beneficial owner; the annual income and net worth of the client or the beneficial owner; (g) the investment objectives of the client or the beneficial owner; (h) if the account is a discretionary account, the dated signature of the client or the beneficial owner and the person to whom discretionary authority was granted for the client or the beneficial owner; for each transaction — (0 the name and address of the account holder; (ii) the amount purchased or sold; (iii) the time of the transaction; (iv) the price of the transaction; and (v) the name of the individual within the regulated person who handled the transaction. (3) The following records may be provided to foreign regulatory authorities in response to appropriate requests relating to investigations in support of the foreign regulatory authorities — (a) the identification of the customer, the client or the beneficial owner set out in sub-regulation (2); (b) for each transaction — (i) the account holder; (ii) the amount purchased or sold; (iii) the time of the transaction; (iv) the price of the transaction; 36  (v) the individual within the holder of the capital markets services licence who handled the transaction; (vi) the bank or broker and brokerage house that handled the transactions. Use of third party holders of clients' money and other assets. 47. (1) A holder of a capital markets services licence using a third party to hold money and other assets of clients must use all due skill, care and diligence in the selection, appointment and periodic review of the third party and of the arrangements made for the holding of those money and other assets. (2) A holder of a capital markets services licence must take into account the expertise and market reputation of the third party, as well as any legal or regulatory requirements or market practices related to the holding of those money and other assets that could adversely affect clients' money and other assets. (3) When the holder of a capital markets services licence uses a third party located outside Brunei Darussalam to hold clients' money and other assets that have specific regulations and supervision regarding the holding of money and other assets on behalf of another person, then those investment services providers shall choose a third party that is subject to the supervision and regulations similar to these Regulations. Use of clients' money and other assets. 48. (1) A holder of a capital markets services licence must not — (a) enter into arrangements for securities financing transactions regarding money and other assets held by it on behalf of a client; or (b) use such money and other assets for their own account or for the account of another client, unless the client has given his prior express consent for the use of the money and other assets on specified terms, as evidenced, in the case of a retail client, by his signature or an equivalent alternative mechanism. 37  (2) The use of the money and other assets of that client must be restricted to the specified terms to which the client has consented. (3) A holder of a capital markets services licence may not enter into arrangements for securities financing transactions in respect of money and other assets held by it on behalf of a client in an omnibus account, if permitted by the Authority, maintained by a third party, or otherwise use the money and other assets held in such an account for their own account or for the account of another client unless at least one of the following conditions is met — (a) each client whose money and other assets are held on an omnibus account, if permitted by the Authority, must have given consent in accordance with sub-regulation (1); (b) the holder of the capital markets services licence must have systems and controls to ensure that only money and other assets belonging to clients who have given prior consent under sub-regulation (1) are used. (4) The records of a holder of a capital markets services licence must include data on the clients on whose instructions the money and other assets have been used and on the number of money and other assets used belonging to each client who has given his consent, so as to enable the allocation of any loss of securities. (5) The records of a holder of a capital markets services licence shall be retained in a medium that allows the storage of information in a way accessible for future reference by the Authority, and in such form and manner to enable the following conditions are met — (a) the Authority must be able to access them readily and to reconstitute each key stage of the handling of each transaction; (b) it must be possible for any amendment to be made with the contents of the records prior to such amendment to be easily ascertained; (c) it must not be possible for the records to be manipulated or altered. Report to Authority regarding client's accounts. 49. Each holder of a capital markets services licence must assure that its auditor makes a report to the Authority at least annually on the adequacy of the measures taken by the holder 38 of the capital markets services licence to comply with regulation 46 and any other regulations. Revocation of holder of capital markets services licence at its request. 50. (1) A holder of a capital markets services licence seeking to have its licence revoked under section 165 of the Order must make an application in writing to the Authority stating — (a) the basis for the request; (b) that it will cease to carry on all regulated activities in or from Brunei Darussalam; (c) the date on which it will cease to carry on all regulated activities in or from Brunei Darussalam; (d) that it will discharge, all obligations owed to its clients with respect of whom the holder of the capital markets services licence has carried on, or will cease to carry on, all regulated activities in or from Brunei Darussalam; and (e) if it is providing investment management or custodial services, that it has made appropriate arrangements for the transfer of business to a new service provider where necessary. (2) A holder of a capital markets services licence seeking to have its licence revoked under section 165 of the Order must satisfy the Authority that it has made appropriate arrangements with respect to its existing clients, including receipt of any clients' consent where required and, in particular — (a) whether there may be a long period in which the services will be wound down or transferred; (b) whether deposits must be returned to clients; (c) whether money and other assets belonging to clients must be returned to them; and (d) whether there is any other matter which the Authority may reasonably expect to be resolved before granting a request for the revocation of a capital markets services licence. 39  (3) In determining a request for the revocation of a capital markets services licence, the Authority may require additional procedures or information as appropriate including information that substantiate that the holder of the capital markets services licence will cease to carry on licensed regulated activities. (4) Where there may be an extensive period of winding down, detailed plans should be submitted to the Authority. (5) It may not be appropriate for a holder of a capital markets services licence to request an immediate revocation of its licence in all circumstances, although it may wish to consider reducing the scope of its licence during this period. Arrangements under paragraphs (3) and (4) must be discussed with the Authority. (6) The Authority may refuse a request for the revocation of a capital markets services licence if — (a) the holder of the capital markets services licence has failed to settle its debts to the Authority; (b) it is in the interests of a current or pending investigation by the Authority, or by another regulatory body or by the Public Prosecutor; or (c) it appears that its clients may be exposed to adverse effect. (7) When the Authority grants a request for the revocation of a capital markets services licence, the Authority may continue to exercise any power under the Order or these Regulations in relation to the capital markets services licence for 3 years from the date on which the capital markets services licence is revoked. PART V MARKET OPERATORS AND MARKET INFRASTRUCTURE Application for licence. 51. (1) Any person who intends to carry on either or both of the investment services and activities of operating a securities exchange or a clearing house in or from Brunei Darussalam shall be — 40  (a) constituted as a body corporate; and (b) make an application to the Authority for a licence in accordance with these Regulations; or (c) make an application to the Authority for recognition in accordance with these Regulations. (2) The Authority may not consider an application for a licence to operate a securities exchange or a clearing house from a person who is already licensed by or has applied for a licence from the Authority. (3) The applicant must submit a written application to the Authority — (a) demonstrating how the applicant intends to satisfy the licensing requirements and all other continuing obligations under the Order and these Regulations; and (b) with copies of any relevant agreements or such other information as the Authority may require. (4) The Authority may grant a licence to the applicant to carry on either or both of the investment services and activities of operating a securities exchange or a clearing house if the Authority is satisfied that it — (a) has satisfied or will satisfy the requirements under the Order and these Regulations in relation to the nature of the investment services and activities; (b) if applicable, will maintain an official list of securities, in a proper and independent manner; (c) is fit and proper; and (d) will conduct and manage its affairs in a sound and prudent manner. (5) In making the assessment as to whether an applicant is fit and proper, the Authority may consider the following — (a) both the applicant and the systems it operates or proposes to operate; (b) all information, including a programme of operations setting out inter alia, the types of business envisaged and the organisational structure; 41  (c) the applicant's connection with its senior management and those who hold a controlling interest in the applicant or any other person; (d) the precise nature of the investment services and activities; (e) any matter which may harm or may have harmed the integrity or the reputation of Brunei Darussalam; 69 the activities of the applicant, the associated risks and accumulation of risks, that those activities pose to the Authority's regulatory objectives; (g) the cumulative effect of factors which, if taken individually, may be regarded as insufficient to give reasonable cause to doubt the fitness and propriety of an applicant; (h) in relation to an application for recognition, the regulatory framework and the regulations thereunder which the applicant is required to comply with in its home state; N any other relevant matters. (6) The Authority may, in considering an application for a licence — (a) carry out any enquiries which it thinks