The customers’ funds and assets held with CMA licensed persons are subject to the provisions and rules set forth in Module 7 “Customers’ Funds & Assets” of the Executive Regulations of Law No. 7 of 2010 on the Establishment of Capital Markets Authority and Regulation of Securities Business, as amended.
A licensed person is required to take measures, which ensure that customers’ funds and assets are maintained, safeguarded and only used for the intended purposes for which they are allocated; maintain complete segregation between deals and orders executed for its own account and those executed for the customer’s account; ensure that the customer is the beneficiary of all transactions related to their funds; and use best efforts to realize and promote its customers’ interests.
Licensed persons shall engage independent auditor on annual basis to prepare the assurance report on the compliance with rules and provisions stated in Module 7. Such report shall be submitted to Capital Markets Authority.
What is Capital Markets Authority’s definition of Customers’ Funds and Assets?
Article 1-2 of Module 7 sets forth:
The customer’s funds include all cash amounts received or held by any licensed person in favor or on behalf of a customer in the course of carrying on any securities activity less the cash amounts allocated to settle the customer’s obligations resulting from the transactions executed for their account, whether such obligations are payable, conditional or contingent.
The licensed person’s fees shall not be included in the customer’s funds if they are payable in accordance with their agreement.
Frequently asked questions related to the assurance report on customers’ funds and assets are as follows:
Can the auditor engaged to audit the annual financial statements or another auditor be appointed?
Article 2-5 of Module 7 sets forth that the auditor engaged to audit the company’s annual financial statements shall be appointed.
Will the licensed person or the independent auditor send the assurance report on customers’ funds and assets to Capital Markets Authority?
The independent auditor shall send the assurance report on customers’ funds and assets to Capital Markets Authority not later than 1 March of every year in accordance with the requirements of Circular No. 6 of 2016.
Who are the licensed persons governed by the rules and provisions of Module 7 – Customers’ Funds and Assets?
The provisions of Module 7 of the Executive Regulations shall apply to the licensed persons who carry on the following activities:
- Portfolio manager;
- Collective investment scheme manager;
- Clearing agency; and
- Qualified securities broker registered in the Bourse
What is the added value to business entities from Report on Compliance with Customers’ Funds & Assets Rules?
- Comply with laws, regulations, resolutions and instructions issued by Capital Markets Authority;
- Enhance business entity’s reputation and increase all stakeholders’ confidence;
- Protect the customers’ funds and assets and promote their interests and investments; and
- Contribute to optimizing regulatory compliance with respect to securities business.
What are the services offered by Baker Tilly?
Assurance Report on Compliance with Customers’ Funds & Assets Rules
Prepare annual assurance report by the licensed person’s auditor on compliance by the licensed person with the rules set forth in Module 7 (Customers’ Funds & Assets) of the Executive Regulations of Law No. 7 of 2010. The required report shall be submitted to Capital Markets Authority not later than 1 March of every year provided that such report will be presented in Arabic language.
(Reference: Executive Regulations – Module 7: Customers’ Funds & Assets, Article (2.5) of Chapter 2 “General Provisions”)