Transactions involving the subscription and dealing with shares of public shareholding companies and corporate bonds in the Hashemite Kingdom of Jordan were, prior to the issuance of the Temporary Securities Law No. 76 of 2002 (the Securities Law), handled generally by the Amman Financial Market (AFM), with it taking on the role of both the Stock Exchange and the regulatory body.
Following the enactment of the Securities Law, three separate bodies emerged out of what had previously been the AFM, with separate functions. These institutions are the Jordan Securities Commission (JSC), the Amman Stock Exchange (ASE) and the Securities Depository Center (SDC).
The Securities Law defines Securities as any ownership, ownership, rights or any evidence (evidencing ownership) or documents, local or foreign that are commonly recognised as securities and considered as such by the Board of Commissioners of the Securities Commission (the Board).
In particular, the term “Securities” includes the following:
- Transferable and tradable companies’ shares
- Bonds issued by companies
- Securities issued by the Government, official public institutions, public institutions or municipalities
- Securities depository receipts
- Shares and investment units of mutual funds
- Equity option bonds
- Spot contracts and forward contracts
- Put and call option contracts
- Any right to acquire any of the items in 1 to 8 subject to Board approval
The following shall not be deemed to be Securities:
- Business papers including cheques and bills of exchange
- Documentary credits, transfers and instruments exclusively traded among banks
- Insurance policies and entitlements in pension funds for beneficiaries which are financed other than by the contributions
Furthermore, Article 6 of the Securities Law states that, notwithstanding what is stated in any other legislation, the provisions stipulated in the Securities Law and the regulations, instructions and decisions issued under it apply to company shares and other traded securities on the market with respect the following matters:
- The rights of the parties arising out of the sale, purchase or transfer of securities
- The method and specific form of registration of ownership rights and their legal effect
- The transfer of ownership rights and the rights arising from such transfe
- The rights of the parties involved in the clearing, settlement and transfer
- The rights of the creditors of the trading contract counterparties arising during the process of the sale, purchase or transfer of securities including the rights relating to the securities and their monetary equivalents
- The conclusion and documentation of trading contracts and means of their proof and cancellation
- Dealing in securities
Article 7 of the Securities Law established the JSC, which aims to protect investors in securities, regulate and develop the capital market to ensure fairness, efficiency and transparency, and protect the capital market from the risks it might face.
It is important to note that no person shall make a public offer unless a prospectus is filed with the JSC, together with sufficient additional information and data to enable an investor to make his investment decision.
The Board shall issue instructions specifying the information and data that shall be included in the prospectus or attached to it.
A securities offer shall be in one of the following forms:
- A prospectus
- An advertisement containing a summary of the prospectus and other information or data required by the JSC or authorised by it pursuant to instructions issued by the Board
- A written text attached to or preceding the prospectus, provided the prospectus has come into effect
The sale of securities that are part of a public offer shall not be binding upon the buyer unless the buyer has first received a copy of the effective prospectus.
However, in accordance with Article 36 of the Securities Law, the Board may, in accordance with criteria it determines, grant exemptions from submitting a prospectus in the following cases:
- If the number of investors to which the public offer is made is limited, and the investors are capable of assessing and bearing the investment risks
- If the funds intended to be raised by the offer are limited
- If the disclosure submitted to the investors is accurate and sufficient to be considered as a substitute for the prospectus
The prospectus shall be submitted in the written or electronic form specified by the JSC in accordance with the instructions issued by the Board, and shall be signed by the chairman of the board of directors or the chairman of the executive board and each of the chief executive officer or the chief operating officer and the chief financial officer of the Issuer, in addition to the following:
- If a company is in the process of being established, the majority of the founders
- If the company is a public shareholding company or a private shareholding company, the majority of the members of the board of directors of the Issuer
- If the Issuer is a limited liability company, the majority of partners
- The Underwriter or Underwriters, as the case may be
- The auditor who certified financial reports attached to the prospectus
The Board may prescribe a specific form or type of electronic signature that shall serve as equivalent evidence to a written signature.
It is also worth noting that no person shall publicly bid to purchase, or acquire by exchange, more than 40 per cent of a Public Issuer's securities except by means of a Public Takeover Bid in accordance with instructions issued by the Board. A Public Takeover Bid to purchase or exchange any securities is deemed to be an offer to all owners of such securities. Any person who makes a Public Takeover Bid shall pay any owner of securities that are the subject of the offer, who offers to sell such securities, the highest price paid to any other seller of such securities, without discrimination. If the number of securities offered for sale or exchange by owners to the person who makes the Public Takeover Bid is higher than the number of securities that the person intends or commits to buy or exchange, then the purchase or exchange shall be from all owners who offer to sell or exchange, in the proportion of the securities offered for sale or exchange to the total securities demanded for purchase or exchange.
Unless licensed by the Board in accordance with instructions issued by it, no person may engage in business as:
- Financial Broker
- Investment Trustee
- Investment Manager
- Financial Adviser
- Financial Services Company
- Any other activities relating to securities determined by the Board.
No natural person may serve as a Registered Person of any of the entities referred to above unless registered with the JSC.
The Board shall, in accordance with instructions issued by it, determine the nature of the activities referred to above, the licensing requirements for each, the registration requirements for Registered Persons, and standards of training, experience and competence applicable to them. The Board may subject applicants to an examination or to any other demonstration to establish satisfaction of prescribed standards. The Board may, in accordance with instructions issued by it, grant any person exemption from the licensing and registration requirements, subject to the demands of public interest.
The Board may require the Licensed Person to provide unconditional bank guarantees or any other acceptable guarantees so as to secure the Licensed Person’s obligations to its clients dealing in securities and ensure its compliance with the provisions of the Securities Law and the regulations, instructions and decisions issued under it. The Board may liquidate the guarantees and dispose of them as it deems appropriate.
The Stock Exchange
Article 65 of the Securities Law established the Amman Stock Exchange (ASE), with its membership consisting of Financial Brokers and Dealers and any other entities designated by the Board. The aims of the ASE include creating an attractive and safe environment for investment, developing processes and methods for trading securities in the stock market, meeting the latest international standards, disseminating trading information to the largest possible number of Dealers and interested parties, and creating transparency and credibility in the dealings of the stock market.
A Trading Market in Securities (Market) shall be licensed as a Stock Exchange in accordance with the provisions of the Securities Law and the instructions issued by the Board in this regard. An application to license a Market as a Stock Exchange shall be filed with the JSC, and shall have enclosed with it its by-laws and instructions governing its activities and such other information and documents as the Board may deem necessary or appropriate for the protection of investors or in the public interest.
A Market shall not be licensed as a Stock Exchange unless the Board determines it is organised and has the capacity to enforce compliance by its members and persons associated with its members with the provisions of the Securities Law and the regulations, instructions and decisions issued under it, and with its own by-laws and instructions.
The by-laws and instructions of a Market shall provide for the following:
- Charging its members, Issuers and other persons using its facilities any fees and charges in a fair and reasonable manner
- Ensuring fairness, efficiency and transparency and preventing fraud, deception and prohibited acts, fostering cooperation and coordination with entities working in the capital market and protecting investors
- Laying down fair principles for any differentiation between clients, Issuers, Financial Brokers or Dealers
- Imposing disciplinary sanctions upon its members and persons associated with them for violation of the provisions of the Securities Law and the regulations, instructions and decisions issued under it and the provisions of the by-laws and instructions of the Market
- Applying equitable and fair trading procedures
- Barring any unjustified or inadequate restraints on competition
- Establishing standards of training, experience and administrative competence for its members and persons employed them, and disciplinary measures against those who do not satisfy those standards
- Ensuring and monitoring the financial adequacy of its members
Neither the chairman nor the deputy chairman of the Market may be a member of the board of directors or of the board of executives of a Licensed Person, or a director, manager, employee or representative of a Licensed Person during their term in office.
The board of directors of the Market shall appoint a certified auditor to audit the accounts of the Market.
In accordance with Article 69(b) of the Securities Law, trading on the Market shall be carried out only through trading contracts between brokers, either on behalf of clients or for their own account. The contracts shall be recorded in the Market registers in accordance with the Market by-laws and instructions, which shall be binding upon all parties to the trading.
Article 76 of the Securities Law established the SDC, which is responsible for the registration of securities, the deposit of securities, transfer of ownership and safekeeping of securities, and the clearance and settlement of securities transactions.
Article 81 of the Securities Law provides that any Issuer shall register at the SDC the securities issued by it, in accordance with the instructions issued by the SDC. The certificates of ownership of securities deposited at the SDC shall be cancelled according to the instructions issued by the SDC. Registration and transfer of ownership of securities traded on the Market and the price settlements of such securities between brokers shall be by means of entries in the SDC’s records.
The SDC may accept electronic data from its members and from the Market in accordance with its issued by-laws and instructions. Unless otherwise proven, the entry records and the accounts maintained, whether manually or electronically, by the SDC, as well as any document issued by the SDC, shall constitute prima facie legal evidence of ownership, registration, transfer of ownership and settlement of the securities, at the price and on the date stated in those records, accounts or documents. If a lien, or other restriction of ownership resulting from a court decision, is imposed on deposited securities, the SDC shall fix that restriction in its records on the date of receiving the court decision, unless the ownership of the respective deposited securities has been transferred prior to that date.
The respective rights and obligations of the seller, the purchaser and of third parties concerning the securities for sale shall be established on the date of concluding the contract at the Market. The SDC shall document the ownership of the sold securities and shall enter the transfer of their ownership in the SDC’s records, according to instructions issued by it. The settlement of the trading contracts of securities deposited in the SDC shall be on the basis of Delivery Versus Payment.