Brokers' User Guide: Abu Dhabi Securities Market

Abu Dhabi Securities Market - Brokers User Guide
ABU DHABI SECURITIES MARKET
Brokers User Guide
November 2000
The International Securities Consultancy November 2000
Table of Contents
INTRODUCTION ................................................................................................................................................ 4 THE ABU DHABI SECURITIES MARKET (ADSM) ................................................................................................ 4 THE BROKERS USER GUIDE .............................................................................................................................. 5 LEGAL STRUCTURE............................................................................................................................................. 5 CUSTOMERS....................................................................................................................................................... 7 CUSTOMER CONTACT ......................................................................................................................................... 7 NEW CUSTOMERS ............................................................................................................................................... 8 ALL CUSTOMERS .............................................................................................................................................. 11 TAKING INSTRUCTIONS..................................................................................................................................... 13 TRADE CONFIRMATION .................................................................................................................................... 14 COMMISSION AND CHARGES............................................................................................................................. 15 STOCK MOVEMENT....................................................................................................................................... 16 LODGING CERTIFICATES AT THE ADSM........................................................................................................... 16 TRANSFER OF SHARES TO TRADING ACCOUNT ................................................................................................. 16 TRANSFER OF SHARES FROM TRADING ACCOUNT ............................................................................................ 17 TRANSFER OF SHARES FROM/TO ANOTHER BROKER ........................................................................................ 17 RE-CERTIFICATION ........................................................................................................................................... 17 PLEDGING ......................................................................................................................................................... 17 CHANGE OF DETAILS ........................................................................................................................................ 18 TRADING ........................................................................................................................................................... 19 TRADING FLOOR ............................................................................................................................................... 19 ORDER PROCESSING ......................................................................................................................................... 19 TRADING ERRORS ............................................................................................................................................. 21 TRADING EX-BENEFIT ....................................................................................................................................... 21 SUSPENSION OF TRADING ................................................................................................................................. 21 UPDATE OF ACCOUNTS ..................................................................................................................................... 22 TRADING LIMIT ................................................................................................................................................ 22 TRADING REPORTS ........................................................................................................................................... 24 SETTLEMENT................................................................................................................................................... 25 SETTLEMENT WITH THE CUSTOMER .................................................................................................................. 25 DELIVERY OF STOCK ........................................................................................................................................ 25 CASH SETTLEMENT WITH THE ADSM .............................................................................................................. 25 FAILURE TO PAY ............................................................................................................................................... 26 STATEMENTS OF ACCOUNT ....................................................................................................................... 27 OFF-MARKET TRANSFERS .......................................................................................................................... 29 PERMITTED OFF-MARKET TRANSFERS ............................................................................................................. 29 BENEFITS AND STOCK EVENTS ................................................................................................................. 30 CASH BENEFITS ................................................................................................................................................ 30 STOCK BENEFITS .............................................................................................................................................. 30 BENEFITS WITH AN OPTION TO CHOOSE ........................................................................................................... 30 STOCK EVENTS ................................................................................................................................................. 30 APPENDIX A FORMS ...................................................................................................................................... 31
APPENDIX B CODE OF CONDUCT AND CUSTOMER AGREEMENT.................................................................... 32 APPENDIX C POWER OF ATTORNEY .............................................................................................................. 49
Introduction
The Abu Dhabi Securities Market (ADSM)
The ADSM exists to provide opportunities for, and promotion of, investment of savings and funds in securities, thereby benefiting the national economy. In order to ensure that the national securities market is based on, and complies with, international standards, the laws of the United Arab Emirates and Abu Dhabi impose various controls over the buying and selling of securities. One very important aspect of the law is that it requires that all trading in listed securities take place through licensed brokers on the floor of the ADSM. The UAE Securities and Commodities Authority acts as the regulatory body supervising the market. In addition, the ADSM itself has rules that lay down more precisely the practices that should be used when participating in the securities market. Brokers must comply with these rules if they wish to trade in securities in Abu Dhabi. Participation in the ADSM is restricted to broking firms that meet the entry criteria referring, amongst other things, to registration with the Authority, capitalisation, and numbers of trained staff. Brokers may only trade on behalf of customers, and not on their own behalf, i.e. they may trade as agents but not as principles. Companies that wish to list on the ADSM must also have approval from the Authority. The market operates on the basis of book entry transfer. This means that, as a general rule, certificates are not issued to investors. All records of ownership are held in the ADSM systems. Certificates will only be issued under exceptional circumstances, for example, in order to allow the holder to pledge his securities against a loan. However, only securities that are lodged with the ADSM can be traded. Investors intending to trade on the ADSM need to have a unique identification number, which will be issued to them on production of certain personal identity documents. They also need to lodge certificates for any securities they already own with the ADSM before they can sell these securities. Trading on the ADSM is by automated order matching. (The computer system is called Horizon.) This means that brokers enter buy and sell orders into the system, on behalf of their customers, and orders are matched using time and price priority rules. These ensure that investors receive the best possible terms for their trade that are available in the market at that time. Clearing, settlement, depository and registration functions are also automated. (This computer system is called Equator.) Settlement of trades takes place between brokers and the ADSM on the business day after trading, which is known as T+1. All cash settlement is carried out through one specified settlement bank the National Bank of Abu Dhabi.
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The Brokers User Guide

The purpose of the Brokers User Guide is to describe to ADSM brokers how to buy and sell shares on the ADSM on behalf of their customers. It describes: the communications the broker must have with his customers; the interactions he will have with registrars and banks; the processes he will use to communicate with the ADSM; and compliance with the ADSM rules and the Code of Conduct.
The ADSM rules and the Code of Conduct lay down in formal terms precisely what minimum practices brokers must adhere to. The User Guide should help brokers, in a somewhat less formal manner, with their day-to-day operations. The User Guide does not give technical details on how to input trades, print out reports, or other system features. This information is to be found in its entirety in the System Manuals provided with the Horizon and Equator computer systems, which are supplied by efa.
Legal Structure
In order to ensure that the national securities market is based on, and complies with, international standards, the laws of the United Arab Emirates and Abu Dhabi impose various controls over the listing, buying and selling of securities. The UAE Securities and Commodities Authority acts as the regulatory body supervising the market, which is governed by the following laws, regulations and resolutions: Federal Law No. (4) of 2000 concerning the UAE Securities and Commodities Market & Authority; Emirate Law No. (3) of 2000 concerning the Establishment of the Abu Dhabi Stock Exchange; Council of Ministers Resolution No 384/10 of 2000 concerning the Regulations regarding the Licensing and Supervising of the Stock Market; Securities And Commodities Authority Resolution concerning Regulations Relating to Brokers; and Council Of Ministers Resolution No 12 of 2000 concerning the Regulations for Listing Securities and Commodities.
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In addition, the ADSM itself has rules, which lay down more precisely the practices that should be followed in the securities market. Brokers must comply with these rules if they wish to trade securities in Abu Dhabi. Companies that wish to list on the ADSM must have approval from the Authority and the companies, and their registrars, must also follow the Authority regulations and the rules of the ADSM to obtain and maintain their listing on the market. A significant new legal provision is that all trading of listed securities must now be carried out on the ADSM and off-market trading of such securities is prohibited. This means that all trading of listed securities in Abu Dhabi must be executed through the ADSM systems and procedures.
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Customers
Customer Contact
Licensed Representatives
Under the new laws, regulations and rules, only broking firms belonging to the ADSM may trade securities that are listed on the ADSM. All trading in these securities must be carried out on the ADSM. In addition, only licensed representatives of these firms may act for and advise customers, and enter trades into the ADSM systems. In order to become a licensed representative of a firm, the individual concerned must undergo training and pass an exam at the end of the training. Brokers must advise the ADSM if a representative leaves and give the reason for leaving. The ADSM will not permit a person to become a representative with another firm if he is dismissed from the original firm for bad conduct. If a licensed representative of one firm leaves the firm and joins another, he will have to take the exam again, as the license is linked to the firm he represents. Similarly, if a broker leaves the ADSM then all his representatives cease to be licensed.
The Code of Conduct

The Code of Conduct (Appendix B) gives precise details of the dos and donts when dealing for customers. However, it can be summarised as: Always act honestly and in your customers best interests; dont do anything which might be construed as damaging to your customers, to other brokers or to the market generally.
Segregated Bank Accounts

One of the most important concepts and principles of the ADSM is that of investor protection. For that reason, it is one of the ADSM rules that all customer money received and held by the broker must be kept in a segregated bank account. This is to ensure that in the event of the failure of the broker, money belonging to customers is not used to pay the brokers debts, and can be recognised as belonging to his customers. The rules also say that the broker must pay a reasonable amount of interest to the customers who have money in these accounts. Since the broker will generally keep one segregated account for all his customers funds, it is also vital that the firms books of account show clearly how much belongs to each customer.
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Current Customers
Brokers who have traded securities in the past will already have a number of customers, or customers, for whom they have acted prior to the introduction of the ADSM. However, in order to act for these customers on the ADSM, brokers will need to go through the same initial processes that they will have to carry out for completely new customers. This means setting up customer agreements and obtaining identification numbers, which they will need when trading in the new environment.
New Customers
Investor Number (IN)
Before a broker can open an account for a customer, he must ensure that the investor has an IN. Investors may apply directly to the ADSM. Alternatively individuals that have a Family Book and companies incorporated in Abu Dhabi may use any bank that has signed an agreement with the ADSM. However, if the investor does not have an IN, then the broker can assist him in obtaining one. The IN acts as a personal, unique identification number within the ADSM systems for the investor. Each investor has only one IN and all his holdings can be identified as belonging to him. This enables the ADSM to provide individuals with composite statements of their holdings in all companies, even if they have dealt through different brokers. To obtain an IN the investor must complete an IN Application form (see Appendix A) and will need to present the following forms of identification: Individuals who are Abu Dhabi nationals; Family Book; Passport;
Companies: the Certificate of Commercial Registration/Trading Licence Chamber of Commerce Licence; Memorandum and Articles of Association;/Contract of Establishment with all amendments; List of authorised signatories; Copy of Board resolution authorising IN application:
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a copy of .Law or Royal Decree establishing the Ministry; a copy of the documents appointing the board of directors; and a copy of the authorised signatories.
For individuals, the Family Book is of particular importance as the IN is formulated around the Family Number. If the customer does not have a Family Book and therefore a Family Number, he must apply for one from the civil authorities. It is understood, however, that there may be instances where the person concerned must be treated with particular sensitivity, and there is no higher authority to appeal to for production of the Family Number. In such a case the ADSM will allocate a number randomly from a bank of numbers kept for this purpose and the IN will then be formulated as if this were a Family Number. However, it should be emphasised that this method will only be used in exceptional circumstances and most customers should either have a Family Number already, or apply for one in the usual way. When acting for foreign investors or nationals, who do not have a Family Book, the broker should contact the ADSM to discuss the documentation that will be necessary to allocate an IN. When a broker is assisting an investor to apply for an IN, then the broker should take copies of the relevant documentation and sign and stamp them to evidence that the broker has seen the original documents. He should then take the completed application forms and copy documents to the ADSM and will be required to pay Dhs 5 for each application. The ADSM will process the application and return the application form to the Broker with the IN written on it. They will also post a card, with the IN shown on it, directly to the investor, by registered post.
The Customer Agreement

In order to trade for a new customer, the broker must first set up a Customer Agreement with him. This ensures that both the broker and the customer know and understand the terms on which they will do business with each other. It is usual for the Customer Agreement to specify a number of details, including: whether the customer authorises the broker to carry out trading on his behalf only against specific instructions or whether the broker has any discretion; by what method the customer will give the broker his order, e.g. in person only, by telephone with a follow-up written confirmation, fax, etc.; how the customer will receive confirmation of his order;
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whether or not the broker expects to receive money from his customer before agreeing to buy securities for him; if he agrees to trade before receiving funds, how soon after the trade must the customer provide the necessary amounts to satisfy the purchase; how soon after a trade has been successfully executed will the customer be notified; how soon after selling stock the customer should expect to receive the proceeds; the amount of commission and other charges the customer will have to pay on any trade; that the broker has the right to sell securities he has bought on behalf of the customer if the customer does not pay what is due to the broker; that all the customers personal details, including his trading activities and securities holdings are entirely confidential and may not be disclosed to any unauthorised person by the broker; that the broker will use his best endeavours to get the best possible price for any trade he carries out for the customer, and that he will attempt to carry out the trade as soon as possible after receiving the order; the timing and frequency of the issue, by the broker, of statements of account, both cash and stock.
Brokers should bear in mind that settlement on the ADSM is on T+1, which means that brokers must pay for stock purchased on the day following the trade, regardless of whether the customer has paid the broker. For this reason, brokers may wish to obtain at least a margin of cash from their customers prior to carrying out a purchase order. The Customer Agreement also contains details of some of the legal obligations and constraints upon each party. For example, customers may not attempt to sell shares to which they do not have legal title; and the broker will not buy or sell shares in the customers name without his full permission to do so. Finally, the Agreement must include a Risk Disclosure Statement. This is designed to ensure that the customer is aware of the risks inherent in investing in securities, and that there is no guarantee that he will make a profit rather than a loss as a result of his investment.
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The Code of Conduct shown in Appendix B contains a sample Customer Agreement. Brokers may use this agreement or one that is modified to meet their own internal policies and procedures. However any agreement prepared by the broker must include the content of the agreement shown in Appendix B.
Opening an Account
After ensuring that the customer has an IN and obtaining the customers signature on the Customer Agreement, the broker is able to open an account within the system. The data is entered into the Equator system by the broker. Under the current Law, transfer of ownership of shares can only be legally completed if a transfer form is prepared and signed by both the buyer and the seller. To enable settlement to take place within the system by book entry transfer, each investor must provide a power of attorney (Appendix C) to enable the ADSM and another (one for the buyer and one for the seller) to sign a transfer on behalf of the investors. This will ensure that the investor has legal title to the shares he buys, even though they are held within the ADSM system and he does not hold a share certificate. The power of attorney will only be used to validate the transfer of securities within the ADSM systems and for no other purpose. The original power of attorney must be lodged with ADSM prior to any orders being executed on the account. The ADSM will stop trading on any account where a Power of Attorney has not been received. Sometimes a group of investors may to hold shares jointly, that is, they each want to have equal ownership rights to the shares, or, more likely, a group of people may become joint owners of a share holding as a result of an inheritance. In these cases each individual must have an IN. However the group will need to nominate one of themselves as their representative and signatory on the account, and each member of the group must provide a power of attorney to this effect. The broker can then set up a joint account for those concerned and shares bought for that account will be owned by the group.
Pledging
Under current law, pledges of shares can only be legally enforced through the use of share certificates and by recording the details of the pledge on the register of members. However, there is nothing in the law which prevents brokers, their customers and pledgees from making appropriate arrangements for safeguarding the positions of all parties, while still trading and settling in dematerialised form. For example, brokers might open an account for the investor which can only be used with the permission of the pledgee, and where any resultant funds are remitted to the pledgee.
All Customers
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Know your customer

Brokers are advised to get to know their customers and to have as much relevant information about them, their investment objectives, and their business dealings as possible. This will enable the broker to provide customers with the best possible advisory services and to build an atmosphere of mutual trust between broker and customer. This information should be reviewed and kept up to date on a regular basis as a customers needs and situation may change from time to time. Brokers must file a copy of each completed customer agreement and must ensure that it is periodically updated with new information about the customer. In some cases the new information will be significant in terms of the investors objectives. Significant changes would include the following: a change in marital status; a change relating to a second person who is allowed to place orders; a change in account name; the investor becoming an insider, i.e. the chairman, board member or an employee of a listed company; and/or a major change in the net worth or annual income of the investor.
In these cases, brokers must ensure that a new customer agreement is prepared and signed by the customer.
Non-paying customers
In order to ensure that customers who do not meet their liabilities do not move from broker to broker, brokers must advise the ADSM of the names of such customers. The ADSM will keep a record of these names and brokers may check with the ADSM before taking on a new customer.
Portfolio Record
Once the broker starts to trade for a customer, he should maintain a portfolio record for him. This will give details of the customers initial holdings and all trades carried out thereafter. In
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this way, the broker will always have an up-to-date picture of the customers investments and will be able to advise him about further trading.
Security Cross Reference

In addition to the portfolio record, brokers are required to maintain a security cross-reference. This is an alphabetical list of securities. Under each security are shown the names of each customer. This list should be updated following each days trading. This data will provide the broker with an accurate list of customers who could be contacted if important or price sensitive information is revealed concerning that security.
Taking Instructions
The broker can take instructions from the customer either in writing, by phone, fax or email, but must be able to prove that the customer did give him such an order. The rules state that any one of the following will be considered proof that the order was given: the customers signature on the instruction form; a recording of the telephone conversation during which the customer gave the order; faxes or emails giving the instructions that can be proved to be authentic.
In all cases the ADSM rules require that the following information is recorded and retained by the broker: date and time of receipt of the instruction; customers account number; name of the company and the security; whether it is a buy or sell instruction; number of securities to which the instruction relates; pricing instructions; nature and duration of validity of the instruction; means of authorisation; and any special instructions.
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If the client is present, he should be asked to sign an order form. Whether or not the client is present, the rules clearly place the onus of proof on the broker to show that he had authorisation from his customer to carry out the trade, in the event of any dispute. The broker is responsible, for this reason, for obtaining the signature of his customer on the written authorisation, or recording orders received by telephone, and for archiving copies of these authorisations. He must also endeavour to verify orders received by fax or email and again, retain proof that he has done so. The broker must also be able to prove that he received any amendments or cancellations in the same way. All trading is required to take place on the trading floor and only licensed representatives are permitted to take orders from customers. However brokers may wish to have licensed representatives available to meet customers, in offices away from the trading floor. This is permissible provided that all orders are passed to a representative on the trading floor for execution. Brokers must ensure that the customer understands what is expected of him regarding prompt payment etc. Where the customer agreement specifies that funds must be available before an order is accepted, the broker must check that the customer has sufficient funds to meet his commitments before trading.
Trade Confirmation
When an order has been executed or partially executed the broker must inform his customer. If the customer is present on the trading floor, he can tell him immediately. In other cases the broker may telephone or fax. In all cases, the office must send out a written confirmation of execution to the customer before the end of the day. The confirmation must give all the details of the trade, including the following: the name of the ADSM broker and its address; the full name of the listed company and the security; the type of transaction undertaken, sale or purchase; the number of securities sold or purchased; the price of the security; the aggregate value of the transaction; commission and any other costs; the total amount to be paid or received by the customer,
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statements indicating that: the ADSM broker is licensed by both the Authority and the UAE Central Bank; the ADSM broker is licensed by ADSM to offer brokerage services to clients in respect of the types of securities being traded; and the transaction has taken place in accordance with these rules and all applicable laws.
This confirmation may act as an invoice to the customer for the sums due, unless the broker has procured the funds prior to trading, in which case it will show by how much the customers cash account with the broker has been depleted.
Commission and Charges

The confirmation to the customer must show clearly how much was paid or received for the securities, and how much was charged for commission and any other charges. The law states that commission and other charges payable by the customer are as follows: transactions worth less than Dirhams 15,000 attract a commission to the broker of Dirhams 75; on transactions with a value greater than 15,000 Dirhams, the broker must charge to customer 0.5% of the value of transactions of a value.
The Law also requires that the broker pays a portion of this commission to ADSM and the Authority. ADSM will collect both portions and pay the required amount to the Authority. The amounts laid down in the law are as follows: ADSM is entitled to: Dhs 22.50 on transactions with a value of Dhs 15,000 or less; and 0.15% on the value of transactions, which have a value of more than Dhs 15,000. the Authority is entitled to: Dhs 7.50 on transactions with a value of Dhs 15,000 or less, and 0.05 on the value of transactions, which have a value of more than Dhs 15,000.
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Stock Movement
Lodging Certificates at the ADSM
Investors are encouraged to lodge certificates with the ADSM so that they can be traded in book entry form at any time. Before securities can be lodged, investors must obtain an IN. To lodge stock, investors complete a Stock Lodgement form (Appendix A) and take the form, their share certificates and any other documentation that may be required by the to the relevant company registrar. Brokers may, of course, assist their customers in this area. When stock lodgement is complete stock will continue to be held in the name of the investor but ADSM will produce, and sign under a power of attorney from the company, an internal share certificate. Stock may then be transferred to the control of a broker (see below) and then sold. At this stage the ADSM will produce, and sign under a power of attorney, a stock transfer form. Therefore ADSM will require no further documentation from the investor when they sell. (Brokers, must however, obtain evidence of the investors instructions as explained in the previous section). The legal documentation to be produced when stock is lodged must therefore be sufficient to authorise the transfer of shares following a sale, except for the stock transfer form, which will be produced by ADSM when the sale actually takes place. The registrar will review the certificates and other documentation and confirm to ADSM that the stock is good delivery. The registrar will then cancel the original certificate but continue to hold the shares in the name of the investor. Securities that are in this form cannot be traded. They may only be: transferred to a broker following the lodgement of a Customer Transfer form (see below); transferred to another investor as a result of a valid off-market transfer; re-certificated (see below).
Transfer of Shares to Trading Account

Before an investor may sell shares the securities must be in the trading account of a broker. When an investor buys the securities are automatically added to the trading account and, unless the investor instructs a transfer out of that account, are available for trading. However where the investor has lodged share certificates with the registrar then the investor must also authorise the transfer of shares to the brokers trading account. To effect the transfer the Broker should obtain the customers signature on a Customer Transfer To Broker form (see Appendix A), sign and stamp to form himself and lodge it at ADSM. The ADSM will transfer the shares to the trading account. The shares can then be traded. The International Securities Consultancy November 2000 Page-16
Transfer of Shares from Trading Account

Investors may, if they wish, request ADSM to transfer shares from the Trading Account of a broker by completing a Customer Transfer From Broker (see Appendix A). On receipt of this form, ADSM will check that the broker has no valid objection to the transfer and then move the shares. Once shares have been moved out of a trading account they are ineligible for trading.
Transfer of Shares from/to Another Broker

Sometimes one of your customers may decide to transfer shares from another broker to you. This may happen when a customer first opens an account with you or at some later stage. To action the transfer you will need to take a signed letter from the investor to the ADSM. The ADSM will check with the other broker that he has no claim on the securities against unpaid amounts. Provided the stock is not being used as a lien then the ADSM will transfer the shares to you. This will result in the transfer of shares into the investors account that is under your control. Conversely, one of your customers may decide to transfer shares to another broker. In this case the ADSM will check with you before transferring the shares.
Re-certification
The transfer and ownership of securities, on the ADSM is achieved and evidenced by book entries in the automated accounts held in the ADSM system. Investors will therefore be discouraged from requesting the issue of a certificate by the company. However, if an investor insists that he be given one, that is his right under current law. There are also some cases where an investor may need to have a certificate for perfectly valid reasons. For example, at the moment, in order to pledge his stock, he is required by law to give his certificate to the pledgee. Thus, investors will still require certificates from time to time. When this happens, the request will be made to the ADSM by the investor (or the broker on his behalf) using a Certificate Request form (Appendix A). If stock is in a trading account then the ADSM will transfer the shares out. They will then forward the completed Certificate Request form to the registrar to request that the registrar issue and the company directors sign a certificate in the name of the investor. Registrars will send the signed certificate directly to the investor. Brokers are advised to make sure that customers understand that certificated stock cannot be traded and that it must be lodged with the ADSM again when they wish to sell.
Pledging
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The Law related to pledges has not yet been changed. An investor that wishes to use securities as a pledge must therefore surrender his certificate to the pledgee and record the pledge on the register. When the registrar receives a pledge instruction or release pledge instruction, these are processed as today. However the registrar must instruct ADSM to record the pledge on the register records. Securities within a trading account cannot, at this stage therefore, be used as a legal pledge. However, In system terms it is not necessary for investors to have certificates in order for a pledge to be recorded on the register and for securities to be held to the order of the pledgee. Brokers may therefore make arrangements with their customers and with third parties to ensure that securities are not moved without the consent of the third party.
Change of Details
When a trade takes place on the ADSM, the holdings in the investors trading account, which is under the control of the broker, is updated. However the register is also written up to reflect the change in legal ownership. The registrar will use the information on the register to distribute dividends and other company information and rights, such as proxy voting forms. It is therefore very important that any changes to investor details, which are known to the broker, should be advised to ADSM so that the register details can also be updated. Brokers should advise ADSM using a Change Details form (see Appendix A).
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Trading
Trading Floor
Each broker will be allocated a trading booth on the trading floor. No more than three brokers representatives, as well as the office manager, are allowed in the booth at any one time. No customers are permitted to enter the trading booth. No food or beverages are permitted to be taken into the trading booth. Smoking is not permitted in the trading booth. The trading floor will be open from 8.00 am until 2.00 pm for five days per week (Saturday through Wednesday). Trading will take place from 9.30 am until 12.00 noon on each day, with a pre-opening session between 9.00 am and 9.30 am and then continuous trading from 10.00 am until 12.00 noon. The Horizon manual explains in detail the processes that are undertaken during pre-opening, opening and continuous trading. Between 8.00 am and 2.00 pm the system will be available to brokers to enable them to make enquiries, download reports, open accounts etc. However, brokers are not permitted to print reports from the trading system between 09.15 and 12.05. This is to ensure the maximum system performance during periods of high trading volumes. At least one brokers representative is required to be present in the trading booth during trading hours. The trading booth will be equipped with workstations. No external programs are permitted to be loaded onto these workstations and all maintenance and updating work will be carried out by the ADSM.
Order Processing
Types of Order There are various types of order a customer may give a broker and which can be accommodated by the ADSM trading rules and system. Additionally, the system allows the broker to add some conditions to the orders if required. The full list of these can be found in the system manual, but most commonly a customer will give his broker the following kinds of instruction. Limit Order: a Limit Order is an order to buy or sell a stated number of shares at a specified price, or better; Market Order: a Market Order is an order to trade a security immediately at the current best price available in the market;
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Hit Orders: these enable the customer to tell the broker that he wants to sell as much of his stock as can be sold at the best price available in the market; Take Orders; alternatively these enable him to ask the broker to buy all of the volume of a particular stock available at the best market price; All or None Orders : these enable the customer to trade only if the entire volume of his available stock is bought/sold, although in this case the trade may be with more than one counterparty; Whole or None Orders: this is used if he wishes the entire volume to trade with only one counterparty; (Has been removed from the ADSM trading rules) Fill or Kill Orders: this is used if the customer requests that the order is cancelled if an immediate trade is not possible; Minimum Fill Orders: these are used if the customer specifies that a minimum number of shares out of the whole order must trade the first time the order is submitted; thereafter, the order is filled according to market forces; Minimum Block; this is similar to minimum fill except that the customer specifies that he wants his order to be traded in minimum sized blocks of shares, Stop Loss Order; this is used to enable customers to limit the amount of loss that might occur on an investment, or to protect a profit, it is an order to sell, which is activated when the stock price declines to, or below, a stated trigger price.
Amend or Cancel Orders The customer may decide that he wants to change his order in some way, or cancel it completely. This can be done provided the order has not already been executed. As mentioned above, brokers must take the same measures following receipt of amendment or cancellation orders from the customer as he did with the original order, to ensure he has proof of the instructions. Similarly, he should give the customer a confirmation of the new instructions for future reference and in case of dispute at a later date. The relevant records and books kept by the broker must also be changed accordingly.
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Duration of Orders Hit, Take and Fill or Kill orders will be deleted from the system immediately, if they fail to be executed. Other orders will be deleted from the system at the end of the trading day. All limit and other special fill orders are therefore all good for the day orders. Investors may give brokers orders with a longer effective period. Brokers will need to reenter orders on each day that the customer order is current. However, brokers must notify his customer and ask for new instructions if any price sensitive information is announced concerning the company or the market conditions change significantly during the currency of the order.
Trading Errors
When a trade is made, i.e. an order is executed by being matched with an equal and opposite order in the system, the broker is notified immediately on his screen. There are also end-ofday trading reports provided to him from the system, which can be printed. After a trade has been executed, the broker may discover that the wrong customer account number has been entered. In this case, the broker must bring all related paperwork to the ADSM to request that the accounts be amended. On very rare occasions the ADSM may agree, at its absolute discretion, to cancel a trade that has been executed. This will only be done with the agreement of both parties to the trade. In this case, a letter signed by the party requesting cancellation needs to be submitted to the ADSM giving full details of the trades and the reason for requesting cancellation. The ADSM will consult the counterparty before cancelling the trade.
Trading ex-benefit
When a company pays a dividend or makes a stock distribution e.g. by making a bonus issue, then the ADSM will mark the securities ex-benefit on the trading day before the record date. Any orders that are executed on that day are entered on the understanding that the buyer will not get the dividend or receive the additional shares. Brokers must ensure that their customers understand the implication of trading ex-benefit. Where a broker has orders with a long duration then he must check with his customer whether or not his customer wishes to change the order price as a result of the ex-date being reached.
Suspension of Trading
The ADSM has the power to; suspend trading in a particular security, all securities, by a particular broker or a particular brokers representative, at any time, if it considers that it is in the interest of the market to do so.
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Update of Accounts
The system will reject a sale order if the investor does not have sufficient stock in his account with the selling broker. Brokers must therefore ensure that stock is available to meet the sale. Brokers can check that stock is available for selling by making a position enquiry through his workstation. The system maintains an account on behalf of the investor, which is under the control of the broker. Stock in this account is available for selling. The account is updated as follows: stock is added to the account as a result of: a purchase on the market; transfer of stock, which has previously been lodged, to the account (though a customer transfer to a broker or a transfer from another broker); stock benefits or events such as a bonus issue;
stock is frozen in the account as a result of: sell orders being entered (stock is earmarked to satisfy the order when it is executed); pledge or freeze instructions relating to the stock being entered by the broker or ADSM;
frozen stock is released as a result of: sell orders being cancelled (either by the broker or automatically at the end of the day; pledge or freeze instructions being released by the broker or ADSM;
stock is debited from the account as a result of: executed sell orders; transfer of stock out of the account (through a customer transfer out of the account or to another broker); stock events that involve a change in the underlying security e.g. a consolidation in this case stock will be debited under one security code and credited under the new code).
The registered holding of the investor is updated at the end of processing on T+1.
Trading Limit
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In order to ensure that brokers will be able to meet their financial commitments to the market, the ADSM will set a trading limit for each broker. The trading limit will be calculated as follows: amount of broker overdraft facility with the settlement bank (this is likely to be 80% of the amount of the bank guarantee (the Law requires brokers to have a minimum bank guarantee of DHS 10 million; however this may be increased at the discretion of the broker); plus any cash lodged with the ADSM (this may be cash belonging to the broker or cash belonging to a specific customer (see below); minus the net cash amount due to the ADSM on that day (i.e. any balance to pay in respect of yesterdays trades (this is because cash settlement is not complete until the end of T+1)
plus or minus trades executed today. Example On day 1 a trader starts with a limit of Dhs 9 million. On that day he buys and sells with a net value of Dhs 2 million to pay. His net balance at the start of the next business day will therefore be Dhs 7 million. During the morning of the next day he sells securities with a value of Dhs 5 million. At that point his trading limit will be Dhs12 million. Assuming he does no further trades and pays his net settlement amount his limit the following morning will be Dhs 9 million. If a broker has failed to pay any amounts due to the ADSM, then the ADSM may further reduce the trading limit by a prudential amount, which in the opinion of ADSM will be sufficient to cover any fees or penalties that may be payable for this breach of the rules. When a trader is approaching the firms limit he will be alerted by a system warning. Attempting to continue to input purchase orders will result in the trades being blocked by the system, although sales may continue to be made. Brokers are able to view their trading limits on the ADSM's Equator system. Brokers may raise their guarantee in one of two ways: by providing an increased bank guarantee; or by depositing cash with ADSM.
ADSM will deposit any cash into an account with the settlement bank, in the name of the broker. The account will be under the control of the ADSM but any interest earned on the account will belong to the broker.
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In some cases a particular customer may wish to execute a large trade that would cause the broker to exceed his guarantee. In these cases the broker may lodge cash with ADSM but advise that this cash belongs to a specific investor. When the broker enters the order for the investor he must advise the market controller who will increase the limit to allow that specific trade to execute.
Trading Reports
Brokers can download an end of day trading report relating to the trades executed during the trading session. This will enable him to make any settlement arrangements he may need to make in time for the following days settlement deadlines.
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Settlement
Settlement with the customer
Terms of settlement with the customer will be laid down in the customer agreement, but as a general rule, proceeds of any sale should be delivered to the customer promptly, or entered immediately into the customers account with the broker if he holds one.
Delivery of Stock
Delivery of stock takes place automatically by book-entry transfer on T+1. Trades are settled on a trade for trade basis by debiting the stock account of the seller and crediting the stock account of the buyer.
Cash Settlement with the ADSM

Brokers settle the cash value of trades net with the ADSM; that is, each day, every broking firm will either pay a sum of money to the ADSM, or receive a sum from it, depending on whether the firm has spent more in purchases than it has received in sales, or vice versa. The amount to pay or receive will be shown on daily payment statements. This amount may include any fees payable to the ADSM and the Authority. Brokers download daily payment statements from the ADSM system. They give full details of their settlements for the relevant day and the net amount owing to the ADSM or due to the broker from the ADSM. Settlement with the ADSM operates via one settlement bank the National Bank of Abu Dhabi (NBAD). While brokers may operate as many accounts with other banks as they wish, each broker must also maintain a settlement account at NBAD. The NBAD will provide an overdraft facility for each settlement account. Brokers are responsible for paying, to NBAD, all fees, charges and overdraft interest associated with the operation of the account. The ADSM notifies the bank of the net cash settlement position for each broker on the morning of settlement day. On the day of issue of the payment statement, the settlement bank will debit the accounts of net payers by noon with the amount due from them and will then credit the accounts of net receivers, before the close of the banking day, with the amount due to them. If the broker owes money to the ADSM, he must ensure that this sum is in his settlement account by noon on the due day. If the ADSM owes money to the broker, that amount will be deposited in the brokers settlement account at NBAD by the close of the banking business day. The International Securities Consultancy November 2000 Page-25
Where the broker has lodged his own cash with ADSM he may instruct that this cash is transferred to his settlement account to meet sums due for payment that day and ADSM will then instruct NBAD to transfer funds. Where the broker has lodged customer cash and has advised the market controller that orders have been entered and executed for which the cash is earmarked, ADSM will automatically transfer funds from the customer account to the brokers settlement account to meet payment on the relevant day.
Failure to Pay
Brokers settlement accounts are backed by a bank guarantee from their own banks. If there are insufficient funds in a brokers settlement account the ADSM will automatically use the overdraft facility to pay ADSM and thus enable ADSM to pay net receivers of funds. The NBAD will immediately advise the ADSM. ADSM will immediately transfer any funds in the brokers cash account to the settlement account and may immediately call on the bank that issued the guarantee to provide funds to re-imburse the settlement bank. However in the latter case ADSM may exercise its discretion although, under the rules, the ADSM must call on the guarantee if the settlement account is not returned to credit within seven days. At any time that a broker is in breach of the rules, in this case by failing to fund his settlement account on the settlement due date, the ADSM may, at its discretion : immediately suspend the broker; impose a fine for breach of the rules; and/or reduce the brokers trading limit by a prudential amount.
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Statements of Account
Evidence of ownership The confirmation issued by the broker to the customer at the end of the trading day acts as the customers notification that he has successfully sold or purchased the securities that he wanted. Brokers who have control of customers stock are also required, under the rules, to issue regular statements to the customer. The customer will not, of course, receive a certificate for purchased securities as the securities were bought on the market and settled by book entry transfer in the ADSM system. The ultimate proof that he does indeed own those securities is the entry of his name on the company register kept by the ADSM. This entry is automatically made by the ADSM system following settlement of the trade. However, investors may, if they wish, request a statement of their holdings from ADSM at any time. Broker to customer The timing and frequency with which the broker issues statements of account to his customers will be detailed in the customer agreement and may vary from broker to broker. For example, some brokers may agree to send statements of both cash and stock after settlement of every trade, while others may decide to issue statements on a monthly basis. However, it is strongly recommended and the sample customer agreement requires, that statements should be sent out, as a minimum, every three months, even if no trading has taken place, as this offers some measure of security to the investor. A statement enables the customer to check that no unauthorised trading has occurred on his account and it may also contain a reminder to customers to inform the broker of any change in personal details. The Equator system will provide statements of stock, which the broker can use when producing his own statements, or which he can send directly to the customer. The ADSM systems do not have enough information to produce statements regarding customers cash accounts and the broker must produce these himself, if cash is held in a segregated account on behalf of the customer.
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The ADSM to customer If the customer wishes to have a statement direct from the ADSM, to confirm information they have received from their broker, they may request one either directly or through the broker. If a customer asks his broker to obtain a statement for him, the broker must ask the customer to complete and sign a Statement Request form (see Appendix A), which the broker will then take to the ADSM in person. The ADSM will produce a statement as soon as possible but at the latest by the end of the business day following receipt of the request. The statement will be passed back to the broker if he requested the issue. Composite statements From time to time an investor may decide he would like a statement of all his holdings in all securities, regardless of which broker he dealt through. Provided the investor has been careful to ensure that all his holdings have been included in his single IN identification records, the ADSM will be able to produce such a statement for him. He may request this directly, by going to the ADSM in person, or via one of his brokers. If a customer asks his broker to obtain a composite statement for him, the broker must ask the customer to complete and sign a Statement Request form (see Appendix A), which the broker will then take to the ADSM. A composite statement will be produced by the next morning at the latest and will be posted to the investors home address, or given to him in person, if he requested it personally. If the broker submitted the request, the statement will be given or sent to him to pass on to his customer.
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Off-Market Transfers
Permitted Off-Market Transfers
Once the ADSM commences operations, all trading in securities listed on the ADSM must be carried out on the ADSM trading floor. All off-market trading in these securities will be prohibited. Therefore, all transfers as a result of trading will be carried out automatically by the ADSM systems. However, there will still be some permitted transfers that are not the result of trades, such as gifts, bequests and court orders. Where they are acting for an investor that wishes to make an off-market transfer, brokers must satisfy themselves that these transfers are truly what they purport to be, and are not an attempt to carry out off-market trading. Where an investor wishes to transfer stock that is in a trading account, he may either approach the ADSM directly or go through the broker. In either case the investor must sign an Off Market Transfer Request (Appendix A), which attests to the validity and legality of the request. The beneficiary (or transferee) must have an IN before the request can be actioned. If the investor approaches the ADSM directly and the stock is in a trading account, the ADSM will approach the broker to ensure that their is no valid objection to the movement. The ADSM will then transfer the securities from the trading account of the broker to the new shareholder and will update the register accordingly. Where a broker is acting on behalf of the recipient of an off-market transfer he will need to obtain the customers signature on the Customer Transfer Request in order to move the securities to his trading account in the recipients name.
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Benefits and Stock Events

Cash Benefits
Cash dividends will continue to be paid directly to investors via the registrar.
Stock Benefits
In the case of stock benefits, stock will be added to the investors holdings via the system, as this is where the records are held. The records will be adjusted centrally by the ADSM, and brokers will be informed that changes have been made. They should then access the system, download the new balances, and send statements to their customers informing them accordingly.
Benefits with an Option to Choose

Where investors are given the option to choose whether they receive cash or stock, the company will usually inform them directly and receive back their choices directly also. The distributions will then be made as above. It is possible, however, that companies may choose to ask the ADSM and its members to carry out the process. In this case, brokers will be sent the option forms by the ADSM, and will be asked to distribute them to their customers who own that particular stock. Customers will be asked to return their forms to the brokers who will pass them back to the ADSM to organise distribution.
Stock Events
The processing of stock events, e.g. subdivisions and consolidations will need to be agreed on an individual basis with the ADSM. It may be necessary to suspend trading for a day to ensure that all trades are settled before the effective date of the event. On the effective date, the ADSM will automatically update the stock accounts of investors to reflect the effect of the stock event. Trading may then commence in the shares in their new form.
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Appendix A Forms
A1 A2 A3 A4 A6 A6 A5 A6 A5 A7 IN Application form Private Individuals IN Application form Companies IN Application form Government Stock Lodgement form Customer Transfer To Broker form Customer Transfer From Broker form Certificate Required form Change Details form Statement Request form Off Market Transfer form
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Appendix B Code of Conduct and Customer Agreement
CODE OF CONDUCT
ABU DHABI SECURITIES MARKET Introduction This Code of Conduct represents an indication of the commitment required of ADSM Brokers and Brokers Representatives to the highest standards of integrity, honesty, fairness, openness and efficiency in the conduct of Brokerage Services and their business practices. It applies to ADSM Brokers not with standing anything else contained in the Rules. It reflects the commitment to maintain standards in the interests of the Market and so reduce the risks of customers in obtaining investment advice and in the provision of Brokerage Services in a competitive market. This Code is a statement of the required practice for ADSM Brokers and Brokers Representatives. Any breach of its provisions will be viewed as serious by ADSM and the Authority and discipline may ensue. When the Abu Dhabi Securities Market makes enquiries in respect of ADSM Brokers, the ADSM will refer to matters set out in this code, as well as to the rules and regulations of ADSM in considering whether any person is or has been guilty of misconduct or is a fit and proper person to remain licensed. The Code is a minimum standard with which ADSM Brokers must comply staff are expected to exceed this standard wherever and whenever feasible. This Code may be varied by the Board from time to time. Interpretation Terms in this Code shall have the same meaning as given to those terms in the Rules of the market operated by ADSM. Non Public Information means any information acquired by any means which relates to the value of any security traded on the exchange, or which may be so in future, which is known to individuals by virtue of their relationship with or to any such company and which has not been made public by an official announcement. Manipulative Trading Practices Manipulative Trading Practices are prohibited. These include: Creating or attempting to create a false or misleading appearance of active public trading for a specific stock, for example fictitious orders for the same stock placed with different ADSM Brokerage firms. Publishing or spreading false data or information regarding the position of entities whose Securities are listed on the market or regarding other ADSM Brokers.
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[Brokers Regulation 18(7)]. Entering or attempting to enter into any scheme or arrangement to sell and re-purchase a stock in an effort to manipulate the market. Causing the last sales or last bid or offer to the day in a stock price to be higher or lower with the intent to manipulate closing price quotations. Using or attempting to use any information to influence the market prices of a stock . Making a fictitious transaction in a stock involving no real change of the ownership of a stock. Improper Selling Practice Improper Selling Practices are prohibited. These include: Confirming a transaction where no trade has been executed (Bucketing). High pressure selling or other undesirable sales practice or other selling of a nature considered undesirable. Leading a customer to believe that he can suffer no loss through opening an account or trading in any stock. Confidentiality of Customer Information All information concerning a customers transaction and his account must be considered confidential and must not be disclosed except with customers permission or by order of ADSM. Information regarding a customers activity and orders must be kept confidential and not to be used for the benefit of other customers. [Brokers Regulation 18(6)]. Honesty and the Customers Best Interest [Brokers Regulation 18(10)]. ADSM Brokers are required to maintain the highest standards of integrity, honesty, fairness, openness, efficiency, justice and equity at all times in their dealings. ADSM Brokers are required to act at all times in the customers best interest. All recommendations must be based on a careful analysis of both the customer information obtained from the customer and the information related to the particular transaction. A cautionary advice must be given to a customer giving orders which appear unsuitable in the light of information available to the ADSM Broker. The advice given, and the customers response, is to be recorded in writing. The customers assets are the property of the customer and are to be used only for the customers purposes; the ADSM Broker is prohibited from using customers assets to his own advantage or for the advantage of others.
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Clients money must be kept in a separate account from ADSM Brokers money. All reasonable steps should be taken to ensure that all information given to the customer regarding his existing portfolio is complete and accurate. All appropriate business like effort must be made to learn the current financial and personal circumstances and investment objective of each customer. No assurance is to be given to a customer regarding the prospect for future price movement or dividend payment of a security. No undertaking and no form of warranty or guarantee may be given to re-purchase or secure the sale of a security at a stated price. Recommendations concerning investment or trading in securities must be made on the basis of information which can be substantiated and is relevant. When implementing clients instructions take into account the details of such instructions and implement the instructions in accordance with the Rules [ADSM Law 28(2)]. Conduct in Accordance with Authority Law If an ADSM Broker acquires non-public information, he shall neither communicate the information, nor take investment action on the basis of such information. [Article 39(1) Authority Law]. The ADSM Broker or a Brokers Representative shall not knowingly participate in, nor assist in, any act of violation of the securities laws of the UAE, Abu Dhabi or any other jurisdiction, nor the rules and regulations of the Abu Dhabi Securities Market. Risk Disclosure An ADSM Broker shall not accept any instructions from a customer until the customer has completed a Customer Agreement. A Customer Agreement shall include an applicable Risk Disclosure Statement in the following form (and shall be printed at least as large as other text in the customer agreement) as follows: Risk Disclosure Statement The price of securities can and does fluctuate, and any individual security may experience upward and downward movements, and may even become valueless. There is an inherent risk that losses may be incurred rather than profit as a result of buying and selling securities. Securities purchased may become unsellable. Investments should only be made in the light of careful analysis and only to the extent an investor can reasonably afford. The customer of a ADSM Broker must assure himself of his ADSM Brokers honesty and competence otherwise the customer risk his investments being made inappropriately or even that they may be misappropriated.
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Standard of duty to get the best available price The ADSM Broker in its relations with its customers and in the execution of the mandate received from the customer, is required to use the care that might reasonably be expected of an informed professional placed in the same circumstances to see the customers orders are executed at the best price available on the Market, unless the customer has instructed otherwise. Types of Buy and Sell Orders The ADSM Broker must ensure that the customer understands what is involved in each type of trading order entered for him. This includes descriptions of several types of trading orders which are detailed in the System Manual along with minimum quotation spreads, and the commissions applicable. Professional Knowledge A continuous effort must be made to maintain a high standard of professional knowledge in managing the ADSM Broker, both financially and operationally and to ensure that the ADSM Broker has in place procedures for proper conduct of his business. Maintain Proper Records It is the ADSM Brokers responsibility to maintain up-to-date records. It is recommended that three types of records be maintained by the ADSM Brokers . New Customer Agreement Form: A copy of an appropriate Customer Agreement Form is attached; an ADSM Broker shall use this or a version of this modified to suit his corporate policies but not excluding any of the content of this form. A copy of a completed form is required to be maintained by the ADSM Broker for each customer and it must be periodically updated with new information about the customer. If such new information amounts to a material change, the ADSM Broker must ensure that a new form is completed. Some examples of material changes in a customers affairs include (1) Changes in marital status (2) change relating to a second person who is allow to place orders (3) change in account name (4) becoming an insider in relation to a publicly traded company (5) a major change in customers net worth or annual income Portfolio Record: This document shows each customers holdings for the ADSM Brokers reference. It must be maintained to ensure that all information within it is current since the record allows the ADSM Broker to discuss at any time the customers security position or investment objectives. A brief note of any special circumstances connected with any trade should be included. Security Cross Reference: This record consists of an alphabetical listing of securities held by customers. Listed under each security are the names of all customers who hold it. This data provides the ADSM Broker with an accurate list of customers to be called should something important develop that might affect that specific security.
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APPENDIX 1 TO CODE OF CONDUCT [ADSM BROKER] CUSTOMER AGREEMENT ADSM Broker Details Name
Address Fax E-mail Telephone Contact Details (including e-mail) Account Number Customer Details Name Address Fax E-mail Telephone Investor Number (First named holder on account) Citizenship Passport Number Bank Account Details (Bank name, branch and account number) Account Details Type of Account PERSONAL/PARTNERSHIP/CORPORATE
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(Attach details of joint account holders) Does anyone other than the persons named have any authority over or any financial interest in the account? Is this a discretionary account? YES/NO Provide details YES/NO See attached authority Special Instructions Type of account Delivery of Securities Method of Confirmation Language Preferred Personal Information Business Name Occupation Relationship to the Business Are you a senior officer or director of a company whose shares are traded on ADSM? Do you or does any part of your business have a position of control in such a company? Age Marital Status Number of Children and Ages Approximate Net Worth Annual Income Investment Knowledge OWNER/PART OWNER/EMPLOYEE/OTHER (Please specify) YES/NO (Details) YES/NO (Details) ARABIC/ENGLISH CASH ACCOUNT/CREDIT ACCOUNT Securities will be held in an account within ADSM unless specific withdrawal or transfer instructions are received
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Investment Objectives Level of Risk We hereby agree that the Investor appoints the ADSM Broker, and the ADSM Broker accepts such appointment, to perform certain Brokerage Services upon the terms and conditions attached as Schedule 1.
_____________________________ For and on Behalf of ADSM Broker _____________________________ Date Definitions In this Agreement, unless the context otherwise requires: ADSM means Abu Dhabi Securities Market
____________________________ For and on Behalf of Investor _____________________________ Date
Authority means the Securities and Commodities Authority, established under the Authority Law. Authority Law means Federal Law No 4 of 2000 relating to the UAE Securities and Commodities Exchange and Authority. ADSM Broker means the person whose name and details are set out on the cover page. Central Bank means the Central Bank of the United Arab Emirates. Customer means the person whose name, details and Investor Number are set out on the front page of this Agreement. Investor Number means the unique identification number allocated to the Customer by ADSM which is a condition to trading of Securities by the Customer. Market means the market for buying and selling securities operated by ADSM. Rules mean the rules of the market operated by ADSM as prescribed by ADSM from time to time. Securities means shares, bonds and financial notes approved by the Authority and listed and traded on the Market. System means the computerised trading system for the Market utilised by ADSM. Trading Account means the Securities trading account within the System held with the ADSM Broker.
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Unless otherwise stated, the following apply: A person may, depending upon the context, include an individual, any form of corporate or business association in any state or form of governmental or official body, whether having a distinct legal entity or not. The clause headings and subheadings are used in this Agreement only to make it easier to read. They are not intended to affect its meaning. The schedules and cover page shall form part of this Agreement. Single shall include plural and vice versa. References to the masculine shall include where appropriate references to the feminine and vice versa. References to any statute, regulation or statutory instrument shall be deemed to be references to that statute, regulation or statutory instrument as from time to time amended or re-enacted or as the context permits substituted therefor from time to time. The words written or in writing include facsimile reproductions or any other means of communication resulting in permanent visible reproduction. Unless stated otherwise references to monetary amounts are to United Arab Emirate currency. ADSM Broker Warranties The ADSM Broker warrants to the Customer that: It holds the following valid and subsisting licences and registrations; Brokers Access Licence issued by ADSM under the Rules; Registration in the Register of Brokers maintained by ADSM; Broking Licence issued by the Authority under the Authority Law and Regulations passed pursuant to that Law; Registration in the Register of Brokers maintained by the Authority under the Authority Law and the Regulations passed under that Law; and Broking licence issued by the Central Bank, and the ADSM Broker is in full compliance with the terms of the above. Customers Rights and Obligations The Customer warrants that it holds a valid Investor Number as set out on the front page of this Agreement. The ADSM Broker is entitled to treat as genuine and duly authorised all dealing instructions which he reasonably believes come from the Customer and which are consistent with the instructions set out on the front page.
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The Customer shall deliver to the ADSM Broker a duly signed a power of attorney or powers of attorney in the form prescribed by ADSM from time to time in favour of ADSM or such other persons as ADSM may prescribe from time to time under which it authorises such persons to execute share transfer forms on its behalf. The Customer acknowledges that until it has complied with clause 3.2, the ADSM Broker shall not accept any orders or instructions from the Customer. The Customer is responsible for immediately informing the ADSM Broker: If he has not received confirmation by post that the ADSM Broker has received its dealing instructions and/or carried them out within 48 hours of placing them; If the Customer receives confirmation of a trade which it did not place or which took place other than in accordance with his instruction. Subject to Clause 14, the Customer shall issue instructions to the ADSM Broker by written instruction, fax or e-mail or by oral instruction given by telephone or in person to or at the address or number set out on the front page of this Agreement or such other address as the ADSM Broker shall specify for the purpose by written notice to the Customer containing the information set out in Schedule 2. The Customer shall not request the ADSM Broker to sell any Securities on the Market unless those Securities are lodged with the ADSM Broker in the Customers Trading Account in accordance with the procedure specified by the ADSM Broker from time to time. The Customer shall not issue any instruction to the ADSM Broker in respect of any Securities which would if carried out or executed and settled be contrary to the provisions of the memorandum and articles of the issuer of those Securities or the law. The Customer shall indemnify the ADSM Broker in respect of any claims, damages or losses suffered by the ADSM Broker arising out of a breach of the foregoing. The Customer is not entitled to open more than one Trading Account with the ADSM Broker. The Customer shall supply the ADSM Broker with all information which the ADSM Broker may require in order to verify the identity of the Customer or the validity of its instruction. The Customer is not entitled to receive the proceeds of any trade undertaken by the ADSM Broker on its instructions until such trade has been executed and settled in the System. The Customer authorises the ADSM Broker to disclose to the Authority any information concerning the Customer and its transactions that the Authority may require. If the Customer wishes to receive a share certificate in relation to any Securities lodged in its Trading Account with the ADSM Broker, it shall follow the procedures prescribed by ADSM from time to time including paying to the ADSM Broker such fees as may be prescribed by ADSM or the Authority. In the event that the Customer does not have the capacity to have Securities the subject of an executed buy order registered in its name, the Customer acknowledges that ADSM may sell such Securities on
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behalf of the customer and the Customer shall indemnify the ADSM Broker for any loss suffered by it in respect of such sale. The Customer acknowledges that once an order placed by the ADSM Broker on behalf of the Customer is executed on the System, the Customer has thereby entered into a legally binding and enforceable, unconditional contract in respect of that transaction. The Customer shall do all things and execute all documents required to give effect to that contract and the underlying transaction, which is the subject of that contract. ADSM Brokers Obligations The ADSM Broker shall, subject to compliance with the Rules and the law, use its best endeavours to comply with the instructions of its Customer to buy or sell Securities which appear to the ADSM Broker to be lawful and not in breach of the constitutional documents of any Listed Company as soon as possible during the trading hours of the Market. The ADSM Broker shall issue to the Customer a written confirmation of every instruction executed on the day of execution. The written confirmation shall contain the information set out in Schedule 3. The ADSM Broker shall hold all funds of the Customer in a bank account segregated from the ADSM Brokers own bank accounts and no ADSM Broker funds shall be deposited in such account. If the Customer defaults in the payment to the ADSM Broker of any amount owing by the Customer to the ADSM Broker in relation to an executed trade of Securities, the ADSM Broker shall, with the consent of ADSM, be entitled to sell the Securities which were the subject of such trade. The proceeds of such sale shall be offset against the debt owing by the Customer to the ADSM Broker and the ADSM Broker shall account to the Customer for the balance of the proceeds of sale within 5 days after the ADSM Broker received such proceeds. The Customer shall have no rights against the ADSM Broker in respect of any loss incurred by it as a result of the sale. Investment Advice and Investment Objectives Subject to clause 5.2, the Customer accepts that the ADSM Broker will not provide any advice as to the merits of a particular instruction if, on receipt of the instruction he reasonably believes that the Customer is not expecting such advice and is dealing on an execution-only basis. The Customer will be informed of this position at the time of placing the instruction. Notwithstanding clause 5.1 above, the Customer may request and the ADSM Broker may provide advice pertaining to the trading of securities on the Exchange. The ADSM Broker will provide investment advice to the Customer on the basis that: The Customers current investment objectives are as specified on the front page or otherwise as notified in writing to the ADSM Broker by the Customer from time to time; and The Customer is prepared to accept the level of risk specified on the front page or otherwise as notified to the ADSM Broker by the Customer in writing from time to time; Unless informed by the Customer of any investments or types of investment which he does not wish to have recommended to him or purchased for him, the ADSM Broker may recommend any
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investment, provided that the ADSM Broker has reasonable grounds for believing such investment to be suitable for the Customer having regard to its requirements and investment objectives. Investment advice shall be provided according to the best of the ADSM Brokers professional skill and knowledge and in accordance with standard market practice. All and any investment advice provided by the ADSM Broker must be evidenced in writing and signed by both parties. The Customer accepts that any advice provided by the ADSM Broker shall not serve as a guarantee as to likely performance and that any trading entered into on the basis of such advice shall be entirely at the Customers own risk and liability. ADSM Brokers Discretion Where written authorisation to the ADSM Broker to enter into discretionary transactions on behalf of the Customer has been provided and subject to any instructions from the Customer, the ADSM Broker shall have full authority at its own discretion and without prior reference to the Customer, to enter into any kind of transaction or arrangement on behalf of the Customer. The discretion afforded to the ADSM Broker under the terms of Clause 6.1 is to be exercised in accordance with the Customers investment objectives, as set out in Clause 6.3. The Customer may set additional limits on the discretion afforded to the ADSM Broker with regard to the following: The type of investment in which the ADSM Broker may enter into transactions on the Customers behalf; and/or The amount of consideration which may be involved in any transactions entered into on the Customers behalf; and/or The value of any investments or any class of investments which may be held on the Customers behalf; and/or Such similar matters as the Customer may specify from time to time in writing. Where the ADSM Broker is granted discretion to enter into transactions on behalf of the Customer, the Customer is to ensure that the ADSM Broker is put in sufficient funds before hand. The Customer accepts that the ADSM Broker will immediately cease dealing once these funds have been exhausted. Conflicts of Interest The Customer is aware that when provided with investment advice by the ADSM Broker, the ADSM Broker or some other person connected with it, may have an interest, relationship or arrangement that is material in relation to the investment, transaction or service concerned. Credit Reference Check
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The ADSM Broker reserves the right to conduct a credit reference check at any time before executing instructions given by the Customer unless the Customer has put the ADSM Broker in sufficient funds to undertake the transaction. Following a credit reference check the ADSM Broker reserves the right to refuse to execute the instruction and/or to impose a dealing limit in relation to instructions received from the Customer as it sees fit. Payment Subject to the following clauses 9.2 and 9.4, the Customer shall ensure that the ADSM Broker is put in sufficient funds to effect an execution prior to an instruction being placed. Where the ADSM Broker holds funds on behalf of the Customer, such funds are to be held in a bank account segregated from Bank accounts of the ADSM Broker, subject to the settlement of any outstanding commitments in accordance with clause 9.6. The Customer shall be entitled to reasonable interest earned on the Customer funds held in this account. Notwithstanding clause 9 above, the ADSM Broker shall have the discretion to accept instructions from the Customer either where it has been put in partial funds or where the Customer has failed to provide funds. Where the ADSM Broker exercises such discretion, this is to be noted in writing in the confirmation set out in clause 4.2. Where the ADSM Broker exercises its discretion in accordance with clause 9, the Customer is to settle any and all outstanding amounts owed within 24 hours of receipt of confirmation of the execution, by any of the methods specified in clause 9 above. Unless otherwise instructed by the Customer in writing, where the ADSM Broker sells securities on behalf of the Customer, the ADSM Broker shall ensure that the Customer receives the proceeds to its account with the ADSM Broker within 24 hours of settlement, less any fees charges and commission including fees payable to ADSM the Authority. Where the Customer fails to make payment of monies owed to the ADSM Broker, the ADSM Broker reserves the right to retain any funds or securities due to the Customer and to take such action as is necessary to offset any and all liability incurred on behalf of the Customer. This right shall not affect any legal rights open to the ADSM Broker. ADSM Broker Charges and Commission Commission and charges on transactions through ADSM Brokers are imposed by the Authority from time to time. Subject to any notification from the Authority or ADSM, which the ADSM Broker shall inform to his Client where the Customer issues instructions for a transaction with a value of less than Dhs. 15,000 it is agreed that the ADSM Broker shall receive a commission of Dhs. 75. The Customer understands and accepts that of this: Dhs. 45 is to be kept by the ADSM Broker. Dhs. 22.50 is to be paid to ADSM by the ADSM Broker.
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Dhs. 7.50 is to be paid to the Authority by ADSM. Where the Customer issues instructions for a transaction with a value of more than Dhs. 15,000 it is agreed that the ADSM Broker shall receive a commission worth 0.5% of the value of the transaction. The Customer understands and accepts that of this: 0.3% is to be kept by the ADSM Broker. 0.15% is to be paid to ADSM by the ADSM Broker. 0.05% is to be paid to the Authority by ADSM. Fees for advisory service shall be subject to the prevailing rate of the ADSM Broker from time to time. ADSM Brokers Records The ADSM Broker shall keep, whether in paper or electronic form records of all transactions entered into on behalf of the Customer, including but not limited to the following: Copies of all instruction forms signed by the Customer and confirmation forms sent to the Customer; Records of any and all telephone conversations entered into with the Customer pertaining to the giving of instructions; Copies of all communications with the Customer made by fax or electronic mail The Customer shall be entitled to copies of each of the above at the cost of the Customer. The Customer accepts that in the event of a dispute between the parties, the ADSM Broker will be entitled to use these records as evidence against the Customer. The parties agree that the following shall be sufficient evidence to prove that the ADSM Broker has the authorisation of the Customer in respect of any order entered into the System by the ADSM Broker on behalf of the Customer: The signature of the Customer on the relevant order; A recording of the telephone conversation between the Customer and the ADSM Broker during which the Customer gave to the ADSM Broker the relevant verbal authorisation. The receipt by the ADSM Broker of an e-mail or fax instruction from the Customer which was confirmed by the ADSM Broker to the Customer on the day of execution of the instruction. Statements of Account The ADSM Broker shall provide the Customer with a statement of any and all money and securities held on its behalf every quarter. Confidentiality Subject to clause 13.2:
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The ADSM Broker shall be responsible for maintaining the confidentiality of all details relating to the Customer which have been submitted or obtained in connection with this Agreement, including but not limited to personal details, trading activities and securities holdings. The ADSM Broker shall not disclose these details to third parties without the prior written consent of the Customer. The Customer accepts that nothing in this clause shall affect the ADSM Brokers duties of disclosure to ADSM and/or the Authority. Risk Disclosure Statement The Customer accepts that the price of Securities can and does fluctuate and any individual security may experience upward or downward movements and even become valueless. There is an inherent risk that losses may be incurred rather than profit as a result of buying and selling Securities. Securities purchased may become unsellable. Investments should be made in light of careful analysis and only to the extent an investor can reasonably afford. The Customer must assure himself of his ADSM Brokers honesty and competence otherwise the Customer risks his investment being made inappropriately or even that they may be misappropriated and he may not get back the full amount originally invested. Amendments The parties may enter into amendments to this Agreement from time to time, provided that such amendments are in written form and signed by both parties. Termination Either party may terminate this Agreement on the provision of 1 weeks written notice or immediately in the case of default by the other party. Consequences of Termination Termination of this Agreement shall be without prejudice to all rights and obligations arising prior to receipt by the other of written notice of such termination. Upon termination: This Agreement will remain in force in respect of any outstanding commitments incurred by the ADSM Broker on behalf of the Customer. No new commitments will be entered into by the ADSM Broker unless and to the extent necessary to end outstanding commitments. Notices Any notice to be given to either party under this Agreement can be given by e-mail, fax, or in writing to the parties at the addresses set out on the front page or such address subsequently notified to the other party in writing. Notice given by e-mail must be confirmed in writing. Notice that is required to be given or confirmed in writing must be sent by pre-paid, [first class] post or delivered by hand.
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A notice served by post shall be deemed to have been served forty-eight hours after posting. A notice served by delivery or e-mail shall be deemed to have been served forthwith upon delivery or the sending of the e-mail, as appropriate. A notice sent be fax shall be deemed to have been given when despatched, subject to confirmation of uninterrupted transmission by a transmission report and provided that any notice despatched by fax after [17:00] hours on any day shall be deemed to have been received at [08:00] on the next business day. In proving service of notices, it will be sufficient in the case of a notice served by post, that such letter was properly addressed, stamped and placed in the post, in the case of a notice served by delivery, that such notice was properly addressed and handed to the addressee or any of its agents and in the case of notice served by e-mail, that the written confirmation was properly, stamped and placed in the post within 24 hours of the relevant e-mail being sent. Assignment Neither party may assign, sub-contract, licence or in any way dispose of its rights or obligations under this Agreement without the prior written consent of the other. Miscellaneous This Agreement, together with any documents referred to in it, constitutes the whole agreement between the parties relating to its subject matter and supersedes and extinguishes any prior drafts, agreements, undertakings, representations, warranties and arrangements of any nature, whether in writing or oral, relating to such subject matter. Governing Law and Jurisdiction This Agreement and all documents attached to it will be construed in accordance with and governed by the laws of the Emirate of Abu Dhabi and the Federal Laws of the United Arab Emirates as applied in the Emirate of Abu Dhabi and each party agrees to submit to the exclusive jurisdiction of the courts of Abu Dhabi.
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SCHEDULE 1 TO CUSTOMER AGREEMENT INFORMATION TO BE INCLUDED BY THE CUSTOMER IN AN INSTRUCTION Date and time of receipt of the instructions. The Customers Investor Number. The name of the Listed Company and the security. An indication whether the instruction is to sell or purchase. The number of securities to which the instruction relates. The instructions given by the Customer as to the pricing of the order. The nature and duration of validity of the instruction. Means of authorisation. An acknowledgement that if the order is executed, there will be no breach of the relevant Listed Companys memorandum and articles of association or the law. Any special instructions.
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SCHEDULE 2 TO CUSTOMER AGREEMENT DETAILS TO BE INCLUDED BY THE ADSM BROKER IN ITS CONFIRMATION OF INSTRUCTIONS RECEIVED The name of the ADSM Broker and its address. The name of the Listed Company and the security in full. The type of transaction undertaken (i.e. sale or purchase) The number of securities sold or purchased. The price of the Security. The aggregate value of the transaction. Fees and commission. The total amount to be paid or received by the Customer. A statement indicating that: The ADSM Broker is licensed by both the Authority and the UAE Central Bank. The ADSM Broker is a member of the Exchange and is authorised by the Exchange to offer ADSM Brokerage services to Customers in respect of the types of securities being traded. The transaction has taken place in accordance with the rules of the Market operated by ADSM.
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Appendix C
Power of Attorney
INVESTOR POWER OF ATTORNEY
BY THIS POWER OF ATTORNEY given on the [ ] day of [ ] 2000 (the Investor) hereby appoints, nominates and constitutes each of the entities listed in the Schedule, (the Attorney) to be the Investors true and lawful attorney within the Emirate of Abu Dhabi, United Arab Emirates (UAE), to do and execute all or any of the following acts, deeds and things on its behalf in respect of the Investors and where appropriate in the name of the Investor: To prepare and sign on behalf of the Investor whether as purchaser or seller, share transfer forms in connection with the transfer of its shares from the Investor to another person or from another person to the Investor. To do all such acts, matters and things as the Attorney shall deem necessary or desirable to give effect to the above. The Attorney shall only exercise the powers given to it under this Power of Attorney through the signature of one of its duly authorised representatives. The Investor authorises and empowers the Attorney to file and/or register this Power of Attorney in any appropriate office and/or registry in the UAE and to procure to be done any and all acts and things which may be necessary to authenticate and give full effect to this Power of Attorney according to the laws and usages of the Emirate of Abu Dhabi and the UAE. And the Investor hereby undertakes to ratify and confirm all and everything which the Attorney shall lawfully do or cause to be done pursuant to this Power of Attorney and to indemnify the Attorney in respect of all and any losses suffered by the Attorney arising out of the performance of its obligations under this Power of Attorney. IN WITNESS WHEREOF the duly authorised representative of the Company has hereunto set his hand the day and year first above written. .............................................. Executed for and on behalf of ................................................ Investor
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Brokers' User Guide: Abu Dhabi Securities Market

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Abu Dhabi Securities Market - Brokers User Guide

ABU DHABI SECURITIES MARKET