Interim Securities Markets Law No. 74

Iraqi Legislation Database PM 12:55 6/19/22, https://iraqld.hjc.iq/PrintLawResult.aspx?PSC=null 1/13 Iraqi Legislation Database Classification: Securities Markets | Stock Exchange Issuing Authority: Iraq - Federal Type of Legislation: Order of the Coalition Provisional Authority Legislation Number: 74 Date of Legislation: 19/04/2004 Status of Legislation: In Force Title of Legislation: Interim Law on Securities Markets Source: Iraqi Official Gazette | Issue Number: 3983 | Date of Issue: 01/06/2004 | Page Number: 59 | Number of Pages: 27 | Part Number 1: | Collection of Laws and Regulations | Note: Basis Based on my authority as Director of the Coalition Provisional Authority and in accordance with laws and customs of war, and in harmony with United Nations Security Council resolutions, including resolutions 1483 and 1511 (2003), And working closely with the Council of Representatives to ensure that economic change is a necessity for the benefit of the Iraqi people and is carried out in a manner acceptable to the Iraqi people. And expressing the Council of Representatives' desire for significant change in the Iraqi economic system as a necessity to improve the living conditions of the Iraqi people, and determination to improve living standards, technical skills, and opportunities for all Iraqis, and combating unemployment and its harmful effects on public security. And acknowledging that some laws related to securities markets under the previous regime will not suit modern, efficient, transparent, and independently organized securities markets, and given that Iraqi contractors and businesses benefit from the revival of capital markets in Iraq, and acknowledging the Coalition Provisional Authority's commitment to undertaking effective management in Iraq, to ensure a new life for the Iraqi people, finding social and economic jobs, and natural daily life transactions, and working in a manner consistent with the UN Security Council report of July 17, 2003, regarding the need to develop Iraq and transition it from a non-transparent central economy to a free market economy represented by sustainable economic growth, through the creation of a vital sector, and the need to find regulatory and legal powers to grant the necessary impact, and working closely with the Council of Representatives, international organizations, relevant ministries, and Iraqi businessmen to create policies that regulate and facilitate securities transactions in Iraq that are fair, efficient, and organized. I hereby declare the following:

Definitions Section (1) Purposes For the purposes of this Law, the following terms shall be defined as follows:

1. Authority: Means the Iraqi Interim Securities and Stock Exchange Authority.
2. Members of the Authority: Means the Iraqi Interim Securities and Stock Exchange Authority.
3. Securities Market: Means the Iraqi Securities Market or any other similar market to the Authority, and may be licensed under this Law in accordance with its rules.
4. General Assembly: Means the Council composed of all members of the Securities Market.
5. Board of Governors or Board or Governors: Means the Board of Governors of the Securities Market or the Governors holding seats on the Board.
6. Council of Representatives: Means the Iraqi Council of Representatives; after the full transfer of sovereignty to an interim Iraqi government, the Council of Representatives shall be a national executive body authorized. For the purposes of this Order, the executive authority in the government

Iraqi Legislation Database PM 12:55 6/19/22, https://iraqld.hjc.iq/PrintLawResult.aspx?PSC=null 2/13 The interim and transitional government is the Council of Ministers. (1) 7. Headquarters: Means the headquarters of the Board of Governors of the Securities Market or the headquarters of the Securities and Stock Exchange Authority as specified in the text. 8. Chief Commissioner: Means the Chief Executive Commissioner of the Securities Market. 9. Member: In the Securities Market, means a licensed broker in the Securities Market. 10. Broker: Means a person authorized by the Board of Governors under Section (5) (1a) of this Law and dealing in securities transactions in the Securities Market, or a legal entity authorized under Section (5) (1b). A bank may be accepted as a broker if authorized to work under that authority. 11. Bank: Means an entity authorized by the Central Bank of Iraq to conduct banking operations in Iraq. 12. Company: Means a joint-stock securities company that issues securities subject to the provisions of this Law, or a company referred to in Section 5 (1b) 2 of this Law. 13. Depository Center: Means the Iraqi Depository, which will be the central body responsible for clearing and settling all securities transactions. 14. Licensed Securities Market: Means any securities market licensed by the Iraqi Securities Authority to conduct securities transactions. 15. Securities: Are financial value commercial shares, including joint-stock company shares or mutual funds, government or corporate issued securities, securities sales rights, limited companies, or any other forms of investment. 16. Government Securities: Means securities fully backed and guaranteed or insured by the Government of Iraq. 17. Listed Companies: Means companies that have been listed for trading in the licensed securities market. 18. IASB: Means the Iraqi Securities Traders Association, a commercial institution for brokers wishing to become partners in licensed securities markets. 19. Law or Interim Law: Means this Special Law on Securities Markets. 20. Permanent Securities Law: The law that will replace this Law, which will establish a comprehensive regulatory and legal structure for securities trading in Iraq.

System and Objectives Section (2)

1. The Baghdad Stock Exchange shall cease its operations, and a new securities market shall be established under this Law, named the Iraq Securities Market. a. The headquarters of the Securities Market shall be in Baghdad, and opening branches in other Iraqi cities is permitted. b. It appears as an entity to conduct its business, which includes its limited liability towards its assets, not towards its members. c. The Securities Market is free from any liability towards the Baghdad Stock Exchange. d. There shall be no supervisory authority of the Companies Registrar in the Ministry of Trade over the Market, and registration in the Ministry of Trade is not required. e. Everything related to Companies Law No. 21 of 1977 and its amendments shall be interpreted from now on to mean the licensed Securities Market and its systems as specified by the Authority's laws based on Section 3 (3) (e) of this Law. f. Upon the liquidation of the Baghdad Stock Exchange, any remaining amounts, after settling its liabilities, shall go to the General Treasury.
2. The Securities Market shall be a legal entity with financial and administrative independence, having the right to file lawsuits before courts and judicial authorities or any other authority, and must be represented by the Chairman of the Board of Governors or a person authorized by the Chairman.
3. The Securities Market must be non-profit, with independent membership and self-regulation. Dealing with third parties is business and does not contradict this Law. Internal control and disposal of its assets upon liquidation after paying legal claims shall be according to the conditions and rules of this Law and the Securities Market rules as authorized and approved by this Law.
4. No securities market or other organized securities market may operate without a license from the Authority. The Securities Market is therefore licensed and authorized under this Law to begin operations immediately, subject to monitoring or regulatory supervision by the Authority. While a new securities law is being selected, the Securities Market exists and operates according to the conditions and requirements of this Law. Licenses for other temporary securities markets shall not be granted before the first anniversary of the date this Law enters into force, unless the Authority specifically finds that investor interests are not fully served.
5. Stamp duty is exempted from securities purchase and sale contracts in the stock exchange.
6. The Securities Market aims to achieve the following: a. Regulate its members and maintain recognized corporate standards in a manner consistent with investor objectives and enhance investor confidence in the market. b. Enhance investor interests in efficient, reliable, competitive, transparent, and honest markets. c. Regulate and facilitate fair, efficient, and organized trading in securities, including clearing and settling such transactions. d. Regulate member trading in services related to securities, as well as procedural transactions, and determine the rights and obligations of concerned parties, as well as means to protect their legal interests. e. To help increase the capital of listed companies or those intending to list themselves on the market. f. Participate, if appropriate, in educational programs to inform qualified investors about investment opportunities in the Securities Market. g. Collect, analyze, and publish statistics and information necessary to achieve the objectives stipulated in this Law. h. Establish and maintain communications with securities markets in Arab and global markets, which are useful in developing securities markets and other licensed markets. i. Perform other services and activities necessary to support its objectives.

Transactions in Securities Markets Section (3)

1. No securities transactions shall be conducted in the Securities Markets unless the class of securities is accepted for commercial trading in the Securities Markets, and transactions shall be conducted in accordance with the rules of the Securities Markets.
2. The Board of Governors of the Securities Markets shall adopt market rules regarding securities trading and other issues, subject to the approval of the Authority.
3. Restrictions on securities trading are as follows: a. All transactions in the Securities Market are restricted to brokers licensed by the Market to conduct such transactions. b. A broker or person authorized to work in securities transactions representing client funds or balances shall not mediate any services related to securities brokerage outside the Securities Market, regardless of whether those securities are included in such transactions offered for commercial trading in the Securities Market, unless such securities are subject to other regulations of the Authority. c. The restriction contained in subsection (b) of paragraph 3 of Section 3 shall not apply to:
4. General subscription for securities upon issuance, provided there is compliance with the conditional clauses of Companies Law No. 21 of 1977 amended and any subsequent laws or amendments and Authority rules.
5. Transfer by the Authority to second-degree relatives (parents, parents-in-law, siblings, siblings of spouse, children) or transfer by inheritance or court order.
6. The restriction contained in subsection (b) of paragraph 3 of Section 3 shall not apply to the issuance of government securities, provided there is compliance with Central Bank of Iraq and Ministry of Finance rules. d. The restriction contained in subsection (b) of paragraph 3 of Section 3 shall not apply to other situations or circumstances determined by the Authority and taking into account its rules:
7. Transparent and competitive pricing and commercial considerations, investment suitability and appropriateness.
8. Ideal interaction in securities supply and demand.
9. Disclosure of financial conditions of the securities issuer, ownership, and control.
10. Reliable settlement arrangements.
11. Qualified and reliable providers of investment services.
12. The Securities Market shall have the authority to cancel any securities transaction in the Market that violates this Law, Market rules, and Authority rules.
13. The Securities Market shall accept Iraqi company securities for commercial trading in the market provided the Iraqi company commits to the existing market controls, which require at least: a. The company has held an annual general meeting required by law. b. The company has publicly provided current financial statements to the Securities Market within six months of the opening of commercial operations, which are prepared according to those requirements to form satisfactory accounting levels and applied, accompanied by guarantees as required by the Securities Market. c. The Depository Center officially confirms to the Securities Market that the company's securities intended for trading in the market are eligible for deposit based on guarantees the Center may require from the company or the company registrar regarding the completeness and accuracy of information related to the quantity of circulating securities and their ownership. d. The securities offered for commercial trading are not subject to legal restrictions on their transfer. e. The company agrees to public disclosure of any information that significantly affects the price of its securities, which are expected to be accepted for commercial trading, and agrees to comply with other requirements that may be imposed by the Securities Market as a condition for accepting the company's securities for trading in the market. f. The Securities Market may, based on an Authority order or its own decision, reject the securities of any Iraqi company from trading in the Market when the issuer fails to comply with Market rules or the Securities Law, or if its securities no longer meet the listing requirements of the Market.
14. A company that has a class of securities accepted for trading in the Market based on Section 3 (5) must comply with the following requirements to maintain that acceptance from the time of market opening: a. The company shall provide the Securities Market and the Authority with quarterly financial reports including a summary balance sheet from the quarterly closing and the nearest fiscal year, and brief comparative quarterly and annual statements of income and cash liquidity up to the quarterly closing and pre-year stages, providing them publicly within a period not exceeding 60 days after the closing of the first three quarters of the company's unaudited fiscal year. Quarterly reports shall be prepared according to shape, content, and accounting standards in force, and accompanied by confirmations and administrative explanations that the Market or Authority may order to request. For the purposes of this Law, the first unaudited quarterly financial report must be submitted within 60 days after the closing of the second quarter of 2004, on or before August 31, 2004. b. The company shall send to the Securities Market and the Authority and prepare publicly within (150) days after the closing of the company's fiscal year financial data including a balance sheet since the closing of the fiscal year, and data on income, cash liquidity, and changes in share ownership for the fiscal year. c. Starting with the annual report for the fiscal year 2004, financial data shall be presented on a comparative basis with the financial data of the previous fiscal year based on the following instructions:
15. The financial data included in the annual report shall be audited according to international audit standards by an independent auditor legally authorized in Iraq and according to international accounting standards and to the extent allowed by standards in force in Iraq.
16. The financial data shall be accompanied by a signed copy of the independent auditor's audit report stating that the financial data has been audited according to international audit standards and to the extent allowed by standards in force in Iraq, and that they represent a true and fair view of the financial results of the company.
17. The financial data shall also be accompanied by those administrative guarantees and explanations that the Securities Market and the Authority may order to request.
18. The Authority may grant additional time for auditing and evaluating the report if circumstances in Iraq necessitate this action. d. The company shall hold the Annual General Meeting within a period not exceeding 60 days from the date of public submission of audited financial data and an earlier date imposed by law. e. The company shall comply with all requirements imposed by the Market as a condition for continuing trading of such securities in the Market, provided that all information provided by the company is accurate and objective.
19. The Board of Directors may adopt separate rules regarding the process of listing and trading securities in the Second Market and the Over-the-Counter Market.
20. A joint-stock company that has been rejected from entering and trading in the Market may send a notice to the Market or any other authorized authority where the Authority can determine the date, quantity, price, and other terms and parties to the transaction in its financial securities, and according to the regulations imposed by the Authority. By decision or order, the Authority may impose requirements on joint-stock companies when applying for approval for commercial trading in the Market and conducting paper transactions. Paragraphs 9 and 10 relating to commercial transactions conducted after March 9, 2003, after the closure of the Baghdad Stock Exchange and the opening of the Iraq Securities Market. Any transactions conducted according to paragraphs 9 and 10 shall be subject to specific Market regulations and strict supervision to ensure that those transactions were not subject to fraud or manipulation.
21. Any transactions conducted outside the Baghdad Stock Exchange after its closure on 19/3/2003 and until the opening of the Iraq Securities Market, except for transactions identified in paragraph 9, shall not be considered legal transactions by the Securities Market or the Authority unless these transactions are conducted in the Iraq Securities Market by a licensed broker after the opening of this Market.
22. Transactions resulting from the transfer of gifts between second-degree relatives (parents, parents-in-law, siblings, siblings of spouse, children, daughters' spouses, and sons' spouses) by inheritance or court order shall not be subject to the restrictions contained in paragraph 9 above.

General Authority Section (4)

1. The General Authority consists of brokers licensed to participate in securities transactions in the Securities Market.
2. The General Authority has the authority to elect members of the Board of Directors of the Securities Market as stipulated by Market rules, and to exercise other authorities determined by Market regulations.
3. Market regulations determine the date of General Authority meetings and procedures for holding such meetings.

Brokers Section (5)

1. The broker authorized to work in the Securities Market shall be one of the following: a. A bank authorized under the Banks Law, including foreign banks, subsidiaries, and branches to participate in securities trading in Iraq. b. A company established under Companies Law No. 21 of 1997 or its subsequent laws and amendments, specialized in activities related to securities trading, investment management, or investment consulting, whose authorized director meets the conditions stipulated in Section 5 (2). c. A company established under a specific law, specialized in activities related to securities trading, investment management, or investment consulting, provided its authorized director meets the conditions contained in Section 5 (2).
2. The director or representative of the authorized broker dealing with securities transactions in the Securities Market, referred to as the Representative, shall be a natural person who: a. Is at least 21 years old and is legally resident in Iraq under Iraqi law. b. Has legal capacity. c. Is not indebted or bankrupt. d. Has not been convicted of a felony by a competent court. e. Has not committed a crime related to financial fraud by a competent court. f. Holds a university degree or equivalent. g. Has at least five years of experience in financial and commercial matters, acceptable to the Market. h. Works in brokerage activities within Iraq or other locations after being authorized by the Securities Market and approved by the Authority.
3. The person participating with the broker and authorized to assist in brokerage activities in the Securities Market or at the broker's workplace shall be a natural person who: a. Is at least 18 years old and is legally resident in Iraq under Iraqi law. b. Has legal capacity. c. Has not been declared bankrupt. d. Has not been convicted of a felony. e. Has not been convicted of a crime related to financial fraud or matters related to the East. f. Holds a secondary school certificate or equivalent. g. Has appropriate experience acceptable to the Market. h. Has participated in brokerage activities within Iraq or other locations after being authorized by the Securities Market and approved by the Authority.
4. The broker shall adopt a trading process and conduct it under a trade name.
5. A broker is not allowed to participate in securities transactions in the Securities Market unless it meets the following conditions: a. The broker is a member of the Market. b. The broker must accept participation in the Depository Center directly or indirectly through one of the trading parties, specifically a correspondent participant of the Depository Center. c. Acknowledgment of daily trading limits for the broker according to Market regulations based on its net capital adequacy, with net capital adequacy determined based on the Depository Center's estimates of the broker's ability to fulfill its obligations, plus a recommendation letter from the settlement bank to the Depository Center.
6. A licensed broker who had the right to participate in securities trading in the Baghdad Stock Exchange before the closure of that Market on March 19, 2003, shall have temporary authority and temporary license to participate in securities trading in the Market according to this Law, provided that: a. That broker commits to additional requirements applicable to the broker under this Law, in addition to its obligations to additional requirements that may be imposed by the Market, Depository Center, Board of Directors, or Authority. b. Brokers with temporary authority or any authority to conduct securities transactions in the Market must continuously comply with obligations and other necessary requirements to conduct trading in the Market according to new conditions.
7. The broker must present to the Market one or more of its representatives who meet the conditions contained in Section 5 (2) above, who is the person authorized by the broker to manage its work in the Securities Market, or the person who is under the supervision and monitoring of the broker, where the broker assigns responsibility to them according to those rules that may be imposed by the Market.
8. The Board of Directors shall adopt rules to regulate the conditions under which the broker operates in the exchange related to securities for its own account or related accounts.
9. The broker shall act on behalf of the seller or buyer of securities in a manner consistent with the rules adopted by the Board of Governors. These rules shall include, for example, the requirement for the client to provide a certified authorization regarding the brokerage relationship related to account opening documents. Brokers may not participate in paper transactions for the client or dispose of their funds or securities without authorized authorization from that client.
10. The broker is required to: a. Pay all fees related to the broker's authorization to conduct trading activities in the Market according to the rules in force in the Securities Market. b. Keep and maintain books, records, and documents as specified in the rules adopted by the Board of Directors of the Market or from

Iraqi Legislation Database PM 12:55 6/19/22, https://iraqld.hjc.iq/PrintLawResult.aspx?PSC=null 6/13 before the Authority. 11. The broker shall not deal in selling securities on behalf of the customer unless the broker determines according to such rules that may be imposed by the Market or Depository Center that those securities are in the possession of the Center and that the customer has a special ownership benefit in them. 12. The broker shall not participate in the purchase of securities on behalf of the customer unless the broker determines according to such rules that may be imposed by the Market or Depository Center that the customer has sufficient funds to pay for those securities. 13. The broker must commit to doing the following: a. Protecting confidential information regarding investors unless disclosure is required by law. b. Working with honesty, integrity, and commitment to Market rules and commercial principles. c. Always working in the interest of customers, especially placing customer interests before its own, preserving their rights, and informing them of all relevant information regarding their securities transactions. d. Refraining from participating in false and fake transactions and all forms of fraud in the Market and behaviors and practices that help mislead and deceive investors or create a false and misleading impression of market efficiency. e. Acting as a trustee for client funds, not as a partner with the client in funds or accounts. 14. The Authority and the Market have the authority to obtain any information relevant to the implementation of this Law, Market rules, or Authority rules from brokers or their agents, employees, or owners without the need to notify or obtain consent from that broker or their representatives or persons associated with them. 15. The broker must maintain the required level of cash liquidity or reserve guarantees in its account, as specified by the Board of Directors according to Market rules, which shall be located in the Depository Center or the Center's settlement bank. If there is a deficiency in the required amount, the broker must cover this deficiency within the period specified in the Market rules. Or in case of the broker's failure to do so, it shall be prevented from participating in securities trading until it provides sufficient financial guarantees. 16. The broker must disclose to the client all fees, commissions, and prices required before proceeding with any agreement or understanding with the customer. The Market may impose rules regarding the maximum commission, price, and wage rate and clearing, in addition to disclosing necessary requirements, as approved by the Authority.

Board of Directors Section (6)

1. The Market is managed and operates under the direction of a Board of Directors consisting of nine members serving for a period less than a year during the validity of this Law or until the Permanent Securities Law is announced. Board members are eligible for reappointment, but this reappointment is not guaranteed under the Permanent Law.
2. The Board of Directors consists of: a. Chairman of the Board of Directors, for which one or more candidates proposed by the Board or a committee subordinate to the Board shall be nominated. b. The Market's Board of Governors may appoint a Chief Executive Officer for the Market. c. A member representing companies whose securities are listed or offered for trading in the Market, all of whom are nominated by one or more persons proposed by the Board of Directors or its nomination committee. d. One of the members shall be the senior official of the Iraqi Association for Securities Trading IASD or the senior member of one of the IASD member companies, proposed by the IASD association for nomination. e. A member representing brokers licensed to trade securities in the Market, and the Board of Directors proposes one or more. f. The Board of Directors may appoint four members of the General Administration with qualifications, remaining independent of the Market or any of its parties, with one having experience in information technology issues, and independent members of the Board shall select three or more candidates from among them.
3. Except for the Chief Executive position, the Administrative Director, after consulting with the Council of Representatives, shall appoint all members of the temporary Board, with the temporary phase for these members starting from the date this Law enters into force and ending upon the enactment of the Permanent Securities Law or after one year from the announcement of the Interim Law. These members have the right to a second appointment, but this appointment is not guaranteed. Members of the Board of Directors are selected by voting in the General Assembly of the Market and based on the Market's internal system or relevant rules.
4. Members of the Board of Directors are also appointed under the Permanent Securities Law, elected by the General Assembly according to the rules of the Securities Market.
5. For the purposes of this Interim Law and appropriate purposes for opening the Iraq Securities Market, regardless of the basic condition in paragraphs (1-6) and (2-6) above, the Board of Directors may consist of persons who do not necessarily meet the standards