Regulation No. 4 Financial Solvency for Financial Intermediation Companies

Regulatory Bylaws of the Securities Commission for the Year 2022 Regulation No. (4) Financial Solvency for Financial Intermediation Companies

Article (1) Financial solvency in the context of applying these bylaws is defined as "the adequacy of the company's financial resources to meet its financial obligations at their due dates and its ability to confront risks associated with its activities, clients, and the securities it trades."

Article (2) The shareholders' equity must not be less than the minimum capital threshold determined by the Commission.

Article (3) A. In the event that a decrease in the company's shareholders' equity, as mentioned in (1) above, appears during the year, the company must issue a guarantee letter covering the difference between the shareholders' equity stated in the company's balance sheet and the minimum threshold determined by the Commission. The Market Manager shall suspend the company's activity upon receiving a notice from the regulatory authorities or the Commission regarding the submission of the letter. B. If the shareholders' equity falls below the minimum threshold determined at the end of the financial year, the company must initiate the necessary procedures to adjust its capital to the required minimum and submit a guarantee letter covering the deficit amount. The Market Manager must verify the initiation of procedures to increase its capital; otherwise, its activity in the market will be suspended.

Article (4) Shareholders of the company are prohibited from: A. Withdrawing any monetary amounts from the company, except for profits in accordance with the Companies Law. B. Being debtors or creditors in the company's accounts, except for share purchase guarantees.

Article (5) The intermediary company must hold liquid or semi-liquid assets (with a maturity period not exceeding one month) to cover obligations to clients, plus all other short-term obligations, at a ratio of not less than 100% of them.

Article (6) To arrive at the liquidity amount referred to in (5) above in these bylaws, special adjustments must be made to asset items according to the following principles: A. Cash in the Treasury: This item is calculated at a percentage not exceeding 10% of shareholders' equity or the company's monthly expenses, whichever is lower. B. Cash in Banks: This item is calculated at its full value, excluding deposits reserved for specific purposes and client guarantees for share purchases. C. Securities Portfolio: The amount invested in it must not exceed 65% of shareholders' equity, including realized surplus up to the date of the monthly financial statements, and includes:

Regulatory Bylaws of the Securities Commission for the Year 2022 First: Listed and traded shares: Valued at market price, relying on the last closing price from the date of the financial statements. Second: Suspended shares: Their entire value is excluded, and the determination of shares suspended from trading, which fall under this item, is subject to the Commission's decision. Third: Bonds issued by the Iraqi government or the Central Bank of Iraq: Valued at market value, and if that is not possible, at nominal value or cost, whichever is lower. Fourth: Bonds issued by joint-stock companies: Valued at market value, and if that is not possible, valued at nominal value or cost, whichever is lower. Fifth: Pledged or seized securities: Their entire value is excluded. Sixth: Securities not listed in the market: Their entire value is excluded.

Article (7) The intermediary must collect receivables (receivables resulting from securities purchase transactions) within the approved settlement period in the market.

Article (8) The intermediary must register all company assets in its name and must not arrange any liabilities for non-company purposes against these assets.

Article (9) The intermediary must hold liquid or semi-liquid balances at all times, with the amount not less than 25% of the previous year's annual expenses.

Article (10) To arrive at the amount of liquid or semi-liquid balances referred to in (9) above, the following amounts must be deducted from the shareholders' equity amount shown in the intermediary company's accounts: A. Adjustments to the value of fixed assets. B. Adjustments to the value of intangible assets. C. Adjustments to the value of establishment expenses. D. All exclusions from current assets referred to in (6) above.

Article (11) Intermediary companies are committed to financial solvency criteria and must provide the Commission and the Market with the information, reports, and documents stipulated by these bylaws, as well as any other documents requested by the Commission or the Market to verify the company's compliance therewith.

Article (12) The Market is required to verify the compliance of intermediary companies with the criteria stipulated in these bylaws or any amendments thereto approved by the Commission.