Regulatory Alerts2023-02-14
Regulatory Regulation No. 12: Controls and Procedures for Segregation of Accounts at Financial Brokerage Companies
The Securities Commission issued Regulatory Regulation No. 12 (2022) mandating financial brokerage companies to strictly segregate their operational accounts from clients' trust accounts at designated banks. The regulation prohibits the commingling of client funds, the use of trust balances for corporate credit facilities or inter-client debt settlement, and requires weekly commission transfers and daily balance reconciliations. It further compels brokerages to maintain detailed investor sub-accounts, report all bank account details to the Commission and the Market, and conduct post-settlement period reconciliations to ensure full compliance with financial transparency standards.
Regulatory Regulations of the Securities Commission for the Year 2022
Regulatory Regulation No. (12) Controls and Procedure for Segregation of Accounts at Financial Brokerage Companies
Article (1) Financial brokerage companies shall segregate their accounts from their clients' accounts as follows: A. Open a current account at the bank in the name of the brokerage company to deposit the company's own funds, its revenues, and funds generated from conducting brokerage activities, and to withdraw funds to cover its expenses, distribute its profits, and other company-specific accounts, excluding the trust accounts. B. Open other current accounts (in Jordanian Dinar and US Dollar) in the name of (Clients' Trusts) and use them to execute their trading operations for the following purposes: First: Depositing amounts received from clients required to finance the purchase of securities on their behalf. Second: Transferring the commission amounts due to the company's own account, resulting from executing trading operations on behalf of their clients. Third: Returning the clients' funds in the case of selling shares, or if purchase operations are not executed, or the remaining balance after completing purchase or sale operations, unless otherwise agreed. C. The brokerage company must maintain sub-accounts for each investor showing the amounts belonging to them and their movements, ensuring that the total of the company's trust accounts matches the total of the same accounts at the bank.
Article (2) The brokerage company is prohibited from the following: A. Using funds deposited in client accounts except in accordance with the terms of the account opening agreement concluded with them. B. Using balances in these accounts to obtain credit facilities or bank loans secured by them. C. Using the credit balances of some clients to settle the debit balances of other clients.
Article (3) The brokerage company must comply with the following: A. Segregating the company's accounts from client accounts when presenting bank balances in its financial statements and accompanying notes. B. Providing the Commission and the Market with data regarding all accounts opened at banks, as follows: First: The company's account number, the bank's name, and the account type. Second: The company's account number / Clients' Trusts, the bank's name, and the account type. Third: The names of persons authorized by the company to open/close and operate the bank accounts. C. Calculating the value of commissions generated from trading weekly and transferring them to the company's account at the banks. D. Not conducting any transfers from the clients' trust account to the company's account except within the limits of commissions generated from trading. E. Conducting a daily review at the end of each working day for the clients' trust account and confirming their balances.
Regulatory Regulations of the Securities Commission for the Year 2022 F. Conducting reconciliation after the end of the settlement period approved in the Market between the total credit balances of clients' trusts and the total balances of the bank accounts designated for these trusts.