Regulatory By-law No. (35) of 2025 for Financial Intermediation Companies Seeking License from the Securities Commission to Trade in Foreign Securities and Commodities Markets

Based on the provisions of Articles (5) and (12) of Legislative Decree No. (74) of 2004,

We have issued the following:

Regulatory By-law No. (35) of 2025 for Financial Intermediation Companies Seeking License from the Authority to Trade in Foreign Securities and Commodities Markets

Article (1): The following terms have the meanings indicated next to them:

• The Authority: The Iraqi Securities Commission.
• Financial Market: Any financial market specialized in trading securities.
• Financial Intermediation Company: The legal entity licensed to practice the following activities (Financial Broker, Principal Trader, Introducer Broker, Investment Management, Investment Custody, Financial Consulting) regarding shares, bonds, commodities, and any other activity determined by the Iraqi Securities Commission in foreign securities and commodities markets.
• Investment Manager: The licensed person who practices managing securities portfolios for others.
• Financial Advisor: The licensed person who practices providing advice and consultation to others in the field of investment in securities and commodities.
• Investment Custodian: The licensed person who practices monitoring and supervising the management of client investments to ensure compliance with the client's investment principles and objectives.
• Investment Management: The qualified professional management of various securities to meet specific investment objectives for the benefit of investors, which must include at least one person licensed by the Authority.
• Introducer Broker: The broker licensed by the Authority to practice the service of introducing clients to an external broker licensed to deal in foreign securities and commodities markets.
• Authorized Person: The person affiliated with the financial intermediation company, whether an employee, manager, or in any other position, and who is licensed for positions requiring a license from the Authority.
• Foreign Securities and Commodities Markets: Any market outside the borders of the Republic of Iraq that is organized and licensed to deal in securities and commodities of all kinds and speculation on prices therein.
• Dealing in Foreign Securities and Commodities Markets: Dealing in securities and commodities markets or acting as an intermediary or manager in securities and commodities of all kinds.
• Foreign Broker: The external broker with whom the licensed financial intermediation company deals to trade in foreign securities and commodities markets, provided that it holds an official license from the competent authorities in its country.
• Bank Account (Collective Account): The account opened in licensed banks located in Iraq through which dealings with foreign exchanges (foreign securities and commodities markets) for buying and selling operations are conducted, opened in the name of the financial intermediation company licensed by the Authority for the benefit of its clients with the foreign broker.
• Financial Broker: The legal entity that practices buying and selling securities and commodities for the account of clients of the licensed Iraqi financial intermediation company.
• Principal Trader: The person who practices buying and selling securities and commodities for their own account directly.
• Prohibited Acts: Any act, practice, plan, approach, or means prohibited by laws, regulations, instructions, or effective decisions.
• Misleading and Deception: Any false statement or means related to material information, any other information, or any omission or concealment of material information to make the provided data correct and accurate. The Authority determines material information. Any act, practice, plan, approach, or means intended to deceive others, lie, deceive, or hide facts, and everything indicating the word fraud.
• Material Information: Any strategic decisions, major developments, and important events that affect the performance, activity, ownership, and continuity of the company, and thus have a direct or indirect effect on the value and movement of securities and commodities.
• Authorization: The request submitted by the investor to the licensed financial intermediation company requesting and authorizing it to execute a specific transaction to buy or sell securities or commodities.
• Custodian: The legal entity licensed by the Authority to practice custodial activities for securities and as stipulated in the Custodian By-law issued by the Authority.
• Commodities: Agricultural products and natural resources extracted from the earth's interior, rivers, and seas after preparation and readiness for commercial use, and any other product that the Authority considers a commodity.

Article (2): It is prohibited for any person to practice one or more of the following activities in foreign securities and commodities markets unless they obtain a license from the Authority to practice those activities, provided that they are authorized persons with the Authority.

• Financial Broker
• Principal Trader
• Introducer Broker
• Investment Management
• Investment Custody
• Financial Consulting

Article (3): The following conditions are required to grant a license to practice one or more of the activities listed in Article (2) of this By-law:

a. The minimum capital requirement for the license applicant for each activity requested to be practiced in Iraqi Dinar must be as follows:

• Financial Broker (1,000,000,000) only one billion dinar
• Principal Trader (250,000,000) only two hundred and fifty million dinar
• Introducer Broker (300,000,000) only three hundred million dinar
• Investment Management (1,000,000,000) only one billion dinar
• Investment Custody (100,000,000) only one hundred million dinar
• Financial Consulting (75,000,000) only seventy-five million dinar

b. The minimum capital requirement for the license applicant to practice one or more of the activities listed in paragraph (a) of this article must not be less than the sum of the minimum capital requirements for each activity requested to be practiced.

c. The net equity capital of the license applicant must not be less than 75% at any time. In case of a decrease, guarantees accepted by the Authority must be provided until the decrease is rectified in accordance with the law within (15) fifteen working days. Conversely, the company's operations will be suspended to cover the difference in equity, and the Authority will suspend the company until the guarantee is provided.

d. The management of the license applicant must possess the necessary experience, competence, and knowledge to practice their activities and must be of good repute. They must provide proof thereof, and the Authority has the right to verify this through appropriate means.

e. The Managing Director and major shareholders who hold a share of 25% of the company's capital must not have been convicted of a crime involving moral turpitude or any crimes related to money.

Article (4): The license applicant wishing to deal in foreign securities and commodities markets must submit a written license application to the Authority accompanied by the following documents:

a. The Articles of Association and Internal Regulations. b. The organizational structure of the financial intermediation company. c. Written work procedures to be applied regarding the service of dealing in foreign securities and commodities markets. d. Appointment of a Compliance Officer and a Compliance Manual detailing the internal control procedures to be conducted to ensure effective supervision of their dealings and their clients' dealings in foreign securities and commodities markets, and the duties of the Compliance Officer as determined by the Authority. e. Appointment of a Risk Management Manager and determination of work procedures that enable them to identify current or potential risks they may face and the mechanism for addressing and monitoring them, with these procedures being reviewed by them continuously. f. Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) work procedures, including a customer acceptance and identification policy, standard and enhanced due diligence procedures followed by the licensed financial intermediation company, procedures for identifying the beneficial owner, and compliance with Anti-Money Laundering and Combating the Financing of Terrorism Law No. (39) of 2015 and the regulations and systems issued thereunder. g. A commitment that the source of funds provided for licensing purposes is legitimate, that these funds are their own, and to provide audited net assets of shareholders certified by an authorized auditor, and that they are the beneficial owner of the licensed financial intermediation company. h. A commitment to the accuracy of the data and information provided to the Authority in the license application. i. Any other documents requested by the Authority.

Article (5): The Authority issues its decision to grant or refuse the license within 30 working days from the date of submission of the application, provided it meets the conditions and requirements, and after scrutinizing the sources of funds and ensuring their integrity.

Article (6): The licensed financial intermediation company is not allowed to start practicing one or more of the services listed in Article (2) of these instructions until it obtains the Authority's written approval to commence dealing in foreign securities and commodities markets and fulfills the following:

a. Payment of fees determined by the Authority. b. Provision of an unconditional financial guarantee as ordered by the Authority and in the form determined by the Authority. The value of the guarantee must be reviewed annually for each licensed financial intermediation company, and the minimum guarantee value must not be less than:

• Financial Broker (500,000,000) only five hundred million dinar
• Introducer Broker (150,000,000) only one hundred and fifty million dinar
• Investment Management (500,000,000) only five hundred million dinar
• Investment Custody (75,000,000) only seventy-five million dinar
• Financial Consulting (50,000,000) only fifty million dinar

c. Providing the Authority with the following:

1. The form of the agreement regarding dealing between the licensed financial intermediation company and the client in foreign securities and commodities markets for approval, certified by official authorities, and the foreign exchange must be licensed in the country where it operates.
2. Any agreement signed with any other party to fulfill the requirements of dealing in foreign securities and commodities markets and specifying the entities with which dealings are conducted.
3. Names of employees in the financial intermediation company, and the curriculum vitae of each, supported by necessary documents.

d. Designating one or two persons as representatives of the authorized persons to practice one or more activities of financial intermediation companies in foreign securities and commodities markets, with their data being audited by the Authority before commencing work.

e. Providing a plan for the (electronic programs) used by the financial intermediation company, internet network connection procedures, and specifications of those networks, specifying the approved trading platform, and the alternative plan in case of any emergency.

f. A commitment from the Managing Director, Manager, and Legal Advisor of the licensed financial intermediation company that all agreements and forms comply with the provisions of laws and meet the Authority's requirements.

Article (7): The licensed financial intermediation company is prohibited from the following:

First: Executing a purchase transaction in foreign securities and commodities markets for a client only after confirming the existence of sufficient cash balance in the client's account in advance to execute the transaction. It is also prohibited to provide financing to its clients from its own funds or from its clients' funds to deal in foreign securities and commodities markets.

Second: Executing any buy or sell transaction in foreign securities and commodities markets except based on authorization from clients for each buy or sell transaction, such as received negotiation, recorded phone call, email, or internet trading. The company must prove at any time that it has an authorization stating the client's name, type of dealing, type of transaction (buy or sell), quantity, price, date and time of authorization, and duration of validity, and must keep the original copy of the authorization for a period of not less than (5) years.

Third: Dealing with any foreign financial intermediation company not licensed by the competent authorities in its country.

Fourth: Paying or crediting any amount to the account of any of its clients as payment for any transaction unless it has been sold for the benefit of the client.

Fifth: Opening accounts for minors and opening joint accounts involving more than one beneficiary for the account and trading for relatives, and writing a commitment to that effect.

Sixth: Cash dealing with clients.

Seventh: Dealing in Contracts for Difference (CFDs), digital and encrypted currencies, Forex, or any other currencies not approved in the Republic of Iraq.

Eighth: It is prohibited for the financial intermediation company to provide stock lending services, i.e., lending shares to clients from other clients or from the financial intermediation company, which are often used for short selling purposes.

Ninth: Commingling its investments with its clients' investments.

Tenth: Working with leverage that enables the investor to obtain doubled amounts used for trading in buying securities and commodities, which do not represent real amounts but rather numbers for trading purposes.

Eleventh: Misconduct with client or shareholder funds, including mismanagement or misuse.

Twelfth: Practicing deception, misleading, and prohibited acts.

Thirteenth: Negatively affecting competition by manipulating commission rates or service fees charged to any client or limiting services provided, whether individually or in collusion with others.

Fourteenth: Spreading rumors, promoting them, or giving misleading or false information, statements, or data that may affect the price of any security or the reputation of any entity, and spreading or promoting any incorrect data or information about foreign exchanges or transactions conducted.

Fifteenth: It is prohibited for the financial intermediation company to open trading accounts with the foreign broker using account merging (Omnibus), where merging client accounts into a single Omnibus Account with the foreign broker is not allowed. Aggregating and executing trades under the name of the financial intermediation company or any other name, rather than individual client names, is prohibited.

Article (8): The licensed financial intermediation company is committed to providing the Authority, before commencing dealing in foreign securities and commodities markets, with the following:

First: Details of the foreign broker's bank account at the clearing bank through which financial remittances for clients will be received and sent.

Second: Guarantees provided by foreign regulatory authorities for the recovery of financial deposits and ownership of securities in the event of the foreign broker's bankruptcy and/or cessation of activity.

Third: An explanation of the mechanism for obtaining and recovering funds held with the foreign broker in the event of the client's death.

Fourth: A list of penalties, fines, audit reports, and disciplinary actions issued by regulatory authorities, if any, against the foreign broker intended to be contracted with.

Fifth: A full explanation and clarification of the foreign tax consequences that will be imposed on the Iraqi client as a result of trading in foreign markets.

Sixth: A list of names and details of companies to be approved for electronic client identity verification and to ensure the client's name is not on local or global blacklist before opening the account.

Seventh: Names of (foreign securities and commodities markets the company wishes to deal in and foreign brokerage companies through which it wishes to trade, and documents proving the licensing of those markets and companies by the competent authorities under which they fall. The licensed financial intermediation company must provide evidence supporting its contract with the concerned companies before promotion and is subject to the Authority's supervision.

Eighth: A copy of the agreement signed with the external broker, or any agreement signed with any other party to fulfill dealing requirements, signed and certified.

Ninth: Providing the Authority with any data or information it may request regarding its trades and its clients' trades in foreign exchanges.

Tenth: Separating client accounts dealing in financial and commodity markets from their own accounts dealing in foreign securities and commodities markets.

Eleventh: Any other requirements or documents requested by the Authority in this regard.

Article (9): Financial intermediation companies are committed to the following:

First: Regulating the relationship between the client and the licensed financial intermediation company under a written agreement that complies with the provisions of effective laws, particularly the Securities Law, and the systems, instructions, regulations, and decisions issued thereunder.

Second: Preparing and organizing contract terms with the client so that the agreement includes at least the following clauses:

a. Clarification of risks related to dealing in foreign securities and commodities markets. b. Explicit reference to the order entry mechanism, whether by the client directly, by the licensed financial intermediation company, or by both. c. Mechanism for recording ownership of purchases in foreign securities and commodities markets. d. Financial settlement mechanism between the client and the licensed financial intermediation company. e. Commissions to be charged by the licensed financial intermediation company and all costs related to dealing in foreign securities and commodities markets. f. Iraqi law and Iraqi courts are adopted to resolve any dispute that may arise between the licensed financial intermediation company and its clients, and to determine dispute resolution methods and agreement termination methods. g. These agreements are written in the account opening contract with the licensed financial intermediation company.

Third: Attaching the mandatory regulatory brochure prepared by the Authority with each agreement signed by the client and informing the client about it. The client must also sign it and consider it an integral part of the agreement.

Fourth: Notifying the client in writing or by the agreed-upon means of executed transactions for their account on the same day of execution. The client has the right to object to any transaction by informing the licensed financial intermediation company by the same means of any error or objection to the executed transactions for their account according to the mechanism stated.

Fifth: Sending a detailed account statement every month to each client for accounts with financial movements or transactions, showing their balance from dealing in foreign securities and commodities markets and details of their transaction movements, or according to the mechanism stated in the agreement, and a detailed statement every 3 months for inactive accounts, along with providing a copy of documents related to their account with the licensed financial intermediation company upon request.

Article (10): The following conditions are required for the licensed financial intermediation company to use the bank account:

a. Not reversing the effect of client orders on its internal records until the actual execution of orders in foreign securities and commodities markets.

b. Preparing necessary records to detail all data related to movements in client accounts dealing through the collective account.

c. Separating its investments in foreign securities and commodities markets and its own cash balances from its clients' investments dealing through the collective account, and showing them separately in all its financial statements.

d. Not using client balances to obtain financial investments.

e. Not conducting any transfers from client accounts to the company's account except within the limits of commissions resulting from trading operations.

Article (11): Licensed financial intermediation companies must separate their accounts from their clients' accounts as follows:

First: Opening a current account in the name of the licensed financial intermediation company at the bank to deposit the company's own funds and revenues, and funds resulting from practicing brokerage activities, and to withdraw to cover expenses and distribute profits, etc., for the company's accounts, except for trust accounts.

Second: Opening another current account in the name of client trusts and using it to execute their trading transactions for the following purposes:

a. Depositing the amount received from clients to finance purchases of securities and commodities for their benefit. b. Transferring due commission amounts to the company's private account resulting from executing buy and sell transactions for the benefit of its clients. c. The Authority monitors the accounts to reconcile them with the transactions executed by the licensed financial intermediation company.

Third: It is prohibited for the licensed financial intermediation company to dispose of funds deposited in client accounts for personal purposes other than buying and selling for the benefit of clients.

Article (12): The licensed financial intermediation company must, before commencing its activities, contract with the Custodian after obtaining the Authority's approval for it, to keep certificates resulting from the purchase of securities and commodities, as stipulated in the Custodian Regulatory By-law and licensed by the Authority.

Article (13): The licensed financial intermediation company wishing to promote its services in any way must place warning phrases regarding the risks of dealing in foreign securities and commodities markets clearly on all its advertisements, as well as on its official website and social media pages.

Article (14): The Authority may impose a financial fine on anyone violating this By-law, not exceeding (50) fifty million dinar. In case of suspicion that the violating act constitutes a crime, it will be referred to the competent courts.

Article (15): The licensed financial intermediation company is committed to acquiring a robust technical system for combating money laundering and financing terrorism and keeping records for (5) years from the date of termination of the relationship with the client.

Article (16): Financial intermediation companies are not registered in the Companies Registration Office until they obtain the Authority's approval.

Article (17): Licensed financial intermediation companies are subject to supervision by competent security agencies through conducting security audits on their owners, and the names of those companies will be published on the Authority's website.

Article (18): Any additional conditions and requirements determined by the Securities Commission according to public interest requirements will be added.

Article (19): This By-law does not apply to digital, foreign, or encrypted currencies.

Faisal Al-Haimis Chairman of the Securities Commission 9/9/2025