Regulatory Bylaw No. 26: Trading of Securities in the Iraq Securities Market

Regulatory Bylaws of the Iraq Securities Commission 2022 Regulatory Bylaw No. (26) Trading of Securities in the Iraq Securities Market

Article (1)

The words and phrases appearing in these Regulatory Bylaws shall have the meanings specified below, unless the context indicates otherwise:

The Commission: The Iraq Securities Commission.
The Market: The Iraq Securities Market.
The Council: The Council legally responsible for the management of the Market.
The Executive Director: The Executive Director of the Market.
Securities:
Shares and bonds issued by joint stock companies; Bonds and certificates issued by the Government and state institutions; And any other local or foreign financial instruments accepted by the Commission. Broker: An entity licensed by the Commission and the Council to conduct securities brokerage activities and registered in the Iraq Money Brokers Association. Broker Representative: The natural person appointed by the Broker to act on their behalf providing brokerage services related to securities transactions, registered in the Market's Broker Representatives Register. Brokers Register: The register maintained by the Market to preserve all information related to brokers and their employees. Trading System: The trading system operational in the Market. Broker Representatives Register: The register maintained by the Market to preserve all information related to broker representatives and their employees. Authorization: The request submitted by the investor to the Broker, requesting and authorizing them to execute a buy or sell transaction for a security based on specific conditions set by the investor in accordance with the provisions of these Regulatory Bylaws. Order: The instruction sent by the Broker to the Trading System to buy or sell a specific security on behalf of the investor or their portfolio. Authorized Person: The person licensed to work on the trading station in accordance with the Regulatory Bylaws.

Article (2)

a. Trading operations in the Market shall be conducted through brokers, and all trades executed in the Market shall be recorded in the Market's registers corresponding to each trading session. b. The records kept at the Depository Center and any documents issued by the Market constitute legal evidence of the trading and ownership of the securities specified therein as of the date of registration of those records and documents, unless the contrary is proven.

Article (3)

a. A Broker is prohibited from trading securities on behalf of any of its clients unless it has concluded a written agreement with them under which the funds are held by the Broker in trust. b. Funds belonging to investors and held in trust by the Broker shall be managed in accordance with the prevailing regulations and the provisions of the agreement signed with the investor.
c. The Broker must ensure that the agreement with its investor includes any information or data required by the regulations and prevailing practices, and at a minimum, must include:

• The name and address of both the Broker and the investor.
• A statement of the services the Broker will provide to the investor.
• A statement of the commissions the Broker will charge the investor.
• A statement of the types of authorizations under which the Broker may execute the investor's orders.
• A warning about the risks of investing in securities in the format approved by the Market.
• Completion of investor-specific information (Know Your Customer) in accordance with Anti-Money Laundering and Counter-Terrorist Financing Law No. (92) of 2004 and whatever the Market and the Commission determine.
  d. The specific authorizations granted by the agreement shall not be restricted by the Broker under any agreement it concludes with the investor, and any condition that contradicts the prevailing regulations or seeks exemption from these authorizations shall be void. e. Any condition in the prevailing regulations that is void shall remain void.

1 This form was drafted under the Anti-Money Laundering and Counter-Terrorist Financing Law No. 92 of 2004, which has been repealed.

Article (4)

a. A Broker is prohibited from entering any sell or buy orders on behalf of any of its clients unless based on a prior authorization from the investor granting this authority. b. The investor's authorization shall be in writing, but may be telephonic or in the form of a fax, email, or any other means agreed upon by the investor with their Broker, provided it is documented in writing within three working days following the transaction.
c. It is the Broker's responsibility to prove in front of the Market that they have an authorization from their investor, and they are responsible for obtaining the investor's signature on the authorization form, verifying and registering authorizations received via telephone, and ensuring the retention of copies of authorizations received via fax or email, as well as retaining copies of written authorizations.
d. The authorization must include the investor's name and number, the name of the security, the type of transaction (buy or sell), the number of securities, the price, the date and time of the authorization, and its validity period. e. The Broker must enter sell and buy orders to the Trading System upon receiving the specific authorizations, with entries made according to the priority of the Broker's order register as confirmed in the agreement. f. The price in the authorization shall be determined according to the investor's conditions at a specified price, provided it does not exceed the market price in the case of a buy, or does not fall below it in the case of a sell, or at the market price.

Article (5)

Any natural person is prohibited from entering sell or buy orders to the Trading System unless they are registered in the Broker Representatives Register.

Article (6)

a. The Broker must notify their investor of the executed trades on their behalf upon execution or as per the agreement between them as stated in Article (3/a) above. b. The Broker must send a statement of account to the investor showing their balance of securities and cash funds and the operations executed on their behalf at least once a month, unless the agreement between them stipulates a shorter period as per Article (3/a).

Article (7)

Trading operations in the Market are executed using the Trading System issued by the Executive Director, approved by the Council of Governors of the Commission. The Council and the Executive Director may amend this guide using the same method of issuance, in accordance with market developments.

Article (8)

a. A Broker is prohibited from conducting any activity aimed at providing a misleading and incorrect image regarding the price of any security or its trading volume in a way that affects the interaction of supply and demand forces in the Market. b. A Broker is prohibited from entering any orders to the Trading System or executing any trade on behalf of any of its clients if this entry or execution contradicts the provisions of the prevailing regulations.
c. The Market shall issue a User Guide, taking into account paragraph (15/a) of these Regulatory Bylaws.

Article (9)

a. A Broker is prohibited from entering any order to the Trading System related to any security if its execution would violate the fundamental system in force in the country or contradict any regulation issued by the issuing entity. b. If an order is executed in violation of the provisions of paragraph (a) of this Article, the Market has the right to compel the Broker to resell or repurchase the specific securities or restore the situation to what it was before the execution of the violating order.
c. If the proceeds from the resale or repurchase process under paragraph (b) of this Article exceed the amounts due for the violating order, they shall be transferred to a special account to be paid to the investor by the Broker concerned. The Market shall designate this account through the Council to ensure the settlement of brokers' trades in the Market. If the proceeds are less than the amounts due, the Broker concerned shall bear the loss and has the right to recourse against the investor to bear the consequences of this violation in accordance with the agreement between them as stated in Article (3/a).
d. The adoption of the measures mentioned in paragraphs (b) and (c) of this Article does not prevent the Executive Director of the Market from taking the necessary disciplinary measures against the violating Broker, including the following cases for the use of the guarantee letter:
First: When a decision is made to suspend the Broker from practicing their activity pending the completion of settlement.
Second: When the Disciplinary Committee issues a decision finding the Broker in violation.

Article (10)

a. The Broker must ensure the investor's sufficiency of the relevant security balance before entering a sell order. b. The investor must settle the value of the securities sold by them through the settlement system.
c. If the selling investor fails to pay the value of the securities sold by them and the commissions due within the settlement period, the Broker may sell the relevant securities after obtaining the approval of the Executive Director. If any profit results from the sale, it shall be transferred to the Broker as stated in paragraph (9/c) above upon realization. If there is a loss, it shall be borne by the Broker concerned in accordance with the agreement between them as stated in Article (3/a).
d. The Broker must, when dealing cash-wise with their clients, comply with the Anti-Money Laundering and Counter-Terrorist Financing Law, the Commission Law, and the Regulatory Bylaws of the Money Brokers Association issued under it, and the Code of Professional Conduct.

Article (11)

Audio recordings made between the Broker and the investor are accepted as evidence of authorization in the event of any dispute between them.

Article (12)

The Council of Governors of the Commission determines the trading days and session times in the Market after approval.

Article (13)

The percentage of allowed increase and decrease from the previous closing price is determined by the Council of Governors of the Commission after approval by the Commission.

Article (14)

Trading in the Market is conducted based on the individual security and its multiples, unless the Council of Governors of the Commission decides otherwise.

Article (15)

a. Securities listed in the Market are priced in Iraqi Dinars and their multiples, and their cash equivalents, as specified in the User Guide referred to in Article (8) of these Regulatory Bylaws, with the approval of the Commission. b. The Council of Governors may approve pricing securities in any currency other than the Iraqi Dinar if it deems it appropriate, provided these securities are issued in a currency other than the Iraqi Dinar and within the currencies approved by the Central Bank of Iraq, with the approval of the Commission.
c. The Council of Governors determines the cash multiples for securities traded in a currency other than the Iraqi Dinar, with the approval of the Commission.

Article (16)*

a. All Broker Representatives and all employees trading securities in the Market are prohibited from trading except through the Broker they work for. b. Brokerage companies are prohibited from trading securities except through their companies.

Article (17)

a. A Broker is prohibited from trading securities on behalf of their portfolio except through the Market. b. A Broker who trades securities on behalf of their portfolio must indicate this in their agreement with the investor.

Article (18)

The closing price is determined by the Market within 15 minutes from the end of the session and within certain controls and procedures approved by the Commission.

Article (19)

a. A Broker may request the Market to modify the trading account number or an executed trade when an error occurs in the entry. This modification must not affect trading priority. b. The Market may take all necessary measures and request any documents it deems necessary to confirm the occurrence of the entry error.
c. Modification requests must be submitted during the trading session. In exceptional cases, the Executive Director—with the Council's approval—may approve modification requests after this time until the end of the settlement process.
d. If the modification request is not due to an entry error but is intended to realize profits or avoid losses for an investor, this violation is subject to disciplinary procedures and penalties imposed by the Market. e. The Executive Director discloses the above in the daily trading report.

Article 16 was amended by the Council of the Commission decision dated 2021/5/26, No. 25/13, dated 2021/6/28.

Article (20)

a. Any trade executed during a trading session due to a malfunction in the Market's trading systems may be cancelled by the Executive Director, provided it is disclosed in the daily report. b. The Market is not liable to compensate any Broker or investor resulting from any cancellation in accordance with the provisions of paragraph (a) of this Article.

Article (21)

The Council of Governors of the Commission establishes all regulatory, administrative, and technical procedures for Brokers to organize the trading process in the Market, after approval by the Executive Director.

Article (22)

a. The first actual trading session after the listing of a company's shares in the Market is free pricing. b. The increase and decrease of the share price during a trading session is limited to 10% of the previous session's closing price.
c. The reference price is calculated at a 50% change rate when re-listing shares of a company before the General Assembly meeting and reducing the reference price or trading price of the share by the amount of the dividend distribution.