CSD Regulations: Deposit, Settlement, and Clearing

Securities and Exchange Commission Regulations 2022 Regulation No. (28) Special System for Deposit, Settlement, and Clearing in the OTC Market

Article (1) a. The CSD shall maintain a register of its shareholders listed on the market, which includes the names of shareholders, their ownership of these balances, their nationalities, and their balances and entries. The CSD shall put in place the procedures for the information related to them, in accordance with the specifications determined by the Council. b. The CSD shall, after loading the shareholder register onto its electronic systems, send it to the company for matching with the register held by it.

Article (2) a. The company is responsible for the correctness, accuracy, and completeness of the contents of the shareholder register before its acceptance, and the CSD shall not bear any responsibility as a result thereof. b. The CSD shall accept this information as a whole and shall not accept the balances of each shareholder until it has reviewed the center's matching with the capital, and the acceptance of the deposit through one of the brokers and following the registration procedures shall not be considered an approval by the CSD of the correctness, accuracy, or completeness of the information and data related to the quantity of shares and any entries in the shareholder register held by it.

Article (3) a. No person shall open a trading account with any broker and trade in securities listed in the CSD unless they obtain an investor number in accordance with the provisions of this system. b. It is not permissible to assign more than one investor number to one investor. c. The investor number shall be issued through the broker or through the CSD in accordance with the procedures followed. d. It is not permissible to issue an investor number for a legal entity through the broker unless the broker submits all the required documents and papers to the Center for study and issuance of the number finally.

Article (4) The broker is obliged to keep copies of all documents submitted to him by the investor for the purpose of issuing an investor number, and to stamp them with a stamp indicating that they are true copies of the original.

Article (5) The CSD shall not approve the supervised entity on any public subscription for issuing investor numbers for investors applying for the subscription, except in accordance with the controls that the CSD puts in place for this purpose, and the supervised entity on the subscription shall bear the responsibility for issuing these numbers in accordance with the provisions of this system.

Article (6) a. The broker shall bear full responsibility for the consequences arising from the issuance of an investor number for his investor, and the broker shall be considered responsible for the correctness of the information and data he entered regarding his investor on the electronic market systems. b. The broker shall bear the responsibility for the correctness of his investor's signature confirmed on the investor number request form and to verify the identity and eligibility of the investor. c. The CSD shall not be considered responsible for the inaccuracy, incorrectness, or incompleteness of the investor's data entered by the broker.

Article (7) The investor must update the request for issuing an investor number with the data related to him contained in it, whether through the market that issued his investor number or through the broker.

Article (8) a. The person who wishes to trade in securities listed in the OTC CSD must open a trading account with one of the brokers. b. It is not permissible to open more than one account per investor with one broker, but it is permissible for the investor to open a trading account with more than one broker. c. The broker shall open trading accounts for its clients on the electronic market systems dedicated for this purpose. d. A trading account shall not be opened for a person unless that person has obtained an investor number.

Article (9) a. Trading accounts can be opened on the electronic market systems as follows: • Independent trading account: opened in the name of one person only (natural person). • Joint trading account. b. It is not permissible to open an account in the name of the deceased's heirs for the purpose of selling securities registered in the name of the deceased only.

Article (10) a. No person shall trade in securities listed in the market unless they deposit the securities owned by them in their account at the OTC CSD. b. The deposit of securities in the person's account at the CSD is done through the OTC CSD. c. Securities are deposited according to the following procedures: • The person submits a request to deposit securities to the CSD through his broker with all the documents required by the CSD. • The broker verifies the correctness of the information provided to him. • The CSD reviews the documents and sends them to the listed company within one working day. • The listed company verifies the ownership of the sent securities and the identity of the person and their eligibility for the deposit request within a period of one working day. • The listed company deposits the securities in the investor's account at the OTC CSD immediately after verifying the correctness and integrity of the securities. • The listed company cancels the share certificates for those securities after completing the procedures.

Article (11) a. The investor may deposit his securities in his account at the CSD or transfer them or part of them to his account with the broker according to the following procedures: • The investor submits a request to the broker to transfer a specific number of securities owned by him from his account at the Center to his account with the broker, on the form prescribed for this purpose. • The broker enters the data and executes the transfer request on the CSD electronic system to finalize the transfer process. • The CSD notifies the broker of the transfer requests or copies thereof. b. Securities purchased on behalf of the investor through any broker are deemed deposited in the investor's account with that broker.

Article (12) The investor may transfer securities deposited in his account with the broker or any part of them to his account at the CSD according to the following procedures: a. The investor submits a request to the broker to transfer a specific number of securities owned by him to his account at the CSD, according to the form prescribed for this purpose. b. The broker enters the transfer request into the system at the OTC CSD and transfers it finally. c. The broker is obliged to execute the transfer process by no later than the next working day after receiving the transfer request, and the broker shall not refuse to transfer the securities owned by the investor to the investor's account at the CSD unless he has legal reasons for doing so, and the broker shall bear the responsibility for his delay in executing the transfer process.

Article (13) In the event of the cancellation of investors' registration from the brokers' register, the CSD shall transfer the securities owned by them to their accounts at the CSD.

Article (14) a. If the listed company decides to increase its capital by issuing bonus shares, the CSD shall transfer these shares to the shareholders' accounts at the CSD. b. If the listed company decides to increase its capital by issuing new shares according to a public subscription at the CSD, the CSD shall transfer these shares to the shareholders' accounts at the CSD.

Article (15) The net value of securities is received and paid through the settlement account, and the CSD opens and manages this account in accordance with the provisions of this system.

Article (16) a. Every broker must open a settlement account with the Settlement Supervisor in accordance with the provisions of this system. b. The CSD has the right to access the account mentioned in paragraph (a) of this article, and the broker is obliged to provide the CSD with a statement of transactions on this account.

Article (17) a. The CSD calculates the net amount due to or from each broker for each trading day and for all brokers on the settlement day. b. The amount mentioned in paragraph (a) of this article is calculated by deducting the total value of his sales of securities for the same trading day from the total value of his purchases of securities for the same trading day.

Article (18) a. The broker may request the CSD to modify the trading account number in a specific transaction in the event of an error in the entry. b. The CSD shall take all necessary procedures and request any documents it deems necessary to verify that an error occurred in the entry. c. The request for modification must be submitted within 60 minutes from the end of the trading session, and in exceptional cases, the Executive Director may, with the approval of the Council, approve modification requests after this time until the end of the settlement process. d. If it appears to the CSD that the modification request was not due to an entry error, and the intended purpose was to achieve profit or avoid loss for the investor, this violation is subject to disciplinary procedures and penalties imposed by the CSD, and the broker must disclose the above in the daily trading report.

Article (19) a. The authorized manager may cancel any transaction executed during the trading session due to a defect in the CSD systems, provided that it is disclosed in the daily trading report. b. The CSD shall not be responsible for compensating any broker or investor as a result of any cancellation in accordance with the provisions of paragraph (a) of this article.

Article (20) Brokers shall comply with all regulatory, administrative, and technical procedures put in place by the CSD after its approval by the Authority and the Executive Director to regulate the trading process.