Instruction COSOB No. 2000-01 of June 11, 2000, Establishing Prudential Management Rules for Stock Exchange Intermediaries

Instruction COSOB No. 2000-01 of June 11, 2000 Establishing the Prudential Management Rules for Stock Exchange Intermediaries

Article 1. — In application of Regulation No. 96-03 of July 3, 1996, relating to the conditions for approval, obligations, and control of stock exchange intermediaries, particularly its Article 40, this instruction aims to establish the prudential rules that stock exchange intermediaries (IOBs) must respect.

Art. 2. — IOBs are required to permanently maintain the following prudential rules:
— risk coverage;
— risk diversification;
— and asset segregation.

Chapter I
The Rules

Art. 3. — The risk coverage rule is defined as the ratio between, on the one hand, the risks incurred by the IOB in the context of counterparty and negotiation for the account of clients, and on the other hand, its net own funds. This ratio must be permanently less than 100%.

Art. 4. — The risks incurred by the IOB referred to in Article 3 above are measured by the total:
— of the net position taken in equity securities, in the context of counterparty, divided by the coefficient 2; — of the net position taken in debt securities, in the context of counterparty, divided by the coefficient 8; — of the net position taken by the IOB for the account of clients, divided by the coefficient 50. Notwithstanding the coefficients above, the IOB's net own funds must in no case be less than 25% of the total balance sheet.

Art. 5. — The risk diversification rule consists of distributing the risks incurred by the IOB across several issuers.

Art. 6. — The risk diversification rule is double:
— The total value of net positions taken by the IOB in the context of counterparty on different values issued by the same issuer must be permanently less than 30% of its net own funds. This rule does not apply to values issued or guaranteed by the State. — The total value of net positions of the same client must be permanently less than 30% of the IOB's net own funds. This rule does not apply to the client who is the majority shareholder of the IOB.

Art. 7. — IOBs are required to prudently manage client cash deposits. Deposits made by clients in the context of stock market operations must permanently be represented by available assets.

Chapter II
Definitions

Art. 8. — For the application of this instruction, the following are understood:
Net own funds of an IOB, the following elements:
— its share capital / personal funds;
— share premiums;
— reserves;
— revaluation differences;
— allocations of a reserve nature, net of taxes; — the result pending allocation (creditor); — blocked accounts of partners. Reduced, where applicable:
— the share of uncapitalized capital;
— the result pending allocation (debit carry forward); — preliminary expenses and intangible assets; — advances granted to shareholders; — the provisional result of the current fiscal year, if it is deficit.

Art. 9. — It is also understood by:
— Position on a given value: the amount of a transaction on this value, negotiated and not yet settled. — Net position on a value: the balance obtained after offsetting long positions and short positions taken on this value. The net position can be a net long position when long positions exceed short positions, or a net short position in the opposite case. — Position taken in the context of counterparty on a given value: the total of securities of this value acquired by an IOB for its own account.

COSOB Regulation Instruction No. 00-01

Chapter III
Miscellaneous Provisions

Art. 10. — IOBs permanently determine the ratios and control compliance with the rules. If the IOB observes that one of the rules is not respected, it must inform COSOB without delay. The IOB indicates the causes of the observed breach and, where applicable, the measures taken to restore the rule.

Art. 11. — IOBs are required to send monthly to COSOB the statements relating to the calculation of the rules established by this instruction and following the models attached to this instruction.

Art. 12. — Controls may be undertaken at any time to ensure compliance with these rules.

Art. 13. — The approval of the IOB implies that it has adopted an accounting system whose operation is capable of providing the relevant data required for the assessment of compliance with the prudential rules on risk coverage, risk diversification, and asset segregation.

Art. 14. — Breaches observed in the respect of prudential rules and information obligations in this matter may lead to the application of the provisions provided for in Article 55 of Legislative Decree No. 93-10 of May 23, 1993, relating to the securities market.

Art. 15. — This instruction enters into force on the date of its signature.

Done in Algiers on June 11, 2000.

The President
Ali BOUKRAMI

COSOB Regulation Instruction No. 00-01

ANNEXES
ANNEX 1: Statement of positions in the context of counterparty.
ANNEX 2: Statement of net client positions.
ANNEX 3: Statement of net own funds.
ANNEX 4: Calculation of ratios.
ANNEX 5: Table of risk diversification by issuers in the context of counterparty.
ANNEX 6: Table of risk diversification by clients.
ANNEX 7: Table of asset segregation.
COSOB Regulation Instruction No. 00-01

ANNEX 1
STATEMENT OF POSITIONS IN THE CONTEXT OF COUNTERPARTY

ELEMENTS | EQUITY SECURITIES | DEBT SECURITIES — Absolute value of the sum of the following elements:
(+) Amount of transactions negotiated on purchase, not yet settled; (-) Amount of transactions negotiated on sale, not yet settled; (+) Amount of transactions negotiated for the account of clients, not having received a formal and precise order from the client and not yet settled. XXX | XXX Net position on a value in the context of counterparty (P) | XXX Coefficient (Coef) | 02 Coverage (P/Coef) | XXX(A) XXX | XXX 08 | XXX(B)

ANNEX 2
STATEMENT OF CLIENT POSITIONS

a) In the case where the securities are held by the IOB, it is equal to the absolute value of the sum of the following elements:
(+) Amount of transactions negotiated on purchase, not yet settled; (-) Amount of transactions negotiated on sale, not yet settled. XXX | XXX Net position of the client on a value (P) | XXX Coefficient (Coef) | 50 Coverage (P/Coef) | XXX(C)

b) In the case where the securities are not held by the IOB, it is equal to the sum of the following elements:
(+) Amount of transactions negotiated on purchase, not yet settled; (+) Amount of transactions negotiated on sale, not yet settled. XXX | XXX Net position of the client on a value (P) | XXX Coefficient (Coef) | 50 Coverage (P/Coef) | XXX(C)

COSOB Regulation Instruction No. 00-01

ANNEX 3
STATEMENT OF NET OWN FUNDS

ELEMENTS | AMOUNT
1 | Share Capital / Personal Funds
2 | Share Premiums
3 | Reserves
4 | Revaluation Differences
5 | Result Pending Allocation (Creditor)
6 | To Add:

Allocation of a reserve nature (net of taxes)
Blocked accounts of partners
Subtotal (I)
1
2
3
4
5
6
Provisional Result of the Current Fiscal Year (if Deficit)
---
Subtotal (II)
TOTAL I-II

ANNEX 4
CALCULATION OF RATIOS

RATIOS %
1) Risk Coverage Ratio
This ratio must be permanently less than 100%.
2) Independence Degree Ratio
This ratio must be greater than or equal to 25%.

COSOB Regulation Instruction No. 00-01

ANNEX 5
TABLE OF RISK DIVERSIFICATION BY ISSUERS IN THE CONTEXT OF COUNTERPARTY

NAMES OF ISSUERS | TOTAL VALUE FOR THE SAME ISSUER | % RELATIVE TO NET OWN FUNDS

ANNEX 6
TABLE OF RISK DIVERSIFICATION BY CLIENTS

NAMES OF CLIENTS | TOTAL VALUE OF NET POSITIONS FOR THE SAME CLIENT | % RELATIVE TO NET OWN FUNDS

COSOB Regulation Instruction No. 00-01

ANNEX 7
TABLE OF ASSET SEGREGATION

DESIGNATION | AMOUNT
— Availability | XXX
— Others (to be detailed) |
TOTAL (1) |
— Various specific deposits |
— Others (to be detailed) |
TOTAL (2) |
BALANCE (1-2) | XXX

COSOB Regulation Instruction No. 00-01