Instructions for Managing and Marketing Investment Portfolios and Funds in Foreign Currencies for Clients

Form (1/1/4/68)

In the name of Allah, the Most Gracious, the Most Merciful

[Central Bank of Jordan Logo]

Number: 1/10/2324
Date: 15/2/1428 AH
Corresponding to: 5/3/2007 AD

Instructions for Managing and Marketing Investment Portfolios and Funds in Foreign Currencies for Clients No. (34 / 2007) Issued by the Central Bank of Jordan pursuant to the provisions of Article (99/b) of the Banks Law

The controls that banks must adhere to in providing services for managing and marketing investment portfolios and funds in foreign currencies for clients are listed below, as follows:-

First: Management of Investment Portfolios and Funds in Foreign Currencies:

Banks may manage investment portfolios and funds in foreign currencies for clients based on their instructions (orders) (Non-Discretionary) or based on their absolute authorization (Discretionary), within a detailed investment policy agreed upon by both parties and according to the following conditions:-

1. The bank's board of directors must adopt a written policy defining the bases for managing investment portfolios and funds, including operational bases, desired investment tools, and activated controls, including operational controls to mitigate the risks of these investments. This policy and any future amendments must be provided to the Central Bank of Jordan within three months from this date.

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CENTRAL BANK OF JORDAN

2. The bank has the right to use market derivatives such as forwards, futures, options, and others, provided that the bank does not sell option rights without appropriate hedging. Investment in these tools must be consistent with the bank's general policy.

3. The bank is prohibited from granting credit facilities to clients or allowing them to utilize existing credit facilities to finance investment operations in these portfolios or funds, or against the guarantee of their shares therein.

4. Define performance benchmarks as a reference for each portfolio/fund managed by the bank based on absolute authorization from clients, in a way that enables them to judge the results.

5. Identify the investment portfolios or funds to which each operation belongs before its execution, using a special register for this purpose.

6. The management of these services must be entrusted to qualified technicians working based on clear instructions approved by the bank's management.

7. The bank must have an independent Back Office department responsible for settling executed operations, in addition to another independent Middle Office department responsible for monitoring client account statuses. These operations must be subjected to the bank's internal audit to ensure compliance with approved policies and procedures.

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CENTRAL BANK OF JORDAN

8. Adopt clear and understandable legal agreement templates regulating the relationship between the bank and the client in both Arabic and English (on the same template), explicitly including all risks that the client may be exposed to, terms of dealing including commissions, fees, and expenses, as well as defining the bank's responsibility in managing these portfolios or funds.

9. Commit to providing clients with detailed and clear reports on their accounts periodically (maximum monthly), or in the event of a material decline in the performance of any portfolio/fund below performance benchmarks, or upon request.

10. Retain client orders, whether written, by fax, internet, or recorded phone calls, for a period consistent with the provisions of applicable legislation in this regard, in a manner that facilitates easy retrieval when needed.

11. The necessity of having detailed, clear, and updated brochures for clients about investment portfolios and funds, including the types and proportions of investment distribution, the size of potential investment risks, and the commissions, fees, and expenses borne by clients.

12. Marketing advertisements through various advertising means for providing these services must be clear and highly transparent.

13. The bank may not act as a counterparty in transactions it conducts on behalf of clients; the bank's role in providing these services is limited to that of an intermediary.

14. The necessity of segregating bank accounts and client accounts in joint investment portfolios and funds, provided that client investment portfolio and fund accounts are shown within the bank's off-balance sheet accounts.

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CENTRAL BANK OF JORDAN

15. Retain all documents supporting all accounting entries made in client investment portfolio and fund accounts, in a manner that facilitates easy retrieval upon request.

16. Show investment portfolio and fund balances in the daily foreign currency position statement sent to the Central Bank of Jordan.

Second: Marketing of Investment Funds in Foreign Currencies:

Banks may market investment funds in foreign currencies, provided they inform the Central Bank of Jordan, and adhere to the following:-

1. The bank's board of directors must adopt a written policy defining the bases for marketing investment funds in terms of the types desired for marketing and the associated risks.

2. The bank is prohibited from granting credit facilities to clients or allowing them to utilize existing credit facilities to finance investment operations in these funds, or against the guarantee of their shares therein.

3. The necessity of having detailed, clear, and updated brochures for clients, characterized by high transparency, especially regarding returns and risks. Clients must review them and sign to confirm their awareness and full responsibility, and their understanding of the bank's role as a marketer of these funds without the bank bearing any responsibility for the results of their marketing.

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CENTRAL BANK OF JORDAN

4. Retain records showing information related to the investment funds marketed by the bank.

Third: General Provisions:

1. The necessity of continuous training for technicians responsible for managing and marketing investment portfolios and funds.

2. The necessity of maintaining a register showing client complaints regarding their investments in these portfolios and funds.

3. The provisions of these instructions apply to licensed banks operating within the Kingdom. Foreign branches of these banks are not subject to these provisions.

4. These instructions shall be effective from their date of issue, and memo No. (93/3) dated 1993/1/5 and any other related instructions shall be cancelled.

Please accept our highest regards,

[Signature]
Governor
Dr. Umayya Toukan

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Form (1/1/09)