Regulatory Bylaw No. 33: Procedures for Pledging and Seizing Securities

Capital Market Authority Regulations
2022
Regulatory Bylaw No. (33): Procedures for Pledge and Seizure of Securities

Based on the System for Deposit and Settlement And the Rules for Electronic Trading and Clearing, the following are the procedures for seizure or pledge of deposited shares:

1. In the case of seizure:
   The Central Depository notifies the Issuer of shares that are seized or pledged. Decisions of seizure sent to the Center are received through the Executive Directorates and judicial decisions. In the case of pledge, notifications are received from banks regarding the placement of a pledge signal for mortgage facilities or similar, accompanied by a letter of confirmation of the pledge from the shareholder himself.

2. The Issuer:
   The Issuer must retain all documents related to ownership restrictions on securities not deposited. The Center notifies the Issuer of any seizure decisions received that relate to securities not deposited. Similarly, the Issuer of shares must notify the Central Depository of its registration. The Issuer must also record the seizure in its records if there is any ownership restriction preventing the pledge.

3. The Central Depository alone:
   Securities deposited with the Center are considered eligible for pledge operations. The pledge is not considered effective unless it is registered and recorded in the Center's shareholder register.

4. The Center places a pledge signal on the deposited securities upon a request submitted by the Debtor to the Pledgee on the form prescribed for this purpose, in accordance with the procedures in force at the Center. The Center notifies the concerned company.

5. The Center removes the pledge signal on the deposited securities upon a request submitted by the Secured Creditor on the form prescribed for this purpose, in accordance with the procedures in force and notification of the concerned company.

6. In the case of splitting the nominal value of pledged securities, the Center places a pledge signal on the securities resulting from the splitting process. The Center records the pledge signal on the free shares unless the pledge contract stipulates otherwise.

7. The Center, upon receiving any decision from a competent authority regarding the seizure of securities and notifying the seizing authority of the seizure signal existing on these securities, does not remove the seizure signal unless a decision from the same seizing authority to remove the seizure signal is received.

8. a. In the event of a request to sell seized or pledged securities, this is done only by obtaining a final judgment from the Executive Directorates, in addition to the judicial decision. The Market Announcement Board and the website publish the announcement.

b. The Market executes the sale process through its electronic board, which includes the number of shares offered for sale. The Brokerage Company executes the sale process and sends a copy to the Authority to state its opinion.

c. The sale is determined through the Brokerage Company at the Central Depository Market.

d. The securities are offered for sale and orders are queued for a period of not less than five minutes. Then, the orders are executed electronically.

e. The execution of the sale price is according to the prevailing prices in the session or at a free price after obtaining prior approval from the Authority.

f. In the presence of a desire to execute a counter-order, prior approval from the Authority is obtained.

g. The proceeds from the sale are sent via a check to the competent Executive Directorate.

9. If a decision from a competent authority regarding the seizure of any securities that were sold or transferred on the date of seizure is received by the Center, the contract of both parties is considered void ab initio.

10. Instead, a request for pledge on securities must specify the word "pledge" subsequently. Banks are requested to mention seizure, as seizure is done through Executive Directorates or government departments, whereas pledge is done through banks for mortgage facilities or similar.