Wednesday, February 25, 2015

Amendments to Capital Market Law

The Capital Market Law (“Capital Market Law”) was amended on 10 November 2014 by way of Royal Decree 59 of 2014 (“Amending Law”). The Amending Law came into effect on the date of issue.

The Amending Law amends Articles 7(b), 12, 13, 17 (second paragraph), 52(2), 60, 63 A(3), 64, 65, 66, 67 and 68. The Amending Law has also added two new Articles – 68(bis) and 72. This article aims to highlight the significant amendments brought to the Capital Market Law.

Investigation of alleged violation of Capital Market Law

Article 60 of the Capital Market Law has been substantially revised to provide that in case of investigation by the relevant authority at the Capital Market Authority (“CMA”), the authority shall have the ability to seek assistance from specialised entity in Sultanate. It can also provide the results of such investigation to external authorities that perform oversight functions on the capital market.

The revised Article 60 will have far reaching impact on CMA’s ability to effectively investigate any violation of the Capital Market Law and thereafter initiate action.

Increased penalties

The Amending Law has substituted Articles 63A(3), 64, 65, 66, 67 and 68 with new articles which provide for substantially increased penalties in the following cases:

  1. providing insider or undisclosed information,
  2. making false statements or announcements which may influence an investor’s decision,
  3. violates the Capital Market Law or commences an activity without procuring a license,
  4. disposes of securities in a manner that makes prospective investors believe that the prices of the such securities are going to fluctuate substantially or make unreal demand for such securities,
  5. fix prices of securities in violation of the Capital Market Law,
  6. including inaccurate or false information in the prospectus of a joint stock company.

A new Article 68(bis) has been added to provide that if found guilty of violation of the Capital Market Law, its executive regulations and related decisions, the relevant court shall have the power to instruct the violator to return all the amounts and revenues resulting from such violation. This provision is in addition to the penalties specified in Capital Market Law (as amended).

Exemptions to Special Purpose Vehicles established to issue Bonds

A new Article 72 has been added which provides that special purpose companies formed for issuing bonds shall be exempted from the requirements of Foreign Capital Investment Law, which means that such companies can possibly own 100% foreign owned companies. Such companies shall also be exempted from paying taxes and charges as may be imposed by the relevant State Administrative Apparatus. In addition, these companies will have the ability to own movable and immovable assets include land.

Acquisition of 25% or more in a public joint stock company

Article 7(b) of the Amending Law now specifies that persons (natural or juristic) can singly or jointly own 25% or more of a public joint stock company provided the acquiring person meets the requirements set by the Board of Directors of CMA. The new Article 7(b) specifies the kind of controls and disclosure requirements that an acquirer will be required to fulfill.

Acquisition of shares under this Article 7(b) will not require the approval of the Executive President of the CMA as long as the acquirer meets the requirements specified by the CMA Board. The CMA Board is yet to issue the requirement criteria to be complained with by the acquirer.

Removal of provisions relating to General Assembly of MSM

The Amending Law has done away with the provision relating to formation and function of General Assembly set out in the Article 13 prior to the amendment. Accordingly the definition of ‘General Assembly’ has been removed from Capital Market Law.

Article 13 has been substituted by new Article 13 which provides that the Board of Directors of Muscat Securities Market (“MSM”) will choose an auditor who is licensed to work in Oman after obtaining approval of the CMA Board. The Board of MSM will also determine the fees of such auditor.

Brokers’ ability to sale unpaid shares

The Amending Law has replaced the second paragraph of Article 17 to provide that a licensed broker shall have the ability to sell securities bought in favour of one of its clients who has not paid the price for such securities. The sale of unpaid securities by the broker shall be in accordance with the rules issued by CMA Board.

The amended Article 17 provides the brokers’ the ability to sell the unpaid securities bought in favour of a client as opposed to the earlier limited option of requesting suspension from trading of unpaid securities.

Inclusion of Shariah related activities in CMA Board’s functions

Article 50 which provides the functions of the Board of Directors of CMA has been revised to provide that the Board shall have the authority to determine the conditions and procedures regulating financial trusts and issuing, listing and trading bonds and related Shariah activities.

CMA’s Board of Directors

Article 52(2) has been amended to provide that the Representative of Ministry of Finance shall now be appointed as the deputy chairperson of the Board of Directors of the CMA. This position was earlier held by representative of the Minister of National Economy.