Raising Capital on Arab Equity Markets: Legal and Juridical Aspects of Arab Securities Regulation

Description

This first book of its kind discusses in particular the role of investor protection as regards disclosure when issuers are offering securities to the public, with full descriptions of the securities markets and stock exchanges in seventeen Arab jurisdictions. In two interrelated parts it examines both the regional macroeconomic matrix and a detailed case study (that of Jordan) in order to analyse the development and characteristics of an Arab regulatory model. Among the important issues and topics arising in the course of the analysis are the following: relevance of international regulatory standards to Arab securities markets; mandatory versus voluntary securities disclosure; the fundamentals of the Islamic financial system, role of riba and gharar, nature and impact of Shari’a’s unquantifiable juridical risks on the modus operandi of Arab securities markets; macroeconomic adjustment policies and structural adjustment programmes in several Arab countries; recent economic and Arab capital markets impact in the wake of the ‘Arab Spring’; extent of different countries’ reliance on Shari’a as a constitutional source; constitutional challenges to the imposition of interest; the need for the positive law to compel securities disclosure under Shari’a; shareholders’ remedies when suing for fraud or negligent misstatements; liability for misleading or inaccurate disclosure (under the general law of the UK and a selected Arab jurisdiction); prospectus liability under the statutory regime of the UK and an Arab regulatory regime; bars to rescission of contract: Comparative UK and Shari'a aspects; and Arab, UK regulatory agencies' enforcement, prosecutorial, administrative and civil remedies. The author closely examines various instruments deployed for conveying securities disclosure and dissemination of information, and looks extensively at relevant rulings as enunciated by an Arab court of cassation. He then constructs a model of an effective securities disclosure regime in order to provide better investor protection for shareholders under Shari’a. 'Among the strengths of Dr Lu’ayy Minwer Al-Rimawi’s book is the fact that at all times he adopts a comparative approach, not only as between different Arab systems, but also with an appreciation of the legal position in the UK and the European Union and elsewhere’ [The Hon. Mr Justice Sir William Blair Q.C., High Court Judge in the UK and Chairman of the Qatar Financial Centre Regulatory Tribunal]. As the first in-depth discussion of the regulation of Arab capital markets in English, with an eye to international standards and the policy issues involved – and with attention focused on the central question of how the law can properly protect investors – this book will commend itself to all those with an interest in securities markets in the Arab world. Cover Half Title Page Title Page Copyright Page The Author Table of Contents List of Abbreviations Foreword Acknowledgements Introduction: Methodology and Structure Part I Horizontal Account of Legal, Juridical and Macroeconomic Issues When Contextualising Arab Securities Markets Chapter 1 Securities Markets and Their Benefits INTRODUCTION 1. SECURITIES MARKETS AND THEIR INSTRUMENTS 1.1. SECURITIES MARKETS 1.2. INSTRUMENTS OF SECURITIES MARKETS 2. EMERGING MARKETS AND BENEFITS OF SECURITIES MARKETS 2.1. EMERGING MARKETS 2.2. BENEFITS OF SECURITIES MARKETS 2.2.1. Benefits Generally 2.2.2. Benefits in Emerging Markets 3. CONCLUSION Chapter 2 Arab Securities Markets INTRODUCTION 1. ARAB SECURITIES MARKETS: WHAT ARE THEY? 2. DIVISION IN TERMS OF CAPITALISATION 3. DIVISION IN TERMS OF BROAD UNDERLYING MACROECONOMICS AND REGULATORY STRUCTURE 3.1. NOT LIKELY EXISTENCE OF CAPITAL MARKETS IN THE SHORT TO MEDIUM TERM 3.2. NEWLY, ABOUT TO BE SET UP, OR STOCK EXCHANGES WITH LIMITED IMPACT IN THE OVERALL ECONOMY 3.2.1. Algeria 3.2.2. Iraq 3.2.3. Libya 3.2.4. The Palestinian Authority 3.2.5. Sudan 3.2.6. Syria 3.2.7. Yemen 3.3. STOCK EXCHANGES IN OIL-PRODUCING ARAB COUNTRIES 3.3.1. Bahrain 3.3.2. Kuwait 3.3.3. Qatar 3.3.4. Saudi Arabia 3.3.5. United Arab Emirates 3.4. STOCK EXCHANGES IN NON-OIL-PRODUCING ARAB COUNTRIES 3.4.1. Egypt 3.4.2. Jordan 3.4.3. Lebanon 3.4.4. Morocco 3.4.5. Tunisia 4. CONCLUSION Chapter 3 Recent Arab Interest in Regulating Its Domestic Securities Markets INTRODUCTION 1. BELATED AWARENESS OF THE ROLE OF STOCK EXCHANGES AS ECONOMIC ENGINES FOR GROWTH 2. MACROECONOMIC ADJUSTMENT POLICIES AND UNDERGOING STRUCTURAL ADJUSTMENT PROGRAMMES 2.1. IMF’s INSTRUMENTAL ROLE IN ARAB STRUCTURAL REFORM PROGRAMMES 2.2. IMPROVED PROSPECTS OF GROWTH IN GDP: REAL AND NOMINAL 2.3. FISCAL CONSOLIDATION 2.4. REDUCING EXTERNAL GOVERNMENT DEBT 2.5. STEADY INCREASE IN OFFICIAL ARAB RESERVES 2.6. TAMING INFLATION 3. CONSISTENT REGIONAL DRIVE AT PRIVATISATION 4. CONCLUSION Chapter 4 Securities Regulation, Investor Protection and Disclosure When Offering Shares to the Public INTRODUCTION 1. SECURITIES REGULATION AND INVESTOR PROTECTION 1.1. WHAT IS SECURITIES REGULATION? 1.2. SECURITIES REGULATION AND THE THEME OF INVESTOR PROTECTION 1.3. SECURITIES REGULATION PRUDENTIAL ORIENTATION 1.4. SECURITIES REGULATION IS NOT AN ALL-INCLUSIVE PANACEA 2. DISCLOSURE AS THE MAIN TOOL FOR INVESTOR PROTECTION WHEN OFFERING SECURITIES TO THE PUBLIC 2.1. DISCLOSURE IS NOT THE ONLY TOOL FOR ACHIEVING INVESTOR PROTECTION 2.2. SHOULD DISCLOSURE BE MANDATORY? 2.2.1. Arguments Based on Economic Hypotheses, Models and Theorems 2.2.2. Mere Reliance on Anti-Fraud Disclosure Provisions Will Not Suffice 2.2.3. Accuracy and Efficiency Enhancement Arguments 2.2.4. Goods-Like Characteristic of Information 3. CONCLUSION Chapter 5 Relevance of International Regulatory Standards to Arab Securities Markets INTRODUCTION 1. SECURITIES REGULATION WAS HISTORICALLY A RESPONSE TO DOMESTIC AND INSTITUTIONAL FACTORS 2. COORDINATED GLOBAL RESPONSES TO ISSUES RELATED TO GLOBAL FINANCIAL STABILITY 3. INTERNATIONAL SELF-REGULATORY BODIES CEMENTING THE GLOBALISED ASPECTS OF SECURITIES REGULATION 4. ARAB POLICY MAKERS EMBRACING GLOBALISATION AND INTERNATIONAL REGULATORY STANDARDS 4.1. ARAB POLICY MAKERS NOT INDIFFERENT TO GLOBAL REGULATORY TRENDS 4.2. ACTIVE ENGAGEMENT IN CROSS-LISTING, LINKAGE AND UNPRECEDENTED OPENNESS TO INTERNATIONAL REGULATORY STANDARDS 5. CONCLUSION Chapter 6 Shari’a’s Juridical Risks in the Context of Arab Securities Regulation 1. THE IMPORTANCE OF EXAMINING SHARI’A JURIDICALLY 1.1. SHARI’A AS A CONSTITUTIONAL SOURCE 1.1.1. Different Levels to Shari’a Being a Constitutional Source 1.1.1.1. Shari’a as an Overall Constitutional Source as the Apparent Embodiment of the State 1.1.1.2. Shari’a as the Principal Source of Legislation 1.1.1.3. Strong Degree of Commitment to Shari’a as a Legislative Source in Arab Constitutions 1.1.1.4. Marginal Role for Shari’a in Arab Constitutions 1.1.1.5. Shari’a Plays No Role as a Constitutional Source 1.1.2. Practical Implications to the Imposition of Interest, Particularly in Egypt and Kuwait 1.2. GAP-FILLING ROLE: SHARI’A’S RELEVANCE TO MODERN COMMERCIAL TRANSACTIONS 1.3. EVER-ENDURING SOCIETAL RELEVANCE OF SHARI’A 2. SOURCES OF ISLAMIC LAW UNDER SHARI’A 3. THE NATURE OF SHARI’A’S JURIDICAL RISKS 3.1. RIBA 3.2. GHARAR 4. SHARI’A’S JURIDICAL IMPACT ON JORDANIAN CIVIL AND COMMERCIAL CODES 4.1. SHARI’A AND THE JORDANIAN CIVIL CODE (JCC) 4.2. IMPACT OF RIBA AND GHARAR 4.2.1. Generally 4.2.2. Impact on Jordanian Civil and Commercial Codes 4.2.2.1. Impact of Riba 4.2.2.2. Impact of Gharar 5. SHARI’A’S JURIDICAL IMPACT ON SECURITIES MARKETS 6. SHARI’A’S JURIDICAL IMPACT ON JORDANIAN SECURITIES REGULATION 7. CONCLUSION Chapter 7 Securities Disclosure under Shari’a: Selected Comparative Aspects with the UK General Law, Particularly under the Principle of Caveat Emptor INTRODUCTION 1. SHARI’A’S JURIDICAL STANCE VIS-À-VIS THE PRINCIPLE OF CAVEAT EMPTOR 2. SHARI’A’S STRONG EXHORTATIONS ON TRANSACTING ON THE MARKETPLACE 3. SHARI’A’S DISCLOSURE OF ALL MATERIAL INFORMATION REGARDING DEFECTS UNDER CONTRACTS OF SALE 4. IMPLICATIONS FOR A SHARI’A SECURITIES DISCLOSURE REGIME 5. THE NEED FOR THE POSITIVE LAW TO COMPEL DISCLOSURE UNDER SHARI’A 5.1. THE LIMITATION OF THE ANALOGY WITH NON-NOTIONAL GOODS 5.2. THE PROBLEM OF NOT ACHIEVING STANDARDISATION OF INFORMATION UNDER A SHARI’A DISCLOSURE REGIME 5.3. INFORMATION UNDER SHARI’A WOULD NOT GUARANTEE PRICE ACCURACY OF OFFERED SECURITIES 6. CONCLUSION Part II Vertical Case Study in an Arab Jurisdiction: The Case of Jordan Chapter 8 The Jordanian Regime for Public Offers Before 1997 INTRODUCTION 1. THE LEGAL FRAMEWORK FOR PUBLIC OFFERS BEFORE 1997 1.1. THE EARLY STAGE 1.2. UNDER THE COMPANIES LAW 1964 1.3. UNDER THE COMPANIES LAW 1989 2. THE LEGAL FRAMEWORK FOR LISTING BEFORE 1997 2.1. THE EARLY STAGE 2.2. UNDER THE AMMAN FINANCIAL MARKET LAW 1976 2.2.1. The Amman Financial Market (AFM) 2.2.1.1. Membership and Brokers 2.2.1.2. Management 2.3. LISTING REQUIREMENTS UNDER THE AMMAN FINANCIAL MARKET LAW 1976 (AFML 1976) 2.4. LISTING REQUIREMENTS UNDER THE INTERNAL LAW OF THE AMMAN FINANCIAL MARKET 1980 2.5. LISTING REQUIREMENTS UNDER THE 1990 AMMAN FINANCIAL MARKET LAW, AS AMENDED BY LAW NO. 31 OF THE YEAR 1992 2.6. LISTING REQUIREMENTS UNDER THE VARIOUS REGULATIONS ISSUED BY THE MANAGEMENT COMMITTEE OF THE AFM 3. ASSESSMENT OF THE REGULATORY REGIME BEFORE 1997 3.1. THE JORDANIAN REGULATORY TECHNIQUES TO ENSURE SOME STANDARDS OF INVESTOR PROTECTION 3.2. DID THE REGULATORY REGIME BEFORE 1997 PROTECT INVESTORS WHEN OFFERING/LISTING EQUITIES? 3.2.1. Incomplete Understanding of the Role of Investor Protection in Defining Some Market Practices 3.2.2. Legal Uncertainty 3.2.3. Inadequate Informational Content in Jordanian Prospectuses 3.2.4. Lack of Accounting Standards and Non-Existent Enforcement Mechanisms 4. CONCLUSION Chapter 9 The Jordanian Regulatory Regime for Public Offers and Equity Listing After the 1997 Regime INTRODUCTION 1. THE CATALYSTS FOR THE STRUCTURAL CHANGES AND THE IMPACT OF PRIVATISATION 2. WHY IS MANDATORY DISCLOSURE NEEDED IN JORDAN? 3. THE STRUCTURAL CHANGES AFTER THE 1997 REGIME 3.1. THE STRUCTURAL CHANGES TO JORDANIAN SECURITIES MARKETS 3.1.1. The Jordanian Securities Commission (JSC) 3.1.2. The Securities Depository Centre (SDC) 3.1.3. The Amman Stock Exchange (ASE) 3.1.3.1. The Primary Equity Market 3.1.3.2. The Secondary Market 3.1.3.2.1. Volume of Trading 3.1.3.2.2. Listed Companies and Main Sectors 3.1.3.2.3. Equity Ownership in Listed Companies 4. THE SPECIFIC REGULATORY FRAMEWORK FOR PUBLIC OFFERS AND LISTING 4.1. THE NEW REGULATORY FRAMEWORK FOR PUBLIC OFFERS 4.2. THE NEW REGULATORY FRAMEWORK FOR LISTING 4.2.1. Brief Account of Historical Functionalities of Listing in the UK 4.2.2. Brief Account of the Jordanian Listing Regime 4.2.3. Listing on the Second Market 4.2.4. Listing on the First Market 5. SECURITIES DISCLOSURE UNDER THE NEW REGIME 5.1. THE SUBSTANTIVE CONTENT OF MANDATED DISCLOSURE 5.1.1. The Applicable Law 5.1.2. Disclosure When Shares Are About To Be Offered/Listed 5.1.2.1. When Shares Are Offered to the Public 5.1.2.2. When Shares Are Listed on the ASE 6. THE INSTRUMENTS DEPLOYED FOR CONVEYING SECURITIES DISCLOSURE AND DISSEMINATION OF INFORMATION 6.1. LISTING PARTICULARS 6.2. PROSPECTUS OR NASHRAT EL-ESDAR 7. ASSESSMENT OF THE NEW REGULATORY REGIME 7.1. ASSESSMENT OF THE JORDANIAN LEGAL UNDERSTANDING OF PUBLIC OFFERS 7.1.1. Implications of the EU Criteria of Public Offers for Jordan 7.2. ASSESSMENT OF THE JORDANIAN GENERAL PRINCIPLES OF SECURITIES DISCLOSURE 7.3. ASSESSMENT OF THE INSTRUMENTS DEPLOYED TO CONVEY SECURITIES DISCLOSURE 7.3.1. Potential Loophole due to Statutory Insistence on Delivery of Prospectus 7.3.2. Conflict between Laws and Regulations until December 2005 7.3.3. No Obligation to Publish a Supplementary Prospectus until December 2005 7.4. NO INVESTMENT PROMOTION REGIME 8. CONCLUSION Chapter 10 Liabilities for Fraudulent or Negligent Misstatements under the Jordanian General Law: Selected Comparative Aspects with the UK General Law INTRODUCTION 1. LIABILITY FOR FRAUD ARISING FROM GHUBIN AND TAGHREER 1.1. MEANING OF GHUBIN AND TAGHREER UNDER SHARI’A 1.1.1. The Concept of Ghubin 1.1.1.1. Ghubin Yaseer 1.1.1.2. Ghubin Fahish 1.1.2. The Concept of Taghreer 1.2. THE JURIDICAL IMPACT OF TAGHREER AND GHUBIN UNDER SHARI’A 1.2.1. The Juridical Impact of ghubin 1.2.2. The Juridical Impact of Taghreer 1.3. SHAREHOLDERS SUING ON THE GROUNDS OF GHUBIN FAHISH AND TAGHREER UNDER THE JCC 1.3.1. Establishing Ghubin Fahish 1.3.2. Establishing Taghreer 1.3.3. Bars to Rescission: Comparative UK and Jordanian Aspects 1.3.4. How Effective Are Shareholders Remedies under Ghubin and Taghreer? 2. LIABILITY FOR NEGLIGENCE 2.1. BRIEF DISCUSSION OF TORTIOUS LIABILITY UNDER SHARI’A 2.2. SHAREHOLDERS SUING FOR NEGLIGENT MISSTATEMENTS IN THE PROSPECTUS UNDER THE JCC 2.2.1. Constituent Elements of Liability 2.2.1.1. Establishing Injurious Act 2.2.1.2. Establishing Injury 2.2.1.3. Establishing Causal Connection 2.2.2. How Effective Are Shareholders Remedies under Negligence? 3. CONCLUSION Chapter 11 Regulatory Liabilities for Misleading or Inaccurate Disclosure: Selected Comparative Aspects with the UK INTRODUCTION 1. CIVIL LIABILITY 1.1. CIVIL LIABILITY FOR DILUTING THE IMPACT OF THE PROSPECTUS 1.2. CIVIL LIABILITY FOR UNDERMINING THE INFORMATIONAL PROBITY OF THE PROSPECTUS 1.3. PERSONS LIABLE AND DEFENCES 2. CRIMINAL LIABILITY 2.1. CRIMINAL LIABILITY FOR DILUTING THE IMPACT OF THE PROSPECTUS 2.2. CRIMINAL LIABILITY FOR UNDERMINING THE INFORMATIONAL PROBITY OF THE PROSPECTUS 3. ADMINISTRATIVE REMEDIES 3.1. DISCIPLINARY MEASURES 3.1.1. Monetary Fines Imposed by the JSC 3.2. CIVIL ENFORCEMENT POWERS 3.2.1. Restraining a Course of Conduct and Securing Assets of Offenders 3.2.2. Ensuring Redress for Investors 4. CONCLUSION Appendix Bibliography Table of Selected Cases Table of Statutory Instruments and Regulations Book/Author Index Index Back Cover