The Capital Markets Authority has amended the requirements for some categories which wish to create investment portfolios for securities by preventing individual institutions from creating these portfolios.
A local Arabic daily said the CMA has kept the rest of the requirements for the authorized person to manage the investment portfolios of securities intact, and are as follows:
— Not to establish investment portfolios for his benefit with another authorized person, with the exception of portfolios established with another authorized person to invest in foreign markets, as well as the investment portfolio pledged as a guarantee for one of the banks, and there was agreement between the two parties to the portfolio contract and the bank to manage the investment portfolio, and trading its components with the knowledge of the other authorized person.
— Not creating investment portfolios for the securities of individual institutions and not concluding internal deals between the investment portfolios that he manages.
— The investment portfolio manager is prohibited from buying or selling treasury shares in a portfolio owned by the company issuing the shares.
— Taking into account that the persons in charge of managing investment portfolios should not occupy positions in the boards of directors or the executive body of authorized persons.
Informed sources told the daily that individual institutions do not have a legal personality independent of their owner, and their investment account can be registered in the name of the owner of the institution, the natural person.
The sources added that the authority’s decision to prevent individual institutions from establishing investment portfolios will prohibit them from opening investment accounts for individual institutions, pointing out that individual institutions often specialize in areas far from the financial market, and their entry into financial investments may reflect negatively on them, due to their lack of depth in their basic field that was established. The commercial register is based on it”, especially since the owner of the institution has the ability to open an individual investment portfolio better than opening a portfolio in the name of the institution he owns.
She pointed out that the measures undertaken by the authority contribute to a greater regulation of the financial market in front of foreign investors, especially that these measures serve to raise the confidence of investors, on the reality of the regulation processes that are carried out by the supervisory bodies.
On the other hand, the sources say that preventing individual institutions from opening investment portfolios may reduce the opportunity for the owner of the institution to negotiate with banks to obtain credit facilities, in addition to reducing options for the investor, which may affect the level of his dealings in the market and his liquidity with which he deals as a result of reducing the options available to him.