Part 2 Part 2 The Financial Industry
Chapter I Chapter I Regulation of the Industry
Article (39) Regulated Services(a) For the purposes of this law, Regulated Services shall mean the financial services provided by the financial institutions, including those governed by Islamic Shari'a principles.(b) The Central Bank shall issue regulations specifying the Regulated Services and organizing the provision of these services. The Central Bank shall supervise and control any licencees providing such services.
Article (40) Carrying Out of Regulated Services(a) No person shall carry out a Regulated Service in the Kingdom unless licensed by the Central Bank.(b) With due regard to the provisions of the Commercial Companies Law, no financial institution shall be established in the Kingdom without the approval of the Central Bank.
Article (41) Restriction on the Use of Certain Names and Expressions(a) No person other than a financial institution licensed for the provision of banking services shall use, in any language, the term 'bank' or any synonym thereof, or an expression, address, invoice, notices or headed papers, which may be understood to mean that such person provides banking services.(b) No person other than a financial institution licensed for the provision of insurance or reinsurance services shall use, in any language, any term or expression, which may be understood to mean that such a person, is a provider of any such service. Also, no person other than those registered in the register stated in Article (74) of this law shall use, in any language, any term or expression that may be understood to mean that such person is providing any expert service in the area of insurance business, brokerage, that he is a representative of an insurance company or engaging in any other activity related to insurance.
Article (42) Marketing & Investment
The Central Bank may issue regulations to prohibit or restrict the marketing of or investing in the Regulated Services by any unlicensed person.
Chapter 2 Chapter 2 Procedure for Licensing, Amendment and Termination of Licences
Article (44) Application for a Licence(a) Any person who wishes to provide a Regulated Service must apply for a license from the Central Bank.(b) An application must contain such particulars and information and accompanied by such documents as specified by the Central Bank.(c) Subject to the Commercial Companies Law, the Central Bank shall issue regulations specifying the requirements for offering a licence to provide Regulated Services. Such requirements may include the legal form of the applicant, the location of its head office, the minimum capital and reserve requirements and the limits of capital adequacy requirements.(d) The Central Bank shall verify the application for a license to ensure that it satisfies all the conditions required, and it may ask for amendments or any additional information that it requires to assist with reaching its decision regarding the application. Such request shall be made within thirty days from the date of submission.(e) The Central Bank shall decide on the application within sixty days from the date of receiving the application complete with all the required information and documents.(f) The applicant may, at any time before a decision has been made about the application, withdraw his application or make amendments to any errors therein or in the supporting documents in accordance with the Regulations issued by the Central Bank in this respect.
Article (45) The Granting of a Licence(a) The Central Bank shall grant a licence to the applicant if he satisfies all the conditions set out in this law and any Regulations issued pursuant thereto.(b) The Central Bank may specify in the license the place at which the licensed Regulated Services to be provided and impose such terms and conditions on the Licencee as it deems necessary for a proper performance of the Regulated Services.(c) The Central Bank shall keep a register entitled the "Register of Licensed Financial Intuitions" on which all applications and supporting documents for licenses and any actions taken on them shall be recorded.
Article (46) Rejection of Application(a) The Central Bank shall issue a decision with the reason for rejecting an application for a licence if it does not satisfy the conditions provided for in this law or its regulations. In such case, the Central Bank shall notify the applicant in writing of the following:1. The refusal to grant the licence and the reasons for such refusal.2. The period of time during which the applicant may appeal to the Central Bank, which shall not be less than thirty days from the date of the notice.(b) The Central Bank shall decide on the appeal made by the applicant and notify him of its decision within thirty days from the date of submission of the appeal. Where an appeal has been refused, the applicant may re-appeal to the Board within thirty days from the date on which he was notified of the refusal, or upon the expiry of the deadline on which he was supposed to receive a decision on his appeal. The decision of the Board shall be final and binding. The applicant shall be notified by the Board's decision during a period not exceeding 90 days from date of his appeal to the Board.(c) The applicant whose appeal has been rejected may appeal to a competent court in the Kingdom within sixty days from the date of notification of such decision or the expiry of the deadline specified for the decision and no notification was received.
Article (47) Publication of the Decision to Grant a Licence(a) The Central Bank shall publish its decision to grant a licence in the Official Gazette and in two local newspapers, one published in Arabic and the other in English.(b) The Licencee must at all times keep an approved copy of the licence displayed in a visible place on the Licencee's premises in the Kingdom.
Article (48) Amendment and Revocation of Licence(a) The Central Bank may, upon a request by a Licencee, amend the conditions of a licence in any of the following cases:1. Adding a Regulated Service to other licensed services.2. Amending or canceling of one or more of the terms and conditions of the licence under Article 45 (b) of this law.3. Removing a licensed Regulated Service from those for which a person is licensed(b) The Central Bank may not amend the licence conditions in accordance with the provisions of (2) and (3) above unless it is satisfied that the Licencee is able to meet the obligations imposed on him under the amended terms of the licence.(c) The Central Bank may amend or revoke a licence under paragraph (a) above in any of the following cases:1. If the Licencee fails to satisfy any of the license conditions.2. If the licencee violates the terms of this law or the regulations or any of the license rules.3. If the Licencee fails to start business within six months from the date of the licence.4. If the Licencee ceases to carry out the licensed activity in the Kingdom.5. If the legitimate interests of the customers or creditors of a licencee required such amendment or cancellation.(d) The Central Bank shall, prior to the cancellation or amendment of a licence according to the provisions of the preceding paragraph, notify the Licencee in writing stating the reasons for such cancellation or amendment, date of validity and the deadline for appealing which shall not be less than thirty days from the date of notification.(e) The Central Bank shall decide on any appeal made in accordance with the previous paragraph and notify the appellant of the decision taken in that respect within sixty days from the date on which the appeal was made.(f) The decision to cancel or amend a licence takes immediate effect from the date stated in the notice.(g) The Central Bank may, in exceptional cases that require no delay, cancel or amend a licence without following the procedures set forth in paragraph (d) of this Article. This shall not affect the right of the Licencee to appeal within thirty days of notification of such decision. The Central Bank shall decide on the appeal and notify the appellant of its decision within sixty days of submission.(h) An appeal against a decision to cancel or amend a licence may be made to a competent court within sixty days from the date of notifying the Licencee of such decision, or upon the expiry of the period specified in the preceding paragraph, for a decision on the appeal, without receiving a notification.
Article (49) Publication of the Decision to Cancel or Amend a Licence(a) The Central Bank shall publish its decision to cancel or amend a licence in the Official Gazette as well as in two local daily newspapers, one published in Arabic and the other in English.(b) The Central Bank may publish its decision on such cancellation or amendment using any other means it considers appropriate, including electronic means.
Article (50) Case of Carrying on Business(a) A Licencee shall not cease to provide any or all of the licenced regulated services, completely or at any of its branches, without obtaining a written approval from the Central Bank.(b) The Central Bank may restrict its approval referred to in the preceding paragraph upon such conditions, as it deems necessary.(c) The Licencee shall publish a notice of its intention to cease to provide any regulated service completely or at any of its branches, in two daily newspapers one in Arabic and the other in English, published in the Kingdom. Such notice shall be given, after receiving the approval of the Central Bank, not less than thirty days before the actual cessation is to take effect, and shall include such information as the Central Bank may specify.
Article (51) Place of Business(a) No Licencee may, without a prior written approval of the Central Bank:1. Open a new place of business in the Kingdom.2. Close or change an existing place of business in the Kingdom.3. Open a new place of business abroad if the licensee is incorporated in the Kingdom.(b) The Central Bank may restrict its approval stipulated in the preceding paragraph, to any other conditions, as it may deem necessary.
Chapter 3 Chapter 3 Control
Article (52) Notification of Control(a) The Central Bank shall issue a regulation specifying the nature and limits of "control" and the regulations applicable in case of approving a control over a licencee or a listed company.(b) The Central Bank must be notified in any of the following cases:1. If effective Control over a Licencee takes place indirectly whether by way of inheritance or otherwise.2. Gaining control directly as a result of any action leading to it.3. The intention to take any of the actions that would lead to control.The controller or the person intending to take control over the Licencee, as the case may be and by the Licencee itself if it is aware of such case, shall in any of the above-mentioned cases, make notification.(c) Notice of Control shall contain a request for the Central Bank's approval for taking control over a licencee or taking any action that may lead to control, and shall also contain such particulars and information and be accompanied by such documents as the Central Bank may specify. In the cases referred to in items 1 and 2 of the preceding paragraph, the notice shall be made within fifteen days from the date of control. In the case referred to in item 3 of the preceding paragraph, the notice shall be made before taking any of the actions that would lead to control.
Article (53) Control Procedures(a) The Central Bank must, within three months from the date of receipt of the notice referred to in Article 52, notify the controller or the person intending to take control over a Licencee, as the case may be, of its approval of control, any of the actions which would lead to a control, or the refusal thereof as the Central Bank may determine at its own discretion.(b) The Central Bank may impose any restrictions that it considers necessary to be observed in case of its approval of a control or any of the actions that would lead to a control.(c) If the period specified in paragraph (a) of this Article lapses without a decision being taken on the application seeking approval of a control or any intended actions that would lead to a control, the application shall be considered as accepted.(d) The controller or the person intending to take control over a Licencee may, within thirty days of the notification, appeal against the Central Bank's decision to refuse the control or any conditions imposed in respect of such control.
The Central Bank shall decide on the appeal and notify the Licencee of its decision within thirty days from the date of submitting the appeal.(e) An appeal against a decision on control may be submitted within thirty days from the date when the concerned person was aware of such decision.
Article (54) Period of Control
An approval of a control shall be temporary and shall take effect from any of the following periods:(1) The period specified in the notice sent by the Central Bank to the controller regarding the approval of control.(2) A period of one year, commencing from the date of notice sent to the controller in approval of control unless the said notice includes specific a period for the control.(3) A period of one year, commencing from the date of the implicit approval to control, or the intended action which would lead to a control, in accordance with the provisions of paragraph (c) of Article (53) of this law.
Article (55) Refusal of Control
The Central Bank may refuse to give approval to a control if it will affect the legitimate interests of the customers or if it is detrimental to the relevant sector, or if the Central Bank decides, according to its own discretion, that it would be inappropriate to control a licencee according to the criteria set by the Central Bank.
Article (56) Effect of Acquiring Shares in Breach of Control Provisions(a) Any person who acquires shares in breach of the provisions of this chapter shall carry out any instructions issued to him by the Central Bank to transfer such shares or refrain from exercising voting rights in respect of such shares according to the procedures prescribed in such instructions.(b) The Central Bank may seek a court order to take appropriate precautionary measures or sell such shares if the Licencee fails to carry out the order referred to in the preceding paragraph. The value of the shares sold shall be paid to the party who has rights therein after the deduction of expenses.
Article (57) Restrictions on Activities(a) A Licencee incorporated in the Kingdom shall not practice any of the following without a prior written approval of the Central Bank:1. Merge, amalgamate or enter into a partnership with any person outside the Kingdom, except in the ordinary course of business.2. Transfer all or a major part of its assets or liabilities inside or outside the Kingdom, without prejudice to the provisions of Chapter 6 of this law.3. Make any modification to its issued or paid-up share capital.4. Modify its Memorandum or Articles of Association.5. Engage in major acquisition or investment operations as determined by the Central Bank.(b) The Central Bank, in granting any approval under the preceding paragraph, may impose such conditions as it considers appropriate.(d) The Council shall set out rules and procedures regulating the acquisition of licenced national entities by others in accordance with the provisions of this Law.
Article (58) Reporting of Matters Influencing the Licencee's Financial Position
The Licencee shall notify the Central Bank immediately of any matter that may affect its financial position, currently or in the future, or limit its ability to meet its obligations.
Chapter 4 Chapter 4 Accounts and Financial Statements
Article (59) Accounting Records(a) A Licencee shall maintain such accounting and other records as may be specified by the Central Bank and shall have separate records for each branch abroad providing any of the services that are subject to this law.(b) Without prejudice to the provisions of the preceding paragraph, insurance and reinsurance companies shall maintain such records as may be specified by the Central Bank for the following:1. Insurance contracts signed by the company.2. Claims made against the company and actions taken thereon.3. Reinsurance contracts entered into by the company.4. Funds to be maintained according to this law.5. Names of insurance brokers, representatives of insurers, and insurance transactions concluded by them for the account of the company.6. Any other records required by the Central Bank.(c) Listed companies shall maintain accounts and other records as required by the Central Bank.
Article (60) Record Keeping
Records referred to in Article 59 of this law shall be kept for at least ten years at the Licencee's main office in the Kingdom or at such other places as the Central Bank may approve. Records shall be kept in such a format, as the Central Bank may deem suitable.
Article (61) Auditing of the Licencee's Accounts(a) Every Licencee shall appoint one or more qualified and experienced external auditors for its accounts for every financial year. A prior written approval by the Central Bank will be required before appointing an auditor.(b) If a Licencee fails to appoint an auditor within four months from the beginning of the financial year, the Central Bank shall appoint such auditor.(c) The Licencee shall pay the fees of the auditor regardless of the manner in which such auditor is appointed.(d) An auditor shall not be the chairman or a director in the Licencee's board or a managing director, agent, representative or taking up any administrative work therein, or supervising its accounts, or a next of kin to someone who is responsible for the administration or accounts of a Licencee, or having an extraordinary interest in a Licencee as the Central Bank may determine.(e) If any of the circumstances referred to in the preceding paragraph occurs after the appointment of the auditor, the Licencee must appoint another auditor.(f) The Licencee shall provide the external auditor with all information and assistance necessary for carrying out his duties.(g) The duties of the auditor shall include the preparation of a report on the final accounts. The report shall contain a statement on whether the Licencee's accounts are correct and reflect the actual state of affairs of the Licencee according to the auditing standards prescribed by the Central Bank and whether the Licencee has provided the auditor with any required information and clarifications.(h) The final audited accounts shall be presented to the general meeting of the Licencee together with the auditor's report. A copy of these documents shall be sent to the Central Bank at least fifteen days before the date of the general meeting.
If the Licencee is a foreign company, a copy of its final audited accounts together with the auditor's report shall be sent to its main office abroad.
Article (62) Final Accounts(a) Every Licencee must, within three months following every financial year, send to the Central Bank and make public its final audited accounts, including the profit and loss statement for all the transactions carried out until year end as well as any other financial statements required by the Central Bank. The final accounts shall be published in two local daily newspapers one in Arabic and the other in English.(b) The final accounts shall be prepared in accordance with the requirements of the Central Bank and shall be certified by the Licensee's external auditors.
Article (63) Additional Tasks for the Auditors(a) The Central Bank may request additional duties from the external auditor concerning licencees or listed companies. Such tasks may include:1. Submission of such additional information relating to the audited accounts as the Central Bank may specify.2. Enlarging the scope of the audit.3. Notifying the Central Bank of any financial violations discovered during the course of the audit.4. Notifying the Central Bank of any reservations regarding the accounts and statements of the Licencee.5. Notifying the Central Bank of any discrepancy in the financial systems, controls, and of any material inaccuracies or inconsistency in the final accounts of the Licencee or listed company.6. Preparing such financial reports and statements as required by the Central Bank. Auditor's fees for such additional tasks shall be born by the licensee or the listed company.(b) By carrying out such assignment requested by the Central Bank under the preceding paragraph, the auditor shall not be in breach of any duties towards the licencee, the listed company or the shareholders.
Article (64) Rules Governing Auditing
Subject to the rules of Law No. 26 of 1996 regarding auditors, the Central Bank may issue additional requirements that should be satisfied by any auditor auditing any licencee or listed company as well as any other tasks concerning the accounts and financial statements of a licencee or a listed company.
Chapter 5 Chapter 5 Licencee's Staff
Article (65) Staff of a Licencee(a) A Licencee must obtain a prior approval from the Central Bank for any nominees to the membership of the board or for any executive post. The Governor shall issue the terms and conditions for obtaining such approval.(b) The Central Bank may determine the standard levels of qualifications, experience and training of licencee's officers and employees.(c) If it becomes evident to the Central Bank that a licencee is employing any official, as a board member or in an executive position, who is not qualified or unsuitable for the assigned job, the licencee shall promptly, after due notification, stop such official from assuming the responsibilities of such a job.
Chapter 6 Chapter 6 Control of Business Transfers
Article (66) Application to Transfer Business(a) A Licencee shall not transfer any banking or insurance business to others before an approval from the Central Bank.(b) A Licencee who desires to transfer all or any part of its business referred to in the preceding paragraph, shall make an application to the Central Bank in the form prepared by the Central Bank for such purpose.(c) A Transfer of Business application shall be published by the Central Bank in the Official Gazette and also in two daily newspapers published in the Kingdom one in Arabic and one in English. The publication should include a call to the concerned parties to submit any objections to the Central Bank within three months from the date of publication.(d) The Central Bank shall consider the objections referred to in the preceding paragraph before taking any action on the application for transfer.
Article (67) Decision on Application for Business Transfer(a) The Central Bank shall determine the procedure of processing applications for business transfer.(b) The following shall apply in order to approve a business transfer:1. The business, subject of transfer, shall not be prohibited by the Central Bank.2. The Transfer of Business shall not cause damages to the interests of the licencee's customers or creditors.3. The transferee must be licensed to carry out the business in the place to which it is to be transferred.4. The Central Bank must be satisfied that the Transfer of Business is appropriate under relevant regulations issued in this respect.(c) The Central Bank shall give its approval to a Transfer of Business if the application satisfies the requirements set in the preceding paragraph. Such approval may be given subject to any conditions deemed appropriate by the Central Bank.(d) The decision of the Central Bank on a Transfer of Business shall be published in the Official Gazette as well as in Arabic and English language daily newspapers published locally. The decision shall be effective from the date set therein.(e) An applicant whose application has been turned down or who faces restrictions regarding the transfer of his business may appeal to a competent court within thirty days from the date of publishing of such decision in the official gazette.
Article (68) Transfer of Other Business
The provisions of this section of the law shall apply to the transfer of any other regulated services offered by a Licencee, other than banking and insurance services, as the Central Bank may decide in order to protect the interests of the licencee's customers and creditors.