Policies And Procedures For Managing Investment Portfolios Of Securities For Clients

The executive regulations of the law establishing the Capital Markets Authority and Regulating Securities Activity required operating companies that are licensed to manage investment portfolios to manage investment portfolios in accordance with a clear policy that is consistent with the size and nature of their activities and that they shall be appropriate to the client’s investment needs. They shall also prepare an investment portfolio management guide for the clients that the company follow, and the criteria upon which it is based for the management of investment portfolios. The guide includes in particular the following:

First: Aspects related to all forms of investment portfolios:

  1. A proof of commitment to the client’s investment objectives and the mechanism for achieving this.
  2. Determining the powers, authorities and responsibilities of the authorized person in each form of investment portfolios.
  3. Regulating the relationship between clients’ investments with the authorized person, subsidiaries and associates, and related parties.
  4. Fulfilling clients’ requests in a way that does not conflict with the purposes of the authorized person for which they were established, for example, that investment portfolio managers, who work in accordance with the provisions of Islamic Sharia, do not invest clients’ funds in securities that do not comply with the requirements of Islamic Sharia even if that is upon the request or order of the client.
  5. A detailed guide to the procedures followed in the event of an occurrence of an error when executing client’s orders.

Second: Aspects related to the investment portfolios that are managed by the authorized person:

  1. A statement that includes an explanation of the policies followed as directed by the client (a conservative, balanced or non-conservative policy).
  2. How to determine the mechanism for diversifying and distributing the assets that make up the investment portfolio according to the client’s directions.
  3. The mechanism for determining the markets in which to invest according to the client’s directions.
  4. Determining the risks associated with the investment portfolio and the securities it contains, and the ways used to reduce those risks.
  5. The mechanism limits for concentrations in the components of the investment portfolio, for each type of security, the sector in which it is invested, the country in which it is invested, and the issuer of the security.
  6. The principles and controls related to the distribution of securities that will be bought and sold for the account of clients, for the investment portfolios that are managed by the authorized person.

The person authorized to manage the investment portfolios of securities shall abide by the following:

  1. Not to create investment portfolios for its benefit with another authorized person, with the exception of portfolios created with another authorized person to invest in foreign markets, in addition to the investment portfolio pledged as a guarantee for a bank, and there was agreement between the two parties to the portfolio contract and the bank to manage the investment portfolio, and circulation of its components with the knowledge of the other authorized person.
  2. Not to conclude internal deals between the investment portfolios that it manages.
  3. The investment portfolio manager shall be banned from buying or selling treasury shares in a portfolio owned by the company issuing the shares.
  4. Taking into account that the persons in charge of managing investment portfolios shall not occupy any positions in the boards of directors or the executive body of other authorized persons.

If you are looking for a Kuwaiti law firm that specializes in providing legal services to the securities, capital and stock market activities, you can count on us at Taqneen, Law Firm and Legal Consultations.

To book an appointment or request legal advice about the duties of securities companies in the optimal implementation of clients’ orders, we are pleased to receive your inquiries at (info@Taqneen.com).