In the Kuwaiti capital markets sector, a Customer is someone for whom a person authorized by the Capital Markets Authority provides or intends to provide services within the scope of the securities activities that they are licensed to perform.
An authorized person, such as an investment portfolio manager, collective investment scheme manager, custodian, or underwriting agent, categorizes its Customers as professional or regular; the professional Customer is further subdivided into a professional in nature and a qualified professional Customer, and each non-professional Customer is classified as a regular Customer, while changing the customer’s classification does not affect the actions and operations that took place under his classification in a particular way.
The authorized person must create a special record for Customer classification that includes the type of Customer classification, its reasons and justifications, and a copy of the notifications, declarations, and agreements related to Customer classification.
In this article, we will explain when a Customer is a professional by nature and when he is a qualified professional Customer, as stated in the eighth book of the executive regulations of the Capital Markets Authority and Regulating Securities Activity No. 7 of 2010.
By nature, the professional customer
The following factors are considered by a professional Customer:
- A government, a governmental body, a central bank, or an international organization (the World Bank or the International Monetary Fund).
- Individuals licensed by the Capital Markets Authority and other financial institutions subject to supervision within or outside the State of Kuwait.
- A company with a minimum paid-up capital of one million Kuwaiti dinars or its equivalent.
In all cases, the authorized person may, in writing, agree with a professional Customer to classify him as a regular Customer.
Customer is a qualified professional.
A qualified professional Customer who meets one of the following criteria shall be considered qualified:
- That the Customer has transacted in large volumes of securities in each quarter over the previous two years, with an average of no less than 250,000 Kuwaiti dinars.
- The Customer’s money and assets with the authorized person must be worth at least 100,000 Kuwaiti dinars.
- The Customer has worked or has previously worked in the financial sector for at least one year in a professional position requiring knowledge of the transactions or services that will be provided to him.
The authorized person must use reasonable care to ensure that the above criteria are met.
The following procedures must be followed in order to classify a Customer as a qualified professional Customer:
- The Customer shall notify the authorized person in writing of his desire to be classified as a qualified professional Customer, either in general or in relation to a specific service, transaction, or type of transaction or securities, and the agreement concluded with the Customer shall include an acknowledgment of his knowledge and acceptance of the implications of the This classification.
- The authorized person must notify the Customer in writing of the implications of being classified as a qualified professional Customer.
If a Customer no longer meets the criteria for being classified as a qualified professional Customer, he must be reclassified as a regular Customer and notified of his new status.
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