Authority’s Board of Directors’ Resolution No. (46/R) of 2012 Concerning the Regulations as to Market Makers

§Preamble

THE AUTHORITY’S BOARD OF DIRECTORS’ DECISION NO. (46) OF 2012 CONCERNING THE REGULATIONS AS TO MARKET

MAKERS The Chairman of the Board of Directors of the Emirates Securities and Commodities Authority, Having considered the Federal Law No. (4) of 2000 concerning the Emirates Securities and Commodities Authority and Market, as amended; The Federal Decree No. (18) of 2009 concerning the Formation of the Council of Ministers of the United Arab Emirates;

The Council of Ministers' Resolution No. (108 /7 and /5) of 2010 concerning the Restructuring of the Board of Directors of the Emirates Securities and Commodities Authority;

The Authority’s Board Decision No. (1) of 2000 concerning the Regulations as to Brokers, as amended;

The Authority’s Board Decision No. (2) of 2001 concerning the Regulations as to Trading, Clearing, Settlement, Transfer Of Ownership And Custody of Securities, as amended;

The Authority’s Board Decision No. (3) of 2001 concerning the Regulations as to the Market Functioning, as amended;

The Authority’s Board Decision No. (29 / r) of 2009 concerning the Regulation as to Safe Custody of Securities;

The Authority’s Board Decision No. (17) of 2011 concerning the Regulations as to the Settlement System on the Basis of Delivery Versus Payment (DVP), as amended;

Based on the approval of the Board of Directors at its 13th meeting of the fourth term held on 02/08/2012, and After consultation and coordination with the Markets, and as required in the public interest,

Has decided as follows:

Definitions

§Article 1

The following words and expressions shall have the meanings given to them below unless the context indicates otherwise:

State: United Arab Emirates.

Law: The Federal Law No. (4) of 2000 concerning the Emirates Securities and Commodities Authority and Market.

Authority: The Emirates Securities and Commodities Authority.

Board: The Board of Directors of the Authority.

Market: A securities and commodities market licensed in the State by the Authority.

Clearing: The entity conducting settlement operations and issuing orders for the payment of funds due to clients in the Market.

Broker: The corporate person permitted under the provisions of the Law to operate a brokerage business in the Market.

Brokerage: The process of executing purchase and sale orders received from clients through the Broker.

Securities: Shares, bonds and notes issued by joint stock companies and bonds and notes issued by the Federal Government or local governments, public authorities and public institutions in the State, as well as any other domestic or non-domestic financial instruments so designated by the Authority. Market Making: The activity comprising the provision of continuous prices for the purchase and sale of certain Securities to increase the liquidity of such Securities in accordance with these Regulations.

Market Maker: The corporate person licensed to engage in Market Making, or a foreign company that performs these activities and is registered with the Market. Eligible Securities: Securities that comply with the standards set by the Market and that are tradable with the support of Market Makers.

Covered Warrants: Tradable Securities of equal value issued by an issuer that give its holder the right, without obligation, to buy or sell a specific number of shares at a specific price (the exercise price) during a specific period of time, and covered by shares based on which such Securities are issued.

Licensing Market Makers

§Article 2

To practice Market Making, a license from the Authority must be obtained and the following conditions apply:

1.The applicant must be a corporate person in any of the following forms: a.A company established in the State and having taken one of the forms set out in the Federal Law No. (8) of 1984 concerning Commercial Companies, with at least (51%) of its capital owned by natural or corporate persons being of the State nationality or the nationality of one of the Gulf Cooperation Council (GCC) states. One of its corporate purposes must be to practice Market Making. b.A company established in the State and licensed by the Authority to operate in the field of Securities, in which case the applicant shall be subject to the controls issued by the Authority concerning the prevention of conflicts between activities. c.A commercial bank or investment company licensed by the United Arab Emirates Central Bank, or a branch of a foreign bank, provided that the parent

bank of the foreign bank is licensed to practice Market Making, and subject to obtaining the approval of the United Arab Emirates Central Bank with respect to such activities.

2.The paid up capital or the allocated capital for practicing Market Making may not be less than AED (30) million or its equivalent in any other currency. 3.Complete separation between Market Making and any other activities that the applicant is licensed to practice in terms of organizational, technical, financial and administrative arrangements. Evidence thereof must be submitted through the following:

a.The adopted mechanism to separate the Market Making from other licensed activities.

b.The staff assigned to perform Market Making activities.

c.A professional code of conduct guide.

The obligation to separate the applicant’s activities shall also apply to the activities practiced by its affiliate, parent, sister and allied companies. 4.The applicant must have adequate financial capital and qualified administrative and technical staff to practice Market Making in accordance with the conditions and controls set forth in Article (3) herein.

5.Payment of the license fee as determined by the Authority.

6.The applicant must satisfy, on a continuous basis, all the license conditions. The Board may revoke a Market Making license in the event that any of the conditions specified in these Regulations are not or are no longer satisfied. 7.The Authority may impose further requirements or conditions, or may exempt anyone from any requirements or conditions, on the basis of market activities input or the public interest.

§Article 3

The applicant for a license shall comply with the following:

(I)With respect to administrative and technical staff:

1.Allocate appropriate administrative and technical staff required to practice Market Making. Each staff member must satisfy the following requirements: a.Be a natural person.

b.Have full capacity.

c.Exhibit good conduct and have a good reputation and cannot have been previously imprisoned for a crime involving dishonesty or a breach of trust unless rehabilitated.

d.Having never been declared bankrupt by a final court ruling unless rehabilitated.

e.Have the academic qualifications and practical experience appropriate to perform the functions of his position.

2.The applicant shall provide the Authority with data and information related to its administrative and technical staff, including their academic qualifications and work experience.

(II)With respect to internal controls:

1.Provide a guide for the internal procedures of the applicant. 2.Provide a risk management system.

License Application

§Article 4

1.An application for a license to practice Market Making, satisfying all conditions set forth in Article (2) herein, shall be submitted to the Authority using the form prescribed for this purpose, and enclosing the information, data and documents to support the application, in particular:

a.The legal form of the applicant and a list of names of members of the board of directors, the executive management and people authorized to sign and submit the application.

b.Proof of payment of the license fees.

The Authority may request any other clarifications, information or documents as it deems necessary.

2.The Authority shall decide on the application within (30) days from the date of submitting the complete application.

§Article 5

1.The term of the license shall be one year, expiring at the end of December each year. The term of the first license starts on the date such license is granted until the end of December of the same year. The fee due on such license shall be charged as a proportion of the fees due for the license period for the year, with any part of a month calculated as a full month. 2.The license shall be renewed by an application submitted to the Authority before the end of November of each year. The chief executive of the Authority may suspend the Market Maker from conducting its business if the application to renew its license has not been submitted within the specified period.

Registration of Foreign Market Makers

§Article 6

1.Save for the provisions of Article (2) herein, the Market may register foreign companies licensed by similar regulatory agencies in their country of incorporation as a Market Maker in the State, provided that such companies have at least five years’ experience in this area, and they meet the conditions and requirements set by the Market in this regard. The orders of the Market Maker shall be executed through a Broker licensed by the Authority. 2.The Market shall sign a market making agreement with a foreign Market Maker before its registration to include the conditions, requirements and controls for its business in the Market.

3.The Broker, through which the foreign Market Maker's orders are executed, shall ensure such foreign Market Maker has adequate capital and the ability to

meet its obligations.

Tasks of the Market

§Article 7 — Tasks of the Market

1.Subject to Authority’s approval, the Market shall put in place the internal procedures and controls to regulate the activity of Market Making, provided that such procedures and controls include the following as a minimum: a.The technical requirements.

b.The trading and settlement mechanisms relating to the orders of a Market Maker.

c.The type and amount of guarantees required for practicing the activity of Market Making.

d.The obligations of Market Makers in connection with providing liquidity. e.The standards and limits used to determine the list of Securities eligible for trading with support from one or more market makers.

f.Controls and priorities for the sequence of the orders’ records and the execution of trades related to the Market Maker.

g.

[1] h.Trading identification numbers in order to achieve greater separation between Brokerage and Market Making activities performed by the company. i.Reporting mechanism and requirements for Market Maker.

j.Mechanisms for disclosure by Market Maker.

2.Publish every new appointment or termination of a Market Maker immediately to the public through the website of the Market, including the identification of the following:

a.Name of the Market Maker.

b.The Eligible Securities under the Market Maker's responsibility. 3.The Market shall determine its trading commissions and the trading commission of the Clearing due on Market Maker’s transactions.[2]

Obligations of the Market Maker

§Article 8

The Market Maker shall comply with the following:

1.Practice its licensed activity and exert the care of a prudent person in accordance with the provisions of the law, regulations and decisions issued pursuant thereto.

2.Inform the Market and the Authority of any unusual trading involving the Securities under its responsibility.

3.Apply the prescribed financial solvency standards as follows:

a.The capital adequacy standards prescribed by the Authority for the companies referred to in item (1/ a, b) of Article (2) herein.

b.The capital adequacy standards prescribed by the United Arab Emirates Central Bank for the entities referred to in item (1/c) of Article (2) herein. 4.Provide the Authority and the Market with the following reports: a.A monthly report of profit and loss and the size of the portfolio related to the activities of Market Making.

b.Quarterly financial statements reviewed by the auditor if the Market Maker is a company only established to practice Market Making.

c.Annual audited financial statements if the Market Maker is a company only established to practice Market Making.

d.A half-yearly report on the internal control function covering the following aspects as a minimum:

-the procedures of organizing its internal controls;

-a list of internal control processes implemented and their outcomes; and -a list of issues discovered and a remediation action plan, especially those related to market risk, settlement and liquidity.

5.Retain commercial records and registers relating to trading for a period of no less than (10) years, and retain back-up copies of such data for the same period. 6.Refrain from using the facilities they have with respect to trading on behalf of their clients.

7.Any obligations required by the Authority or the Market.

Facilities Granted to Market Makers

§Article 9

1.Sales transactions carried out by Market Makers shall not be subject to the advance ownership confirmation applied by the Market in relation to Securities. However, the Market Maker shall deliver such Securities on the settlement date at the latest. If the Market Maker fails to deliver the Securities sold on the settlement date, he shall comply with the remedial actions determined by the Market to settle the transactions so executed by it.

The Market may, in certain cases and at its discretion, require the Market Maker to confirm in advance the ownership of the Securities before executing the sales orders.

2.Articles (3), (4), (5), (6), and (7) of the Authority’s Board Decision No. (3) of 2000 concerning the Regulations as to Disclosure and Transparency shall not apply to Market Makers.

3.Market Makers may practice short selling, Securities lending and borrowing in accordance with the provisions set forth in detail in regulations issued by the Authority in this regard.

4.If an issuer of Covered Warrants is acting as a Market Maker for such Covered Warrants it will be exempt from complying with the requirements of the minimum number of holders of a Covered Warrant for the issuance value.

5.Securities may have more than one Market Maker.

6.The Market may exempt Market Makers from some of the prescribed Market Making obligations (including the reduction of the margin between the bid and offer prices, or to exempt them from their obligations) in circumstances at the discretion of the Market.

7.In exceptional circumstances and at the discretion of the Market, the Market may exempt Securities that are subject to Market Making from the application of Article (9) of the Authority’s Board Decision No. (2) of 2001 concerning the Regulations as to Trading, Clearing, Settlement, Transfer of Ownership and Safe Custody of Securities.

Inspection of Market Makers

§Article 10

1.The Authority may, without prior notice, perform periodical oversight and inspection over companies licensed to practice Market Making in order to ensure their compliance with the Authority’s laws and regulations and the Market bylaws. 2.The Market shall ensure compliance by the Market Maker with the provisions of these Regulations and shall notify the Authority of any breach in this regard. 3.The Market may impose the penalties prescribed for violations contained in its internal bylaws. The concerned parties may appeal against the decision of the Market within 30 days from the date of notification thereof.

Violations and Penalties

§Article 11

1.The Authority may, at its own discretion or upon request from the concerned Market, initiate an investigation of a Market Maker in any of the following circumstances:

a.A breach of the provisions of the Law, or the bylaws, regulations, decisions or instructions issued in implementation thereof.

b.A departure from the standards of professional conduct.

2.If it is proved that the Market Maker has committed the violation attributed to him, the Authority may impose one of the following sanctions: a.A warning to the Market Maker and an order to correct the violation within the period specified by the Authority.

b.A fine of no more than the maximum limit provided for in the Law and the regulations issued pursuant thereto.

Suspension and Cancellation of the License

§Article 12

1.The Market may suspend the Market Maker from Market Making if the Market establishes that the Market Maker’s performance does not serve the interests of the Market.

2.The Authority may suspend the Market Maker from Market Making or may cancel the license in any of the following cases:

a.Failure to comply with any of the conditions of the license or approval stipulated in the Law, or bylaws, regulations, decisions or instructions issued in implementation thereof.

b.Serious breach of any of the duties or obligations contained in the Law, and regulations, decisions or instructions issued in implementation thereof. c.Failure to pay the applicable fees or to pay the imposed fines. d.The passing of a final court judgment declaring the licensed company bankrupt.

e.The winding-up or liquidation of the company.

3.The decision to cancel the license of a Market Maker shall be published in two daily newspapers issued in the State with at least one in the Arabic language at the Market Maker's expense. The Market Maker whose license is cancelled shall be removed from the register of Market Makers prepared by the Authority for this purpose.

4.The Market Maker may appeal the decision to suspend his business or cancel the license issued by the Authority before the competent court within thirty (30) days from the date of notification thereof.

§Article 13

This Decision shall be published in the Official Gazette and shall come into effect from the next day to the date of its publication.

Engineer Sultan Bin Saeed Al Mansouri Chairman of the Board of Directors

Issued in Abu Dhabi on: 12/8/2012.

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• [1] - Item (1/g) of Article (7) has been omitted according to Decision No. (26) of

• [2] - Item (3) of Article (7) has been added according to Decision No. (26) of