Authority’s Board of Directors' Resolution No. (47/R) of 2012 Concerning Lending and Borrowing Securities

§Preamble

The Authority’s Board Decision No. (47) of 2012 concerning the Regulations as to Lending and Borrowing Securities The Chairman of the Board of Directors of the 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 Composition 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 Securities and Commodities Authority;

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

The Authority’s Board of Directors’ Decision No. (2) of 2001 concerning the Regulation for Trading, Clearing, Settlement, Transfer of Ownership and Safekeeping of Securities, as amended;

The Authority’s Board of Directors’ Decision No. (3) of 2001 concerning the Internal By-Law of the Market, as amended;

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

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

The Authority’s Board of Directors’ Decision No. (46) of 2012 concerning the Regulation for the Market Maker;

Based on the approval of the Board of Directors at its 13th meeting of the Fourth Term convened on 02/08/2012, and After consultation and coordination with the Markets, and as required for 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.

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

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 mainly comprising of the provision of continuous prices for the purchase and sale of certain Securities to increase the liquidity of such Securities in accordance with the Market Maker regulations. Market Maker:The corporate person licensed to engage in Market Making or the foreign Market Maker registered with the Market.

Securities Lending and Borrowing : A contract under which the ownership of Securities is temporarily transferred from one party (the lender) to another (the borrower). The borrower commits to return the Securities at any time during the agreed period at the request of the lender or at the end of the agreed period unless otherwise agreed.

Lending and Borrowing Agent:A corporate person authorized by the Authority to conduct Securities Lending and Borrowing transactions for himself or on behalf of others.

Lending Agent: A Lending and Borrowing Agent authorized to conduct Securities lending transactions on behalf of others.

Borrowing Agent: A Lending and Borrowing Agent authorized to conduct Securities borrowing transactions on behalf of others.

Obtaining the Authority’s Approval

§Article 2 — [1]

Other than the following, no person may act as an agent for Securities Lending and Borrowing transactions prior to obtaining the Authority’s approval, which shall be subject to an annual renewal:

1.Clearing House.

2.Brokers for the purposes of settling their clients’ transactions in accordance with the Delivery Versus Payment (DVP) procedures.

3.Cases of executing lending and borrowing agreements entered into between foreign institutions and companies in accordance with the method specified by the Market.

Conditions for the Lending and Borrowing Agent

§Article 3

(I)The Clearing House may carry out the functions of the Lending and Borrowing Agent in accordance with the provisions of this Regulation.

(II)The following corporate persons may act as Lending and Borrowing Agents upon the Authority approval in accordance with the conditions set forth in item (III) of this Article:

1.A custodian licensed by the Authority.

2.Local banks, branches of foreign banks and investment companies licensed by the Emirates Central Bank.

3.Companies that operate in the field of Securities in accordance with the controls set by the Authority to prevent conflicts in the activities.

(III)In order to obtain the Authority’s approval to conduct Securities Lending and Borrowing, the following documents shall be submitted:

1.Evidence of the availability of human, technical, and organizational resources required for the activity, as well as risk management procedures. 2.Evidence of adequate capital.

3.Evidence of the technical system to process information, and evidence of the existence of electronic links between the company and the Market for follow-up and control.

4.A record and book keeping system includes the names of clients and transactions executed, contracts signed, commissions and fees collected. 5.The systems and basis of internal control and financial auditing, as well, a certificate from the company’s auditor confirms that the accounting system applied thereby ensures compliance with the requirements of the required operations.

Approval Procedures to Practice as a Lending and Borrowing Agent

§Article 4

1.An application shall be submitted to the Authority to obtain prior approval for practicing the activities of a Lending and Borrowing Agent according to the form prescribed for this purpose, and enclosing the documents, data and information that support the application. The Authority may request any other clarifications,

information and documents if it deems necessary.

2.The applicant shall pay the fees prescribed by the Authority. 3.The Authority shall decide on the application within (30) days from the date of submitting the complete application.

4.A register shall be established in the Authority to record the Lending and Borrowing Agents which approved by the Authority.

5.The approval shall be valid for a period of one year ending at the end of December of each year. The period of the first approval shall be from the date of granting the approval until the end of December of the same year. The fee payable for such first approval shall be charged as a respective proportion of that year, with any part of a month calculated as a full month.

6.The approval shall be renewed by an application submitted before the end of November of each year with the renewal fee prescribed by the Authority. The renewal application shall be considered by the Authority based on the performance of the Lending and Borrowing Agent and its compliance with the provisions of applicable laws, regulations and rules.

Methods of Lending and Borrowing Securities

§Article 5

(I)Securities Lending and Borrowing shall be made by one of the following methods:

1.The Clearing House is the second party in the Securities Lending and Borrowing operations.

2.Through a Lending and Borrowing Agent for both the lender and the borrower.

(II)The Market shall set the terms, procedures and controls to regulate each method of Securities Lending and Borrowing and may use one or both methods.

Scope of Lending and Borrowing Securities

§Article 6 — [2]

Securities Subject of Lending and Borrowing

§Article 7

1.The Market shall determine the Securities that are allowed for Lending and

Borrowing.

2.Subject to clause (1) herein, it is not permissible to lend Securities under mortgage in accordance with the procedures of the Market, Securities subject to a lien in accordance with the laws and regulations in force in the State, or Securities purchased by margin trading, and in any other case as determined by the Market.

Lending and Borrowing Agreement

§Article 8

(I)Subject to the provision of clause (I. 1) of Article (5) of this Regulation, an agreement for Securities Lending and Borrowing shall be signed between the lender and the borrower and shall at least include the following:

-The name of the lender and his Lending Agent (if applicable). -The name of the borrower and his Borrowing Agent (if applicable). -The name and symbol of the Security to be lent.

-The value of the Security/Securities to be lent.

-Securities lending period, and the right of the lender to reclaim the Securities during that period and the method thereof.

-Determination of the type and amount of collateral in accordance with the provisions of this Regulation.

-Determination of the fees and commissions payable to the agents of the lender and the borrower.

-The acceptable limits for the reduction in the collateral amount that shall not exceed (5%).

-The necessary procedures to replace or increase the collateral and clearly indicating the rights of the parties involved.

-The necessary procedures to reclaim the Securities if the required Securities cannot be delivered.

-Identifying cases of breaching obligations, rights and counterparty’s liabilities. -The necessary procedures to deliver or liquidate the collateral, and maintain the margin when the daily re-assessment shows a substantial change in value. -The method of distributing dividends and other material rights related to borrowed Securities and collateral.

(II)Notwithstanding clause (I) herein, a general agreement between the lender and the borrower may be signed to govern Securities Lending and Borrowing transactions between them without including the detail of such transactions, provided that each transaction is separately executed upon orders include the detailed information.

Collateral Provisions

§Article 9

(I)The collateral provided to borrow Securities shall be in any of the following methods:

1.Cash collateral of no less than (105%) of the value of the borrowed Securities. 2.Unconditional bank guarantee issued by a bank and payable on demand of at least (105%) of the value of the borrowed Securities. If the lender is a natural person and resides in the State, the bank guarantee must be issued by one of the banks operating in the State.

3.Securities owned by the borrower with a value not less than (110%) of the value of the borrowed Securities. If the lender is a natural person and resides in the State, the Securities must be listed on a Market.

(II)The cash collateral shall be retained by the Lending Agent. The Securities provided as collateral shall be kept with Clearing House.

(III)The Lending Agent shall re-calculate the value of the collateral on a daily basis as per the market value of the Securities (closing price).

(IV)The Lending Agent shall request an increase of the collateral from the Borrowing Agent if it falls below the percentage specified in the agreement so that this percentage will be reached. The collateral shall be increased no later than two business days from the date of such request.

(V)The Lending Agent or the Clearing House, as the case may be, shall enforce liquidate the collateral if the Borrowing Agent fails to increase the collateral at the specific date, provided that the liquidation shall be made on the day following the expiry of the period specified in clause (IV) herein.

(VI)The Lending Agent shall notify the Clearing House upon liquidating the collateral.

Obligations of the Lending and Borrowing Agents

§Article 10

The Lending and Borrowing Agent shall comply with the following:

1.Prior to executing a transaction, to have an authorization from the client allowing him to perform the Securities Lending and Borrowing transactions.

2.To record the Securities Lending and Borrowing operations of its clients and their instructions, as well as the volume of executed transactions, collateral provided, and all commissions and fees.

3.To issue a written or electronic confirmation to the client to notify him of the transactions that have been executed on that same day.

4.To send regular reports to clients, and upon request of a client, to clarify the Securities Lending and Borrowing transactions that have been executed, and information regarding the follow-up on collateral value.

5.To retain records related to Securities Lending and Borrowing transactions for a minimum period of (10) years, and keep back-up copies of such records for the same period.

6.To provide the Authority and the Market with any reports they request within two working days from the date of the request.

7.To inform its clients on the risks of Securities Lending and Borrowing and obtain the client’s acknowledgment thereof.

8.To exert the skill of a prudent person while performing his tasks.

General Provisions

§Article 11

1.The lender is entitled to all the material rights relating to the lent Securities, unless otherwise agreed with the borrower.

2.The lender may sell the Securities he has lent before reclaiming them; the Market shall set the internal rules and technical regulations for that. 3.The custodians of both parties shall be notified (if they are not parties to the transaction) of any Securities Lending and Borrowing agreement in order to carry out their duties accordingly.

4.The Market shall ensure that the process of Securities Lending and Borrowing will not exceed the percentage of foreign ownership.

5.The transfer of ownership of Securities related to Lending and Borrowing transactions shall be made by the Clearing House notwithstanding Article (3) of the Authority’s Board of Directors’ Decision No. (2) of 2001 concerning the Regulation for Trading, Clearing, Settlement, Transfer of Ownership and Safekeeping of Securities.

Market Bylaws

§Article 12

Upon the Authority’s approval, the Market shall set internal bylaws that include the procedures and controls for organizing Lending and Borrowing transactions.

Fees and Commissions

§Article 13 — [3]

The market shall determine the fees and commissions due to the Market and the Clearing Houseon the securities lending and borrowing transactions.

Oversight over the Lending and Borrowing Agents

§Article 14

1.The Authority may periodically, without prior notice, supervise and inspect parties practicing Securities Lending and Borrowing in order to ensure their compliance with the Authority laws and regulations and the Market bylaws. 2.The Market shall ensure compliance by the Lending or Borrowing Agent with the provisions of this Regulation and notify the Authority of any breaches occurr in this regard.

3.The Market may impose sanctions in relation to the violations of its internal bylaws. The concerned parties may appeal to the Authority against any decision issued by the Market within (30) days from the date of notification thereof.

Arrangements Consistent with Islamic Sharia

§Article 15

This Regulation shall apply to any agreement or arrangement that is consistent with the principles of Islamic Sharia and permits the temporary transfer of ownership of Securities from one person to another.

Violations and Penalties

§Article 16

1.The Authority may, by itself or upon a request from the concerned Market, investigate with the Lending Agent or Borrowing Agent in any of the following circumstances:

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

b.Diverting from the standards of professional conduct.

c.Abusing the borrowing of Securities in contravention to the purposes of this Regulation with the intention of circumventing the applicable laws and

regulations.

2.If the Lending Agent or Borrowing Agent is proved to have committed the violation attributed to him, the Authority may impose one of the following sanctions:

a.Give a warning to the Lending Agent or Borrowing Agent and compel him to correct the violation within the period specified by the Authority. b.Impose a monetary fine of no more than the maximum limit stipulated in the Law and the regulations issued pursuant thereto.

Suspension and Cancellation of Approval

§Article 17

1.The Authority may suspend the Lending or Borrowing Agent from practicing as a Lending and Borrowing Agent or may revoke the approval in any of the following cases:

a.Failure to meet any of the conditions of the approval set forth in this Regulation.

b.Serious breach of any of the duties or obligations stipulated in the Law, bylaws, regulations, decisions or instructions issued in implementation thereof. c.Failure to pay the renewal fee of the approval or to pay the imposed fines. d.The issuance of a final court judgment declaring the company bankrupt. e.Winding-up or liquidation of the company.

2.In case of suspension or revocation of an approval, the existing Securities Lending and Borrowing operations and legal positions shall be dealt with in accordance with the controls set by the Authority.

3.The decision to revoke the approval shall be published in two daily newspapers issued in the State with at least one in the Arabic language at the company’s expense, and the company shall be removed from the register of Lending and Borrowing Agents prepared by the Authority for this purpose. 4.The Lending and Borrowing Agent may appeal the Authority’s decision to suspend or revoke its license issued by the Authority before the competent court within thirty (30) days from the date of notification thereof.

§Article 18

This Decision shall be published in the Official Gazette and shall come into effect from the next day from 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] - Article (2) has been amended according to Decision No. (18) of 2014

• [2] - Article (6) has been omitted according to Decision No. (18) of 2014

• [3] - Article (13) has been amended according to Decision No. (4) of 2015.