Authority’s Board of Directors’ Resolution no. (48/R) of 2012 Concerning the Regulations as to Short Selling of Securities

§Preamble

The Authority’s Board Decision No. (48) of 2012 Concerning the Regulations as to Short Selling of Securities 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 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;

The Authority’s Board Decision No. (46) of 2012 concerning the Regulation as to Market Makers;

The Authority’s Board Decision No. (47) of 2012 concerning the Regulation as to Lending and Borrowing Securities;

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 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 / UAE: United Arab Emirates.

Law: 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: The 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.

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. Short Selling: When an investor sells Securities that are not owned by him or when an investor sells borrowed Securities.

Market Making: The activity mainly comprising of the provision of continuous prices for the purchase and sale of certain Securities in order 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 a foreign company that performs these activities and is registered with the Market.

Cases of Short Selling

§Article 2

Short Selling may be carried out in the following cases: 1.By a Market Maker to practice its activity in Market Making. 2.Any other cases approved by the Authority.

Securities Permitted for Short Selling

§Article 3

1.The Market shall determine the Securities that are eligible for Short Selling in accordance with the standards set by the Market and approved by the Authority. 2.Short Selling of Securities may only take place after one month following listing in the Market.

3.Short Selling may not be used for Securities that are subject to the rights of subscription for shares during an increase in capital or in covered warrants.

Suspension of Short Selling

§Article 4

1.The Authority may, at its own discretion or at the request of the Market, temporarily or permanently suspend Short Selling of some or all Securities in the event of exceptional circumstances that may be detrimental to the Market, at the discretion of the Authority, including a sharp change in the prices. 2.Short Selling shall be stopped on the same day and the next business day for Securities that decrease in value, in one trading day, by no less than (5%) and no more than (10%) of the closing price of the previous day. The Market shall determine the market percentage upon which Short Selling shall be suspended between the above two percentages.

Obligations of Dealers in Short Selling of Securities

§Article 5

1.A Broker may not execute any Short Selling transactions except after ensuring his client's ability to deliver the Securities by the settlement date that are intended to be Short-Sold.

2.The Broker may not provide a complete or partial guarantee for Securities borrowed by his client to settle a Short Selling transaction. 3.The Broker may not Short-Sell Securities unless the sale price order is higher than the price of the last executed transaction.

4.Short Selling may not be used in order to prejudice the fairness and integrity of the Markets.

5.Short Selling orders of Securities must be entered at a specific price.

Disclosure of Short Selling Positions

§Article 6

1.The Market shall disclose to the public on a daily basis and after the end of the trading session the number of shares of listed companies, traded units of exchange-traded funds and any other Securities as determined by the Authority that were Short-Sold.

2.The Market shall disclose to the Authority on a daily basis and after the end of the trading session the position of any single investor if what the said investor Short-Sold of a single Security exceeds (0.25%) of the actual number of Securities available for trading.

Failure to Deliver Securities

§Article 7

If the Short-Sold Securities are not delivered on the settlement date, the seller will have failed to settle. Such failure to settle shall be addressed according to the procedures established by the Market and approved by the Authority. The Market may provide the facilities it deems appropriate to the Market Maker in connection with such failure to settle.

Market Oversight

§Article 8

1.The Market shall impose a fine on the Broker or the Market Maker who has failed to deliver the Securities that were Short-Sold in accordance with the bylaws of the Market as approved by the Authority.

2.The selling Broker who has failed to deliver the Securities that were Short-Sold shall pay compensation as determined by the Market.

3.If the selling Broker who has failed to deliver the Securities fails to pay the compensation and fines, the bank guarantee will be called against the Market Maker or the selling Broker in accordance with the method and procedures followed by the Market.

4.The Market must provide weekly reports to the Authority containing the value and volume of Short Selling trades through the number of Securities and the participating member in the Market.

5.The Market may impose the penalties prescribed for the violations contained in its internal by-laws. The concerned parties may appeal to the Authority against the decision issued by the Market within (30) days from the date of notification thereof.

6.Short Selling transactions executed through a Broker shall be deducted from the allowed trading volumes in light of the bank guarantee or other guarantees submitted.

Market Bylaws

§Article 9

The Market shall set the internal bylaws governing the procedures for Short Selling provided that such by-laws are approved by the Authority.

Exempting Market Makers from Certain Provisions

§Article 10

Market Makers shall be exempted from the application of the provisions of Articles (3/3), (4), (5/1, 5/3) of these Regulations.

Arrangements Consistent with Islamic Sharia

§Article 11

These Regulations shall apply to any agreement or arrangement that is consistent with the principles of Islamic Sharia and permits a person to sell Securities that he does not own at the date of sale.

Violations and Penalties

§Article 12

1.The Authority may, at its own discretion or upon the request of the concerned Market, initiate an investigation into violations of Short Selling in any of the following circumstances:

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

b.Diverting from the standards of professional conduct.

2.If a violation is proved to have been committed, the Authority may impose one of the following sanctions:

a.Give a warning to the violator and compel him to correct the violation within the period specified by the Authority.

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

c.Temporarily or permanently suspend Short Selling operations by the violator.

§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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