M
C
D
.
Light
Dark
APR 13 2024

Last Data Update

APR 12 2024

Consumer Protection Fund

Article (47)

The CMA shall set up a fund by the name of “Consumer Protection Fund” (CPF). The entities operating in the field of securities shall be members in the fund with the aim to compensate the consumers of securities firms for the loss of their assets held with any of the firms. The regulation shall prescribe the activities that the fund can conduct, responsibilities and contributions of members in the fund capital, claim processes, rights and obligations of the fund, borrowing percentage, persons entitled to compensation and supervision and regulation fees CMA charges and such other matters.

Article (48)

CPF shall not cover;

  • Consumer’s losses arising due to changes in market value of securities, entering into unsuitable investments or insolvency of the issuer of the security in which investments were made.
  • Losses to assets lent or provided as security by entities operating in the field of securities, among themselves, on bilateral basis.
Article (49)

Compensation from CPF shall not be combined with any other compensations. Where the consumer receives other compensation, such compensation will be deducted from the compensation of CPF.

Article (50)

CPF shall not compensate any of the following parties;

  • employee or director or owner of 5% of capital or more, of the entity for which the compensation is being paid.
  • a person with the power to exercise controlling influence over the management or policies of the entity for which the compensation is being paid, as set out in the Regulation.
  • a person who caused or contributed to the loss.
  • a person who did not deal at arm’s length.
  • a settlement or clearing institution.
  • a securities firm acting for itself.
Article (51)

The Board may, if it deems in the interest of the national economy that intervention of CPF is required, rescue any member facing financial trouble that is threatening its continuation, in accordance with the guidelines and requirements set out in the Regulation, by not more than the one-third of CPF’s net assets.

Article (52)

If CMA observes that any member of the Fund has been declared as bankrupt, it shall appoint a liquidator, specify its scope of work and direct him as necessary. The Liquidator must submit its reports to CMA. If the assets of consumers are not specifically identifiable, they must be distributed on pro rata basis. The consumers, who lost their assets with the licensed entity, shall have priority over the creditors, in the liquidation process.

Article (53)

Consumers’ assets held with any securities firm shall not be subject to claims by the creditors of that entity.

Article (54)

CMA may ring fence the member’s assets who face financial trouble threatening the consumer’s assets held with it or if their license is being terminated in accordance with Article (58) of this law or if they are declared as bankrupt, until adjustment of its situation or the end of license cancellation process or liquidation, in accordance with the procedures set out in the Regulation.