The clients’ funds and assets held with CMA licensed persons are subject to the provisions and rules set forth in Module 7 “Clients’ Funds & Assets” of the Executive Regulations of Law No. 7 of 2010 on the Establishment of Capital Markets Authority and Regulation of Securities Business, as amended.
A licensed person is required to take measures, which ensure that clients’ funds and assets are maintained, safeguarded, and only used for the intended purposes for which they are allocated; maintain complete segregation between deals and orders executed for its own account and those executed for the client’s account; ensure that the client is the beneficiary of all transactions related to their funds; and use best efforts to realize and promote its clients’ interests.
Licensed persons shall engage an independent auditor on annual basis to prepare the assurance report on the compliance with rules and provisions stated in Module 7. Such a report shall be submitted to Capital Markets Authority.
Frequently asked questions related to the assurance report on customers’ funds and assets are as follows:
What is Capital Markets Authority’s definition of Clients’ Funds and Assets?
Article 1-2 of Module 7 sets forth:
The client’s funds include all cash amounts received or held by any licensed person in favor or on behalf of a client in the course of carrying on any securities activity less the cash amounts allocated to settle the client’s obligations resulting from the transactions executed for their account, whether such obligations are payable, conditional or contingent.
Client’s assets are all non-cash money and Securities and other assets held or received by any Licensed Person for or on behalf of a Client in the course of any Securities Activity.
The licensed person’s fees shall not be included in the client’s funds if they are payable in accordance with their agreement.
Can the auditor be engaged to audit the annual financial statements or another auditor be appointed?
Article 2-5 of Module 7 of the CMA Bylaws sets forth that a CMA-registered auditor shall be appointed, but it is not necessarily to be the auditor engaged to audit the company’s annual financial statements.
Will the licensed person or the independent auditor send the assurance report on clients’ funds and assets to Capital Markets Authority?
The independent auditor shall send the assurance report on clients’ funds and assets to Capital Markets Authority not later than 1 March of every year in accordance with the requirements of Circular No. 6 of 2016.
Who are the licensed persons governed by the rules and provisions of Module 7 – Clients’ Funds and Assets?
The provisions of Module 7 of the Executive Regulations shall apply to the licensed persons who carry on the following activities:
- Portfolio manager
- Collective investment scheme manager
- Clearing agency
- Qualified securities broker registered in the Bourse
What is the added value to business entities from Reports on Compliance with Clients’ Funds & Assets Rules?
- Comply with laws, regulations, resolutions, and instructions issued by Capital Markets Authority.
- Enhance the business entity’s reputation and increase all stakeholders’ confidence.
- Protect the clients’ funds and assets and promote their interests and investments.
- Contribute to optimizing regulatory compliance with respect to securities business.
What are the services offered by Baker Tilly Kuwait?
Assurance Report on Compliance with Clients’ Funds & Assets Rules
Prepare an annual assurance report by the licensed person’s auditor on compliance by the licensed person with the rules set forth in Module 7 (Clients’ Funds & Assets) of the Executive Regulations of Law No. 7 of 2010. The required report shall be submitted to Capital Markets Authority not later than 1 March of every year provided that such report will be presented in the Arabic language.
(Reference: Executive Regulations – Module 7: Clients’ Funds & Assets, Article (2.5) of Chapter 2 “General Provisions”).
- Financial Statements Audit
- AML-CFT Compliance
- Agreed-Upon Procedures
- Internal Control Review
- Internal Audit Quality Assessment
- Custodian’s IT Review
- Loan & Financing Review
- Sport Ent. Utilization Control
- Capital Adequacy
- Assets Valuation for Bonds Sukuk
- Preferred Shares Classification
- Capital Amendment