(A) INTRODUCTION
The Amman Financial Market ("AFM") is the only stock market in Jordan. It is an independent government agency that acts as a securities exchange and a regulatory body and is regulated by the "AFM Law". The Central Bank of Jordan, licensed banks, specialised credit institutions, Jordanian public shareholding companies ("PLCs") and licensed brokers are ipso jure members of the AFM. The management of the AFM is entrusted to a "Management Committee" appointed by the Council of Ministers.
(B) TRADING ON THE AFM
Securities traded on the AFM include the shares and bonds of PLCs as well as government and municipality bonds. Over-the-counter trades, short sales, options, futures and other derivative trading are prohibited.
Price changes are currently limited to five percent of the previous business day's closing price. The Controller of Companies may request the AFM to suspend trading in the shares of any company if more than ten percent (10%) of said shares are transferred to one person.
Orders are executed on a continuous auction basis. Settlements among brokers and their clients are applied on a spot basis. All transactions are recorded before 10 a.m. on (T+1). The AFM has two business days to update its records. The usual settlement time frame is (T+3).
(C) BROKER COMMISSIONS & CHARGES
A licensed broker may act as a commission broker, may purchase and sell securities for his own portfolio, underwrite the issuance of new securities and act as a securities consultant. Brokerage commissions are limited by law to 1% of all transactions. In practice, brokers charge 0.65% commission on any stock purchase up to JD. 20,000.- per contract and 0.5% commission on any purchase in excess of JD. 20,000.- per contract.
(D) SUPERVISION & DISCLOSURE REQUIREMENTS
A senior representative of the Government supervises all Management Committee meetings. A quasi-judicial disciplinary council adjudicates charges of misconduct instituted against members and employees of the AFM. Fictitious and fraudulent transactions are prohibited.
PLCs have disclosure and regular reporting obligations. An issuer is required to publish a prospectus containing all information important to the investor.
(E) LEGAL REFORM
A new Securities Law has been drafted and will soon be submitted to Parliament. It establishes a Securities Commission to supervise all securities related transactions. The new Law repeals the AFM Law and allows for the establishment of a self regulatory Securities Market (Bourse) and Central Depository. The new Law regulates the disclosure of information through prospectus and regular reporting requirements and sets some strict rules prohibiting fraudulent actions by companies and individuals. Stiff penalties and jail sentences are imposed for violations. Short sales and futures and options trading would no longer be strictly prohibited.
A new fully automated "scriptless trading" bourse is expected to be established. A smooth transition between the AFM and the new Bourse is provided for in the new Law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Ali Sharif Zu'bi & Sharif Ali Zu'bi Law Office - Amman, Jordan - Fax: (962) 6 634277.
