OFFICIAL USE
Terms of Reference
Jordan: Capital Markets Legal and Regulatory Review
1.Project Description
Local Currency and Capital Markets Development (LC2) is one of the key strategic initiatives of the European Bank for Reconstruction and Development (the EBRD or the Bank).The strategic objectives agreed for the Initiative are to achieve more efficient and self-sustaining financial intermediation in the Bank’s Countries of Operation through broader use of local currency instruments and the development of local capital markets, thereby contributing to economic progress and fostering a more stable financial environment. Technical cooperation is one of the most important mechanisms used to achieve the desired transition impact.
Subsequent to the G-8 Finance Ministers' Meeting in Marseille in September 2011, the International Financial Institutions concerned jointly agreed on eight focus areas of activity under the Deauville Partnership to support countries in the Arab world engaged in transitions toward “free, democratic and tolerant societies”. The EBRD and the Arab Monetary Fund were tasked with leading the module on the development of capital markets in Egypt, Jordan, Morocco and Tunisia. It was agreed that they will provide technical assistance support in a coordinated manner according to each institution’s mandate and expertise to help these countries deepen local capital market development.
Within this context the Jordan Securities Commission (JSC) approached the EBRD, requesting the Bank’s technical assistance to prepare a 5-year Strategy and Roadmap (the Roadmap) with a view to further reform Jordanian capital markets. The Roadmap was presented to and discussed with local stakeholders during a December 2016 event in Amman organised under the patronage of H.E the Prime Minister of Jordan.
The JSC approved the Roadmap in January 2017 (available at and sent a further request to the EBRD through the Ministry of Planning and International Cooperation for continued support in the phased implementation of the Roadmap. Demonstrating Jordan’s commitment to the project, HE the Prime Minister ordered the creation of a Capital Market Working Group (CMWG) in April 2017, a high level committee that will steer the implementation of the Roadmap across different stakeholders in the coming years. The CMWG brings together the following stakeholders: the Jordan Securities Commission, Amman Stock Exchange, Securities Depository Centre, Companies Controller, Financial Services Companies Association, Central Bank of Jordan, Social Security Investment Fund, and the Income and Sales Tax Department of the Ministry of Finance.
The EBRD now intends to support the CMWG in carrying out the reforms outlined in the Roadmap via a Capital Market Development Project (the Project), commenced in April 2018 and envisioned as a 3-year project. The Project consists of five Working Teams, one of which relates to Legal and Regulatory Policy.
As part of this Team’s work, the Bank now intends to engage a consulting company or law firm (“Consultant”) to support the Project in reviewing, and where necessary proposing revisions to, specified aspects of Jordan’slegal regime as it relates to the use of capital market instruments. Part of this assignment will be follow-on work to an assessment conducted in 2016.
2.Objectives of the Assignment
Principal objective: The overall objective of this assignment is to conduct a review of Jordan’s Companies Law and securities law, together with their relevant implementing by-laws, regulations, to determine which adjustments are needed to broaden and deepen participation in the market, remove market skewing impacts, make the market more competitive within the region, and/or align the market with good international practices.
The principal objective will be achieved by:
2.1ReviewingJordan’s Companies Law and securities law as they relate to (a) the use of a variety of capital market securities and instruments, from the viewpoint of issuers, investors, and intermediaries; (b) (dis)incentives to participate in the capital market; (c) the treatment of corporate restructurings and other financial engineering techniques; and (d) corporate governance rules, disclosures and practices.
2.2Comparing the results of the review to the practices of neighboring country markets, as well as to good international practices, to the extent they differ.
2.3Proposing improvements to the existing legal framework for securities and financial instruments which are consistent with the Assignment.
2.4Drafting proposed legislation to implement a revised legal framework for securities and financial instruments, in consultation with the Jordanian Authorities.
2.5Presenting the final draft of the legislation to the EBRD and the Jordanian Authorities and supporting its passage through the Jordanian House of Representatives.
2.6Providing ongoing support to the Jordanian Authorities in the implementation of the revised capital markets legal framework.
3.Scope of Services:
To accomplish the above objectives, the Consultant shall, subject to the direction of the EBRD Operation Leader (“OL”) and the Project’s Technical Team Lead (“TTL”), provide the following services:
Analyseand Benchmark Jordan’s Capital Market Legal Framework
3.1Conduct a comprehensive review of Jordan’s current company law and securities law, together with implementing by-laws and regulations, and of all other laws, by-laws and regulations applying, directly or indirectly, to the capital market.[1] The review should include an analysis of:
- An issuer’s ability to create and sell the following types of securities and instruments:
- corporate common shares, preferred shares, and debt (including all types of maturities – commercial paper, short, medium and long-term debt -- and debt issued in both coupon form or at discount to face value);
- covered bonds;
- securitisations;
- OTC and listed Derivatives, includingrepos, FX swaps, and FX forwards;
- insurance annuity products;
- life insurance with an investment feature;
- investment funds (open-end and closed-end);
- exchange traded funds (ETFs);
- unit investment trusts (UITs);
- private equity and venture capital funds; and
- on platforms, including peer to peer or “crowdfunding” arrangements, for debt or equity, consistent with investor protection and market integrity concerns.
- The laws’ impact on each phase of the life cycle of the investment product or instrument, with a particular focus on (dis)incentives to participate in the capital market:
- primary market offerings;
- secondary market transactions;
- custody;
- operations of open-end investment funds;
- payments made by the issuer to the investor or by one party to the derivatives contract (dividends, interest, margin adjustments);
- conversion of the security or contract into another security or contract (to include adjustment of cost basis);
- assignment of the derivative contract; and
- redemption or repurchase of the securities by the issuer from the investor, or maturity of the derivatives contract with subsequent settlement (cash or physical).
- The laws’ treatment of corporate restructurings and other financial engineering techniques, including:
- tender offers;
- share repurchase programs by issuers;
- mergers and consolidations;
- spin-offs and demergers; and
- squeeze-out provisions.
- The laws’ provisions regarding corporate governance, including:
- allocation of jurisdiction among regulators;
- content of mandatory provisions;
- existence of voluntary codes;
- allocation of mandatory requirements and prohibitions versus voluntary guidelines;
- enforcement mechanisms possessed by the assigned regulator;
- applicability of administrative, civil and criminal sanctions; and
- protection and timely enforcement of investor rights, including for minority shareholders.
3.2Review the line items of the Roadmap’s Appendix A and either validate their continuing application or update them to reflect subsequent events.[2]
3.3Benchmark the results against comparator countries, including the practices of neighboring countries (the list to be agreed with the Project), as well as to good international practices, to the extent they differ.
3.4Prepare an Inception Report, describing the results of the analysis and the benchmarking exercise, for submission to the EBRD and the Jordanian Authorities.
Prepare a Legal Concept Paper
3.5Prepare a legal Concept Paper which, on the basis of the Inception Report, suggests adjustments needed to: (a) support broader and deeper participation in the market, (b) remove market skewing impacts, (c) make the market more competitive within the region, and/or (d) align the market with good international practices.
3.6Present the Concept Paper to the EBRD and Jordanian Authorities and in the framework of a dedicated workshop to key stakeholders including market participants, answering all questions that may be raised, providing additional comparative information where necessary, and revising the Concept Paper on the basis of comments received.
Draft Legislation to Implement the Revised Capital Market Legal Framework
3.7Draft the changes necessary to implement the revised capital market legal framework, in accordance with the ideas developed in the Concept Paper and the instructions of the Jordanian Authorities (“Draft Legislation”). The Draft Legislation will include a set of recommended amendments to existing legislation as well as needed new legal authorities.
3.8Draft the relevant secondary legislation (by-laws, regulations) necessary to implement the Draft Legislation, in co-operation with the Jordanian Authorities and the relevant regulatory bodies.
3.9Participate in meetings in Jordan, as requested, to explain the revised capital market legal framework and its implementation through the Draft Legislation, and revise the Draft Legislation as necessary following such meetings and on the basis of comments from the Jordanian Authorities or the EBRD.
Present theFinalisedDraft Legislation and Support Passage by Parliament
3.10Prepare and present the Draft Legislation, in final form, incorporating all earlier comments, to the EBRD and the Jordanian Authorities and provide any support necessary or incidental to the passage of the Draft Legislation by the Jordanian House of Representatives.
3.11Prepare, if instructed by the OL, a concise explanatory document on the revised legal framework and the Draft Legislation describing its rationale, operation and the required means of implementation, and present this explanatory commentary before relevant persons and committees involved in the parliamentary process.
Provide Ongoing Support for Implementation of the Revised Legal Framework.
3.12Support the Jordanian Authorities in the implementation of the revised legal framework and the Draft Legislation following its passage by the parliament, including by drafting, if required and as instructed by the OL, the necessary regulations to implement the approved Draft Legislation and the revised legal framework.
3.13Prepare a detailed final report (“Final Report”) for the EBRD and the Jordanian Authorities encompassing previous deliverables (the Inception Report, Concept Paper, and Draft Legislation in final form), a detailed roadmap describing the phasing of all other implementing measures which will be necessary to fully implement the revised legal framework, an assessment of the effectiveness of the implemented legislation and regulation, and any recommendations to improve the effectiveness of future such assignments.
The Consultant will also be available to perform such other tasks related to the Assignment, including, but not limited to, (a) participation in discussions among the EBRD and Government of Jordan officials, and (b) participation in capacity building events in Jordan in relation to the capital markets legal framework, as may reasonably be requested by the OL.
The Consultant will also liaise with other Project Working Teams and any consultants engaged to support them, and supply information from the analysis, in order to ensure a seamless analysis of the legal drivers impacting the capital market.
4.Deliverables
All deliverables should be prepared and delivered in English.
Deliverable / TimingInception Report / To be delivered within four weeks of project start
Concept Paper / To be delivered within four weeks of Inception Report
Draft Legislation (preliminary form) / To be delivered within 12 weeks of Inception Report (revised versions to follow as project progresses)
Draft Legislation (final form) / To be delivered within eight weeks from the Draft Legislation
Final Report / To be delivered within 24 weeks of final version of Draft Legislation. The six months deadline takes into consideration the deliberative process within the Government of Jordan and the Parliament
5.Implementation arrangements
The Consultant shall carry out the tasks described above in coordination with the OL and TTL, who will manage all aspects of the Assignment. Representatives of the EBRD Resident Office in Amman will facilitate contacts with the Jordanian Authorities, regulators and private sector capital markets participants, as appropriate. The Consultant will be required to independently arrange all logistical support including, but not limited to, office space, communications equipment, interpretation/translation, and such other assignment-related support as may be necessary.
The Consultant shall commence work on the Assignment immediately upon signing of the contract. The Assignment is expected to last approximately 18 months.
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OFFICIAL USE
[1]This assignment does not include a review of the tax regime imposed on the capital market.
[2]For both items 3.1 and 3.2 the Consultant will engage extensively with private sector participants in order to identify practical obstacles and limitations presented by the current legal framework not readily evident from the documents themselves. The emphasis of this review shall be on developing changes to the legal regime that will have a specific, positive impact on market operations.