Palestine Exchange Rules

Rules of Professional Conduct for Working within the PSE

Palestine Securities Exchange Board of Directors approved this Regulation in its Fourth Session on 3/8/2006

Palestinian Capital Market Authority Board of Directors approved this Regulation in its Twentieth Session on 18/12/2006 (Decision 7/20)

January 2007

Definitions

Article(1)

The following words and expressions have the specific meaningshereunder unless the context indicates otherwise:

"Law": The Securities Exchange Law No (12) of 2004 as amended and includes the instructions and regulations issued pursuant thereto.

"Authority": Means Palestinian National Authority.

"PCMA": Means Palestinian Capital Market Authority.

"PSE":Means Palestine Securities Exchange, including the Clearing, Depository, and Settlement Center, which is a secondary market where listed securities are traded. This PSE will be two classes: first and second.

"Board of Directors": PSE Board of Directors

"CEO": PSE manager/chief executive officer.

"Securities": Means shares and bonds issued by the Authority or governmental institutions or municipalities or public shareholding companies or any other securities that may be traded pursuant to the Law.

"Holding Company": The Company that exercises financial and management control over another company or several subsidiaries by owning more than half of its capital and/or control the composition of its board of directors or own over 50% of its shares.

"Subsidiary company": The Company that is controlled by another company (the parent) who owns not less than half of its capital whereby it controls the composition of board of directors.

"Related Company": The Company that dominates another company or is dominated by another company or where another company dominates both companies by a percentage between 20%-50% without issuing consolidated financial statements.

"Issuer": The legal person that issues securities or announces its intent to issue securities.

"Control": means direct or indirect ability to affect the acts and decisions of another person and control is deemed actual when a person owns more than 50% of the shares of the company

"Owner": means any person that owns more than 5% of a membership company’s capital.

"Major Owner": any person who owns directly or indirectly 10% or more of the securities of the issuer.

"Public": means persons who are affected directly or indirectly, by the financial and investment activities in the PSE.

"PSE Rules": Palestine Securities Exchange approved regulations by PCMA, and the instructions, resolution, directives issued by the PSE pursuant to these Rules.

"Related Party": any employee, who engages a management senior position in a company or enjoys signature power on behalf of such company, or an insider who has access to material information that affects the price of the securities of such a company or the auditor of such a company or any of its founders or members of the board of directors, or a person who holds, directly or indirectly, 10% or more of the capital of such a company. A related person also includes the indirect property for this purpose that held by a relative up to the second degree or the property of a company owned by him or his first degree relevant, over 50% of the company capital shares.

"Membership Company": The securities Company licensed by the PCMA, and member to both PSE and the Center.

"Staff of the Membership Company": means all the staff of the membership company including the management, the licensed person, the financial advisors, and accredited broker.

"Authorized Person": The employees of the membership company who was authorized by the PSE as a financial advisor for invest in securities.

"Trading Contract": The contract made between the membership company and the client for the purchase and sale of securities.

Obligations of the Membership companytowards the PSE

Article (2)

  1. The Membership Company, its employees, managers, board members, proxies, shareholders and any other persons related to its business and activities at the PSEshall comply with all the articles of dealing andtrading provided in the Securities TradingRegulation or in the PSE rules, as well as the articles of professional and moral conductbased on principles of cooperation among members.
  2. If the securities trading regulation or the PSE rules have been amended,themembership companyshall be committed to those amendedarticles and rules.
  3. The provisions of this regulation shall be enforced consistently without any incongruity with thePCMAinstructions.

Article (3)

  1. Anymembership companyshall not carry outany action that would harm the reputation of the PSE, its members and customers.
  2. Any membership company shall not disclose any confidential information known to the membership company and its employees by virtue of their job.

Article(4)

  1. If anauthorized person comes to his known that a client or a possible client is trying to exploit a certain activity or to use the PSE facilities for a purpose other than legal dealings with securities, then he must inform the membership company management of the incident, which,in turn, should inform the PSE immediately.
  2. The membership company complies withthe enforcement of the PSEinstructionsstating that any membership company shall not accept any orders or keep trading accounts for a person deemed by the PSE as unacceptable personto deal in securities.

Article (5)

  1. The membership companyshall comply to present its financial statements and auditor reports, prepared in accordance with international accounting standards, to the PSEat the end of each fiscal year and when ever requested to do so.
  2. The membership companyshall comply originallyin maintaining accounting books and records according to the international accounting standards.
  3. The membership companyshallcomply to open its books and records for auditing by the PSEand open its offices for thePSEinspector, who has the authority by the law to obtain copies of these records and documents related to the membership company activity.

Article (6)

  1. 1. The membership companyshall comply with the provisions of law and the rules of the PSEand,in particular, with the following:
  1. Retention of records and documents prescribed by the prevailing laws, including records anddocumentsrelated to its dealings in the PSE.
  2. Should not collectfees and commissions exceed prescribed limits according to the PSE rules and the PCMA regulations.
  3. Notifying the PSE of any violation of the provisions of the Law and the rules of the PSE.
  1. The membership company is responsible for its employee's violation of Law and the rules of the PSE.
  2. The membership companyshall sign an undertaking to abide by the provisions of the Law and rules of the PSE according to the designated form.

Article (7)

The membership companyshall not give a guarantee, directly or indirectly, to a client against losses that may arise due to tradingor agree with him upona rate of profit already set.

Article (8)

  1. The membership company, and any of its employees, is forbidden to exercise any businessexcepttrading in securitiesaccording the law and PSE rules.
  2. Observing the provision of the preceding paragraph,PSEmay allow for a member ofthe management staff of the Membership company or one of its employees, upon his request,to exercise an external job not related to securities when the following conditions are met:
  1. The person applying for exemption shall prove thathis external job is not linked to the work of the membership company and a conflict of interest is not expected to emerge as a result of this external work.
  2. The person applying for exemption shall, at all times, meet all his obligations to the membership company and these should always have priority over his external work.
  1. When granting the exemption, the PSEmay determine a period of time for doing the external work or impose other conditions.

UnjustifiableInfluence on Prices and Illicit Agreements

Article (9)

The membership company, and its employees, shall observe the law and PSE rules in line with the integrity of trading and is not allowed to manipulatein the PSE and/or stocks prices. In particular, any of the following acts is considered a violation and a manipulation of prices:

  1. False, delusive or unreal operations that imply trading activities intended to mislead customers of an active market.
  2. Every act or action intended to provide misleading, incorrect information or statements or spread rumors about the rising or falling in securities prices.
  3. Harming the reputation of any other membership company or degrading its position.
  4. Using the securities registered in client'snames to achieve a particular interest.
  5. Carrying out fake operations to client'sportfolios to get only a commission.
  6. Perform any operations that are not consistent with good practices in the PSE or that are not consistent with the materials of a fair and transparent PSE.
  7. Publicizing or assist inspreading misleading or incorrect news as well as publicizing news related to animminent change insecurities pricesto have impact on such prices and deal accordingly.
  8. Providingclients withinaccurate, misleading information or recommendations, or giving them consultations or information that may lead toexcessive or unjustifieddealings to achieve a particular interest or in order to obtain commissions.
  9. Processes agreed upon in advance or conduct operations or enterorders through the trading system in marketto suggest an existence dealing in the securityor to manipulate in their prices to facilitate their sale or purchase.
  10. Participatein any agreements or practices which may mislead or deceive the investor or falselyinfluencing and controlling prices of one or some of the securities orthe market as a whole.
  11. Enter orders to the tradingsystem in the market to falsely influence the marketor the prices without havingany effects on transfer the property.

Article (10)

The membership companyshall comply with the settlement of operations carried out properly and in accordance with the PSE rules.

Article (11)

  1. The membership companyshall organize its work in a responsible manner and provide the necessary human, technical and financial resources to execute itsbusiness in accordance with the law and PSE rules.The membership company, in particular,shall observe the following:
  1. Prepare the bases, lists, appropriate systems and procedures to perform and settle operations and keep records and reports.
  2. Work out adequate internal administrative and control procedures.
  1. Each membership company shall save its records and financial transactions according to customary accounting principles.

Obligations of the Membership CompanyTowards Clients

Article (12)

  1. A person is deemed a "client" if the membership company has obtained any commissions or fees for their services to him. This includes anyone who gets financial consultationsfor free in order to encourage them to become clients.
  2. The owners, boardmembers,management,employeesof the membership company andtheir first-degree relatives are not considered clients.

Article (13)

  1. The membershipcompany shall not open a trading account for any employee of another membership companyexcept if a written consent is obtained from the other membership company and this shall be disclosed to the PSE. This employee is not considered as a client for both companies.
  2. The membership company shall not open a trading account to another workingmembership company.

Article (14)

  1. The membership company shall not dispose of the client`s securities unless a written trading contract is signedbetween them including at least the following:
  1. The name of the membership company and the client.
  2. Exposure of the functions to be undertaken by the membership company on behalf of the client.
  3. Showing the commission obtained by the membership company for its services in accordance with fees and commissionslist.
  1. The membership companyshall provide the customer with a copy of the contract signed between them.

Article (15)

The membership company shall not:

  1. Provide financial facilities to investors for purchase and possess securities with the exception of what is available under the law and PSE rules and any rulesissued accordingly.
  2. Carry out various purchase and sale operations for investor's accounts without written authorization.

Article (16)

  1. When executing any purchase or sale operation to the client`s account, the membership company shall inform the client with the details at once or as stated in the contract signed between them.
  2. The membership companyshall provide the customer with a free, quarterly, account activity report.

Observance of Confidentiality

Article (17)

  1. The membership companyshall keep onconfidentiality of its client's transactions.
  2. Subject to the statement in paragraph (a) of this Article, the membership company is committed to discloseimmediately to the PSE any information requested by PSE about any client.Themembership companyshall not conclude any contract or agree to any arrangement that would restrict the membership company's ability to full disclosure of such information to PSE.
  3. The noncompliance to the provisions of paragraphs (a) and (b) above is deemed as a violation to this regulationand the violator shall be penalized by paying a fine not exceeding one thousand(1,000) Jordanian dinars.

Consideration ofClientsInterests

Article (18)

  1. The Membership companyshall makeeverypossible effort and care to do the following:
  1. Be acquainted to every detail oftrading account or purchase or sale order related to each client.
  2. Make sure to receive clients orders in due form
  3. Give priority to sale and/or purchase orderspursuant to their receipt staging and refuse the preference of one client`s interest over another.
  4. Make sure thatconsultations provided to the client are at his interest and consistent tohis investment objectives.
  1. Noncompliancewith the provisions of paragraphs (a) above is deemed as a violation of this regulation and the violator shall be penalized by paying a fine not exceeding one thousand (1,000) Jordanian dinars.

Article (19)

The membership company is committed to review thematerial information and financial data related to any client before opening any new trading account.

Article (20)

The membership company is committed to monitor thetrading accounts activity in accordance with accounts surveillance principles issued by the PSE from time to time.

Article (21)

The membership company and its employees shall:

  1. Give priority to the purchase and sale orders received from clients over all orders accepted by the membership company for the same securityand the same price.
  2. Separate the dealingsbetween the company`s private properties from the investors properties and refrain from usinginvestors funds and securities for the company`s private purposes.

Article (22)

The membership company and its employeesshould favor the client's interests over their own personal interests, and take the necessary proceduresto protect the interests of clients and protect the credibility of dealings in securities.

Article (23)

The membership company must notify the investors, owners of the securities,with the information received from one of the issuers directly or through the PCMA or the PSE and pass the information received from the owners to the issuer directly or through the center.

Fair Dealings in Securities

Article (24)

If a disagreement arises between the membership company`s duty to maintain the client`s interests and its duty to maintain the integrity of the securities dealings, the membership company must meet its obligations to the PSE to maintain the integrity of trading in securities.

Article (25)

  1. The membership company must ensure that, when it accepts or executes the client`s order, itwill not harm the integrity ofdealing insecurities.
  2. The following orders aresubject to rejection since they harm the integrity of dealing in securities:
  1. Falsetrading.
  2. Manipulation and deception in general, when the purpose of the trading is for apurposes other than legitimate investment.
  3. Trading processes not duly authorized including the orders submitted by persons notauthorized by the membership company to perform activities on the intended trading account.

Article (26)

The authorized person shall not accept any payment or gift or incentive of any kind as an encouragement or reward either directly or indirectly for the provision of some advice related to investment in specific securities for a particular client or to the public in general.

Membership CompanyParticipation in SecuritiesSubscriptions

Conflicts of interest

Article (27)

The membership company or the authorized person, who owns securities or is expected to own securities issued or to be issued shall:

  1. Disclose that to the PSE.
  2. Inform the clients of this before offering advice to purchase or sell these securities.

Article (28)

If themembership companywas anunderwriteror an issuance agentregarding an issuance of securities, it must ensure that all the orders of clients concerning these securities have priority over the orders of its employees, management and board members.

Article (29)

The membership company shall not, under any agreement entered into, restrict the responsibilities imposed by law and the rules of the PSE or get an exemption from those responsibilities.

Article (30)

If themembership company has an interest in the process to be carried out to the client, or if it is related to a process that would lead to disagreement of interest, it shall not execute this process unless the client is being informed and the proper procedures are taken to ensure the client`s interest and fair treatment. In particular, the company shall notify the client and obtain prior approval before executing any orders for him in the following cases:

  1. If the membership companyis participating in marketing the securities subject to deal.
  2. If the membership company has already participated in the offering of securities during the past year.
  3. If themembership companyis a holding company or a subsidiary or an ally to the issuer of the securities.

Article (31)

Noncompliancewith the provisions of articles (27-30) above is deemed as a violation of this rule and the violator shall be penalized by paying a fine not exceeding ten thousand (10,000) Jordanian dinars.

Article (32)

The membership company is committed against the client in the following:

  1. Verification of the identity, status and eligibility of clients, their representatives and proxies to deal and dispose and issuepurchase or sale orders as well as the verification of signatures contained in theseordersunder penalty of responsibility.
  2. Observing the clientsrights against their accounts, particularly with respect to any returns in accordance with the agreement made with the client.
  3. Adopting the necessary procedures to totalseparate between client'saccounts. Under no circumstances shall an account belonging to a particular client be used to coverothers accounts.Supporting documents of the previous procedures are keptto ensure the integrity of the implementation. These are made available to the PSE and the PCMA upon request.
  4. Total separation between the functions of managingclient's accounts, client service in generaland the execution functions that deal with the PSE trading system.
  5. Informing the client with the different types of activities carried out by the membership company,and the benefits and risks of each.
  6. Notifying its clients of any material information disclosed in the PSEand relevant to the sale or purchase orders issued by these clients to the membership companywhich has not been executed prior to this disclosure. The notification indicated is accomplished by any specific means of receiving orders from the client.
  7. Sending periodic statements of accounts once a month to clients explaining the activity of their own accounts. In the event of any disagreement or objection from clients regarding the statements sent, the internal auditor of the membership company shall notify the PCMA and the PSEwithinthree working days from the date of receipt of the client`s objection.

Membership CompanyCommitment to Assist Limited ExperienceClients