The Jordan Securities Commission Adopts Licensing Requirements and Conditions for Foreign Brokers

The Board of Commissioners of the Jordan Securities Commission has adopted requirements for licensing bodies of foreign brokers with whom licensed financial services companies wish to engage in trading on foreign stock exchanges. The Board also adopted other requirements pertaining to the foreign broker. Furthermore, the Board decided to prohibit these companies from signing agreements with a foreign financial broker that another licensed company has already signed with, or with a foreign financial broker from the same group, for the duration of the agreements. This prohibition applies to trading in Contracts for Difference (CFDs). The Board also granted these companies a grace period until June 30, 2025, to comply with these regulations.

The regulatory authority granting the license to a foreign intermediary that a licensed financial services company wishes to contract with for financial services on foreign exchanges must stipulate that it not be based in a high-risk country on the anti-money laundering and counter-terrorism financing blacklist, or a country under increased monitoring on the Financial Action Task Force's grey list, as classified by the National Anti-Money Laundering and Counter-Terrorism Financing Committee, or a country subject to sanctions by the UN Security Council, or a tax haven according to the Financial Secrecy Index issued by the Tax Justice Network, or a country with the highest corruption rates according to Transparency International's Corruption Perceptions Index. Additionally, the licensing authority must be a full member of the International Organization of Securities Commissions (IOSCO) and a signatory to its Memorandum of Understanding, and a member of the Union of Arab Securities Authorities and/or IOSCO if the licensing authority is based in an Arab country.

The licensing authority must also be a member of the Union of Arab Securities Authorities and/or IOSCO if the licensing authority is based in an Arab country. The requirements for a foreign broker with whom a licensed financial services company wishes to contract, as approved by the Council, are as follows: the foreign broker must be licensed by the competent regulatory authority in the country where they are located; they must have been actively operating for at least five years prior to the licensed financial services company contracting with them; neither they nor their representatives should have been subject to any violation or penalty that would affect the company's financial, administrative, or reputational standing; and the licensed financial services company must provide the Securities and Exchange Commission, when submitting the annual renewal application, with a letter from the foreign broker's regulatory authority confirming that the license is still valid and that the broker is actively operating. The company must also provide information on any violations, if any, issued against the foreign broker or their representatives, specify the country where the foreign broker is located and the licensing authority, and provide details on the account registration process with the foreign broker, whether it is directly in the client's name or through omnibus accounts.

The company must also specify the country where the foreign broker is located and the licensing authority, and provide information on the account registration mechanism with the foreign broker, whether it is in the client's name or through omnibus accounts.

The foreign broker must also be licensed by the relevant regulatory authority in their country of residence. The decision falls within the scope of the Authority's exercise of its powers as mandated by the Securities Law, the Law Regulating Trading in Foreign Exchanges, and the regulations and instructions issued thereunder. Among the most important of these powers is the regulation and development of the financial market to ensure fairness, efficiency, and transparency. This aligns with the Authority's efforts to enhance investor confidence in the market's investment environment, protect them from potential risks, and monitor trading operations and the activities of licensed and accredited entities in the financial markets. The aim is to improve market competitiveness and efficiency, making it a safe destination for investors regionally and globally.

The decision is also a proactive preventative measure consistent with the standards and principles of the International Organization of Securities Commissions (IOSCO) regarding systemic risks. It addresses how to avoid and mitigate these risks through a set of precautionary measures and risk management and hedging strategies. These strategies aim to protect investors and the market environment from potential risks and minimize their impact, ensuring that if one company is exposed to certain risks, the effects are not felt across the entire supply chain. This will mitigate their effects and ensure market integrity and enhance financial stability by adhering to international standards and principles and implementing their legal and regulatory requirements, particularly by adopting a sound framework for comprehensive management of systemic, legal, credit, operational, liquidity, and all other risks.

It is worth noting that the Securities Commission had previously issued a circular to financial services companies licensed to conduct financial services business on foreign stock exchanges, informing them of these decisions. These decisions followed other resolutions on this matter that regulated some of these companies' obligations to their clients and certain aspects of dealing on foreign stock exchanges, such as determining leverage, related client declarations, and including a guidance bulletin issued by the Commission in company agreements with their clients, in accordance with the Law Regulating Dealing on Foreign Stock Exchanges and the Instructions for Regulating Dealing on Foreign Stock Exchanges. These companies were given sufficient time to implement these obligations.
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