In review: capital markets law in Kuwait – Lexology
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An extract from The International Capital Markets Review, 11th Edition
A seismic shift in the regulation of capital market activities in Kuwait took place on 21 February 2010, the date the National Assembly (the Kuwaiti parliament) enacted the Capital Markets Authority Law (the CMA Law).2 The CMA Law created a new and independent body, the Capital Markets Authority (CMA), and provided the basis for the CMA’s establishment, aims and goals, in addition to a new legal framework to fill a lacuna in the law.
The CMA Law is considered by prominent experts and practitioners as the most complex legislation enacted in the recent history of Kuwait. The primitive infrastructure of capital market regulation prior to the CMA,3 coupled with its hasty, unplanned enactment, led to inevitable obstacles, preventing a smooth transition into the new regulatory framework and resulting in its rigid impractical application. The complexity stems from the fact that the CMA Law innervates and complements public and private laws, such as the Civil Law, the State Audit Bureau Law, the Penal Law, the Companies Law and the Central Bank’s Law, as well as their respective by-laws and regulations.
On 10 May 2015, Law No. 22 of 2015 (the CMA Law Amendment) was enacted, which contains amendments to 64 articles out of the 165 articles that make up the CMA Law. The CMA Law Amendment came into force on 10 November 2015. On 9 November 2015, the CMA issued its improved by-laws, which were a polar shift from their predecessors and included substantial changes to the regulatory regime and processes within the CMA to bring it into line with International Organization of Securities Commission (IOSCO) standards. In May 2017, IOSCO rendered its decision to grant the CMA full member status.
Nearly a decade after its inception, and with a tumultuous period following its inauguration, the CMA and market participants appear to have reached a stable level in terms of establishing conventions, precedents and acceptable practice. The CMA by-laws constitute clear and easy-to-navigate regulations in the form of an organised unified code, which largely includes all relevant legislation.
Since May 2017, the CMA, the Kuwait Clearing Company KSCC (KCC) and the only stock exchange in the country, the Boursa Kuwait, have embarked on a multi-phase exercise to develop the market. As a by-product of this focused exercise, FTSE Russell, MSCI and S&P Dow Jones have all decided to upgrade the Boursa Kuwait and classify it as an emerging market.
The CMA Law consists of 13 chapters. It starts by outlining the organisational structures and regulatory frameworks of the CMA, securities exchanges and clearing agencies. In Chapters 5–9, it regulates organised securities activities, licensing of parties engaging in capital market activities, acquisitions and minority rights, and collective investment schemes, and the formalities and procedures related thereto. The CMA Law also provides extensive guidance on the conditions and requirements for disclosures and market announcements. The legislation concludes with general and transitional rules.4
The CMA Law provides language for the creation of specialist courts, which have jurisdiction over all matters subject to the CMA Law. Article 108 stipulates that the court of first instance will be ‘the Capital Markets Court, the location of which shall be decided by virtue of a decree from the Minister of Justice with the approval of the Supreme Judiciary Council’. The Capital Markets Court comprises two circuits: a penal circuit that has jurisdiction over all penal cases arising from matters subject to the CMA Law; and a circuit that oversees civil, commercial and administrative matters subject to the CMA Law.
In addition, Article 112 of the CMA Law stipulates that penal and non-penal circuits at the courts of appeal will have jurisdiction over appeals arising from the court of first instance. The highest courts of appeal with respect to matters subject to the CMA Law are the courts of appeal, and the Court of Cassation, normally the highest court of appeal, has no jurisdiction. The purpose of this approach is thought to be to streamline the process and reach final judgments in an expeditious manner.
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