Panel Session 4: Stock Exchange and Capital Markets

Presentation: The Establishment of the Syrian Securities Exchange Market
Dr. Mohammed Imady
Chairman of the Board of Commissioners
Syrian Commission on Financial Markets and Securities


Ladies and Gentlemen, Dear Friends.

I would like to thank the organizers of the conference, Dr. Akhras and Sir Andrew Green and the members of the British Syrian Society for giving me the opportunity to present to you at the beginning of this session a short summary of the current status of the Commission on Financial Markets and Securities.

In June 2005 the Law on Financial Markets and Securities was issued, creating the Commission on Financial Markets and Securities with the following major objectives:

  1. To organize and develop the financial markets and the related works and activities in order to insure justice, efficiency and transparency and to contribute to reducing the risks associated with securities transactions.
  2. To protect investors in securities from unfair and illegal practices or acts involving frauds or gambling on securities
  3. To encourage savings and investment activities that serve the national economy.

In order to achieve those objectives the Commission is entitled to:

  1. Organize and control full disclosure of information relating to securities
  2. Organize and control the issuing and dealing in securities
  3. Organize and control business and activity of the entities under its control and supervision and
  4. Control the financial markets

In February 2006 the Board of Commissioners was created. The Board consists of four full-time members and three members who only attend the meetings of the Board.  These three are the Deputy Minister of Finance, the Deputy Minister of Economy and the Deputy Governor of the Central Bank of Syria.

Although this law was issued and a political decision was taken to set up a stock market, some people opposed the established of a stock market for different reasons. A programme of action was adopted and the first step was to conduct a study to prove to those who opposed the stock market, that his would be a positive step towards the modernization of the financial system of the country.

The finding of this study proved that, on the supply side, we have around fifteen join-stock companies ready to be listed in the market with a large number of shares. On the demand side we have ample financial liquidity and personal savings in the country ready to be invested in the market. We also found that many companies of all sizes need either an increase in their capital or total financing of their capital and that we will be able to prepare the regulatory system and run the market with the help of some of our expatriates.

The second step was to address or at least to identify the pre-conditions of the stock market namely:

  •  Contract law
  •  Insolvency law
  •  A speedy mechanism for settling disputes
  •  High quality accounting and auditing standards and
  •  The system of corporate governance

We started to develop a regulatory system for the primary market. We prepared the following by-laws and regulations:

  1. The executive regulations of Law 22 and the internal structure of the Commission
  2. The requirements of the accreditation of financial auditors which includes an accounting degree, membership in the association of legal accountants, five years of consecutive practice and five auditing reports on the joint stock companies
  3.  The disclosure regulations and their forms
  4.  The licensing regulation of the financial services and intermediary companies   which requires, among other things, a specified amount of capital according to the kind of financial service too be rendered, a bank bond of twenty percent of the capital to be deposited with the Commission, expertise, honesty etc.
  5.  The Security Issuance and Offering Act
  6.  The system of fees and charges levied by the Commission

After we prepared this draft regulatory system, we published it in the newspapers and also sent copies of it to the Chamber of Commerce, the Chamber of Industry, the Association of Financial Accountant, layers and companies with the aim of getting their feed back.

At this point, we invited an IMF delegation to Syria and showed them our draft regulatory system. They gave their remarks and we incorporated what we considered appropriate and suitable into the draft. Then, we sent the draft to the Prime Minister for his signature. This entire process took us four months hard work, day and night.

To deal with the pre-conditions of the stock market we did the following:

  1. We assigned on of our full-time Board members, Dr. Elias Haddad, to help finalize the draft company law
  2.  We prepared rules for settling investment disputes on the basis or arbitration in order to avoid lengthy legal court procedures. In addition, we made the arbitration settlement compulsory for the members of the market.
  3. We incorporated in the Securities Exchange Law the principle of good governance and we requested Dr. Haddad to include them in the draft company law.
  4.  We adopted the international accounting and auditing standard and made it compulsory for the accredited auditors to adhere to these standards.

Next, we began working on preparing the Securities Exchange Law. A draft was sent to the Prime Minister who referred it to his legal advisors and then to the Economic Committee and the Council of Ministers. After taking their remarks into consideration, a new draft law as prepared and sent to the President for his consideration. The Securities Exchange Law was finally signed and issued on October 1 2006.

This Law includes the following:

  1. The Creation of the Damascus Stock Exchange with corporal capacity and financial and administrative autonomy, under the supervision of the Commission, with mandatory membership for all join-stock companies whose financial papers are listed in the market and for intermediary companies. The Stock Exchange has a general assembly, a board of directors and an executive director
  2.  The creation of a Security Clearance and Depositary Centre
  3.  The introduction so the principles of good management practices and good corporate governance
  4.  The introduction of the procedures of inspection, investigation and sanctions
  5.  The introduction of the procedures of Arab and foreign investment
  6.  The possibility of converting the Damascus Exchange Market into a private company and
  7.  The introduction of a system of legal immunity for the members of the Board of Commissioners and for the members of the Board of Directors

At the same time we were working on the draft Securities Exchange Law, we prepared a list of possible candidates for membership in the Board of Directors of the Damascus Stock Exchange. The people we suggested included chairmen of the board of joint-stock companies whose capital was one hundred million Syrian pounds or more and financial experts in Syria as well as expatriate Syrians. This list was sent to the Prime Minister in order to His Excellency to choose suitable members from our suggested candidates. The Prime Minister issued a decree nominating nine members of the Board and subsequently, the first joint meeting of the Board of Commissioners and the Board of the Damascus Stock Exchange was held.

The Board of Commissioners handed over a decree to the Board of the Stock Exchange that covers the bye-laws of Law 55, the listing requirements, the dealing requirement and copies of the letters and affairs that have to do with the electronic system of dealing settlements and security depository systems etc.

Around thirty experts were appointed which will form the nucleus of our institution.  In conformance with our intention of cooperating with the private sector, on November 8th the Board of Commissioners will meet with the joint-stock companies. We intend to work hand in hand with the private sector, the Ministries of Finance and Economy and the central Bank in order to make this venture a success for the Syrian economy.

Last Wednesday I was in Abu Dhabi with Dr. Jelaylati where we attended a meeting of all Arab supervisory stock exchange commissions. No one was happier than I to see Syria included in this club of financial markets.

It is true we still have to face many challenges. I am sure your thoughts and ideas will help us solve and deal with these challenges.

Other Speeches

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