Qatar: Securities & Banking Overview
December 28, 2020
By: Mohamed Fouad, Senior Associate
The Qatar Central Bank, established by Emiri Decree No. 15 of 1993, was constituted as the state monetary authority in the State of Qatar, which assumed the functions of its predecessor, the Qatar Monetary Agency. QCB functions in accordance with Law No. 13 of 2012 on the Qatar Central Bank and the Regulation of Financial Institutions (“QCB Law”) and lays down and regulates monetary, credit and banking policies in support of the national economy through general decisions, directions, circulars and regulations issued from time to time which constitute the Qatar Central Bank Regulations.
Its regulatory role focuses on monetary policy as well as the supervision of financial institutions, including banks, exchange houses, investment companies, insurance companies, financial and leasing companies and their representative offices. The QCB also manages its reserves in foreign assets, organises and manages banks’ clearing operations and payments systems, conducts studies and researches related to domestic and international economic developments. It extends advice to the government on financial and economic issues.
In Qatar, the banking sector is regulated by QCB Law, Law No. (11) of 2015 (“Commercial Companies Law”) and the QCB Regulations. A licence from the QCB under Article 77 of the QCB Law is required for an entity to engage in the business of banking and other financial activities in Qatar. The QCB Law requires that local banks take the form of a public shareholding company incorporated pursuant to the Commercial Companies Law and which must offer its shares for public subscription. Foreign banks, authorised by decree to operate in Qatar, should set up branches of a foreign banking company.
The Qatar Financial Markets Authority
In Qatar, commercial, financial and investment banking activities as well as transactions pursuant to these activities are subject not only to QCB Law and Commercial Companies Law, but also to Law No. (8) of 2012 , i.e., the Qatar Financial Markets Authority (“QFMA”) Law.
Under the QFMA Law, QFMA assumes the role of a regulator which has a supervisory capacity, whereas the Qatar Exchange is left with an executive role in securities trading in the nature of execution and clearing and settlement of transactions. The QFMA Regulations require every company that proposes to offer its shares to the public or to register any securities with the Qatar Exchange to: (i) apply to the Qatar Exchange for approval of trading of securities to be offered; (ii) submit to the QFMA for approval, a prospectus that contains sufficient information about the company, the terms of the offer and the securities to be offered; and (iii) provide the said prospectus to the public prior to the date of public offering, unless the securities are privately placed pursuant to the QFMA Regulations.
The Qatar Financial Centre
In March 2005, Law No. (7) of 2005 (“QFC Law”) was promulgated to establish the Qatar Financial Centre, an economic zone designed to attract international financial institutions and multinational finance related businesses.
The QFC offers such businesses the opportunity to establish their operations in a special regulatory environment in Qatar with greater flexibility and privileges not generally available to foreign investors under the ordinary laws of Qatar, such as 100 per cent foreign shareholding. QFC Law, in general, and the financial services regulations issued thereunder, provides a range of permitted activities which can be conducted in or from the QFC.
The regulated activities are those commonly recognised as constituting financial services or services in support of financial businesses. These include the establishment and distribution of funds and financial instruments as well as a number of corporate headquarter-type activities. The QFC Law requires businesses that wish to conduct any of the permitted activities in or from the QFC to be established therein and be licensed by the QFC Regulatory Authority to carry out the proposed activities.
The QFMA Financial Services Rulebook defines ‘Promotion and Marketing of Securities’ as the marketing, distributing, advertising, publishing or making available any data, information or advertising material relating to the call for subscription or investment in securities, or encouraging any person to agree with another person in respect of a listed security, submitted an application for listing or has been offered in the Qatari market.
The said regulations require any person intending to carry out the activity of “Promotion and Marketing of Securities” in relation to shares issued to the public or its trading among investors to first obtain a license from the QFMA. However, it is generally considered permissible to engage in distribution of securities and provision of securities-related services to individuals and corporate entities in Qatar without a licence in Qatar if this is done remotely from outside of country i.e. on a purely cross-border basis without physically engaging in on-the-ground activities in Qatar. This is a view based on the understanding that Qatari law does not generally extend to activities undertaken outside of Qatar and Qatari regulatory institutions do not exercise extraterritorial jurisdiction.
The QCB Law requires that no person shall, before obtaining a licence from the QCB, be permitted to display on any document or correspondence or advertising or other media the name or logo of a bank, or financing or investment company, or exchange, or insurance or reinsurance company, or solidarity or re-solidarity, or credit card or credit information company, or inquiry or credit rating company, or financial advisory service, or investment fund, or an Islamic financial institution, or any other financial institution or service as determined by the QCB.
Persons are restricted to acquire or dispose of for their own account (directly or indirectly) securities based on inside information per the QFMA Regulations. Disclosing inside information, and recommending or inducing any person based on inside information is restricted. Persons are also restricted from giving false or misleading information regarding the supply and demand, or price or value of securities regulated by the QFMA. Furthermore, persons may not participate in a security transaction where the connected trade is with fictitious devices or any other form of deception or contrivance.