Legal Structure of Iranian Capital Market

Posted on Posted in Business Guidelines

A) Securities and Exchanges High Council
The Council is the highest body of the Iran capital market, its duties includes determining the macro
policies and strategies of the capital market and also taking necessary measures for organizing and
developing the capital market supervision and law enforcement.
Members of the Council are:
2) The Minister of Finance and Economic Affairs to the President of the Council is responsible;
3) Minister of Commerce;
4) President of Central Bank of Iran;
5) Heads of Chamber of Commerce and Industry and the Chamber of Mines;
6) The head of the Securities and Exchange Organization as secretary and spokesman for the
Organization;
7) The Attorney General or his deputy;
8) A representative from the Associations;
9) Three financial experts exclusively from the private sector in consultation with professional
associations by proposal of Minister of Economic Affairs and Finance and approval of the Cabinet, and
10) A person exclusively from private sector experts with suggestion of the relevant Minister and
approval of Cabinet for any commodity exchange.
B) Securities and Exchanges Organization (SEO)
The Securities and Exchange Organization of Iran (SEO) was established in 2006 after Tehran Stock
Exchange demutualization and as of Article 5 of the Securities Act ratified by the Islamic Consultative
Assembly on November 22nd, 2005.
In other words, securities market supervisory authority in Iran was divided into the two institutions;
Securities and Exchange Organization and Securities and Exchange High Council. The Organization shall
be a public non-governmental institute with legal and financial independence and shall be funded through
a service charge and admission fee collected from companies listed in the Exchanges and other revenues.
The required funding for commencement of activity of the Organization shall be provided out of trust
fund of the Stock Exchange Council deposited with the Tehran Stock Exchange Brokers’ Organization.
Board of Directors of the Organization consists of 5 members elected upon the Chairman of the
Council’s recommendation and the Council’s approval. Board members of SEO are elected among
trustees and persons having good reputation and experience in the field of financial experts exclusively
from non-public sectors.
C) Security and Commodity Exchange
Up to July 2011, there are three exchanges in Iran under the supervision of SEO. The Tehran Stock
Exchange (TSE) is the first primary equities market in Iran. In addition to the TSE, there are two other
regulated markets: Farabourse Securities Market (OTC), the market for bonds and small-and-medium
sized enterprises (SMEs); and the Iran Mercantile Exchange (IME), the principal commodity market in
Iran. Every trade is cleared and settled by the central Depository and Clearing and Settlement
Corporation (CSD) that provide the custodian and book-entry service.
Under the supervision of the Securities and Exchange High Council, the Iran securities market initiated
its modernization process in the 2000’s. With a view to building a more accommodating regulatory
environment, starting in 2005, the authorities further carried out a series of legal reforms, such as the
“Capital Market Law” and the “Law for Development of New Financial Instruments and Institutions”, as
well as amendments to the “Listing Regulation” and article 44 of Iran Constitution (for facilitating the
privatization) and so on.
To cope with the changing global environment and the increasing global competition, the securities and
exchanges organization (SEO) and Securities and Exchange High Council and Iran’s securities-related
organizations endeavor to make the market internationally attractive and competitive. The aims are for
the Iran’s capital market to become an important player in the international arena, to find a position in the
national economy, and to serve as a fund raising and asset management center.
In recent years, by attracting large companies from different industries in a growing process, Iran’s capital
market helped to finance many projects.
Establishing new institutions in capital markets such as investment banks play a vital role in financing the
projects and supporting the entrepreneurs. Growth OTC will help to attract small and medium
enterprises.
With growth and development of economy in recent years, the company has concluded that they should
think internationally to achieve their rightful place in the region. Presence in the capital markets and
relationship with it will help them in this direction.
Components diagram below shows the Iran’s Capital market Structure.

 

FAR Law Firm

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