Kuwait Capital Markets Authority Rules And Regulations Free Practice Test Set Two

Correct: The valuation of in-kind shares is a mandatory process when a company increases its capital using non-cash contributions. This ensures that the value assigned to the assets accurately reflects their worth, protecting the interests of existing shareholders and the integrity of the company’s capital structure as per the CMA Executive Bylaws and the Companies Law.

Incorrect: The claim that valuation is only required for mandatory acquisition offers is incorrect because the scope of “Valuation of Assets” explicitly includes in-kind shares for capital increases. The suggestion that the board of directors can determine the value without formal mechanisms is wrong because the law mandates specific processes and mechanisms to ensure objectivity. The statement that valuation excludes capital increases and only applies to mergers is false, as capital increases via in-kind shares are one of the primary triggers for asset valuation under the regulatory framework.

Takeaway: The “Valuation of Assets” under Kuwaiti law is a comprehensive regulatory requirement triggered by specific corporate actions, including capital increases through in-kind contributions and mergers, to ensure fair pricing and transparency.

Correct: Providing quarterly reports to the Authority within ten working days from the end of each quarter is the right answer because the Kuwait CMA Executive Bylaws (Module 4) specifically mandate that Licensed Persons must submit these reports for all securities investment portfolios under their responsibility, including those managed by the client, the firm, or held in custody, within this precise timeframe.

Incorrect: The requirement for monthly reports within five working days is wrong because the CMA regulations establish a quarterly reporting cycle rather than a monthly one. The statement that reports are only required for discretionary portfolios is wrong because the reporting obligation is comprehensive and includes portfolios managed by the client or simply held in custody. The option suggesting semi-annual reports within twenty working days is wrong because it fails to meet the more frequent quarterly reporting standard and the stricter ten-day submission deadline set by the Authority.

Takeaway: Licensed Persons must ensure regulatory transparency by submitting detailed reports on all investment portfolios under their care to the CMA on a quarterly basis within ten working days of the period’s end.

Correct: The issuance must be accompanied by a Shari’ah certificate (Fatwa) issued by a Shari’ah Supervisory Board approving the structure and the prospectus is the right answer because the Capital Markets Authority (CMA) Executive Bylaws require that any Sukuk issuance must be certified as Shari’ah-compliant by a recognized Shari’ah Supervisory Board. This board is responsible for reviewing the legal structure, the underlying assets, and the offering documents to ensure they adhere to Islamic financial principles.

Incorrect: The suggestion that Sukuk must be guaranteed by the Government of Kuwait is wrong because Sukuk are investment instruments where the risk is generally borne by the investors based on the creditworthiness of the issuer or the performance of the underlying assets, rather than a mandatory state guarantee. The claim that assets must consist exclusively of liquid cash and receivables is wrong because Shari’ah principles generally require Sukuk to be backed by tangible assets, usufructs, or services rather than just cash or debt to avoid prohibited interest (Riba). The requirement for the Shari’ah Board to be composed of five members who are also company directors is wrong because Shari’ah boards must be independent of the company’s management to ensure objective oversight and avoid conflicts of interest.

Takeaway: Under the CMA regulations for Sukuk, obtaining a Shari’ah compliance certificate from an independent Shari’ah Supervisory Board is a mandatory prerequisite for the approval and issuance of the securities.

Correct: The investor is exempt from the requirement to make a mandatory tender offer for the remaining shares because the acquisition resulted from a debt restructure is the right answer because the Kuwait Capital Markets Authority (CMA) Executive Bylaws specifically list debt restructuring as one of the valid exceptions to the mandatory acquisition rule. Under Article 2.7, while a person who acquires more than 30% of a listed company’s securities must normally launch an offer for the remaining shares, a debt restructure allows for an exemption from this obligation.

Incorrect: The statement that the investor must submit a mandatory offer within 30 days is wrong because it describes the general rule for mandatory acquisitions without accounting for the specific legal exception provided for debt restructuring. The claim that the investor must reduce ownership to below 30% within two years is wrong because that specific timeframe and remedy apply to acquisitions resulting from inheritance, wills, or court judgments, not debt restructuring. The requirement to obtain a waiver from the Board of Directors of the offeree company is wrong because exemptions are granted by the Authority or defined by the regulations, not by the target company’s board.

Takeaway: Although crossing the 30% ownership threshold in a listed company typically triggers a mandatory offer for all remaining shares, the CMA provides specific exemptions for circumstances such as debt restructuring, mergers, and inheritance.

Correct: Obtaining approval from senior management and applying enhanced due diligence measures is the right answer because the Kuwait Capital Markets Authority (CMA) Executive Bylaws require Licensed Persons to implement stricter controls for Politically Exposed Persons (PEPs). This includes identifying the source of wealth and funds and ensuring that high-level management oversees the initiation of the relationship due to the inherent risks of money laundering and corruption associated with such positions.

Incorrect: The proposal to use simplified due diligence is wrong because PEPs are never classified as low-risk entities under AML/CFT frameworks; simplified measures are reserved for entities like regulated financial institutions or public companies with high transparency. The requirement to notify the Financial Intelligence Unit immediately upon inquiry is wrong because a report is generally triggered by suspicious activity or specific transaction thresholds (STRs), not merely the status of a potential client. Performing standard due diligence with biennial monitoring is wrong because enhanced due diligence requires more frequent and rigorous ongoing monitoring than the standard protocol.

Takeaway: Under CMA regulations, dealings with Politically Exposed Persons (PEPs) necessitate enhanced due diligence and senior management authorization to manage the heightened risk of financial crime.

Correct: The requirement to cover the shortage from the Licensed Person’s own funds and notify the Authority immediately is the right answer because the CMA Executive Bylaws mandate that any unresolvable discrepancy resulting in a shortage must be corrected using the Licensed Person’s capital to protect the client’s interests, followed by immediate regulatory disclosure.

Incorrect: The suggestion to report the discrepancy only in the annual compliance report is wrong because the rules require immediate notification to the Authority when a shortage occurs. The option regarding utilizing surplus funds from other client accounts is wrong because it violates the fundamental principle of segregation, which prohibits using one client’s funds for the account of another. The choice to suspend transactions and wait for a bank investigation is wrong because the Licensed Person has a proactive obligation to replenish the account from their own funds immediately if the discrepancy cannot be corrected.

Takeaway: Licensed Persons must maintain strict segregation of client assets and are personally liable to replenish any shortages found during reconciliation from their own funds while providing immediate notice to the CMA.

Correct: Opening a separate bank account specifically for client funds that is distinct from the firm’s own operational accounts is the right answer because the CMA Executive Bylaws require Licensed Persons to segregate client money from their own corporate funds to ensure that client assets are protected from the firm’s creditors and are not used for the firm’s own business purposes.

Incorrect: Maintaining all funds in a single consolidated account while using internal accounting software is wrong because the regulation requires physical segregation at the banking level, not just ledger-based separation. Transferring client funds to the firm’s main operational account for liquidity is wrong because this constitutes commingling of assets, which is strictly prohibited under the rules for client asset protection. Segregating only institutional client funds while keeping retail funds in a general account is wrong because the requirement for segregation applies to all clients regardless of their classification or the size of their assets.

Takeaway: A fundamental requirement for Licensed Persons under the CMA rules is the strict physical and legal segregation of client funds from the firm’s own assets to safeguard investor interests.

Correct: A significant technical malfunction in the electronic trading system is a critical operational event that directly impacts the exchange’s core function of providing a continuous and transparent trading environment. Under Kuwait Capital Markets Authority (CMA) regulations, any event that threatens the stability, integrity, or continuity of trading must be reported to the Authority immediately to ensure proper regulatory oversight and the protection of investors.

Incorrect: The appointment of junior administrative staff is an internal human resources matter that does not reach the threshold of material regulatory significance required for prompt notification to the Authority. Scheduled maintenance of a public website during non-trading hours is a routine operational procedure that does not disrupt market activity or trading integrity, and thus does not trigger emergency notification requirements. Standard price fluctuations within established daily limits are normal market occurrences and do not necessitate a specific regulatory notification unless they involve suspected market abuse or manipulation.

Takeaway: Licensed Securities Exchanges are legally obligated to maintain transparency with the CMA by reporting any material operational failures or technical risks that could jeopardize the orderly and fair functioning of the capital market.

Correct: Providing basic technical information that is essential to the entity’s operations is explicitly listed in the Kuwait Capital Markets Authority (CMA) Glossary as one of the specific ways Significant Influence is established when the 20% ownership threshold is met.

Incorrect: Receiving an annual report is a standard regulatory requirement for all shareholders and does not constitute participation in policy-making or board representation. Utilizing software under a standard end-user license agreement is a routine consumer transaction and does not qualify as an “important transaction” that demonstrates influence over the company’s strategic direction. Publishing independent research reports is an external activity performed by analysts and does not meet any of the criteria for influence, such as the exchange of administrative employees or representation on the Board of Directors.

Takeaway: Under CMA regulations, Significant Influence is presumed at 20% ownership and is confirmed through active involvement in the investee’s governance, such as providing technical expertise, board representation, or participating in profit distribution decisions.

Correct: The Representative of a Collective Investment Scheme (CIS) Manager – Operations Officer is defined as an employee who receives and executes orders within the limits of support operations, such as registration and settlement, and coordinates with the Investment Controller without having any discretional authorization to take investment decisions.

Incorrect: The Representative of an Investment Portfolio Manager is part of the administrative body authorized to manage portfolios, which implies a management function rather than a strictly non-discretionary operational role. The Senior Investment Adviser is a natural person practicing investment advisory with specific higher qualification requirements, focusing on providing advice rather than back-office execution and settlement. The Risk Management Officer is responsible for identifying, evaluating, and classifying risks and monitoring control systems, which is a supervisory and control function rather than an operational execution role.

Takeaway: Under CMA regulations, the Operations Officer for a CIS Manager is a non-discretionary role focused on the technical execution, registration, and settlement of transactions.

Correct: Serving the notice at least seven business days prior to the start of the investigation and ensuring it is delivered between 7:00 AM and 7:00 PM on official business days is the right answer because it strictly adheres to the procedural requirements set by the Kuwait Capital Markets Authority to ensure the person under investigation has sufficient time to prepare their defense.

Incorrect: The claim that a notice only requires three business days is wrong because the CMA regulations specifically mandate a minimum lead time of seven business days. The suggestion that a notice only needs to include the session time and the investigator’s name is wrong because the law requires a comprehensive list of information, including a summary of the violation and its legal basis. The statement that email notices require a manual confirmation of receipt from the recipient is wrong because the regulations state that an email notice is legally effective as of the date it is sent from the Authority’s system once the transmittal report is received.

Takeaway: The Kuwait CMA enforces strict procedural timelines and content requirements for investigation notices, such as the seven-business-day rule, to uphold the right of defense and ensure transparency in regulatory proceedings.

Correct: The CEO position is a specific exception to the general rule for filling vacancies in registered employment positions. While most positions must be filled within six months, the Authority allows a period of one year to fill a vacant CEO position, provided that a member of the Board of Directors or a registered senior executive assumes the duties in the interim and the Authority is notified within five business days of this arrangement taking effect.

Incorrect: The suggestion that the position must be filled within six months is incorrect because that timeframe applies to general registered positions, not the CEO role. The claim that the Internal Audit Officer must take over the interim duties is incorrect as the regulations specifically designate Board members or senior executives for this role to maintain operational continuity. The idea that the Authority does not need to be notified if a Board member takes over is wrong, as notification is mandatory within five business days of the interim situation taking effect.

Takeaway: Under Kuwait CMA rules, the CEO vacancy is granted a one-year replacement window, which is longer than the standard six-month requirement for other registered positions, subject to specific interim management and notification protocols.

Correct: Obtaining a specific license as an Investment Adviser is the right answer because the Kuwait Capital Markets Authority (CMA) distinguishes between persons on the financial analysts’ register and licensed Investment Advisers. While those on the register may issue research and publications, only those specifically licensed as Investment Advisers are authorized to provide recommendations for the purchase or sale of securities and assets.

Incorrect: The suggestion that the firm only needs to update its entry in the financial analysts’ register is wrong because the register is specifically for analysts who do not make recommendations; a separate licensing process is required for advisory activities. The role of an Investment Controller is wrong because this license pertains to the supervision and control of Collective Investment Schemes (CIS), not the provision of investment advice to the public. The claim that three years of registration grants recommendation rights is wrong because the authority does not grant advisory powers based on seniority or time elapsed on the analyst register; a formal license application for the specific activity is mandatory.

Takeaway: Under Kuwait CMA regulations, there is a strict functional separation between financial analysis and investment advice, requiring a specific Investment Adviser license for any person or entity providing buy or sell recommendations.

Correct: The Kuwait Capital Markets Authority (CMA) Executive Bylaws stipulate that the Dividing Company must make all required documentation available for stakeholder review at its headquarters at least ten business days prior to the General Assembly. Additionally, if a company chooses to withdraw from the division process after the announcement, it is prohibited from initiating any other division for a period of one year from the date of the withdrawal announcement.

Incorrect: The option suggesting a fifteen-day period and a six-month prohibition is incorrect because it misstates the specific regulatory timeframes established by the CMA. The option involving the Ordinary General Assembly is incorrect because corporate divisions specifically require a resolution from an Extraordinary General Assembly (EGM). The option proposing a five-day availability period and a two-year prohibition is wrong as it fails to meet the minimum ten-business-day transparency requirement and overstates the duration of the subsequent ban.

Takeaway: To ensure regulatory compliance during a corporate division, companies must provide stakeholders with a ten-business-day review period before the EGM and observe a one-year cooling-off period if they withdraw from the transaction.

Correct: The requirement to accept shares on a pro-rata basis is a fundamental principle of the Partial Purchase Offer under the Kuwait Capital Markets Authority (CMA) Executive Bylaws. This ensures that all shareholders of the targeted class are treated equally and have the opportunity to participate in the offer. If the number of shares tendered by the shareholders exceeds the amount the offeror intended to buy, the offeror must scale back the purchases proportionally from all participating shareholders.

Incorrect: The statement regarding exceeding 50% ownership is incorrect because a partial purchase offer is specifically designed for acquisitions resulting in a stake between 30% and 50%; any acquisition intended to result in more than 50% ownership must be conducted as a full takeover offer for 100% of the shares. The suggestion that an offeror can negotiate different prices with individual shareholders is wrong because the CMA rules require a unified offer price to ensure the principle of equality among shareholders. The claim that an offeror is exempt from appointing an independent investment advisor is incorrect as the target company’s board is generally required to provide an opinion supported by an independent advisor to guide shareholders on the merits of the offer.

Takeaway: Under CMA Module 9, a Partial Purchase Offer must be extended to all shareholders of the relevant class and requires pro-rata acceptance if oversubscribed to maintain equitable treatment.

Correct: The statement of subscriptions must be submitted to the Authority within ten business days of the subscription closing date, and the subscription agent is then required to transfer the subscription payments to the issuer within one business day after receiving the statement. This ensures the regulator is informed of the offering’s outcome before the capital is officially moved to the issuer’s control.

Incorrect: The claim that the statement is due within five business days is incorrect because five business days is the regulatory deadline for the allocation of securities to subscribers, not the reporting deadline to the Authority. The suggestion that the statement is due within fifteen business days is wrong as fifteen days is the timeframe allowed for an issuer to advertise the cancellation of an issue. The option suggesting funds are transferred within three business days of the closing date is incorrect because the transfer is specifically triggered by the receipt of the subscription statement, not the closing date itself, and must occur within one business day.

Takeaway: Kuwait CMA regulations require a formal subscription statement to be filed with the Authority within ten business days of closing, followed by a rapid one-business-day window for the agent to transfer funds to the issuer.

Correct: The Board of Directors of the offeree company is legally required to submit its response to shareholders and the Authority within seven business days of receiving the offer document. This response must include the Board’s own opinion and recommendations, alongside the professional opinion of an investment adviser, to ensure shareholders have sufficient information to make a decision.

Incorrect: The suggestion that the Board has ten business days is incorrect because the Executive Bylaws specifically mandate a seven-business-day window for the response. The idea that the Board must wait until the collection period ends is wrong because the purpose of the recommendation is to guide shareholders during the collection process, not after. The claim that the response is only required if the offer is hostile is incorrect, as the disclosure and recommendation requirements apply to all formal acquisition offers under these rules.

Takeaway: Under Kuwait CMA regulations, the offeree’s Board must provide a reasoned recommendation and an independent investment adviser’s opinion within seven business days of receiving an offer document.

Correct: Investment accounts opened with Islamic banks that are subject to the supervision of the Central Bank of Kuwait are explicitly excluded from the definition of a Collective Investment Scheme (CIS). This exclusion is designed to maintain clear jurisdictional boundaries, ensuring that these specific banking products remain under the specialized oversight of the Central Bank rather than the Capital Markets Authority.

Incorrect: The option regarding contractual arrangements for movable assets is wrong because the CMA definition of a CIS specifically includes contractual schemes related to both movable and immovable assets intended to enable investors to participate in profits. The option describing an investment fund as a corporate entity is wrong because the regulations explicitly state that a CIS may exist in the form of a corporate entity. The option regarding mechanisms decided by the Authority is wrong because the bylaws grant the Authority the power to include such mechanisms within the scope of CIS regulations, not exclude them by default.

Takeaway: The Kuwait CMA defines Collective Investment Schemes broadly to include various corporate and contractual structures, but specifically excludes certain products like insurance contracts and Central Bank-supervised investment accounts to avoid regulatory overlap.

Correct: A director is not considered independent if they are a first-degree relative of any board member or senior executive management at the company or its group. This rule is established under the Kuwait Capital Markets Authority (CMA) Module 15 to ensure that the director can exercise objective judgment without the influence of family ties to the executive leadership.

Incorrect: Owning 3% of the company’s capital does not disqualify a director, as the CMA threshold for losing independence due to shareholding is 5% or more. Previous employment with a competitor four years ago is not a disqualifying factor; the cooling-off period for independence usually applies to employment within the company itself or its affiliates within the last two years. Providing services to a different company in the same sector does not inherently create a conflict of interest with the subject company unless there is a specific material business relationship or cross-directorship prohibited by the rules.

Takeaway: The CMA defines independence through specific criteria, including the absence of close family relationships with management and a shareholding limit of less than 5%, to safeguard the integrity of board oversight.

Correct: The six-month period is the right answer because, according to the Kuwait Capital Markets Authority (CMA) Module 12 (Listing Rules), any shareholder who owns 20% or more of a Kuwaiti shareholding company’s capital, whether directly or indirectly, is prohibited from disposing of their shares for a period of six months starting from the date the company’s shares are officially listed on the exchange.

Incorrect: The twelve-month period is wrong because it exceeds the standard regulatory lock-up duration for major shareholders in a typical listing scenario. The eighteen-month period is wrong as it is not a timeframe recognized by the CMA for this specific disposal restriction. The twenty-four-month period is wrong because it represents a significantly longer restriction than the six-month minimum required to ensure market stability post-listing.

Takeaway: To maintain market confidence and ensure the commitment of significant stakeholders, the CMA imposes a mandatory six-month holding period on shareholders with a 20% or greater stake following a company’s listing.

Correct: The requirement for a minimum of seven business days’ notice before the start of an investigation, served between 7 am and 7 pm on official business days, is the correct procedural standard mandated by the Kuwait Capital Markets Authority (CMA) regulations to ensure the notified party has adequate time to prepare their defense.

Incorrect: The suggestion of a three-day notice period with a window of 8 am to 2 pm is incorrect because it fails to meet the statutory seven-day minimum and uses an incorrect time window for service. The option proposing a ten-day notice period with service allowed at any time, including weekends, is wrong because the CMA strictly limits the service of notices to official business days and specific hours (7 am to 7 pm). The option stating a five-day notice period during standard CMA office hours is incorrect as it contradicts the legal requirement for a seven-business-day lead time and the specific 7 am to 7 pm service window defined in the regulations.

Takeaway: To ensure due process, the Kuwait CMA requires that any person under investigation be provided with at least seven business days’ notice, served exclusively on business days between 7 am and 7 pm.

Correct: Within five business days from the date the capital reduction occurred is the right answer because Module Thirteen (Collective Investment Schemes) of the Executive Bylaws explicitly requires the fund manager to notify the Authority within five business days if the fund’s capital falls below the minimum requirement (which is KD 2 million for Public Funds). This prompt notification is essential for the Authority to evaluate the situation and protect the interests of unitholders.

Incorrect: The suggestion of three business days is wrong because it is shorter than the period granted by the CMA regulations for this specific reporting requirement. The fifteen-day period is wrong because that duration is associated with the timeframe for a manager or custodian to respond to a notice of license revocation, not for reporting capital shortfalls. The option regarding waiting until the end-of-month valuation is wrong because the reporting obligation is triggered by the date the reduction occurs, and waiting for a monthly cycle could delay necessary regulatory intervention.

Takeaway: Managers of Public CISs in Kuwait must monitor capital levels against the KD 2 million minimum and report any deficiency to the CMA within five business days to facilitate regulatory supervision.

Correct: The requirement for at least 75% of the attendees at the General Assembly ensures significant shareholder support for the delisting, while the six-month notice period provides a transition window for investors to adjust their positions before the shares become illiquid. This is consistent with the CMA Executive Bylaws regarding voluntary delisting procedures.

Incorrect: The suggestion of a simple majority (50% + 1) and a three-month notice period is incorrect because the CMA regulations mandate a higher threshold of 75% and a longer notice period of six months to protect minority shareholders. The option mentioning 75% of total issued shares is wrong because the regulation specifically measures the 75% against the “attendees” of the General Assembly, not the total share capital. The option requiring unanimous consent (100%) is incorrect as the law only requires a 75% supermajority of those present.

Takeaway: Voluntary delisting in Kuwait requires a 75% supermajority approval from General Assembly attendees and a mandatory six-month notice period to ensure market transparency and investor protection.

Correct: The Licensed Person, its clients, its employees, and any other person directly or indirectly linked to them by control is the right answer because Kuwait CMA Module Eight (Conduct of Business) requires Licensed Persons to identify and manage conflicts of interest that may arise between the firm itself, its employees, its clients, or any person linked to them through control. This broad scope ensures that all potential biases in decision-making or service delivery are addressed.

Incorrect: The suggestion that conflicts only occur between the Licensed Person and retail clients is wrong because the regulation does not exempt professional clients or internal staff from conflict-of-interest considerations. The claim that conflicts are exclusively between the firm and the CMA is wrong because that describes a regulatory oversight relationship rather than the operational conflicts of interest managed under conduct of business rules. The idea that conflicts only exist between two competing clients is wrong because it ignores the significant risk of conflicts between the firm’s own interests (or its employees’ interests) and those of its clients.

Takeaway: Licensed Persons must maintain a comprehensive conflict of interest policy that covers interactions between the firm, its staff, its clients, and any entities linked by control to ensure fair treatment of all parties.

Correct: Ensuring at least two members are independent, the majority are non-executive directors, and the board meets at least six times annually with a minimum of one meeting per quarter is the right answer because it adheres to the mandatory requirements of the Kuwait CMA. For a nine-member board, 20% equals 1.8, which must be rounded up to 2 independent members. Furthermore, the rules mandate that the majority of the board must be non-executive directors (NEDs) and that the board must meet at least six times a year, ensuring at least one meeting occurs in each quarter.

Incorrect: The suggestion to use the ‘comply or explain’ principle for the number of independent members is wrong because the requirement for independent members under Rule One is specifically listed as a mandatory provision that must be complied with, unlike other parts of Rule One. The option proposing a majority of executive directors is incorrect because the CMA rules explicitly require that the majority of board members must be non-executive directors to ensure objective oversight. The option regarding five meetings per year is wrong because the regulations set a minimum threshold of six meetings per annum and require at least one meeting per quarter.

Takeaway: Under Kuwait CMA Corporate Governance rules, companies must maintain a board where the majority are non-executive directors, at least 20% are independent (rounded up), and meetings are held at least six times a year with quarterly frequency.

Correct: The requirement to refrain from purchasing shares outside of the offer process is the right answer because the Kuwait CMA Executive Bylaws (Book 9: Mergers and Acquisitions) mandate that an offeror must not purchase shares of the target company through any means other than the partial purchase offer from the date of the announcement until the end of the offer period. This ensures the integrity of the offer price and maintains equal treatment of all shareholders.

Incorrect: The statement regarding accepting all shares even if they exceed the target is wrong because a Partial Purchase Offer is specifically designed for a set percentage (between 30% and 50%); if the offer is oversubscribed, shares are accepted on a pro-rata basis rather than increasing the total acquisition size. The claim that an offeror must already hold 30% is wrong because a partial purchase offer is the mechanism used to reach a stake of 30% to 50%; it is not a prerequisite to already hold 30%. The mention of a 90-day offer period is wrong because the CMA regulations typically specify a standard offer period of 30 days, and 90 days exceeds the regulatory timeframe for such transactions.

Takeaway: Under Kuwait CMA rules, a Partial Purchase Offer is a regulated process to acquire between 30% and 50% of a company, requiring strict adherence to the ‘equal opportunity’ principle which prohibits side-purchases during the offer period.

Correct: A listed company may delay the disclosure of material information if such disclosure would compromise the confidentiality of preliminary negotiations or procedures related to a potential deal or transaction. This exception exists to prevent the premature release of information that could negatively impact the company’s ability to successfully conclude sensitive business arrangements.

Incorrect: The claim that a delay is permitted to prevent a temporary decline in share price is incorrect because the CMA regulations prioritize market transparency and the equal distribution of information over the stabilization of stock prices. The suggestion that a lack of a unanimous board vote justifies a delay is wrong because disclosure obligations are based on the materiality of the event rather than the specific internal voting tally of the directors. The idea that a company can wait until the end of a fiscal quarter is incorrect because material information must be disclosed immediately to the public to ensure a fair and efficient market, regardless of the financial reporting cycle.

Takeaway: Under Kuwait CMA rules, the primary exception to the immediate disclosure of material information is the protection of confidentiality during preliminary negotiations for significant corporate transactions.

Correct: The value must be determined through the specific valuation mechanisms and processes prescribed by the CMA and the Companies Law for in-kind contributions is the right answer because the regulations mandate a formal valuation process for in-kind shares constituting a company’s share capital, whether at the time of incorporation or during a capital increase, to ensure the assets are not overvalued and the capital structure remains sound.

Incorrect: The suggestion that a simple majority vote without external reports is sufficient is wrong because the law requires a technical valuation process rather than just a shareholder vote to validate the asset’s worth. The idea that the requirement is waived based on the duration of a business relationship is wrong because the valuation rules for in-kind contributions are mandatory and do not provide exemptions for long-term clients. The claim that the internal audit department is solely responsible is wrong because the valuation must follow the specific mechanisms provided for in the Companies Law and CMA bylaws, which typically involve independent or specialized valuation procedures to ensure objectivity and prevent conflicts of interest.

Takeaway: The Kuwait Capital Markets Authority and the Companies Law require a formal, regulated valuation process for all in-kind contributions to a company’s capital to maintain market integrity and protect shareholder rights.

Correct: The requirement to notify the Authority of the specific procedures, measures, and the expected timeframe for resolution is mandated by the CMA Executive Bylaws when an investment or borrowing control violation persists beyond five Business Days. This ensures the regulator is informed of the manager’s strategy to return the fund to compliance.

Incorrect: The suggestion that the manager must immediately suspend NAV calculation is incorrect because NAV must still be determined to protect existing unit holders’ transparency, and suspension is usually reserved for valuation difficulties. The requirement to obtain a waiver from 50% of unit holders is wrong as regulatory compliance issues cannot be waived by unit holders in lieu of notifying the Authority. The option regarding automatic liquidation is incorrect because the regulations focus on correction and notification rather than the immediate termination of the fund for a control breach.

Takeaway: Under Kuwait CMA regulations, if a Fund Manager cannot correct a violation of investment or borrowing controls within five Business Days, they are legally obligated to provide the Authority with a formal resolution plan and timeline.

Correct: The restriction of an SPV to issuing bonds and sukuk, the requirement for its dissolution upon achieving its purpose, and the limit of three shareholders are the right answer because Kuwait Capital Markets Authority regulations specifically mandate that SPVs are limited to these activities, must be wound up by force of law once their purpose is achieved, and cannot have more than three founders or shareholders during their term.

Incorrect: The suggestion that an SPV can engage in any financial activities similar to its primary purpose is wrong because the regulations explicitly state they shall not pursue any other purposes, even if similar. The claim that the term of the SPV can be shorter than the issued securities is incorrect because the law requires the term to be no less than the term of the Bonds or Sukuk. The idea that SPVs are exempt from licensing if formed by one person is false, as all SPVs must be licensed by the Authority regardless of the number of founders.

Takeaway: Special Purpose Vehicle companies under CMA rules are strictly regulated entities limited to issuing specific debt instruments, requiring licensing, and subject to mandatory liquidation upon the completion of their defined purpose.