According to the International Monetary Fund (IMF), Jordan's regulatory and supervisory framework generally observes international standards and codes in securities, reflecting the country's efforts to strengthen supervision in recent years. However, the underlying assessment on which this statement was based was - upon the request of Jordanian authorities - never published, and therefore the compliance statement cannot be verified. Nonetheless, the Jordanian Securities Commission (JSC) stated in its 2005 Annual Report that it is working to upgrade the Jordanian capital market towards international standards. To achieve this goal, the annual report lists a number of measures, such as enhancing the JSC's supervisory role and increasing disclosure and transparency in the market.

General Overview

In 2004, in the annual Article IV Consultation report, the International Monetary Fund (IMF) noted that "Jordan's regulatory and supervisory framework generally observes international standards and codes in securities, reflecting the country's efforts to strengthen supervision in recent years" (p. 13). This seemed to have been the outcome of an IMF 2004 Financial System Stability Assessment (FSSA) of Jordan. However the circulation of the final FSSA report was highly limited and, according to a 2005 report by the Independent Evaluation Office of the IMF (IEO), the Jordanian authorities declined to publish the FSSA..

In the 2004 Article IV report, the IMF noted that the securities market was going through an impressive regulatory and technological improvement. However, the report noted, the securities market would benefit from privatization and from further financial deepening, including a longer yield curve.

The Jordanian Securities Commission (JSC) regulates the securities market. According to its website, a part of its mandate is to protect investors, as well as ensure fairness and transparency. The World Bank, in its 2004 Report on the Observance of Standards and Codes (ROSC) for Corporate Governance, notes that the JSC's powers and authority increased significantly with the Securities Law amendment in 2002. The Amman Stock Exchange (ASE) is Jordan's only stock exchange and is regulated by the Securities Law, the Listing Rules of 2003, the Trading Rules of 2003, and other internal bylaws. According to the World Bank's 2004 Corporate Governance ROSC, the ASE had not played a major role in regulating listed companies. Nonetheless, the ASE's powers were significantly strengthened on April 1, 2004, so that it was able to issue warnings and fines, and suspend and de-list issuers.

According to the JSC's 2005 Annual Report, the JSC will "continue its efforts to upgrade the capital market of Jordan to international standards, and enhance supervision and investor protection, in a manner that would increase confidence and its attractiveness to local and international investments". (p. 35) Among the goals that the JSC lists to achieve this target in the short term are: (1) Enhancing the JSC's regulatory and supervisory roles; (2) establishing the Jordan Financial Center; (3) establishing a training institute in the capital market; (4) preparing a code of corporate governance for listed companies; (5) enhancing public awareness and the culture of investment in securities; (6) promoting Jordan's capital market and attracting foreign investment; (7) enhancing disclosure and transparency in the market and (8) developing electronic systems and programs.

In a 2006 paper written for the IMF, authors Saadi-Sedik and Petri note that, for an emerging market economy like Jordan's, the ASE is unusually large in terms of market capitalization (almost 300 percent of GDP). The authors consider the recent performance of the ASE as exceptional, which can be seen as partly reflecting long-standing domestic efforts to promote financial equity markets. The 2006 IMF Article IV Consultation report asserts that the equity markets had gone through a major correction. Since 2000, the average annual increase of the ASE index had been 36 percent, compared with the historical average of 13 percent. In the 2006 Financial Indicators of the World Bank, Jordan topped the charts, with the 10 largest firms accounting for a staggering 85% of market capitalization.

The Jordan Securities Commission is a member of IOSCO and is Chairman is the Vice Chairman of the IOSCO Emerging Markets Committee, and the IOSCO Presidents Committee (IOSCO website).

The Principles

1. The responsibilities of the regulator should be clear and objectively stated.

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There is no publicly available information as to Jordan's compliance with this principle.

The JSC is legally mandated to regulate the securities market. As part of its mandate, it must protect investors as well as ensure fairness and transparency. The World Bank notes in its 2004 Corporate Governance ROSC that the JSC's powers and authority increased significantly with the Securities Law amendment in 2002. The Commission (the Chairman, the Deputy Chairman and three commissioners) is appointed by the Council of Ministers, and reports to the Prime Minister. The Securities Law prohibits JSC members from engaging in any other profession or job in either the private or the public sectors. It also obliges them to disclose ownership of securities and their families. Commissioners can be removed without cause. However, the publicly available information does not explicitly address Jordan's compliance with this principle.

2. The regulator should be operationally independent and accountable in the exercise of its functions and powers.

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The JSC is self-financing, and has returned excess revenues to the government budget in recent years, according to the 2004 World Bank Corporate Governance ROSC. The budget must be approved by the Prime Minister. However, the publicly available information does not explicitly address Jordan's compliance with this principle.

3. The regulator should have adequate powers, proper resources and the capacity to perform its functions and exercise its powers.

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As of the end of 2005, the JSC had a staff of 91, according to its 2005 Annual Report. However, the publicly available information does not explicitly address Jordan's compliance with this principle.

4. The regulator should adopt clear and consistent regulatory processes.

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There is no publicly available information as to Jordan's compliance with this principle.

5. The staff of the regulator should observe the highest professional standards, including appropriate standards of confidentiality.

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There is no publicly available information as to Jordan's compliance with this principle.

6. The regulatory regime should make appropriate use of Self-Regulatory Organizations (SROs) that exercise some direct oversight responsibility for their respective areas of competence, to the extent appropriate to the size and complexity of the markets.

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The ASE is Jordan's only stock exchange, and is regulated by the Securities Law, the Listing Rules of 2003, the Trading Rules of 2003, and other internal bylaws. The 2004 World Bank Corporate Governance ROSC noted that the ASE had not played a major role in regulating listed companies. Nonetheless, the ASE's powers were significantly strengthened on April 1, 2004, enabling it to issue warnings and fines, and suspend and de-list issuers. Furthermore, the Controller of Companies, under the Ministry of Industry and Trade, also plays a key corporate governance enforcement role. The Controller has wide information and recourse rights, is present at general shareholder meetings (GSMs), and can dissolve a company's board or revoke its registration. However, it cannot impose fines and must bring cases in court following investigation or use "moral suasion." The World Bank report further noted that a proposed amendment to the Securities Law, under discussion in 2004, would have given the Controller the power to issue fines. However, the publicly available information does not explicitly address Jordan's compliance with this principle

7. SROs should be subject to the oversight of the regulator and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.

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There is no publicly available information as to Jordan's compliance with this principle.

8. The regulator should have comprehensive inspection, investigation and surveillance powers.

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There is no publicly available information as to Jordan's compliance with this principle.

9. The regulator should have comprehensive enforcement powers.

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There is no publicly available information as to Jordan's compliance with this principle.

10. The regulatory system should ensure an effective and credible use of inspection, investigation, surveillance and enforcement powers and implementation of an effective compliance program.

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There is no publicly available information as to Jordan's compliance with this principle.

11. The regulator should have authority to share both public and non-public information with domestic and foreign counterparts.

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According to its 2005 Annual Report, the JSC "attaches great importance to strengthening its cooperation ties and exchanging information and expertise with Arab and international organizations. The JSC concluded international agreements of cooperation and MoUs.... In 2005, the JSC signed a MoU with the Romanian Securities Commission aiming mainly to reinforce cooperation, exchange legislative and technical information and expertise" (p. 17). Previously, agreements and MoUs were signed with Bahrain, Kuwait, Malaysia and Egypt, and there are draft agreements and MoUs to be signed in future with Oman, Poland, Ukraine, China and Pakistan. However, the publicly available information does not explicitly address Jordan's compliance with this principle.

12. Regulators should establish information sharing mechanisms that set out when and how they will share both public and non-public information with their domestic and foreign counterparts.

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There is no publicly available information as to Jordan's compliance with this principle.

13. The regulatory system should allow for assistance to be provided to foreign regulators who need to make inquiries in the discharge of their functions and exercise of their powers.

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There is no publicly available information as to Jordan's compliance with this principle.

14. There should be full, timely and accurate disclosure of financial results and other information that is material to investors’ decisions.

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The World Bank reports, in its 2004 ROSC for Corporate Governance, that Jordan observes one, largely observes two, and partially observes one of the sub-principles of Principle V of the Organization for Economic Cooperation and Development (OECD) Principles of Corporate Governance, which address Disclosure and Transparency. Audited consolidated annual accounts are sent to the JSC within 90 days of fiscal year's end, and to the Controller at least 21 days prior to the annual general meeting. The JSC is responsible for disclosure enforcement. Its monitoring team, with a staff of eight, follows the quality of disclosure, but does not extensively review the quality of financial statements. The World Bank report notes that "compliance with filing and disclosure standards is generally good. About 40 percent of listed firms make a high-quality disclosure, and all listed firms file their audited financials" (p. 10).

15. Holders of securities in a company should be treated in a fair and equitable manner.

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The World Bank's corporate governance ROSC reports that Jordan largely observes two of the sub-principles of Principle III of the OECD Principles of Corporate Governance, which addresses the "Equitable Treatment of Shareholders," and partially observes one. The report notes that, in Jordan, "shareholders have a direct action for redress that is not typical for emerging markets. Any shareholder can examine unpublished corporate information through a court order; shareholders holding 15 percent of capital can request the Controller to audit the company" (p. 7). Furthermore, shareholders can "seek redress with the Controller, who has wide investigative and intervention powers. The enforcement powers of the Controller are distributed to the extremes: for example, it can remove directors but cannot impose administrative penalties or fines, which can only be imposed by a court" (p. 8).

16. Accounting and auditing standards should be of a high and internationally acceptable quality.

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In its 2004 ROSC dealing with accounting and auditing practices in Jordan, the World Bank concluded that Jordan has reached significant achievements in aligning its accounting standards with International Financial Reporting Standards (IFRSs), but that major challenges remained. It was recommended to focus on strengthening enforcement mechanisms to ensure compliance with the established accounting requirements. Overall, the World Bank noted that, to fully implement IFRSs, "a culture shift is required to reduce the influence of tax accounting on general-purpose financial statements" (p.1).

Also according to that 2004 World Bank Accounting and Auditing Practices ROSC, Jordan is committed to aligning its national corporate financial reporting requirements with the International Standards on Auditing (ISAs), and it has achieved significant improvements. Considerable steps have been taken to narrow the "compliance gap" in auditing practices (p. 1). However, the report found that closing the gap completely will be challenging and demanding. Educating new auditors and reeducating practitioners and regulators requires focusing on a different style and philosophy of accounting requirements.

17. The regulatory system should set standards for the eligibility and the regulation of those who wish to market or operate a collective investment scheme.

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There is no publicly available information as to Jordan's compliance with this principle.

The JSC 2003 Annual Report notes that the Mutual Funds Instructions define the conditions and procedures for the establishment of mutual funds, their modus operandi, and the obligations on these funds (p. 44).

18. The regulatory system should provide for rules governing the legal form and structure of collective investment schemes and the segregation and protection of client assets.

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There is no publicly available information as to Jordan's compliance with this principle.

19. Regulation should require disclosure, as set forth under the principles for issuers, which is necessary to evaluate the suitability of a collective investment scheme for a particular investor and the value of the investor’s interest in the scheme.

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There is no publicly available information as to Jordan's compliance with this principle.

20. Regulation should ensure that there is a proper and disclosed basis for asset valuation and the pricing and the redemption of units in a collective investment scheme.

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There is no publicly available information as to Jordan's compliance with this principle.

21. Regulation should provide for minimum entry standards for market intermediaries.

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There is no publicly available information as to Jordan's compliance with this principle.

22. There should be initial and ongoing capital and other prudential requirements for market intermediaries that reflect the risks that the intermediaries undertake.

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There is no publicly available information as to Jordan's compliance with this principle.

23. Market intermediaries should be required to comply with standards for internal organization and operational conduct that aim to protect the interests of clients, ensure proper management of risk, and under which management of the intermediary accepts primary responsibility for these matters.

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There is no publicly available information as to Jordan's compliance with this principle.

24. There should be procedures for dealing with the failure of a market intermediary in order to minimize damage and loss to investors and to contain systemic risk.

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There is no publicly available information as to Jordan's compliance with this principle.

25. The establishment of trading systems including securities exchanges should be subject to regulatory authorization and oversight.

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There is no publicly available information as to Jordan's compliance with this principle.

26. There should be ongoing regulatory supervision of exchanges and trading systems which should aim to ensure that the integrity of trading is maintained through fair and equitable rules that strike an appropriate balance between the demands of different market participants.

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There is no publicly available information as to Jordan's compliance with this principle.

27. Regulation should promote transparency of trading.

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There is no publicly available information as to Jordan's compliance with this principle.

28. Regulation should be designed to detect and deter manipulation and other unfair trading practices.

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There is no publicly available information as to Jordan's compliance with this principle.

29. Regulation should aim to ensure the proper management of large exposures, default risk and market disruption.

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There is no publicly available information as to Jordan's compliance with this principle.

30. Systems for clearing and settlement of securities transactions should be subject to regulatory oversight, and designed to ensure that they are fair, effective and efficient and that they reduce systemic risk.

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There is no publicly available information as to Jordan's compliance with this principle.