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The Legal Environment of the Capital Market in Palestine

 
 
At first, Mr. Zobi identified the concept of the capital market in Palestine. He stressed that the concept is old and dates back to 1932, when the Arab Bank was incorporated in Palestine. At that time, the Ottoman Civil Code (Mejelle) as well as Company Laws in force used to govern and regulate the trading of shares of public shareholding companies between sellers and purchasers. The prevailing legal framework is particularly important because it still regulates the current capital market. Although the Law Concerning the Capital Market Authority No. 13 of 2004 is now in place, the aforesaid legal framework encompasses the general rules of such regulation.
 
Mr. Zobi also stated that the legal regulation of the capital market is relatively modern. It was created with the establishment of the Palestinian National Authority (PNA). Moreover, the framework that regulates the Palestinian capital market is not only legal, but it is also a contractual one as it is based on the agreement of listing.
 
However, the laws which regulate the capital market in Palestine are as follows:
  1. The Jordanian Company Law No. 12 of 1964 – which acts like a constitution that governs and regulates trading and transactions at the capital market;
  2. The Palestinian Law No. 13 of 2004 Concerning the Capital Market Authority – the legal authority of the Palestinian capital market;
  3. The Palestinian Law of Banks No. 2 of 2002;
  4. The Jordanian Commercial Law No. 12 of 1966;
  5. The Jordanian Penal Law No. 16 of 1960.

Mr. Zobi also explained that securities traded in the capital market are of four types:

  1.  Shares;
  2.  Bonds;
  3.  Convertible bonds (which practically do not exist in the Palestinian capital market)
  4.  Negotiable options of sales and purchases in the capital market. 

On the other hand, securities do not entail bills of exchange.
 
Additionally, Mr. Zobi stressed that the relation between the capital market and Palestinian Capital Market Authority (PCMA) is complementary. PCMA plays a major role as it is the legal authority, which supervises and monitors the financial market transactions and activities. In many States, capital market authorities have replaced the functions of governors of central banks and monetary authorities. In addition, the Company Controller plays an important role in supervising the financial market.
 
Furthermore, Mr. Zobi highlighted the significance of disclosure in the financial market. Everybody has an equal access to information. This promotes the principles of transparency and equal opportunities. Ensuring equal access to information is an inherent duty to be fulfilled by companies' board members as well as by brokerage companies.
 
However, Mr. Zobi stated the Law of Securities No. 12 of 2004 features a number of shortfalls. In general, the Law does not enforce sanctions and penalties in a gradual manner, thereby rendering such sanctions unfair and exaggerated even if applicable to simple contraventions.
 
Finally, Mr. Zobi emphasised that the Palestinian capital market has witnessed positive, progressive developments over a short period of time.