Structure of Financial Service Providers
According to the articles of association for financial service providers, they have at least
one governing body and one supervisory body as any other joint stock firms.
Subsequently, functions and responsibilities of these bodies are defined in related
regulations and constitution. Generally there are three separate kinds of bodies including
decision making body (stock holders and Assembly), governing body (board of
managers) and supervising body (inspector). In addition there are some different
specialized committees which are considered in constitutions to provide some service for
different part of the company. It is necessary to mention that there is just one difference
between them and it is about portfolio manager’s body .It has an additional supervising
body and it is trustee. We will define some of its responsibilities.
۱- Stockholders
Stock holders have the power to control the company via different tools. All stock
holders should be approved before establishing an entity by high council (investment
bank) or SEO (other financial service providers). The stock holders indecency and
competency should be perceived by regulators.
۲- Assembly
The powers and functions of the company’s ordinary and extraordinary assembly (general
meetings) shall be the same powers and functions as prescribed in the Commercial Code
and in accordance with the rules and regulations which have been provided in the existing
articles of association for the assembly (ordinary and extraordinary general meetings) of
the private joint stock companies.
The company’s general meetings shall convene in accordance with the provisions of the
Commercial Code as follows:
- Ordinary general meeting: this general meeting shall convene at least once a
year so as to address the following issues:
a- hearing the report given by directors as regards the annual performance of the
previous fiscal year;
b- hearing the report given by the inspector––auditor;
c- Examining and approving financial statements of the previous fiscal year;
d- Approving the amount of distributable profit;
e- Approving the amounts of bonus, attendance fees, salaries and benefits for the
board of directors;
f- Appointing the principal inspector/auditor and alternate inspector–auditor of
the company and their fees;
g- Selecting (a) mass-circulated newspaper (s) to publish the company’s notices;
h- Appointing directors/executives;
i- Issuing securities in the name of company exclusive of convertible or
exchangeable securities with company shares;
j- Other issues which are within the jurisdiction of the ordinary general meeting
in accordance with the Commercial Code.
- The extraordinary general meeting: this general meeting shall convene at any
time to address the following issues:
a- modifications in the articles of association;
b- Change in the capital sum (increase or decrease);
c- Issuance of convertible or exchangeable securities with shares;
d- Premature dissolution of the company in compliance with the Commercial
Code and the Securities Market Act.
۳- Board of Directors;
The company is run by a board of directors comprising at least 3 and at most 7 principal
members who are elected by the ordinary general meeting from among the shareholders
for a term of two years. The number of board member’s normally ends in an odd number
and the majority of them are constituted of non-executive members. The reelection of
board members for subsequent office-terms shall meet no impediment. The professional
qualifications of board members, whether the principal member or the alternate member
as well as the representatives of the legal entities sitting on the board of directors shall
have to be approved by the Organization as per the procedures prescribed by this
Organization. If the board members, whether natural persons or legal entities, lose their
qualifications, the alternate members shall substitute them. Where the representative of
the legal entity lacks qualifications, the legal entity sitting as a board member shall,
within the period of 15 days at the latest, introduce its substitute representative to the
Organization.
The board of directors shall have unlimited powers for any action taken in the name of
the company and for any activities and transactions relating to the company objectives
about which the decision-making is not within the competence of the general meetings.
Such powers are exercised as follows:
- To act as the company’s representative before the shareholders, all
governmental and non-governmental departments, public institutes, law courts and
other natural persons and legal entities;
- To approve in-house (internal) by-laws (rules) as proposed by the managing
director;
- To enforce the approvals of general meetings and approved rules after they
have been communicated;
- To appoint and remove the managing director and fix his salary and benefits;
- To make resolutions in respect of establishment and dissolution of agencies
or branches at any location inside and outside the country (Iran);
- To make all their efforts towards achieving the company objectives in the
most efficient and effective manner;
- To approve the organizational structure, employment requirements and the
scale of salaries and wages;
- To approve the annual budget as well as the long-term, medium-term and
short-term plans of the company;
- To open any type of account with banks and other authorized institutions and
operate it (them) in the name of the company;
- To fulfill the obligations undertaken by the company against other parties
and safeguard the rights and interests of the company against others;
- To issue, endorse, accept, pay and protest against the commercial papers;
- To conclude any type of contract, modify, cancel or revoke it as regards the
movable and immovable properties which are related to the company objectives
and conduct of all activities and transactions stated in article 2 of the present
articles of association as well as addressing all unilateral contracts/obligations;
- To take decisions on the issues related to registering and transacting all
intellectual rights including any type of patent, trade name or trade mark and
industrial name, intellectual property, goodwill and all presumptive privileges;
- To deposit in trust any type of documents, deeds, funds or securities
including their return, collection or recovery;
- To receive loans and facilities from banks, corporations and authorized
institutions pursuant to the rules provided in the present articles of association;
- To mortgage the company assets whether movable or immovable, and release
(redeem) them from encumbrance even on frequent occasions;
- To institute any civil proceeding or criminal case and defend any pending
case, whether civil or criminal, with any judicial authorities, law courts, public
prosecutor’s offices, special or public non-judicial authorities and Administrative
Justice Tribunal on behalf of the company; to defend the company against any
litigation (action) brought up versus the company, whether criminal or civil with
the judicial authorities or special or public non-judicial authorities and
Administrative Justice Tribunal; to appear in person at police departments and
exercise all the powers required in the course of proceedings from opening to
closing stages including appearance at hearing sessions, raising objection against
the court’s decree, lodging an appeal for revision (Court of Appeal), filing a
second appeal to the Supreme Court, making a protest and a request for rehearing;
to request for compromise and settlement, return of documents, records, dismissal
of the claim or the cause; to bring a claim of forgery, renunciation and, skepticism
about the counterparty’s evidence and return of exhibits and proof of the forger; to
sign the contracts containing the conditions for arbitration or arbitral agreement
and refer the claim or the case to arbitration and appoint and select the arbitrator
(with or without the right to make settlement); to seek the enforcement of the
arbitrator’s final and absolute award; to request for issuance of an enforcement writ
along with follow-up actions; to receive the judgment debt and funds in trust and
chase them up; to appoint the assessor and appraiser; to appoint and remove the
attorney and representative with frequent rights of substitution; to make confession
on the nature of claim, to implead the third party and defend the impleader,
counterclaim and defend against the counterparties; to accept or reject
administration of oath; to seek security on the remedy sought; to recover the loss
arising from offences and other similar issues;
- To establish the holders of authorized signature in the company and the terms
of reference (scope of powers and functions) of each one of them;
- To establish the internal control system to ensure the compliance of all
operations towards the company goals and within the framework of laws,
regulations, constitutions and in-house by-laws;
- To prepare the annual financial statements and the report on the performance
of the board of directors by presenting it to the inspector––auditor;
- To prepare the quarterly (mid-term) financial statements to be presented to
the inspector––auditor;
- To invite the ordinary and extraordinary general meetings and set the
agendas thereto;
- To propose any type of reserve/provision in additions to the statutory reserve;
- To propose distribution of profit (dividend) among shareholders;
- To monitor the activities and performance of company executives including
the managing director;
- To propose modification of articles of association to the extraordinary
general meeting;
- To cooperate with the Organization and the inspector––auditor in the
performance of their functions;
- To acquire assets, investment, and establish or enter into partnership to
establish various companies and other entities towards performance of duties and
realization of company goals;
- To open letters of credit (LCs) and accomplish all customs affairs to clear the
commodities which are required towards achievement of company objectives;
- To cooperate with international communities/bodies and join the respective
regional and global organizations;
- any powers and functions which, pursuant to the provisions of the Securities
Market Act and relevant rules, have been and shall be deemed to be within the
scope of the powers and functions of the board of directors.
۴- Inspector;
The inspector––auditor is entrusted with the following functions and responsibilities in
addition to the functions and responsibilities prescribed in the Commercial Code for the
joint-stock companies, the Securities Market Act, articles of association and other rules
and regulations in force:
۱) To make comments on the company’s annual financial statements in
compliance with the auditing standards and national accounting;
۲) To make comments on the accuracy of the information provided in any type of
report that the board of directors has presented to the general meeting;
۳) To present reports to the general meeting in respect of the adherence or nonadherence
to the rules and regulations by the company’s directors and staff
members during the fiscal year;
۴) To examine the company’s internal control systems during each fiscal year and
prepare a report thereon including the comment on the efficiency of the internal
control system, cases of breach, suggested amendments and present them to the
board of directors and auditing committee.
۵- Trustee;
According to Article 18 of “The Regulations Governing the Establishment and Activity
of the portfolio manager”, In order to commence the portfolio managing activities, the
portfolio manager shall have to choose at least one legal person whose eligibility is
acceptable to the SEO as trustee and conclude a contract with it. The trustee’s functions
and responsibilities as well as its fee shall be established in the contract signed between
the portfolio manager and the trustee pursuant to the provisions herein. The portfolio
manager shall have to immediately deliver a copy of the contract to the trustee and
submit a copy of the same to the SEO for registration within two business days after the
contract has come into effect.
In addition, Article 21 of “The Regulations Governing the Establishment and Activity of
the portfolio manager” specifies: The trustee shall have to exercise regular control to
ensure that the portfolio manager:
- Abides by the portfolio management contracts that the portfolio manager has
signed with its clients, whether or not the trustee’s position has been accepted in
such contracts;
- Complies with the regulations on the establishment and activities of the
portfolio management firms;
- Complies with the rules that the SEO has delegated its regulatory functions to
the trustee as a party to the contract with the portfolio manager;
Additionally, if the trustee detects any violation of the foregoing issues, it shall
have to report the matter to the SEO and shall simultaneously give notices
required for rectification to the portfolio.