27. Acquisition and disposal of Investment Entitlements

(1) An Investment Entitlement is acquired by an Account Holder against an Investment Intermediary by the credit of the Investment Entitlement to the Account Holder’s Investment Account maintained by the Investment Intermediary.

(2) No further step or operation is necessary to make the acquisition of an Investment Entitlement effective against third parties.

(3) An Investment Entitlement is disposed of by an Account Holder by the debit of the Investment Entitlement to the Account Holder’s Investment Account.

(4) Without affecting any requirement that no credit or debit be made without a corresponding debit or credit, a debit or credit of an Investment Entitlement to an Investment Account is not ineffective because it is not possible to identify an Investment Account to which a corresponding credit or debit has been made.

(5) Debits and credits to Investment Accounts in relation to Investments of the same description may be made on a net basis.

(6) This section does not prevent any other method provided by law for acquiring or disposing of Investment Entitlements, but the priority of an interest created by any other method is subject to the provisions of section 32 (Recognition of and priority among competing interests).

28. Rights in Investment Entitlements

(1) The credit of an Investment Entitlement to an Investment Account maintained by an Investment Intermediary (the relevant intermediary) gives the Account Holder:

• (a) subject to subsection (2), the right to receive and exercise the rights attached to the Investment, including, for example, dividends, interest and other distributions and voting rights; and
• (b) the right, by instructions to the relevant intermediary, to cause the Investment Entitlement (or part of it) to be debited to the Investment Account and credited to an Investment Account of another Account Holder (whether with the relevant intermediary or another Investment Intermediary) or to be delivered into the possession or Control of a Secured Party; and
• (c) the right, by instructions to the relevant intermediary, to cause the Investment Entitlement (or part of it) to be debited to the Investment Account and credited to the Account Holder’s Investment Account with another Investment Intermediary; and
• (d) the right, by instructions to the relevant intermediary, to withdraw Investments so that the Account Holder may hold them otherwise than through an Investment Account, to the extent permitted by the laws under which the Investment is constituted, the terms of the Investment and the account agreement; and
• (e) any other rights given under any other the provisions of AIFC Regulations and AIFC Rules applying to Investment Accounts and Investment Intermediaries.

(2) Credit of an Investment Entitlement to an Investment Account of an Account Holder who is acting in the capacity of Investment Intermediary in relation to the Investment Entitlement only gives a particular right under subsection (1)(a) if that Account Holder, or another Investment Intermediary through which, directly or indirectly, the Account Holder holds the Investment Entitlement, is entitled to that right under the laws under which the Investment is constituted and the terms of the Investment.

(3) The rights given to an Account Holder under subsection (1):

• (a) are effective against the relevant intermediary and third parties; and
• (b) may be enforced against the relevant intermediary and, subject to the laws under which the Investment is constituted and the terms of the Investment, the issuer of he Investments.

(4) Subsection (3) does not limit, or otherwise affect, section 40 (Position of issuers of Investments) or section 41 (Set-off and netting).

29. Exercise of rights in Investment Entitlements

(1) An Investment Intermediary must take appropriate measures to enable the Investment Intermediary’s Account Holders to receive and exercise the rights mentioned in section 28(1) (Rights in Investment Entitlements).

(2) However, to the extent that a right mentioned in section 28(1) is dependent on the actions of the Investment Intermediary, the Account Holder is not entitled to the right to the extent that giving effect to the right:

1. (a) is not within the power of the Investment Intermediary; or
2. (b) would require the Investment Intermediary to act in a way that is not permitted by law or by the terms of the relevant Investment; or
3. (c) would require the Investment Intermediary to establish an Investment Account with another Investment Intermediary; or
4. (d) is waived by the Account Holder by agreement with the Investment Intermediary.

(3) Also, any obligation of the Investment Intermediary in relation to a right of the Account Holder mentioned in section 28(1) is satisfied if the Investment Intermediary acts in relation to the obligation:

1. (a) if the Investment Intermediary is an Authorised Market Institution—in accordance with its business rules; or
2. (b) if the Investment Intermediary is authorised (however described) to conduct business in the AIFC—in accordance with the account agreement or, if there is no account agreement, in accordance with reasonable commercial standards; or
3. (c) in accordance with any other agreement between the Account Holder and the Investment Intermediary; or
4. (d) by placing the Account Holder in a position to exercise the right directly.

30. Investment Accounts: authority, timing, conditionality and reversals

(1) A debit or credit of an Investment Entitlement to an Investment Account maintained by an Investment Intermediary (the relevant intermediary) for an Account Holder is not effective unless the relevant intermediary is authorised to make the debit, credit or designating entry by:

• (a) the Account Holder; or
• (b) an Investment Intermediary administering the Investment Entitlement with the Account Holder’s authority; or
• (c) an Authorised Market Institution acting under its business rules,

(2) Except as otherwise provided by the business rules of an Authorised Market Institution, a debit or credit of an Investment Entitlement to an Investment Account takes effect when it is made.

(3) If a debit or credit of an Investment Entitlement to an Investment Account is made conditionally under the terms of an account agreement or the business rules of an Authorised Market Institution or by operation of law, the debit or credit is effective against third parties when, and only if, the condition is satisfied.

(4) An account agreement, the business rules of an Authorised Market Institution, or the Acting Law of the AIFC, may provide that a debit or credit of an Investment Entitlement to an Investment Account is liable to be reversed.

(5) Subsection (6) applies if:

• (a) an Investment Entitlement is credited to an Investment Account maintained by an Investment Intermediary (the relevant intermediary) for an Account Holder; and
• (b) the credit is not effective, and is liable to be reversed, because of the circumstances in which it was made; and
• (c) before the credit is reversed, the Investments are credited to the account of a third party under a further disposition.

(6) Despite subsection (4), the fact that the initial credit is not effective, and is liable to be reversed, because of the circumstances in which it was made does not make the further credit ineffective against the Person making the further disposition, the relevant intermediary or third parties unless:

• (a) the further credit is made conditionally and the condition is not satisfied; or
• (b) the further credit is made to a Person having knowledge, at the time it is made, that it is made as a result of the further disposition and that the further disposition was made in such circumstances; or
• (c) the further disposition is made by way of gift or otherwise gratuitously.

(7) For subsection (6), a Person has knowledge of a matter if the Person has actual knowledge of the matter or has knowledge of facts sufficient to indicate that there is a significant probability and deliberately avoids information that would establish the facts of the matter.

31. Prohibition of higher-tier attachment

(1) No attachment of or in relation to an Investment Entitlement attached to an Investment Account maintained by an Investment Intermediary for an Account Holder may be granted or made against the issuer of the relevant Investment or any other Investment Intermediary.

(2) In this section: attachment means any judicial, administrative or other act or process for enforcing or satisfying a judgement, award or other judicial, arbitral, administrative or other decision against or in relation to the Account Holder or for freezing, restricting or impounding Property of the Account Holder to ensure the ability to satisfy or enforce any future such judgement, award or decision.

32. Recognition of and priority among competing interests

(1) Interests arising under section 27 (Acquisition and disposal of Investment Entitlements) and under the AIFC Security Regulations:

• (a) have priority over any other interest created by any method permitted by the Acting Law of the AIFC; and
• (b) rank among themselves in the order in which they were created.

(2) Any other interest in Investment Entitlements arising by operation of law under the Acting Law of the AIFC has the priority provided by the Acting Law of the AIFC.

(3) Subject to subsections (1) and (2), the priority of any competing interests in Investment Entitlements is decided by the Acting Law of the AIFC.

(4) As between Persons entitled to any interests mentioned in this section, the priorities provided by this section may be varied by agreement between them.

33. Protection against Third Party Property Interests

(1) If a Person acquires an Investment Entitlement under section 27 (Acquisition and disposal of Investment Entitlements) and does not, at the time of acquisition, have knowledge of a Third Party Property Interest in relation to the Investment Entitlement, the Person is not subject to the interest.

(2) However, subsection (1) does not apply if the Investment Entitlement was acquired by way of gift or otherwise gratuitously.

(3) For this section, a Person has knowledge of a Third Party Property Interest if the Person:

• (a) has actual knowledge of the interest; or
• (b) has knowledge of facts sufficient to indicate that there is a significant probability that the interest exists and deliberately avoids information that would establish the existence of the interest.

(4) For this section, knowledge received by an organisation is effective for a particular transaction from the time when it is, or ought reasonably to have been, brought to the attention of the individual within that organisation conducting the transaction.

34. Duty of Investment Intermediary to have sufficient Investment Entitlement

(1) An Investment Intermediary must not:

• (a) make a credit of an Investment Entitlement to an Investment Account maintained by the Investment Intermediary or held by the Investment Intermediary with another Investment Intermediary; or
• (b) dispose of an Investment Entitlement held by the Investment Intermediary or credited to an Investment Account held by the Investment Intermediary with another Investment Intermediary; if, on the credit or disposition becoming effective, there would not be sufficient Investments Entitlements of the same description held by the Investment Intermediary or credited to Investment Accounts held by the Investment Intermediary with other Investment Intermediaries.

(2) If at any time sufficient Investments Entitlements of any description are not held by the Investment Intermediary or credited to Investment Accounts held by the Investment Intermediary with other Investment Intermediaries, the Investment Intermediary must take the action necessary to ensure that sufficient Investments Entitlements of that description are so held or credited.

(3) For this section, a reference to sufficient Investments Entitlements of any description is a reference to Investments Entitlements of an aggregate number or amount at least equal to the aggregate number or amount of Investments Entitlements of that description held by the Investment Intermediary or credited to Investment Accounts held by the Investment Intermediary with other Investment Intermediaries.

(4) Subsection (2) does not limit or otherwise affect:

• (a) any other provision of the Acting Law of the AIFC; or
• (b) any provision of the business rules of an Authorised Market Institution; or
• (c) subject to the Acting Law of the AIFC, any account agreement relating to the allocation of the cost of ensuring compliance with that subsection.

(5) The fact that a credit or disposition is made by an Investment Intermediary in Contravention of subsection (1) does not make the credit or disposition ineffective, but:

• (a) the Investment Intermediary must comply with subsection (2); and
• (b) this subsection does not affect any liability of the Investment Intermediary to compensate the relevant Account Holder for any loss resulting from the Contravention.

35. Investments and certain money claims not part of insolvent Investment Intermediary’s estate etc.

(1) Investments held by an Investment Intermediary, or credited to Investment Accounts held by an Investment Intermediary with another Investment Intermediary, must be allocated to the rights of Account Holders of the Investment Intermediary to the extent necessary to ensure that the aggregate number or amount of the Investments or claims of that description so allocated is equal to the aggregate number or amount of such Investments or claims credited to Investment Accounts maintained by the Investment Intermediary.

(2) Investments allocated under subsection (1) do not form part of the Property of the Investment Intermediary available for distribution among, or realisation for the benefit of, the Investment Intermediary’s creditors in an insolvency proceeding (whether in the AIFC or elsewhere) in relation to the Investment Intermediary and are not otherwise subject to claims of creditors of the Investment Intermediary.

(3) The allocation required by subsection (1) must be made by the arrangements of the Investment Intermediary or, in the absence of such arrangements, by operation of the Acting Law of the AIFC.

36. Effect of insufficiency on Account Holders’ rights

(1) If the aggregate number or amount of Investments held by an Investment Intermediary, or credited to an Investment Account that an Investment Intermediary holds with another Investment Intermediary, is less than the aggregate number or amount of Investments of that description credited to Investment Accounts of the Investment Intermediary, the shortfall must be allocated:

• (a) if the Investment Intermediary is an Authorised Market Institution and its business rules make provision for the allocation of the shortfall—in accordance with the business rules; and
• (b) in any other case—among the Account Holders to whose Investment Accounts the assets or Investments of the relevant description are credited, in proportion to the respective numbers or amounts of assets or Investments so credited.

(2) In any allocation required under subsection (1)(b), no account must be taken of:

• (a) the origin of, or any past dealings in, any Investments held by the Investment Intermediary or credited to Investment Accounts held by the Investment Intermediary with other Investment Intermediaries; or
• (b) the order in which, or time at which, any Investments are credited or debited to the respective Investment Accounts of Account Holders.

37. Right of Transfer against insolvent Investment Intermediary

(1) The rights of an Account Holder under section 27 (Acquisition and disposal of Investment Entitlements) constituted by the credit of an Investment Entitlement to the Account Holder’s Investment Account maintained by an Investment Intermediary are effective against a Receiver or Liquidator in any insolvency proceeding (whether in the AIFC or elsewhere) in relation to the Investment Intermediary.

(2) Without limiting subsection (1), if the Investment Intermediary is or becomes insolvent, the Account Holder may instruct the Transfer or registration of Investments or Investment Entitlements or transfer of money claims to which section 36(1)(b) (Effect of insufficiency on Account Holders’ rights) applies. The instruction is enforceable against a Receiver or

Liquidator.

38. Insolvency of clearing and settlement intermediaries or Authorised Market Institutions

Any provision of the business rules of an Authorised Market Institution relating to the finality of acquisitions or dispositions made under the business rules:

• (a) prevails, to the extent of any inconsistency with any AIFC Regulations or AIFC Rules, in deciding claims to Investment Entitlements subject to the Control of the Authorised Market Institution; and
• (b) has effect, and prevails over, any law of insolvency (whether of the AIFC or otherwise) despite the commencement of an insolvency proceeding (whether in the AIFC or elsewhere) in relation to the Authorised Market Institution or any party to a contract for the acquisition or disposal of an Investment or Investment Entitlement to which the business rules apply.

39. Instructions to Investment Intermediaries

(1) An Investment Intermediary is neither bound nor entitled to give effect to an Instruction in relation to an Investment Entitlement of the Account Holder of an Investment Account maintained by the Investment Intermediary if the Instruction is given by a Person other than the Account Holder or the Account Holder’s agent.

(2) Subsection (1) is subject to:

• (a) the provisions of the account agreement, any other agreement between the Account Holder and the Investment Intermediary, or any other agreement entered into by the Investment Intermediary with the Account Holder’s consent; and
• (b) the rights of any Person (including the Investment Intermediary) who holds a perfected security interest under the AIFC Security Regulations; and
• (c) subject to section 32 (Recognition of and priority among competing interests), any judgement, award, order or decision of a court, tribunal or other judicial or administrative authority of competent jurisdiction; and
• (d) any mandatory provision of the Acting Law of the AIFC; and
• (e) if the Investment Intermediary is an Authorised Market Institution—its business rules.

40. Position of issuers of Investments

(1) Any provision of the AIFC Companies Regulations, and any provision of the terms of issue of Investments constituted under the AIFC Companies Regulations, that would prevent the holding of Investment Entitlements with an Investment Intermediary, or the effective exercise by an Account Holder of rights in relation to Investment Entitlements, are modified to the extent necessary to make possible the holding of Investment Entitlements with an Investment Intermediary and the effective exercise of the rights of an Account

Holder.

(2) Without limiting subsection (1), that subsection applies to provisions of any of the following kinds:

• (a) a provision that restricts the ability of a holder of Investments to exercise voting or other rights in different ways in relation to different parts of a holding of Investments of the same description;
• (b) a provision that does not include adequate provision for making available to Account Holders holding Investment Entitlements, or to Investment Intermediaries for transmission to Account Holders holding Investment Entitlements:

(i) copies of notices, accounts, circulars and other materials addressed by the issuer to holders of the Investment Entitlements; or

(ii) ways of exercising the rights attached to the Investments either in person or through a proxy or other representative;

• (c) a provision that prohibits, or fails to recognise, the holding of Investments by a Person acting in the capacity of Investment Intermediary;
• (d) a provision under which recognition of the holding of Investments by an Investment Intermediary, or the exercise of rights by an Account Holder holding Investment Entitlements to such Investments, is conditional on the maintenance of records in a particular medium;
• (e) a provision that imposes restrictions on the holding of Investments, or the exercise of rights attached to Investments, by reference to the identity, status, residence, nationality, domicile or other characteristics or circumstances of any Person acting in the capacity of Investment Intermediary.

(3) However, this section does not make an issuer of Investments bound by, or compel an issuer of Investments to recognise, a right or interest of any Person in or in relation to the Investments if the issuer is not bound by, or compelled to recognise, that right or interests under the laws under which the Investments are constituted and the terms of the Investments.

41. Set-off and netting

(1) As between an Account Holder who holds Investment Entitlements for the Account Holder’s own account and the issuer of the Investments, the fact that the Account Holderholds the Investments with an Investment Intermediary must not of itself, in any insolvency proceeding (whether in the AIFC or elsewhere) in relation to the issuer, prevent the existence or exercise of any rights of set-off that would have existed, and been exercisable, if the Account Holder had held the Investments otherwise than through an Investment Intermediary.

(2) Netting of entitlements, and rights to Investments or entitlements, as provided in agreements between parties, between Investment Intermediaries and Account Holders, or in the business rules of an Authorised Market Institution, are enforceable.

(3) Close-out netting as provided in termination provisions of agreements, or in the business rules of an Authorised Market Institution, are enforceable according to the terms of the agreement or business rules.

42. Enforcement of Investment Entitlements

Except as otherwise provided by the Acting Law of the AIFC, an Investment Entitlement may be enforced only against the Investment Intermediary against which the Investment Entitlement was acquired.