Iran Capital Market Dealing Exam cheat sheet

Governing statute is the Securities Market Act (Qanun-e Bazar-e Sarmayeh); the Securities and Exchange High Council issues implementing regulations and the SEO supervises and enforces them.

The High Council is the top policy body, chaired by the Minister of Economic Affairs and Finance; the SEO head sits on it, and its resolutions bind all market participants once notified.

Key regulated categories: securities exchanges, OTC Iran Fara Bourse, brokers/dealers, collective investment funds, investment advisory firms, custodians and CSDI, each requiring an SEO licence.

Disclosure duty: issuers must publish audited annual financial statements and interim reports within regulatory deadlines; material events must be disclosed promptly to the public and the exchange.

Market abuse prohibitions cover insider trading, market manipulation and dissemination of false information; the SEO's enforcement committee can impose fines, suspend licences and refer cases.

Price limits: shares trade within a daily band (commonly ±5% for main-board shares, wider for some instruments and smaller issuers under current SEO rules); first-day and reopened symbols follow special rules.

Takeover and block-trade rules require notification thresholds for ownership changes; acquisition of control triggers mandatory offer obligations under SEO regulation.

Capital increases, rights issues and free share distributions (bonus shares) require SEO approval and shareholder/board process compliance before listing of new shares.

Two-tier trading venues: Tehran Stock Exchange (TSE) for larger listed companies and Iran Fara Bourse (IFB) for SMEs, sukuk, funds and base-market issuers; both are regulated by the SEO.

Market participants: brokers (licensed to receive and route client orders), dealers/market makers, institutional and retail investors, investment funds, custodians and the Central Securities Depository of Iran (CSDI).

The SEO (Sazman-e Burs) is the regulator; the Exchange Council and High Council set policy; exchanges operate the matching engines and surveillance.

Brokers must segregate client assets from proprietary assets, keep client accounts at CSDI in the client's name, and maintain minimum net capital per SEO rules.

Order flow: retail clients open a coded account with a broker, deposit funds, place orders via broker systems; brokers are responsible for order validation, limits and record-keeping.

Investment funds are separate legal entities managed by licensed fund managers; assets are held by a custodian and supervised by an auditor and the SEO.

Market makers on TSE/IFB provide liquidity under SEO-approved contracts with quoting obligations; failure to meet obligations can lead to penalties or loss of market-maker status.

Foreign investors may access the market only through licensed intermediaries and registered codes under Central Bank and SEO foreign-investment rules.

Nominal (par) value of Iranian shares is commonly IRR 1,000; market price is set by supply and demand on the exchange and may trade at a premium or discount to par.

Rights issue (Haq-e-Taqdim): existing shareholders receive tradable rights to subscribe new shares at par value; the rights themselves can be traded on the exchange for a limited period.

Capital increase from retained earnings or revaluation reserve is issued as free bonus shares (Saham-e-Jayze) to all shareholders pro rata, with no cash payment.

Corporate action timeline: board proposal, auditor report, SEO approval, registration of the capital increase, then listing of new shares; the record date determines entitlement.

Ex-rights and ex-dividend adjustments: after the record date the share trades without the right; the exchange adjusts the reference price to reflect the value of the right or dividend.

Cash dividend (Sud-e-Naghdi) is declared by the general meeting; the company must pay within the statutory period (commonly 8 months) through the CSDI/securities settlement process.

Pre-emptive rights protect against dilution; a shareholder who does not exercise rights may sell them on the exchange during the trading window or let them lapse.

Share transfer is effected by book entry at CSDI; physical certificates are largely eliminated, and the shareholder register is maintained electronically.

Sukuk are asset-backed or usufruct-based Islamic certificates; common Iranian structures include Ijarah, Murabaha, Musharakah, Istisna and Wakalah, each with distinct cash-flow mechanics.

Sukuk holders receive returns from underlying asset income (e.g., rent in Ijarah) rather than interest; the structure must avoid riba, gharar and maysir to be Sharia-compliant.

Government and corporate sukuk trade on IFB/TSE; prices are quoted as a percentage of nominal value and accrued profit is settled between buyer and seller.

Conventional interest-bearing bonds are restricted in Iran; the market instead uses Islamic treasury bills, participation papers (Musharakah) and sukuk for financing and monetary operations.

Money market instruments include Central Bank participation papers and interbank deposits; the CBI uses them for open market operations and liquidity management.

Yield calculation for sukuk uses expected profit rate and remaining maturity; price moves inversely to yield, and accrued profit from the last coupon date belongs to the seller.

Issuance requires SEO approval, a prospectus, a trustee/agent, and a Sharia supervisory review; the underlying asset must be identified and legally transferred.

Credit risk and structure risk differ by sukuk type: Ijarah is asset-backed and generally lower risk; Musharakah and Mudarabah expose holders to profit-and-loss sharing.

Mutual funds (Sandough-e Sarmayegozari) pool investor money, issue units at NAV, and are managed by a licensed fund manager with a separate custodian and auditor.

NAV per unit = (total assets − total liabilities) / number of outstanding units; subscription and redemption are priced at the NAV of the valuation date per fund rules.

Fund types include equity, fixed-income, mixed, money-market, index and sector funds; each has investment limits (e.g., maximum single-issuer exposure) set by the SEO.

Exchange-traded funds (ETFs) trade like shares on TSE/IFB; their market price may deviate from NAV, and authorized participants create/redeem units to arbitrage the gap.

Real estate funds, commodity funds and venture capital funds are separate categories with distinct asset and liquidity rules; they are typically listed on IFB.

Fund governance: the manager owes fiduciary duties, must follow the prospectus and investment policy, and reports NAV and portfolio composition regularly to the SEO and unit holders.

Other instruments include mortgage-backed securities, deposit certificates, and participation bonds; each has its own listing and disclosure requirements.

Investors can compare funds by NAV, return, expense ratio and tracking error; past return is not a guarantee of future performance.

TSE and IFB use electronic order-driven matching engines; orders are matched by price then time priority under continuous trading, with opening/closing auctions setting reference prices.

Order types include limit, market, stop and iceberg orders; validity can be day, fill-or-kill or good-till-date depending on the venue's supported set.

Daily price limits: orders outside the allowed band are rejected; hitting the limit creates a queue, and the symbol may be halted if volatility persists.

Order lifecycle: submission, validation (funds, code, limits), routing, matching, execution report, and post-trade allocation; each step must be logged for audit.

Best execution and fair treatment: brokers must execute client orders promptly and not front-run or trade ahead of client orders.

Block trades and negotiated deals occur off the order book but must be reported to the exchange and settled through CSDI within the prescribed window.

Market halts and symbol suspensions are imposed by the exchange or SEO for disclosure failures, abnormal price movements or technical reasons; reopening follows published rules.

Trading calendar and settlement cycles follow the exchange timetable; orders are time-stamped and surveillance systems monitor for manipulation patterns.

CSDI acts as central securities depository; it maintains book-entry ownership records and processes transfers and corporate actions.

Settlement is typically T+2 (trade date plus two business days) for equities on TSE/IFB; cash and securities legs are matched and settled through the clearing house and CSDI.

Clearing house acts as central counterparty in many markets, novating trades and managing counterparty risk through margin and a guarantee fund.

Delivery versus payment (DVP): securities are transferred only when cash is paid, reducing principal risk in settlement.

Failed settlements trigger buy-in or penalty procedures under exchange/SEO rules; repeated failures can lead to suspension of the broker.

Corporate actions (dividends, bonus shares, rights) are processed by CSDI based on the record date; entitlements are credited to the holder's account automatically.

Custodians hold client securities in segregated accounts; reconciliation between broker records, CSDI records and custodian records is required daily.

Post-trade reporting includes trade confirmations to clients, regulatory trade reports, and position keeping for margin and risk monitoring.

Fiduciary duty: brokers and advisers must act in the client's best interest, disclose conflicts of interest, and obtain suitability information before recommending products.

Insider trading prohibition: trading or tipping on material non-public information is an offence; firms maintain restricted lists and information barriers.

Market manipulation includes wash trades, spoofing, layering, pump-and-dump and marking the close; surveillance systems and SEO enforcement target these patterns.

Client order handling rules: no front-running, no misallocation of fills, fair allocation across clients, and prompt execution unless instructed otherwise.

Confidentiality: client data and order information must be protected; disclosure is permitted only with consent or legal requirement.

Advertising and marketing must be fair, balanced and not misleading; performance claims require disclosure of fees and risks.

Personal account dealing by employees requires pre-clearance and reporting; insider holdings and conflicts must be disclosed.

Breach reporting and whistleblowing channels are required; firms must investigate and remediate conduct failures and cooperate with the SEO.

Customer due diligence (CDD): identify the client, verify identity using official documents, and understand the purpose and intended nature of the relationship before opening an account.

Enhanced due diligence (EDD) applies to politically exposed persons (PEPs), high-risk jurisdictions, complex ownership structures and large or unusual transactions.

Beneficial ownership: identify the natural persons who ultimately own or control the client (commonly a 25% threshold under international standards) and verify their identity.

Ongoing monitoring: screen transactions against client profiles, watch for structuring, rapid movement of funds, and third-party funding inconsistent with the client's business.

Suspicious transaction reports (STRs) go to the Financial Intelligence Unit (in Iran, the FIU under the AML law); tipping off the client is prohibited.

Record-keeping: retain identification records and transaction records for the statutory period (commonly at least 5 years after the relationship ends).

Sanctions and PEP screening must be performed at onboarding and periodically; matches require escalation and possible freezing or rejection.

Risk-based approach: assign clients low/medium/high risk, apply proportionate measures, and refresh CDD on trigger events such as ownership change or unusual activity.