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Capital Market Development (Phase III) in West Bank and Gaza

Project Development Objective (PDO)

This project aims to operationalize the risk-based supervisory approach of the Palestine Capital Market Authority and to create an enabling regulatory environment for the introduction of investment funds in the West Bank and Gaza.

Background

Authorities of the West Bank and Gaza (WBG) have recently requested support to strengthen the ability of the Palestine Capital Market Authority (PCMA) to supervise and encourage healthy development of securities markets in WBG. Team members working on Phase I (2009–10) of the Capital Market Development Project—a previous technical assistance project funded by the FIRST (Financial Sector Reform and Strengthening) Initiative—provided an assessment of the relationship between the PCMA and the Palestine Exchange. The Phase I team also supported drafting a decree to reallocate responsibilities between the two institutions. The Phase II (2012–14) team focused on the operational framework necessary for the PCMA to fulfill its mandate, and also helped draft two operational manuals on oversight and enforcement. 
The Phase III project team is currently providing critical tools to (a) operationalize risk-based supervision of securities companies and (b) allow for the introduction of investment funds in WBG. 

Activities

The project team is providing technical assistance to in the following areas:
1.  The team is operationalizing a risk-based approach to supervising securities companies in WBG.
     In addition, the team is designing risk questionnaires to capture data for assessing license 
     holders’ business models and risks. The team is also developing the risk-assessment model for
     the PCMA. Last, the team is (a) reviewing and proposing changes to current reporting
     requirements, the capital adequacy framework, and licensing requirements; (b) developing rules
     for conducting business; (c) providing capacity-building training to staff members; and (d)
     conducting a workshop with stakeholders to gain their feedback on the proposed reforms. 
2.  The team is developing a set of regulations and guidelines that will allow for the introduction
     of investment funds in WBG. The team’s draft regulations align with the International 
     Organization of Securities Commissions’ (IOSCO) Principles of Securities Regulation, particularly
     with Principles 24–28. The team is also developing reporting templates and conducting a
     workshop for relevant PCMA staff members and industry participants to offer feedback on the
     proposed regulations

Expected Outcomes

The expected outcomes of this project are as follows:
1.  Establishing a system to help regulators and supervisors exercise more intense scrutiny of firms
     with riskier profiles;adopting a risk-assessment tool; submitting adequate, accurate, and timely
     data to firms; adopting stronger prudential regulations 
2.  Increasing compliance with laws and regulations by firms with riskier profiles (IOSCO Principle 2)
3.  Enacting regulations that are conducive to investment
4.  Regulating investment funds in accordance with international best practices (IOSCO Principles
     24–28)