Building of Tehran Stock Exchange in Iran
If you’re not resident in, or a citizen of, a country that restricts your ability to trade with Iran, it is possible for you to participate in the Iranian public markets as a portfolio investor. Foreign portfolio investors have three choices of platforms on which to trade:
- The Tehran Stock Exchange (TSE) – the equity market and main exchange in Iran;
- Farabourse – an over-the-counter (OTC) market allowing investors to trade in smaller companies;
- Iran Mercantile Exchange – commodities and commodity derivatives can be traded on Iran’s third exchange, the IME.
While foreign laws may restrict the practicality of investing in Iran, the investment process for foreigners is quite simple under Iranian law, subject to the following parameters:
- Trades must be made through a broker licensed in Iran. Iran’s government restricts direct market access to regulated brokerages. Here’s the full list of licensed Iranian brokerages for you to choose from.
- Foreign investors must obtain a license for investment. To apply for the license, complete these forms and submit them to the authorities through your broker. All applicants must complete Form 1, then individuals complete Form 2 and legal entities (companies, partnership, etc.) complete Form 3. Form 4 is actually a blank version the trading license issued by the Iranian Securities and Exchange Organization, so can be ignored during the application process.
The license application process takes a week on average, with a maximum approval time of 10 days.
Once in possession of a trading license, Article 10 of the Regulations Governing Foreign Investment authorizes foreigners to open accounts in local currency with their broker or bank. Investors fund these accounts by converting their foreign currency into Rials to support their investing and banking operations. The same article also authorizes the repatriation of capital gains and dividends earned through this foreign portfolio investment without the need for Central Bank approval.
Getting money into Iran
Funding Iranian investments as a foreigner is difficult from a practical perspective. As a consequence of the US sanctions on Iran, the nation’s financial institutions have been cut off from international transfers via the SWIFT payment network. Iranian foreign exchange brokers often work with partners in neighbouring countries such as the UAE to transfer funds, but the fees for these services are quite high (usually above 5% of the transaction).
Foreign direct investment into Iran is managed under the Foreign Investment Promotion and Protection Act (FIPPA), which allows for full foreign ownership of Iranian firms.