Amendments are made to Regulations concerning Disclosure and Transparency and others concerning Trading, Clearing, Settlement, Transfer of Ownership, and Custody of Securities, as well as to regulatory controls and procedures concerning application of Article (168) of Commercial Companies Law.
The board of directors of the Securities and Commodities Authority (SCA) approved amendments to the Regulations concerning Disclosure and Transparency and those concerning Trading, Clearing, Settlement, Transfer of Ownership, and Custody of Securities, as well as other amendments to the regulatory controls and procedures as to the application of Article (168) of the Commercial Companies Law.
The SCA board held its fourth meeting at the Dubai office, under the chairmanship of H.E. Eng. Sultan bin Saeed Al Mansoori, Minister of Economy and SCA Board Chairman. The meeting was attended by H.E. Mohamed bin Ali bin Zayed Al Falasi, Deputy Board Chairman, H.E. Abdulla Khalifa Ahmed Al Suwaidi, H.E. Hilal Khalfan bin Dhaher Al Muhairi, H.E. Alyazia Ali Saleh Al Kuwaiti, and H.E. Abdulla Al Turifi, SCA CEO.
Also present at the meeting were H.E. Maryam Al Suwaidi, Deputy CEO for Licensing, Supervision, and Enforcement (rapporteur) and H.E. Dr. Obaid Al Zaabi, Deputy CEO for Legal Affairs and Issuance (coordinator).
At the meeting, the board discussed a number of important matters and issues pertinent to the securities industry and made the following decisions:
Amendment of a number of regulations in accordance with the requirements of the Emirates Competitiveness Council (ECC)
As part of the routine reviews conducted in coordination with the ECC to ensure that the SCA rules and regulations meet the international requirements for raising the competitiveness of the country, SCA prepared a draft of legislative amendments to some of its regulations, which is necessary to meet the requirements of the World Bank to raise the competitiveness of the UAE on the minority investor protection index. The board approved amendments to the following regulations:
Regulations concerning Trading, Clearing, Settlement, Transfer of Ownership, and Custody of Securities
Approval was given to the amendment of Article (22) of the Regulations concerning the Trading, Clearing, Settlement, Transfer of Ownership, and Custody of Securities to ensure that they conform with the international requirements of raising the competitiveness of the country on the minority investor protection index. Among the amendments approved was giving shareholders the right to trade freely and prohibiting companies from altering their Articles of Association to ban trading in their shares prior to or during the convening of their general meetings, or during transactions, trades, or actions that may impact their capital.
Also among the amendments is giving SCA the right to make a decision to suspend trading in any listed securities in case of exceptional circumstances that call for such suspension, or if it sees that the trading in such securities does not serve the common good or violates the rights of shareholders, or for other reasons. Moreover, having obtained an approval from SCA, the market manager has the power to suspend trading in any listed securities in case of exceptional circumstances that disrupt the flow of business and the market order or any other circumstances that the manager sees necessary.
Regulations concerning Disclosure and Transparency
In order to meet the international requirements to raise the competitiveness of the UAE on the minority investor protection index, the board approved amendments to the Regulations concerning Disclosure and Transparency. A new article is to be added to prohibit any company, other than a public joint-stock one, from offering any securities for public subscription. In all cases, no company, entity, or natural or corporate person established or registered in the UAE, in free zones, or abroad may publish any advertisements in the UAE that include an invitation for public subscription in securities prior to obtaining the SCA approval, in accordance with controls and conditions to be determined by SCA in this regard.
Furthermore, another article will be added to obligate every natural or corporate person (or associated group or relevant parties), who owns 50% or more of the capital of a listed public joint-stock company and wishes to increase such ownership, to submit an acquisition proposal to all shareholders in that company according to the controls, conditions, and procedures determined by SCA in this regard.
Under the new article, companies should take into account that mutual ownership between two independent public joint-stock companies may not exceed 10% of the capital of each of them. SCA may set the controls to regulate such ownership.
Regulatory controls and procedures for the application of Article (168) of the Commercial Companies Law
With regard to the regulatory controls and procedures for the application of Article (168) of the Commercial Companies Law, the board approved the addition of two new clauses, Nos. (6) and (7) under Article (1), so that a subsidiary may not be a shareholder in its parent company. Any allocation or transfer of shares from the parent company to one of its subsidiaries shall be null and void. An exception from the provisions of clause (6) of this Article is that a company that becomes a subsidiary of a parent company and owns shares therein before subordination may continue as a shareholder in the parent company, without the right to vote at board meetings of the parent company or at its general meetings. Such subsidiary must dispose of its shares in the parent company within (12) twelve months from the date of subordination to the parent company.
Viewing the experiments of financial markets in Belgium and Luxembourg
The board also reviewed a report on the business assignment carried out by the SCA delegation headed by H.E. Abdulla Al Turifi to both Belgium and Luxembourg. The assignment included discussions of ways to develop the legislative environment of the UAE financial markets, actions that would contribute to upgrading the UAE markets to developed market status on Morgan Stanley Capital International (MSCI) and other international indexes, and the best practices to promote the investment environment, the mutual fund industry, and the operational and technical market regulations. The assignment also included examining the different aspects of the dual control system applied in Belgium, studying the operational and technical regulations adopted in its financial markets and the systems applied in the Euronext market, and conducting an evaluation of the feasibility of the dual control system.
The SCA delegation focused, during its assignment, on the methodology of drafting and issuing the regulations required to upgrade the markets from emerging to developed on MSCI. The delegation also held business meetings with representatives of the Belgium Financial Services and Markets Authority, headed by Jean-Paul Servais, as well as Vincent Van Dessel, Chairman and CEO of Euronext Brussels.
The report revealed that the assignment achieved a number of results related to the performance of SCA and the UAE local markets both in terms of regulations issued by SCA and the current control system (the Belgian delegation pointed out that the alternative system (dual control) currently applied in Belgium has not achieved better advantages) or with respect to SCA’s plan to develop the market, whether in terms of the trading mechanisms and the clearing, settlement, and depository mechanisms, the limits of foreign ownership permissible in public joint-stock companies, and the need to educate brokers and introduce them to new investment products in financial markets.
Furthermore, the SCA delegation held business meetings with representatives of the Luxembourg Stock Exchange, presided over by Robert Scharfe, to review the exchange experience, which includes 40 thousand listed securities, mostly foreign, and uses trading, clearing, and cash settlement systems similar to those adopted in Euronext, as well as the policy and practices of the Financial Markets Authority of Luxembourg with respect to mutual funds. It dedicates an independent department for all matters related to mutual funds, including approving prospectuses, licensing entities that provide services to funds, and conducting inspections on entities and mutual funds.
SCA also delivered a detailed presentation that included its initiatives to develop the UAE financial markets and the available investment opportunities at the discussions and meetings with representatives of the securities industry at the head office of the Association of Luxembourg Fund Industry (ALFI). Industry representatives applauded the amendments made by SCA on mutual fund regulations and the flexibility of such regulations. They also appreciated its efforts in introducing to the world the UAE investment environment and its internationally advanced legislative infrastructure. They expressed their views on ways to accelerate the steps to upgrade the UAE markets to developed markets on major global indexes.
The report, which was reviewed by the board of directors, included the actions to be taken by SCA to make use of the outcome of the discussions and the various aspects of the business assignment.
