UAE's Securities And Commodities Authority Forces Dormant Account Mechanism On Brokerage Companies

The Securities and Commodities Authority (SCA) issued a decision concerning dormant customer accounts held at securities brokerage companies, forcing such companies to classify customer accounts with no financial activity or data update for three years into dormant, as per a number of stages and procedures.  

H.E. Abdullah Al Turifi, CEO of SCA, said that by introducing this procedure, SCA aims at safeguarding customer assets—whether securities or cash—against potential loss or misuse as part of its role in protecting investors and maintaining the rights of all financial market participants. Al Turifi indicated that the decision also contributes to reducing financial burdens, as well as regulatory and legal obligations placed on brokerage companies as a result of maintaining dormant accounts and constantly following up on them.

Al Turifi explained that the decision circulated to brokerage companies includes six items that demonstrate decision implementation mechanism and procedures as follows:

1. Notify customers, through their last known address, that their account has been left dormant for the last three years, with no financial activity or full and proper data update, and that their data must be updated and transactions must be undertaken within thirty days of the notice date, provided that the notice includes a description of the consequences of noncompliance with the specified time period. 
2. If the time period expired with no financial activity or data update, the company shall take these actions (within two working days):
   1. Classify the account as dormant and prohibit transactions.
   2. Transfer securities balances to the clearing house at the relevant market. In this case, transfer fees may be lifted as per the mechanism and procedures applicable.   
   3. Maintain cash balances and make them available and not act upon them without instructions from the customer, SCA, or the relevant authorities.
   4. Supply customers, through their last known address, with a final account statement and clarify that no further account statements shall be sent until they contact the company for account activation.   

The decision further explains that if the account is classified as dormant, customers can contact the company to activate the account and make the necessary updates.   

In case the customers do not wish to have the account activated, they must contact the brokerage company to have the account closed or receive their cash and contact the relevant market concerning their securities dues, without violating the brokerage company's right to close the account, taking into consideration the account opening agreement.

The decision forces brokerage companies to introduce an appropriate mechanism to regulate this procedure within their internal systems.

As an exception, provisions of the decision do not apply to accounts with complaints filed at SCA, or at the public prosecution, or the court until such complaints are substantiated by a notice from SCA or a decision or ruling from the public prosecution or the relevant court, as may be the case. The decision shall enter into force from the issuance date.