SCA Board Introduces Amendments to Regulations Relating to Institutional Discipline Standards and Governance of Public Joint-Stock Companies

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Keen to improve the regulations that govern the operations of UAE-based markets and to conduct ongoing reviews of the regulations that regulate securities trades to ensure that they keep pace with the latest developments in international markets, the SCA board approved some proposed amendments to existing regulations as follows:

Amendments to Regulations relating to Institutional Discipline Standards and Governance of Public Joint-Stock Companies

As part of the efforts to improve the regulations relating to the governance of public joint-stock companies with a view to facilitating procedures and raising the ranking of the country on the World Bank's Ease of Doing Business Index—a global competitiveness index—on Minority Investor Protection, the board approved amendments to certain articles of the SCA Board's Decision No. (7/Chairman) of 2016 relating to Institutional Discipline Standards and Governance of Public Joint-Stock Companies. The amendments were introduced to the following articles: Article 1, titled “Definitions"; Article 12, titled “Register of Insiders"; Article 22, titled “Dismissal of A Board or An Executive Management Member or Removal from Office"; Article 23, titled “General Assembly Meeting"; Article 24, titled “Call to the General Assembly Meeting"; Article 30, titled “Implementation of the General Assembly Resolutions"; Article 32(c); Article 43, titled “Duties of the Boards of Directors"; Article 45, titled “A Board Member's Loss of Independency"; and Article 46(b), titled “Permanent Committees"; and Article 3 bis, titled “Publication".

Amendments to the Trading, Clearing, Settlement, Transfer of Ownership, and Custody of Securities Regulations

The board also approved amendments to the SCA Board's Decision No. (2) of 2001 relating to the Trading, Clearing, Settlement, Transfer of Ownership, and Custody of Securities Regulations. The amendment was introduced to Article 14, which states that: “The chairman, the members of the board of a company whose Securities are listed on the Market, its general manager, and any of its employees who have knowledge of material data of the company, shall not deal by themselves or for their accounts through others or for others in any other capacity, in the Securities of the company, or Securities of the mother, subsidiary, sister or affiliate company of such company, during the following periods: Ten (10) working days prior to the announcement of any material information which would result in share price increase or decrease, unless such information was a result of sudden, unforeseen circumstances".

Since the above text does not specifically define “material information" or information regarded as material, but rather establishes a general criterion for determining whether a piece of information is viewed material or not, the amendment specified 16 cases in which information is considered material and must be communicated and disclosed immediately. This will help to avoid any potential misinterpretation, confusion, or speculation over the meaning of “material information".

Amendments to Investment Fund Regulations

The SCA board also approved proposed amendments to the investment fund regulations. A legislative amendment was introduced to Article 10(1) of the SCA Board Chairman's Decision No. (9/Chairman) relating to Investment Fund Regulations to read as follows: “Investors are permitted to offer in-kind shares—as per the controls in place—in exchange for subscribing to the investment fund units". The amendment takes into consideration that allowing investors to subscribe with in-kind shares will encourage the establishment of more funds, especially real-estate fund, thus making a qualitative leap in the development of financial markets.

Regulations for Operators of Crowdfunding Platforms

The SCA board reviewed the draft regulations for operators of crowdfunding platforms and the recommendations put forward by the executive committee at its last January meeting. It gave green light to proceed with approving the regulations after consulting with the UAE Central Bank and the Ministry of Economy.

The board also reviewed a presentation on the draft regulations. The presentation highlighted the entities prohibited to seek funding through the platform, the key obligations that the operator has to meet towards SCA and investors, the key obligations that fund seekers have to meet, back-out controls, and penalties and advantages.

The board examined—at a previous meeting—the main features of the crowdfunding regulations, which are intended to provide fund seekers with specific amounts of money from investors in exchange for equity stakes or capital increase shares. This is done through an e-platform that is programmed to display crowdfunding requests.      

Transformation of Brokerage Companies into Integrated Financial Services Companies

In line with the UAE Vision 2021 that aims at creating a competitive environment for financial services companies to ensure the highest standards of excellence and enable investors to choose the most distinctive and most committed service providers who deliver “fair" and “transparent" financial services, the board reviewed and approved SCA's plan to transform brokerage companies into integrated financial services companies. It directed that a road map be created for the plan's implementation.

CEO of SCA Named Vice-Chair of the IOSCO Board

For the first time at the local and international levels, Dr. Obaid Al Zaabi, CEO of SCA, was named Chair of IOSCO's Growth and Emerging Markets Committee (GEMC) from 2018 until 2020 and Vice-Chair of theIOSCO board for the same period. SCA has also become an IOSCO board member. This will positively impact the reputation of the financial markets operating in the country and will bolster their status. It will also enable SCA to demonstrate its abilities in regulating securities markets and to highlight its experience through its active participation in GEMC's projects.

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