During a media briefing at GITEX in Dubai

Dr. Obaid Al Zaabi:

The legislative system for the capital markets industry is being developed to keep pace with global best practices.  

The legislation conforms with the IOSCO standards. 

SCA goes a long way in upgrading markets. 

SCA regulates the capital markets industry, according to the government’s strategic objectives and the initiatives aimed at developing and upgrading capital markets to developed market status.

SCA’s initiatives focus on protecting investors, maintaining minority rights, and supporting women’s participation on corporate boards of public joint-stock companies.

The brokerage in securities regulations are being restructured to be in line with those applicable in advanced markets in terms of the existence of systems to manage technology, risks, and investments and to provide integrated investment services and products such as derivatives, market making, and other activities necessary to establish investor confidence.

A new governance code is being launched to keep pace with the changes in investor protection, to accommodate sustainability and social responsibility requirements, and to preserve the environment.

On the sidelines of SCA’s participation at GITEX Technology Week 2019 in Dubai, Dr. Obaid Saif Al Zaabi, SCA’s CEO, said that the leading positions that SCA assumed at the international level and in a number of forums, organizations, and reports come in recognition of the status enjoyed by the UAE at various levels and reflect the tireless efforts of SCA’s board of directors, chaired by H.E. Eng. Sultan Al Mansoori, Minister of Economy, in terms of: 

  1. Working to develop the legislative infrastructure by issuing regulations and resolutions and proposing amendments to keep pace with the changes and developments in local and international markets;
  2. Adopting new and innovative methods to strengthen the supervisory system (electronic and otherwise);  
  3. Improving the organizational structure and the technical and administrative staff through the creation of new departments and sections; and 
  4.  Launching the National Investor Awareness and Financial Inclusion Project.


Dr. Al Zaabi added that “in response to directives from its board of directors chaired by H.E. Al Mansoori, SCA spares no effort in addressing all violations related to capital markets, based on the supervisory role entrusted to it under Federal Law No. (4) of 2000 concerning the Emirates Securities and Commodities Authority and Market and Federal Law No. (2) of 2015 concerning Commercial Companies, as well as the implementing regulations and decisions to serve the interest of the national economy and ensure the soundness of transactions and the protection of investors. 

The Legislative System: 

Dr. Al Zaabi said the SCA succeeded in achieving a balance between awareness-raising, future-shaping, and financial inclusion efforts on one hand and the development of the inspection and audit system and of enforcement and compliance mechanisms on the other. He added that SCA’s new law, once approved by the concerned authorities, will provide further support in this direction.

Dr. Al Zaabi explained that as part of its endeavors to develop the legislative infrastructure to support the principle of protecting investors and maintaining their rights, SCA has included in its strategic plan a major objective of limiting violations committed in the capital markets operating in the country, which has already been achieved through the initiatives adopted by SCA, including: 

  1. Issuing new regulations; 
  2. Tightening sanctions prescribed for some violations; 
  3. Creating new mechanisms and procedures, including publishing names of violators and posting warnings on SCA's website. 


Dr. Al Zaabi reiterated that SCA has gone a very long way in upgrading the country’s markets to developed market status. He revealed, during a media briefing on the sidelines of SCA’s participation in GITEX, that SCA is working on restructuring the regulations concerning brokerage in securities, in accordance with those applicable in advanced markets, as part of an integrated strategy to convert brokerage companies from small trading companies to integrated financial companies providing all services to local and international investment portfolios such as brokerage services, custody services, financial consultations, portfolio and investment fund management, and market making, in addition to many services provided by global securities companies. 

The CEO announced the launch of a new governance code to keep up with changes in investor protection, to accommodate sustainability and social responsibility requirements, and to preserve the environment and the government. He confirmed that SCA is regulating the capital markets industry according to the government’s strategic objectives and the initiatives aimed at developing capital markets and upgrading them to advanced market status while accommodating technological changes, such as the blockchain technology

Dr. Al Zaabi stated that SCA has teams working in accordance with the best international standards in relation to mechanisms and methods of corporate supervision and inspection, saying that the team, which is responsible for inspecting public joint-stock companies, monitors disclosures and the application of governance requirements and controls, while the financial investigation team studies files of inspection reports on companies subject to SCA’s supervision, takes all necessary actions in this regard, and imposes penalties on violators, pursuant to the provisions of the Commercial Companies Law and SCA’s regulations. 

He said that SCA conducted a study on the percentage of foreign ownership in joint-stock companies, which showed that most companies did not reach the 49% set by the Commercial Companies Law, explaining that companies are required to allow ownership up to 49% at least. He added that the government has issued a new investment law, which covers several activities, to increase the limit of foreign ownership to more than 49%, and that these mechanisms ensure that the requirements set by the FTSE Group and Morgan Stanley with regard to the opening of foreign ownership and upgrading the markets are met, indicating that the UAE surpasses many countries in this field. He pointed out that there are plans for both markets to establish clearing companies, which is a requirement for market upgrade, while SCA proposes to have a unified clearing company to serve the markets, which will ensure compliance with the requirements of Morgan Stanley, FTSE, and Standard & Poor’s, stressing that the existence of a strong clearing company that has in place systems for operations and protection against risks would be better for the country.

With regard to monitoring companies with accumulated losses, Dr. Al Zaabi said: "We presented to the board of directors the issue of distinguishing the losing companies according to the best international practices by marking the companies to distinguish them with losses of 20%, 30% and 50%.", explaining that there are some companies that have losses of 50% and more since a long time. He added that there is a proposal to put these troubled  companies already listed on the primary market on the “under the watch” list within another platform where these companies will be put in a new platform, monitored, and presented to investors, but so far the system does not exist although there are number of requests to be dealt with and processed. 

He added that the project concerning the trading of securities of free zone companies, which is part of the Dubai 10X Initiative, in coordination between SCA, the Dubai Financial Market (DFM), and free zones, is currently in its final stages, pointing out that the initiative helps to facilitate the access of investors in free zones to financial markets in Dubai, which will help expand their businesses. 

Dr. Al Zaabi presented SCA’s efforts in developing the financial sector in the country as a whole through several initiatives, most notably: 

  1. Cooperation with free zones in the country: SCA and the free zones in the country entered into a passporting agreement, similar to that adopted by the European Union and compliant with the principles of IOSCO. This agreement allows the supervision, control, and registration of investment funds across the borders of free zones and the country’s territories outside these zones. 
  2. Partnership with the official and legislative authorities in the country: SCA has assumed a main role in providing the technical and legal support to the Ministry of Finance, the UAE Central Bank, and the Ministry of Justice through stages of writing and issuing many pieces of legislation in the country. 
  3. Partnership with other regulatory authorities and entities in the country: SCA has signed agreements and memoranda of understanding with the UAE Central Bank to transfer the latter's powers and authorities in relation to securities and to cooperate in cash settlement through the Central Bank in addition to combating money laundering. SCA has also entered into a memorandum of understanding with the Insurance Authority to monitor investment plans provided by insurance companies. 

During the interview, Dr. Al Zaabi referred to initiatives aimed at developing the corporate sector in the country at the following levels: 

  1. Establishing the principles of good governance: SCA has adopted international principles (such as the guiding principles of OECD and the Cadbury Report and others) in developing and enforcing governance decisions and controls that are continuously reviewed and amended to establish the principles of good governance across listed companies. As a result, the country jumped from 132nd to 9th place in just four years, according to the World Bank’s Ease of Doing Business Report. SCA is currently reformulating its governance regulations in cooperation with experts and specialized global companies to enhance the country’s competitiveness by establishing a new code of governance that focuses mainly on investor protection and includes aspects related to environmental, social and corporate governance (ESG), as well as ensuring appropriate representation of women on corporate boards. 
  2. Reviewing the quality system of external auditors: In cooperation with international bodies, such as the Institute of Chartered Accountants in England and Wales (ICAEW) and the Dubai Financial Services Authority (DFSA), SCA has established an accreditation system for external auditors and issued regulations governing the audit of listed companies. SCA also issued procedures to review the quality of the work of external auditors on listed companies. 
  3. Multiple platforms for listing and trading companies: SCA has previously issued regulations concerning the second market, which allow the listing of private companies, and divided the market of listing public joint-stock companies into two public platforms according to their compliance with listing requirements. In accordance with the self-regulatory model, SCA has transferred listing to the markets and proposed several platforms, the most important of which are platforms for blue chips and small and distressed companies. 
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