The Emirates Securities and Commodities Authority (SCA) has granted the National Bank of Abu Dhabi a licence to practise the 'securities custody' activities of securities listed on local markets, making the bank the first to achieve this feat.
The granting of the licence followed NBAD's meeting of all prerequisites as outlined in SCA Board Resolution No (29/R) of 2009 concerning regulations of securities custody. It is also in line with SCA's efforts to further improve efficiency of the country's capital market by innovating new financial services on its markets in accordance with the best international practices and to meet the demands of investors.
According to the securities custody transaction, an investor may entrust his securities in the custody of a specialised company or bank licenced for that activities. The securities are then kept by the bank or company in the form of book interest in the name of the investor, who may mandate the custodian to act appropriately on the securities, for example, by referring them to a broker when the owner wants them sold. The investor may also mandate the custodian to receive on his behalf dividends when they are being distributed. The custodian may also represent the investor in other activities such as subscription of IPO, attending general assembly meetings and voting on his behalf, but according to the investor's instructions.
"It will lead to better regulating of the market and encourage investors, particularly, corporate investors, to invest more on the local markets, adding that it will also, on the other hand, lead to liquidity surge on the local markets and activate transactions, said Ibrahim Al-Za'abi, SCA Deputy Chief Executive Officer for Licensing, Supervision and Enforcement Affairs.