A series of major regulation changes was announced yesterday by the Emirates Securities and Commodities Authority (Esca) in a move intended to boost transparency.
The licences of two brokers – Faisal Shares and Bonds Brokerage and Merchant Securities – were cancelled because they failed to comply with an Esca order within the deadline they were given.
The amendments cover rules relating to brokers, disclosure and transparency, exchange, clearance, settlement, fees and listing dates. They were agreed at a meeting of the stock market regulator’s board presided over by the Chairman, Minister of Economy Sultan bin Saeed Al Mansouri.
The changes require markets to ensure that listed companies comply with regulations by disclosing basic information and financial data. The markets must verify that the information is presented clearly and includes the required facts. They must, after taking the necessary action, refer violations by listed companies to Esca.
The amendments are intended to boost levels of disclosure and transparency in line with best international practices followed in world markets. A further aim is to strike a balance between the interests of public stock companies and those of investors.
The board approved amendments to the system of exchange, clearance and settlement that will restrict dealing in a company’s shares by its officers and employees.
The chairman and board of a listed company, its general manager and any employee with access to basic data will be banned from dealing – personally or through others – in the securities of the company or those of the parent or an allied company during the following periods:
- Ten days before the announcement of any fundamental information that would affect the upward or downward price of the share, unless the information was the result of emergency or sudden events;
- Fifteen days before the end of the spring, biannual and annual financial period and until the disclosure of financial data.
The board also approved amendments to the authority’s fees system and listing dates. A company’s listing with Esca will in future last for a year, ending in December. The first listing will run from the date of approval until the end of December of the same year.
Further changes will allow a broker to challenge in court a decision by Esca to cancel his licence within 30 days of receiving notification. And the board will be able to remove a broker whenever the market, investors’ or public interest required this.
The companies whose licences were cancelled yesterday had failed to conform to decision No 176/R of 2006 within the deadline they were given, which ended at the end of 2007.
Esca Chief Executive Abdullah Salem Al Turaifi said talk by some brokers and financial analysts of a link between the decision to introduce separate accounts for brokers and investors and the fall in share prices was categorically not true.“There is a drop in prices and volumes in all Gulf, regional and even world markets,” he said.
“There are several intertwined elements that have cast a shadow on several world financial markets. And at the local level we see a state of anticipation on the part of investors ahead of the announcement of results for the first quarter of the year.
“With due respect to the views of analysts and brokers with regard to a link between account separation and the drop in prices, their analyses are far from objective because of the conflict between their interests and the separation decision.
Some of them are owners of brokerage companies that have not responded to Esca’s decision in time. Some would like to increase the volume of trading even if this were at the expense of Esca’s systems and regulations, which aim to protect investors, financial markets and brokerage companies operating in the markets.”
Al Turaifi said there were prestigious brokerage firms with a good reputation in the market that provided excellent service to investors. “There has been no impact from the separation decision on the volume of their transactions,” he said.
Referring to the marginal trading system, Al Turaifi said Esca applied the best internationally recognised practices when making initiatives or decisions affecting the financial markets.
The authority posted drafts on its website so they could be read by all concerned and interested parties, then considered their comments before making final decisions. Esca is still waiting for replies from investors, brokerage companies and all those concerned with the securities markets on proposals for marginal trading and financial consultancy and analysis.
Hamood Al Yasi, Director-General of Emirates International Securities, welcomed the board’s decisions and said they would improve transparency.
The introduction of restrictions on trading by company officials and employees was the most significant move.He said the decisions had clearly strengthened Esca by giving it the powers close down brokers’ offices. At the same time they gave brokers and companies the right to challenge decisions.
New rules for listed firms