Keeping the UAE stock markets in equilibrium

An Emirati monitors rates at the Abu Dhabi Stock Market.

Obaid Saif Al Zaabi, CEO of the Securities and Commodities Authority (SCA), said the state of the stock market today does not reflect the UAE's vibrant economy.

Al Zaabi explained that the financial market gets affected by the speculative bets of investors who do not have the necessary experience and tools. They could be affected by the geopolitical situation in the region, the global markets as well as the oil price.

In an exclusive interview with Khaleej Times, Al Zaabi said results of companies listed on financial markets are aligned with the profits handed out to shareholders and the recurrent profits the companies gain.

He attributed the current situation of the UAE financial market to the absence of the corporate investor, who is not in a hurry to make short-term profits.

Al Zaabi said the SCA works to attract the foreign investor with a number of world-class initiatives. He said 38 global criteria have been applied in the country, which has made the UAE on par with advanced countries.

He said the SCA is working to include 2 new platforms: the first is to finance small and medium projects through shares, a first-of-its-kind initiative in the world. The second platform is to enact a set of laws that can allow listing and stock-financing these companies and enable them to get the required financing and trade in the UAE financial market. In addition, this platform shall initiate a mechanism that would allow listing the parent companies as well as free zone companies.

Al Zaabi said the proposed law has been referred to an experienced legal house for a final review. The law, he said, contains numerous aspects, including investment funds, governance and financial stability to be made under the supervision of the SCA.

The law toughens penalties as well. There will be more control over trading in securities using the latest programmes to identify trading made by members of the board of companies.

Violations
Regarding several complaints received through social media against companies listed in the market, Al Zaabi said shareholders are the primary controlling body for companies and can file a complaint with the SCA or can proceed to sue the board of directors for its investment decisions if they spot any violation.

Al Zaabi said that 20 per cent of company shareholders can request holding a general assembly meeting. He said law stipulates that if 1 shareholder or more or at least 5 per cent of stockholders find out that the company is handled in a manner that could harm their interests, or if the company is planning to act in a way that could damage the interests of all or some shareholders, the shareholders are entitled to submit an application to the SCA supported by tangible documents so the authority could initiate action.

However, if the SCA failed or refused to examine the application within 30 business days, a shareholder or shareholders are entitled to take legal action within 10 days from the date of rejecting the application.

Citing an instance, he referred to how some investors were concerned about the continuous losses incurred by Marka Company that was established in 2014 at a capital of Dh500 million. Shareholders were worried after they came to know that Marka bought the Reem Al Bawadi chain of restaurants for Dh315 million. Al Zaabi said the shareholders can file a complaint with the SCA or the court.

Al Zaabi said the law entails the board of directors of the company to inform the SCA if it plans to buy assets or companies or establishments whose value is more than 20 per cent of its capital. He said the SCA can evaluate those assets, companies and establishments, pointing out that Marka Company has failed to do so.

The shareholders of Marka Company can run the business being partners and owners of its assets at the same time. They have also the right to view the company's books and documents or any paper related to any deal the company had clinched with any relevant body on approval by the company's board or as per a decision made by the company's general assembly, or as per what is stipulated in the company's charter (statute).

Al Zaabi confirmed that the SCA has a watch body that continually controls the market. The authority also organises awareness campaigns through booklets and videos and publishes them in media so investors know their rights.

"We summon companies that lost about 30 per cent of their value to lay down a plan in order to overcome the losses. If a company lost 50 per cent, it is called in to prepare a new financial structure and demand the company to hold an obligatory general assembly meeting and let them choose either to reshuffle the company or shut it down," Al Zaabi noted.

Rehabilitation of analysts
Al Zaabi said the SCA offers specialised training courses for Emiratis who want to become financial analysts. The trainees will get a certificate in return.

"We sent a circular to all brokerage companies prohibiting them from terminating the services of any Emirati national. On our part, we offer training and rehabilitation to them when necessary."

There are 2 kinds of tests which comply with international standards and the SCA deals with a world institute for these exams. A trainee must finish accredited training hours. They are also trained in Emirati law.

"We monitor whatever complaints are raised in the media, newspapers and social media and take action in case rules have been broken," he concluded.

- malzarooni@khaleejtimes.com

Mustafa Al Zarooni

malzarooni@khaleejtimes.com