So can I demand to see the accounts of its member firms? It's not altogether clear.
Bedtime reading with DFSA handbook conjures up conundrum
The “core values”of the Dubai International Financial Centre are integrity, transparency and efficiency, according to the website of Dubai’s financial hub. Let’s focus on the middle one of those three for a while.
I don’t know what readers take to bed with them, but for me it’s usually a historical work, sometimes fiction, and very occasionally poetry.
But when the nighttime hours just won’t bring blessed sleep, I sometimes reach for a copy of the General Rulebook of the Dubai Financial Services Authority (DFSA), the body that is charged with upholding and protecting the DIFC’s core values.
It was on one such recent night – une nuit blanche, the French call it – that I came across rule 8.6.3 of the DFSA, which states on page 68:
“If requested, an Authorised Person must provide to any Person a copy of its most recent audited accounts, together with the auditor’s report referred to in Rule 8.6.1(b). If the copy is made available in printed form, the Authorised Person may make a charge to cover reasonable costs incurred in providing the copy.”
Well, that was the end of sleep for me that night. I was intrigued by the capital letters for one thing. I’m certainly a person, but am I a Person?
But most of all I was dazzled by the potential for an inquiring financial journalist in that short paragraph. Can I really just ask any of the hundreds of firms regulated by the DFSA to show me their accounts?
I know from past experience that although most of them in theory subscribe to the DFSA’s “core values”, in practice they guard their financial secrets closely.
They have a right to do so, I must add. Private companies, which constitute the vast majority of the DFSA’s membership, have no corporate obligation to show their accounts to any Tom, Richard or Harry – or even Frank – who might come along.
But they do have an obligation, if they are authorised by the DFSA, to adhere to that body’s rules. So why not just ask?
I chose a clutch of companies from the DFSA’s 428 registered firms. My selection criteria were random, I guess, but I think I came up with a fairly good cross-section of the DIFC: brokers, private equity houses, local banks and local arms of international banks.
I asked, about a month ago. I have so far not seen a single hint of a balance sheet, let alone a profit and loss account, from any of them.
(I will not name them here and now. That is to come.)
The reasons for not adhering to DFSA rules were varied. One financial firm said my request was with its lawyers, and you know how long it takes once it’s with the legal eagles, don’t you?
Another said I was welcome to come in and have a coffee with the chief executive, who would show me the accounts – as long as I signed a non-disclosure agreement (NDA) first.
Asking a journalist to sign an NDA is like asking a bricklayer to throw away his trowel, or a brain surgeon his scalpel.
Two of the DFSA-registered branches of big global banks said all the essential information I needed was in their annual reports, which was a polite way of telling me to go away and play with my toys.
The most ingenious was a suggestion from the DFSA-registered arm of a big international investment bank that it was obviously an error on the part of the DFSA. Such a ridiculous rule would surely never be intended. Maybe it was a typing error, it was offered. Anyway, I still couldn’t see the accounts.
So what does the DFSA think? Is rule 8.6.3 a typing error?
I paraphrase, but the gist of the regulator’s response was this: “The rules are clear. Anybody in any capacity has the right to see the accounts. If an authorised firm declines to disclose them, they have to ask the regulator for a waiver from the rules, and show a valid reason why the DFSA should allow a waiver. If they will not show you the accounts, you should make an official complaint to the DFSA.”
So I guess that’s the next stage, in the interests of integrity, transparency and efficiency. And a good night’s sleep.