x Abu Dhabi, UAEMonday 24 July 2017

Financial industry supports new rules

Top fund managers and industry officials voiced support for the stock market regulator's new rules on share ownership, but said more legislation to protect minority shareholders was also needed.

The new regulations introduced by the Securities and Commodities Authority this week require investors to notify the market immediately if they plan to purchase a shareholding in a public company of 30 per cent or greater. Reuters
The new regulations introduced by the Securities and Commodities Authority this week require investors to notify the market immediately if they plan to purchase a shareholding in a public company of 30 per cent or greater. Reuters

Top fund managers and industry officials voiced support for the stock market regulator's new rules on share ownership, but said more legislation to protect minority shareholders was also needed.

The new regulations introduced by the Securities and Commodities Authority (SCA) this week require investors to notify the market immediately if they plan to purchase a shareholding in a public company of 30 per cent or greater.

Investors will have to disclose once their holdings in affiliated entities of listed stocks reaches 10 per cent and when their combined holdings in a public company reaches 5 per cent.

The moves come after the Abu Dhabi government-controlled investment fund Aabar Investments amassed a 21.57 per cent stake this year in the Dubai contracting company Arabtec Holding through its affiliated companies.

Aabar's entities were not obliged to disclose their holdings in Arabtec if they were less than 5 per cent.

"It was a big surprise," said Sebastien Henin, a portfolio manager at The National Investor in Abu Dhabi, of the new regulations. "This shows that the Arabtec story triggered a reaction from the regulator."

Stockbrokers said the SCA's regulations addressed the interests of minority shareholders, even thoughthey are not directly mentioned.

"The overriding factor here is to protect minorities and the retail investor," said Anastasios Dalgiannakis, the head of institutional trading at Mubasher Financial Services in Dubai.

"If we had this rule before, the accumulation of shares would have been much more transparent and could have protected minority shareholders."

"Usually regulations happen after a catalyst, the regulator saw some loopholes and wanted to fix it," said Fadi Al Said, a senior fund manager at ING Investment Management in Dubai.

"These markets are still in nascent stages and more needs to be done for minority shareholders."

The new rules follow a series of regulations that the SCA introduced following the global financial crisis.

All these rules are aimed at tightening the governance of UAE financial markets.

The Dubai International Financial Centre on Monday night revealed that it would also update disclosure rules for share ownership to meet similar standards required in the European Union.

The UAE is under review for emerging markets status by the international index provider MSCI. The country is currently classified as a frontier market.

halsayegh@thenational.ae

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