Dubai Shareholders in publicly listed companies in the UAE are sometimes left feeling aggrieved when it comes to the delisting of a stock, the merger of companies, the irregular movement of prices or just a plain lack of transparency by corporates. But, they do have rights which they can exercise if they feel it necessary.
“The UAE certainly offers investors a full package of rights and remedies for securities fraud , market abuse and misleading forecasts and information,” said Gary Watts, partner and had of corporate commercial at the law firm Al Tamimi & Co (ATCO).
“But to date we have not seen investors taking their grievances to the courts and the regulators and testing the rules and institutional framework. This will be the only way the market will develop faith in the system”.
He answered some questions Gulf News put forward in an email.
GN: What rights do minority shareholders have under the local law?
Watts: Apart from those rights prescribed under Federal Law No 8 of 1984 Concerning Commercial Companies, rules or regulations of the Securities and Commodities Authority (SCA) address corporate governance issues, like directors’ remuneration and board conflicts of interest. This enhances minority protection.
GN: Where can you lodge a complaint against a company for the irregular movement of its stock or suspected insider trading?
Watts: A claim against a listed company for irregular movement of its stock, or against a trader, can be filed with the Board of the SCA. The Board of the SCA is authorised to take action and impose penalties against the party it finds in breach of its rules and regulations.
As far as disputes concerning trading in securities or commodities on the ADX or DFM are concerned, parties can file a claim before the Board of the SCA. Aggrieved parties can also apply to the SCA to form a panel of arbitrators and submit a dispute to it for resolution. Finally, parties can take action in relation to a ADX and DFM transactions to a competent (civil) UAE court.
GN: What happens it a company’s investor relations department does not respond appropriately to queries?
Watts: This is not of a legal matter. There are no legal requirements [in regard to] investor relations practices. However, a party can file a complaint to the SCA at http://www.sca.gov.ae/english/pages/contactus.aspx
A complaint can also be filed with the Board of the SCA. However, if the Board declines to act the matter will not be taken up by the SCA.
GN: Can an investor sue a listed company for wrong doing, like a violation of fiduciary responsibility by a board member.
Watts: An investor can file a claim before a competent (civil) court in the UAE for damages or any other remedies. There are widely framed rights to sue for fraud, power abuse, violation of Federal Law No 8 of 1984 Concerning Commercial Companies and “mal-management” which any shareholder can exercise. However, litigation like this can be very complex, expensive and time consuming. An investor can also file a complaint to the Board of the SCA against a party they think is in breach of its duties.
Finally, an investor can agree with the counter party to bring the matter before an arbitration panel of the SCA.
GN: What should be the reasonable expectations of redress for a retail investor with a complaint?
Watts: Damages can be awarded by a competent UAE court under the Federal Law No 8 of 1984 Concerning Commercial Companies. The Board of the SCA can:
cancel or suspend trading in a share;
suspend or revoked a broker’s license. The Board’s decision can be appealed by the broker in a competent UAE court; terminate market membership of a broker or an issuer.
Any person is liable to imprisonment for not less than three months and not more than three years; and a fine of not less than Dh 100,000 and not more than one million dirhams, or either of these penalties, if they:
• furnish any data, or information that is untrue to affect the market value of securities and an investor’s decision to invest or otherwise;
• deals in securities on the basis of unpublicized or undisclosed information acquired by virtue of their position;
• spreads tendentious rumours about the selling or buying of shares; and or
• exploits unpublicised information which could affect the prices of securities to achieve personal benefits.
Any dealings or transactions based on misinformation will be null and void.
The court however needs to issue a judgment, following the sanctions’ provisions set out under the SCA regulation.
The SCA also has the right to impose penalties or take the following measures against listed companies and investors:
• A warning
• A fine of no more than Dh 100,000
• Suspending the investor for no more than one year.
• Suspending the listing for no more than six months.
• Cancelling the listing.
The chairman, members of the board and employees of a company whose securities are listed on the ADX or DFM are liable for fines and imprisonment if they, directly or through others, deal in its shares before disclosing the details of the transaction to the markets and getting the necessary approval. Any transaction that takes place without the approval of the market authorities will be deemed null and void. Prison or fines will also apply if the chairman, directors or employees exploit inside information for their own gain.