Abu Dhabi: New legislation issued by the Securities and Commodities Authority (SCA) will help increase confidence in the UAE’s capital markets but it might not be enough to tip the scales in terms of attracting more liquidity and foreign investors.
On Saturday, the SCA issued Resolution Number 7 of 2016 on the governance of public joint stock companies. The 55-article legislation combines a bundle of regulations regarding corporate governance and the implementation of the Commercial Companies Law.
Mohammad Yasin, managing director of the National Bank of Abu Dhabi’s Securities, said the UAE’s markets need to see more investment products in order to bring in additional liquidity.
“We need to diversify from being a long-only market on equities into a multi-investment platform on equities, bonds and securities. We need to be able to go short and long, we need to introduce liquid ETFs [exchange-traded funds] and we need to be active in trying to attract more market makers. Times like this when we see low traded volumes and hardly any move on the solid stocks tell you that the market is lacking interesting tools for investors to trade in,” he said.
Yasin added that regulators should also encourage more IPOs to bring in liquidity. He pointed that the SCA should also focus on the accountability issue and ensure that those who break trading laws are penalised.
In addition to grouping together various articles that regulate companies, the legislation mandates that the board of directors of a public joint stock company should have 20 per cent of positions reserved for women. Female participation on boards was initially optional for companies but now is mandated by the law.
The legislation also reduces the quota of minority share owners from 10 per cent to 5 per cent, giving more rights to those who own a relatively small share in a company.
Its articles also discuss voting mechanisms on boards of directors, as well as regulations on dividend distribution, board nominations and responsibilities, and the duties of a chairperson, among other issues.
