Abu Dhabi
A member of the Federal National Council on Tuesday demanded that the Securities and Commodities Authority (SCA) apply more scrutiny to the market to eliminate illegal trades.
Ahmad Mohammad Al Shamsi, a member from Ajman, told the House that it was extremely crucial that all companies maintain the credibility needed to put the UAE on a firm footing to attract international investment.
“Small investors have suffered great losses recently as UAE-listed firms make sharp movements up and down the stock market for no apparent reason,” Al Shamsi said.
The UAE has recently been upgraded to emerging market status in index compiler MSCI’s (Morgan Stanley Capital International) latest classification review.
The FNC member said disclosure is very important for public joint stock companies in order to achieve law and order on the markets. Disclosure must be made at the right time and must reflect the reality of a company’s performance. It must be equitably shared among all stakeholders and must be made on all the works of the company, including its financial situation, performance and ownership.
“It is in everyone’s interest that UAE markets make the step up from emerging market to developing and developed status to capture a greater proportion of international investment,” said the member.
The FNC member argued that high levels of transparency increases both trust and market liquidity and therefore have a positive impact on the share price.
Al Shamsi was speaking after Arabtec’s managing director and chief executive officer, Hassan Ismaik, resigned from his position, following a period of weak performance of the company’s stocks on the Dubai Financial Market (DFM), which saw share prices drop from over Dh8 to around Dh4.
Al Shamsi questioned malpractices in the stock market, asking how a board member in a company owns a 28.85 per cent stake in a construction giant.
The much-bemoaned issue of a lack of transparency has once again come into sharp focus as traders question whether both the market regulator and public companies are fulfilling their financial disclosure requirements.
Sultan Bin Saeed Al Mansouri, Minister of Economy and chairman of SCA, said the regulator was trying to apply more scrutiny to the market to ensure that transparency and disclosure rules are satisfied.
The SCA has suspended listed companies in the past for failing to disclose enough information about their financial situation, Al Mansouri said.
The SCA takes various forms of action if a company or individual is deemed to be flouting disclosure rules including issuing warning letters and fines or suspending securities. Individuals can also be subject to fines or imprisonment. “Disclosure and transparency regarding financial information represents one of the major principles of corporate governance,” Al Mansouri said, but declined to reveal any information about ongoing investigation into whether illicit trades were made by Arabtec or other companies.
Al Mansouri stressed corporate governance is the most potent factor in terms of attracting foreign investment.
