Stock - Dewa
DEWA's move on transparency through strict anti insider trading rules will catch the attention of investors. Image Credit: Shutterstock

Dubai: The Dubai utility company DEWA has come out with a comprehensive set of rules against insider trading, and by which individuals would benefit from having prior information about the company’s operations, plans or financial results. The passing of these rules by DEWA will help the DFM-listed stock resonate with investors, particularly international funds.

On Thursday (January 19), DEWA’s stock is trading unchanged at Dh2.41.

Some of the leading ADX listed entities already have similar tight requirements that ban insider trading practices, and DEWA’s push could ensure other leading lights on DFM too would join in. According to DEWA, the penalties for any individual/entities using privileged information for their own gains include:

  • Disciplinary action that could lead up to termination for employees caught in such violations;
  • Criminal and/or civil offences registered against the violators under Federal Law No. 4 of 2000. This could lead to imprisonment for a ‘period of not less than 3 months and not more than 3 years’ and/or a fine of not less than Dh100,000 and not more than Dh1 million’; and
  • The concerned transaction will be deemed null and void.

“With UAE stocks, especially newly listed IPOs, coming under international investor attention and from global indices, there needs to be full transparency,” said a market analyst. “This is what you are seeing with the tightening of the insider trading rules.”

Halt to trades

Company insiders will be prohibited from trading in DEWA securities 10 working days ahead of any public announcement, including, of course, the quarterly results. The only exception is if the inside information is deemed as a result of ‘sudden unforeseen circumstances’.

In a statement, DEWA said: “This policy provides guidelines to those who have access to Inside Information from amongst all DEWA employees as well as members of the Board of Directors and Audit Committee and their relatives with respect to transactions in the company’s securities.

“It identifies the company’s procedures on all important matters relating to insider trading while in possession of Inside Information. The policy aims at preserving the reputation and integrity of the company as well as that of all persons affiliated with the company.”

‘Material info’

All informed individuals or their relatives/associates are deemed to have ‘material information’ that they could use (or manipulate) for their own enrichment. “The information is considered ‘material’ if there is a substantial likelihood that a reasonable investor would consider it important in making a decision to buy, sell or hold a security, or if the information is likely to have a significant effect, direct or indirect, on the market price of the security and the volume of its trading.

“Material information can be positive or negative and can relate to virtually any aspect of a company’s business or to any type of security, debt or equity.”