INTERNATIONAL BRIEFINGS
United Arab Emirates corporate governance for publicly listed speaking, common law-trained judges
Afridi & Angell companies. In addition, regulations passed (UAE court proceedings are conducted in
within the past two years suggest the SCA Arabic).
may be looking to take a more active Securities regulation in the DIFC is the
Securities regulation regulatory role that may expand beyond responsibility of the DFSA. Although the
in the UAE listed companies and local securities
exchanges. For example, SCA Decision No.
regulatory scheme is young and still
evolving, securities legislation in the DIFC
R
egulation of securities and 33/R of 2009 deals with the function of is generally more detailed than under the
financial markets in the United maintaining a shareholder register for UAE federal scheme and DFSA compliance
Arab Emirates (UAE) is a private joint stock companies. Private requirements are generally more rigorous.
potential source of confusion to investors companies have historically been outside of Contrasts are considerable such that
and financial institutions. Generally the scope of SCA regulation. SCA Decision investors and financial institutions should
speaking, there are two different No. 17/R of 2010 concerning Anti-Money view the DIFC and the UAE like two
regulatory schemes and three different Laundering and Terrorism Finance different countries when it comes to legal
regulators. Combating Procedures, although applicable and regulatory matters.
Historically, regulation of securities only to the markets, companies and One noteworthy feature of the
trading and transactions involving institutions (and their directors and DIFC/DFSA regulatory scheme worth
investment products has been the domain employees) licensed by the SCA, addresses highlighting is that rules governing the
of the UAE Central Bank. In 2000, the a topic already regulated by the Central marketing and sale of interests in collective
Emirates Securities and Commodities Bank. investment schemes (eg investment funds)
Authority (SCA) was created. Together the Securities laws and regulations in the are different from rules governing the
Central Bank and the SCA are the UAE are still in an evolving stage and some marketing and sale other types of securities.
regulators under the UAE federal regulatory observers have questioned whether the Although the three regulatory bodies
scheme. country should move to a system whereby communicate with each other,
A separate regulatory scheme exists in the securities regulation becomes the sole communication does not make for a
Dubai International Financial Centre domain of the SCA. However, there is no unified system. At the outset of any
(DIFC). The DIFC is a financial free zone indication that such suggestion will be proposed securities transaction, an
located in the Emirate of Dubai, which has followed any time soon. The UAE Central important first step is to ascertain which
a separate legal and regulatory structure Bank has been and remains a powerful rules and regulations apply so that
from the rest of the UAE. The regulator in institution whose authority extends beyond compliance can be structured accordingly.
the DIFC is the Dubai International matters conventionally associated with the
Financial Services Authority (DFSA). domain of a central bank.
Contacts:
UAE Federal Scheme DIFC/DFSA Scheme P.O. Box 3961
Financial markets in the UAE are relatively The DIFC was established in 2005. One of Al Ghaith Tower - Level 8, Suite 806
young. The first security exchange in the the goals was to create a modern financial Hamdan Street
UAE was created only a decade ago. Prior center with a regulatory structure modeled Abu Dhabi, UAE
to the creation of the SCA in 2000, the on best practices followed in major interna-
Tel: +971 2 627 5134
Central Bank assumed responsibility for tional financial markets such as New York,
Fax: +971 2 627 2905
securities regulation. Today, such responsi- London, Singapore and Australia.
E-mail: abudhabi@afridi-angell.com
bility is shared with the SCA. Creating such a centre involved creating
Web: www.afridi-angell.com
As a matter of law, the division of a new legal and regulatory system from
responsibility between the Central Bank scratch, which deviates from the UAE
and the SCA is not clearly delineated. As a system in several key respects. For example,
matter of practice, the SCA has generally DIFC law is
limited its regulatory oversight to publicly based on
listed UAE companies and the three public common law
securities exchanges in the UAE proper – (the UAE. has a
the Dubai Financial Market (DFM), the civil law
Abu Dhabi Securities Exchange (ADX) and system),
the Dubai Gold and Commodities legislation is
Exchange (DGCX). Sale of foreign adopted in
securities in the UAE is regulated by the English (UAE
Central Bank. The Central Bank also legislation is
exercises considerable influence through its adopted in
licensing and related regulatory oversight of Arabic) and
banks and various types of financial Gregory Mayew court
institutions. proceedings are
In recent years, the SCA has taken a conducted in
more active role in financial regulation English by
generally, particularly in the area of English
54 IFLR/October 2010 www.iflr.com