UAE amends stock ownership rules

The UAE market regulator has unveiled a major overhaul of stock ownership rules in a bid to force more disclosure in takeover deals and boost transparency. But it was not clear when the guidelines would come into effect nor what penalties would apply to infractions. The new regulations drafted by the Securities and Commodities Authority (SCA) requires buyers to inform the stock market if they intend to buy 30 per cent or more of a listed company in the UAE. “The board agreed during the meeting to make adjustments to the disclosure and transparency system in order to develop the legislation governing the functioning of financial markets,” the SCA said in a statement posted on state news agency WAM. The regulator can reject proposed transactions if it deems them to be against the interests of shareholders or the economy. The move comes a month after Abu Dhabi’s state-owned firm Aabar Investments accumulated a 20.8 per cent-stake in Dubai contractor Arabtec Holding from the market through different subsidiaries. Aabar’s chairman — who is also now Arabtec chairman — was quoted at the time as saying the fund had a 53 per cent position. A stock market source told Reuters Aabar owned 53 per cent of Arabtec. The new rules also require an investor pool together all holdings in a specific company — whether held by family members, companies and affiliates — and inform the regulator if the ownership is above the five per cent mark. Positive initiative “It’s a positive initiative and something that the market really needs but we will have to wait and see how well these initiatives can be enforced upon,” said Mohammad Ali Yasin, an Abu Dhabi-based capital markets analyst. “The question also is how do you penalise the institutions who are not complying with these rules, when are these rules effective from and what happens to previous such transactions.” The UAE, classified as a frontier market by index complier MSCI, lacks a proper takeover code which makes mergers of publicly listed companies difficult. Gauging ownership levels in some listed companies is complicated by cross holdings through affiliates and separate vehicles which can belong to the same entity. Calls for more governance and transparency heightened after the Aabar/Arabtec moves with the construction firm’s shares more than doubling this year. Aabar, which tried to buy Arabtec for $1.7 billion (Dh6.2 billion) in a failed 2010 takeover, has not disclosed what its intentions are with regard to the stock build up and minority investors have been concerned their interests would be overlooked. Aabar itself delisted abruptly from the Abu Dhabi stock market in 2010, causing an uproar among minority investors.    Several regulations have been enacted in the UAE previously to boost local financial markets but enforcing these laws has been a challenge for the regulator. Last year, the UAE postponed draft regulations on its nascent asset management industry, which were seen as a key step for investor protection and boosting market confidence, after market players voiced concerned that some of the proposals lacked clarity, sources said.