He doesn’t look like the kind of guy who would get upset easily. If anything, Ian Johnston comes across as a little shy, gentle and unassuming. But dig a little deeper, and it soon becomes clear that the new chief executive of the Dubai Financial Services Authority is no pushover. “Regulation is about having a row of levers. When you see something going wrong, you have a few levers you can pull. Sometimes the right lever is enforcement — you just have to say, ‘you know what, that’s unacceptable. We are kicking you out’. Making the choice of what lever to pull takes a bit of wisdom.”
There are few better regulators in the market right now than Johnston, who took the reins at DFSA in June this year, having first joined the organisation in 2006, as the managing director to head up the Policy and Legal Services Division. Initially the DFSA appointed a firm of international headhunters to fill the vacancy, but, not surprisingly, decided to settle on one of their own. In Johnston, they have a man with a glittering track record in the complex world of financial regulation, having held numerous high-profile roles in Australia and Hong Kong.
And so far, Johnston likes what he has seen.
“I think people are very comfortable here. We have done two stakeholder surveys in five years. Their consistent position was that the rule of law and the regulation was a strong attraction, the fact we are regulated to international standards, and of course the infrastructure of the DIFC. If you look at the big firms that are here, they have voted with their feet to come here. Our job is to create an environment in which companies can do business and making sure the markets are fair and transparent — and that investors are properly protected,” Johnston says.
Johnston is upbeat about the future, though he knows the past hasn’t always been so rosy. Eight years ago, the two high-profile Brits brought in to oversee the DFSA regulation, Ian Hay Davison and Philip Thorpe, were booted out after clashing with their bosses. Back in March 2010, DIFC governor Omar Bin Sulaiman was arrested on suspicion of “profiting from public funds.”
Four months later, former DFSA chairman Dr Habib Al Mulla gave an explosive interview to Arabian Business, laying into the entire concept of the DIFC.
Al Mulla complained: “It’s more of a shopping centre and more of a real estate project…There was a clear vision with the first blueprint for the DIFC… [However] it has moved away from the path we set out on, which was to build a financial centre with high standards, to attract the 500 top companies in the region, to become a hub for doing business for the whole region. That initial direction, particularly when it comes to the exchange, but also the DIFC as a whole, has been lost.”
Johnston says he isn’t in the business of responding to media comments made by others, and prefers to focus on the positives — of which, no doubt, there are many.
He says: “One of the things in the time I have been here, there were less than 100 firms that were regulated, that has trebled. But it is not just more firms, the business has deepened. Companies are doing more things, they are managing more assets. So it’s not just broadening, its deepening. So for us as a regulator it’s good.”
Johnston adds: “I would expect the DIFC to keep growing. As for regulation it will follow more of a global agenda, the new markets law we are bringing in will bring us closer in line to Europe. In ten years time you will see fewer difference between regulations in different places, so it will be easier to move around.”
While Johnston gets his teeth stuck into new laws, the entire set-up of Dubai’s financial hub is also undergoing transformation. Earlier this year the DIFC announced it was splitting into two. The DIFC Authority, a government body, saw its property portfolio spun off, to be managed by a new entity, the DIFC Properties.
Jeff Singer, former boss of Nasdaq Dubai, was brought in as CEO of the DIFC Authority, while Nabil Ramadhan was made acting CEO of DIFC Properties. They report to the Board of Directors of DIFC Authority. Together they will implement DIFCA’s growth strategy to raise the number of DIFC’s membership, which currently stands at 860 active companies, increase the number of people working at DIFC to an estimated 25,000 people and complete the remaining development of the 110-acre site.
Despite many well-publicised hiccups along the way, there is now a growing feeling that since the DIFC’s launch in 2005, it is now widely regarded as a global financial hub. The Banker magazine ranked Dubai ahead of centres like Zurich, Tokyo, Geneva, Luxembourg, Dublin and Chicago, and named it as the third-best location in the world for inward FDI in financial services. DIFC has also become an important element of the UAE economy, contributing in 2011 around $1.3bn, equivalent to 1.4 percent of the nation’s non-hydrocarbon GDP as estimated by International Monetary Fund.
Johnston says: “I used to work in Hong Kong and we have very good relationship with Hong Kong and Singapore, and they see us developing that way. And they are happy to see us do that. I don’t know what the threshold is to be called a global financial hub but the fact is the world’s providers of capital recognise this place, and the key institutions clearly recognise this place as that.”
That said, Johnston also knows that every major regulator on the planet cannot avoid the stream of big financial scandals that have hit the industry in recent months. Although not directly linked to Dubai, he admits that the regulator is always keeping an eye out to see if foreign-made scandals could impact his territory. “Our job is regulating this 110 acres and not regulating beyond, but when you have issues elsewhere with companies, we are always looking at the conduct that takes place within the DIFC.”
He adds: “I strongly believe that incentive systems have a lot to do with behaviour. I think part of the issue is that firms reward appropriate behaviour. Companies need to make sure they do the right thing. If you have a bonus calculation for your sales force, then I think one of the things that need to be factored in is their adherence to compliance… The trend now is going to be on core compensation. Though I don’t think bonuses will ever disappear.”
Although having only been in the top job for three months, Johnston has no shortage of admirers at the DFSA. Privately, many are impressed with his comfortable and friendly manner, though with an incredible eye for detail.
Johnston himself is quick to pronounce “I love my job,” and you get the feeling that he really means it. He explains: “I’m not motivated by money or power — more by influence in terms of taking important decisions.”
After spending an hour in his company, it is hard to believe that Johnston once worked in Australia as a stand-up comedian. And he looks horrified when I bring this up. “That was another lifetime back and as a young boy,” he says.
So is there a chance that Johnston will one day hang up his regulation pen and get back on the comedy stage? “I think I’m beyond it! But I still watch comedy when I can. It’s very important to have a balance in your life. It’s about having other things in your life, it makes you happier and healthier — and it makes me do my job better.”
Few can argue he is doing a pretty good job so far.
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