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Mon 1 Jan 2007 12:00 AM

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ADSM tightens regulations for greater market transparency

Exchange clamps down on insider trading and demands better training and exams for brokers

Abu Dhabi Securities Market (ADSM) is to reform a number of its rules and regulations to enhance disclosure, improve transparency and make investors more aware of risk. It is hoped the rules will bring new levels of professionalism to brokers operating in ADSM.

The initiatives, which are part of the market’s best practices programme, also aim to crack down on any attempts at insider trading.

Speaking at a press conference in Abu Dhabi, Rashed Al Baloushi, acting director general of ADSM, said: “The new regulations, standards and guidelines ADSM will implement over the next month are considered to be the most extensive since our market was established six years ago.”

He added that the reforms would ultimately ensure the long term sustainability, transparency and integrity of the market.

ADSM implemented new disclosure requirements at the beginning of 2007. The exchange will now publish on its website the names of any company insiders who trade in, or intend to trade in, their own company stock.

It also publishes the names of board members or shareholders who acquire three percent or more of a company, based on the number of electronic shares in circulation.

The insider’s restriction or ‘closed period’, during which they are not allowed to trade their own company stock, will be extended to two weeks prior to the end of each quarter until the company’s financial report is distributed according to ADSM’s requirements. Previously, insiders could trade up to two weeks after the end of the quarter.

ADSM has also implemented new professional standards and training programmes for brokers, and has imposed new requirements for investors opening accounts with brokerage firms.

Brokers must now complete exams every two to three years to ensure that they are operating to the highest professional standards. Employees who do not pass exams or who fail to complete their training will be suspended.

There have also been amendments made to account opening forms and an additional clause regarding risk disclosure. Brokers will be obliged to question investors about their investment objectives and strategy.

Al Baloushi said: “The new disclosures make ADSM one of the most transparent markets in the Middle East. Violation of these rules will not be tolerated.”

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