Corporate governance must be reviewed and improved in the wake of the collapse of Abraaj, according to Daman Investments chairman Shehab Gargash.
Gargash said he is concerned that the UAE capital markets have faced “major blows” to governance frameworks over the last several years, particularly that of Abraaj.
Gargash said he believes that there is still “ad hoc” governance over companies and traders.
“Insider trading is not looked at as seriously as it should,” he said. “And the emptying of company coffers, which we’ve never seen before, we have recently seen.
“These are all very serious situations. For me as a manager in this market, I have a much smaller universe of acceptable companies to invest in than I had five years ago. That is not a function of a bad market. It’s a function of bad governance.”
Gargash said that the UAE’s Securities and Commodities Authority is “extremely strict” on some elements of governance, and “extremely lax” on others.
“I think they are getting better,” he said. “But they are not there yet.”
Last week, the Dubai Financial Services Authority (DFSA) said it handed out fines of $299.3 million and $15.2 million – a total of $314 million - on Abraaj Investment Management Limited (AIML) and Abraaj Capital Limited (ACLD), the largest ever imposed by the regulator.
Daman’s CEO, Ahmed Khizer Khan, said that he doesn’t believe that “after the fact” fines are a long-term solution, instead calling for increased governance and for boards of directors to be held responsible.
“Especially for a defunct company, what are you going to get out of it? There is also a long line of creditors standing in front of you. There is a need to enhance the governance,” he said.
“The regulatory regime has to ensure the most controlled guidelines [are followed], from shareholder and investor protection to the responsibility and liability of the board of directors,” Khan added.
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