By Daniel Stanton
Falcon Financial Services decides to shut down rather than raise capital in line with new UAE regulations.
One of the brokerage firms suspended by the UAE stock market regulator last month for failing to meet new paid-up capital and bank guarantee requirements is shutting down with the loss of 15 jobs, an employee has revealed to Arabian Banking & Finance.
The employee, who did not wish to be named, said Dubai-based Falcon Financial Services has decided to close rather than raise its capital in line with the new regulations, without giving any further details.
The Emirates Securities and Commodities Authority (ESCA) suspended Falcon Financial Services along with 10 other firms after they failed to increase their paid-up capital and bank guarantees to $8.1 million and $5.4 million respectively.
The closure could be the start of a period of consolidation in the industry where small brokerage firms - suffering due to competition from larger rivals and a reduction in commission rates - either team up with other smaller players or leave the market altogether.
ESCA's statement at the time of the suspensions seemed to suggest that brokerage firms that did not meet the new requirements within a month would lose their brokerage licences.
However, Ramesh Iyer, compliance officer at Merchant Securities, one of the affected firms, said that the firms are still licensed to continue as brokerage houses until January, even though they cannot buy securities.
This gives them more time to raise additional capital, although they may be subject to financial penalties from the ESCA for late compliance.
The firms suspended by the ESCA on October 1 were Amwal International Financial Brokerage, International Shares and Bonds Centre, Merchant Securities, Al-Madina Financial Brokers, Faisal Shares & Bonds Broker, Emco Financial Services, Delma Brokerage, Dubai Brokerage, Al-Theqa Financial Services, Global For Shares and Bonds, and Falcon Financial Services.
Delma Brokerage, International Shares and Bonds Centre, Emco Financial Services and Amwal International Financial Brokerage said they have increased their capital and resumed full operations. The remaining firms were not immediately available for comment.