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Wed 3 Jan 2007 10:07 AM

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GCC clampdown on compliance

Two UAE brokerage firms suspended and 21 warned in latest drive for enforcement of stock market rules.

Brokerage companies Al Safwa Islamic Financial Services and Golden Gate Securities have been banned from trading in the UAE because of non-compliance with market rules and regulations, according to the Emirates News Agency.

The ban – enforced by the regulator Emirates Securities and Commodities Authority (ESCA) – is the latest sign of increasing enforcement of market regulations in the Gulf region.

The two brokerage companies are not allowed to trade on UAE bourses until further notice.

ESCA has also issued warning letters to four other companies, asking them to prove their compliance with regulations before next Thursday; another 17 companies were warned for failing to complete their licensing requirements, and given until February 4 to rectify their legal status.

According to the Abu Dhabi Securities Market (ADSM) website, ASCA sources said that punitive action has been initiated against a few brokers as part of its efforts to enforce compliance in license renewal. Brokerage firms are required to comply with a list of requirements to renew their licenses for 2007.

“A number of brokers have missed the December 15 deadline to submit their applications after meeting the compliance related requirements. The market watchdog is understood to be upset over the laxity from the part of brokers in meeting regulations relating to license renewal,” said a Dubai-based broker quoted on the ADSM website.

The move is evidence of the increasingly strict regulatory climate in the Gulf region. 

In a announcement (unconnected with today’s action on the brokerage firms) the ADSM said last month that it will implement new reforms in 2007 to prevent insider trading.

It was also reported in the Arabic press last month that the Saudi stock market is investigating 25 cases of fraud, breaches in transparency regulations, and trading in the period of embargo.  The Tadawul is thought to be increasing regulation, and issuing penalities relating to its transparency laws.

In Kuwait, it was also reported last month that the local stock market has imposed penalties on 13 companies and investors for violation of the transparency laws. 

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