Time to get tough

Moving from London to the Middle East was always going to be a great challenge but at the same time a great adventure. And so far so good. But from talking to friends involved in building up the financial world in the region and specifically in the UAE, one thing has been bugging me and it doesn’t seem to want to go away — until this week.

Regulation, transparency, applying the law and cracking down on those who fail to disclose or regularly chose to disregard deadlines has been a major sticking point for some time now and is creating some serious headaches for established finance professionals setting up in the region, and for those local firms who want to make regulation-abiding headway. I’m sure some have profited from a “whoops did I just shred that document you needed”, but that’s another matter.

Luckily, however, it seems those days are well and truly over with the Emirates Securities and Commodities Authority announcing a deserved crackdown on two brokerage companies banning them from trading in the UAE until further notice, due to non-compliance of market rules and regulations. And it has gone even further by issuing letters to four other businesses asking them to prove their compliance by the end of the week, while warning another 17 to rectify their legal status by February 4 or else. These are not bully-boy tactics, but necessary measures allowing the authorities to separate the bad and the ugly from the good and those who want to transform the UAE into the Middle East’s most progressive financial hub. Not only that, it also enables us to see the real picture within the corporate world, naming and shaming those that fail and applauding those who deserve credit for moving the industry and markets forward. Look out for further prevention reforms in 2007, with the Abu Dhabi Securities Market leading the way.

The encouraging news, however, is that the pattern is spreading further afield than just the UAE.

Evidence of the increasingly strict regulatory climate in the Gulf region is also being experienced in Kuwait and Saudi Arabia, with both governments and sets of regulators heeding calls for increased transparency from their respective locally listed companies.

For example, the Tadawul, the Saudi Arabian stock market, is investigating 25 cases of fraud, breaches in transparency regulations, and trading during periods of embargo, while the Kuwaiti stock market has imposed penalties on 13 companies and investors for violation of its transparency laws.

The next challenge is to see further evidence of transparency — not just from those that fail to disclose, but also from those that are willing to reveal how transparent they really are and that have nothing to hide. Perhaps I could suggest companies revealing their quarterly or annual figures? Just a hint of how more of you are doing in a clear and see-through manner would mean tougher questions, but also open the way for more competition and more unified best practice across Middle Eastern borders.