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The UAE government issued a federal decree law regarding the Capital Market Authority, and a federal decree law regarding regulating the capital market, as part of efforts to modernize the legislative and supervisory framework for the financial sector, enhance its stability, efficiency, and competitive ability, in a way that consolidates the compatibility of the national system with the highest international standards, and enhances the independence of the Capital Market Authority and its role in the safety and stability of the financial market sector and fair competition in this sector.
The basic objectives of the Capital Market Authority
The two decrees aim to maintain the stability and safety of the capital market sector. They also define the basic tasks of the Capital Market Authority, most notably regulating and supervising licensed financial activities and issuers in accordance with international standards, issuing regulations and standards to ensure fair and effective financial practices, supporting governance principles, monitoring and analyzing systemic risks, and developing the capital market sector in the country as a financial center with an international reputation.
Compatibility with international standards
The two decrees aim to raise the level of compatibility with global practices and adherence to the requirements of international organizations concerned with the financial sector, including: the International Organization of Securities Commissions (IOSCO), the World Bank (WB), as well as the International Monetary Fund (IMF), the recommendations of the Financial Action Task Force (FATF), and other requirements that would improve international assessments.
On the other hand, the two decrees will contribute to enhancing cross-border cooperation and supporting the state’s direction in building strong relations with all countries of the world, in addition to facilitating mutual recognition procedures and opening the door to the recognition of cross-border financial products, according to an official government statement.
Keeping pace with digital transformation and innovation in financial services
In the field of customer protection and financial inclusion, the two decrees establish an integrated system that obligates licensed persons to enable all segments of society to access appropriate financial services, keeping pace with digital development and financial technology, and ensuring leadership and sustainability in financial activities and services. Frameworks have also been developed for national awareness programs in cooperation with the financial sector and community institutions, and an emphasis on the continuation of positive practices previously in place, especially those It is related to aligning credit facilities with the client’s income and protecting him from irresponsible practices.
Proactive measures to ensure financial stability and customer protection
The decree law regarding the regulation of the capital market includes proactive measures for early intervention to address any indicators of deterioration in the conditions of the licensed person, with the aim of ensuring the financial stability of financial activities and services and protecting customers, including activating recovery plans, imposing additional requirements for capital and liquidity, amending the strategy and administrative and operational structures, appointing temporary committees or direct management of the licensed person, and taking merger, acquisition or liquidation procedures when needed. And applying special procedures to the licensed person if his situation is not corrected.
According to the decree law, the Capital Market Authority – in its capacity as the settlement and resolution authority – plays a major role in managing financial crises by isolating and appointing new departments, appointing a temporary director to manage the licensed person and his assets, restructuring the capital, and carrying out rescue operations to ensure the continuity of vital activities.
In terms of administrative penalties, the decree law stipulates raising the ceiling of administrative fines in proportion to the severity of the violations and the volume of transactions, allowing the Authority to impose a proportional fine of up to ten times the profit the violator has achieved or the loss he has avoided, and the possibility of reconciliation with violators before final judicial decisions are issued, in addition to the possibility of publishing the penalties on the official website of the Capital Market Authority, in a way that enhances Transparency and discipline in the market.
The most prominent provisions of the two decree-laws:
– Strengthening the independence of the Capital Market Authority in accordance with international standards.
– Providing an integrated system to protect investors and create advanced and competitive financial markets that support financial technologies.
– Reducing systemic risks by adopting proactive measures for early intervention and settlement to address any indicators of deterioration in the financial conditions of licensed entities.
– Protecting customer funds and isolating them from the liability of the licensed entity, given that customer funds and securities are not considered part of the financial liability of the licensed entity.
– Obligating licensed entities to enable investors to access appropriate financial services to keep pace with digital transformation and innovation in financial services and activities.
– Emphasizing the operational and regulatory competencies of financial markets, authorizing them to practice central clearing and central depository activities, as well as deciding the finality of transactions resulting from the execution of orders in the market.
– Enhancing investor protection by enacting standards for disclosing and preserving their assets and organizing mechanisms for receiving complaints and settling disputes.
– Regulating Sharia-compliant products and activities within the supervision of the Capital Market Authority.
The primary tasks of the Capital Market Authority in the decree law include:
– Establishing and implementing financial policy for the operation of financial markets, and organizing and supervising licensed financial activities in accordance with international standards.
– Issuing systems and standards to ensure fair and effective financial practices.
– Monitoring and analyzing systemic risks.
