Interview: Maryam Buti Al Suwaidi
In what ways is innovation helping to streamline business operations in capital markets?
MARYAM BUTI AL SUWAIDI: The financial sector is experiencing rapid growth, and financial services firms are adopting flexible business models. As the regulator of capital markets in the UAE, the SCA closely monitors challenges and risks. The emergence of new products, services and technologies, such as distributed ledger technology and artificial intelligence, presents both opportunities and challenges for regulators. It is crucial to assess the impact of these offerings on the industry and markets, and re-align the regulatory framework that helps foster their development.
While technological advancements facilitate transaction flow, they are not without challenges. Risks include difficulties in monitoring cross-border trades, operational risks, cybercrime and data privacy concerns. In light of the UAE’s commitment to developing a diversified economy, financial innovation is essential. The demand for innovation in financial markets is increasing as the digital transformation continues around the world. Innovation in financial markets is increasing the speed of transactions, facilitating better structured products and increasing financial inclusion, widening the reach of the investor community.
Where do you see opportunities to enhance corporate governance among private sector firms?
AL SUWAIDI: Strong corporate governance practices play a crucial role in fostering trust in capital markets and driving economic growth. However, higher governance standards come with increased legal obligations for corporate directors and heightened expectations from shareholders, creditors and stakeholders to address conflicts of interest. The SCA has taken measures to strengthen governance regulations, promote institutional discipline, transparency and sound business practices in joint-stock companies. These efforts align with international best practices advocated by organisations such as the International Organisation of Securities Commissions and the OECD. The UAE has seen improvements in its ranking among countries for doing business and competitiveness.
The amended regulations aim to enhance governance practices in public companies, safeguard minority investor rights, foster board independence and increase shareholder participation in decision-making.
What will be the impact of the UAE authority’s limitations on foreign fund marketing?
AL SUWAIDI: The primary effect of the new regulations will be promoting foreign funds to retail investors, while leaving professional investors unaffected. Under the regulations, there will be a decrease in registration fees for foreign funds targeting professional investors. The goal of these measures is to strengthen regulatory oversight and enforcement to safeguard the savings of retail investors in foreign funds.
Additionally, the reforms address risks associated with unregulated investment management companies operating foreign funds in the country. The objective is to prevent regulatory arbitrage with foreign jurisdictions by addressing consistent requirements when offering investment funds to retail investors. Under the current rules, foreign fund managers will need to adhere to the same regulations when promoting cross-border foreign funds to markets such as the EU, Ireland, Luxembourg and the US. This may require the establishment of a local fund structure that invests in foreign funds. If foreign fund managers intend to engage retail investors in the UAE, they have the option to establish a local investment fund management company licensed by the SCA.
By creating local funds that allocate investment towards units of foreign investment funds and securities, retail investors can benefit from regulatory measures and oversight. This approach guarantees the security of their investment and instils confidence.