In order to modernize the legal and regulatory framework that governs the financial sector and promote stability, efficiency, and competition, the UAE Government has issued two federal laws that give greater powers to the Capital Market Authority (CMA) and the way capital markets are regulated.
The new decision rules align the national regulatory ecosystem with the highest international standards. It strengthens the independence of the Capital Market Authority and its role in safeguarding the stability of the capital markets sector. It will also improve investor protection.
The rules define the main principles of the CMA, which regulates licensed financial activities and issuers, directs and supervises them in accordance with international standards, issues regulations and standards to ensure fair and efficient financial processes, monitoring and analyzing risks related to the system.
The UAE is developing capital market regulation
The Act introduces early intervention measures to address indicators of deterioration in the financial condition of licensed institutions.
These measures include revitalizing capital recovery programs, imposing additional capital requirements and necessary funds, adjusting management and operational strategies and structures, appointing temporary committees or placing licensed firms under direct supervision. Extreme measures may include a merger, acquisition, or liquidation of the default company.
The CMA, in its role as a resolution authority, will play an important role in managing financial problems through the dismissal and appointment of managers, the appointment of an interim manager to manage the licensed organization and its assets, financial restructuring, and the implementation of rescue measures to ensure the continuation of critical operations.
The decree rules also provide for the increase of administrative fines in proportion to the seriousness of the violation and the seriousness of the transaction. The CMA will now be able to levy a maximum fine of up to ten times the profit earned by the infringer or 10 times the amount of the loss avoided.
The rules bring the UAE’s financial laws into line with organizations such as the International Organization of Securities Commissions, the World Bank, the International Monetary Fund and the Financial Action Task Force. It also supports enhanced international cooperation, streamlines consultation processes, and enables recognition of financial products across jurisdictions.
