SCA Seeks Information on Foreign Exposure

Haseeb Haider
Filed on January 30, 2009

ABU DHABI - The Securities and Commodities Authority (SCA) has instructed the listed firms to submit detailed information on their exposure to real estate, derivatives and structured products to ascertain the extent of the financial losses the nation’s companies have suffered from these investments in to recession-hit western economies.

The SCA circular comes as a follow-up to the UAE Central Bank’s instructions to banks and financial institutions on the same topic, issued on January 27, asking them to submit detailed information on their investment activities.

The instructions allow companies to furnish new information in their preliminary unaudited reports which can be submitted within 45 days after the closure of financial year.

The banks, financial and corporate institutions, who have huge exposure to equities, structured products and real estate products, have to furnish the information classified according to their geographic locations, maturity, tenor and also the values.

The company has to explain the accounting standards it follows to manage these investment.

The financial statement should also disclose details about allocations, cash and deposits at banks as well as accounts and deposits with foreign banks, outlook for performance in 2009 and future plans.

According to a US thinktank, UAE’s ADIA, the world’s largest sovereign wealth fund (SWF) lost $125 billion in the financial crisis, while Kuwait’s new oil minister put the figure in trillions of US dollars.

SCA said its move aims at administering justice in terms of transactions, achieving transparency and protecting investors.

‘’The aim is to explain the impact of the international financial crisis on these companies,’’ the SCA said.

In September 2008, SCA asked these companies to follow these instructions when they prepared their statements for the third quarter of 2008. It noted that all companies have fallen on line.

Dr Qaiser Anis, managing partner at Elliot Shahid Hadi & Co, commenting on the SCA move said that the idea is to evaluate the amount of financial losses UAE’s firms have suffered in the global financial meltdown.

Eric J Milne, partner head of banking and finance, at Simmons & Simmons said that shareholders will welcome this development as it will assist in providing further clarity on asset valuations. He said most companies will be monitoring their exposure to these assets very carefully in the current financial climate.

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