SCA board okays rules on sukuk, bonds

Regulations expected to pave the way for raising more capital and subsequent listing

Sultan bin Saeed al Mansouri chairing the board of directors meeting. — supplied photo

The Securities and Commodities Authority (SCA) has approved regulations for sukuk and corporate bonds, a step which will pave the way for raising more capital and their subsequent listing.

At a meeting of the board of directors, which was presided over by the UAE Minister of Economy Sultan bin Saeed Al Mansouri, and attended by Deputy Board Chairman, Abdullah Salim Al Turifi, SCA Chief Executive Officer, and all other members, reviewed a number of issues related to the financial markets including draft regulation for sukuk, draft regulation for corporate bonds and the proposed amendments concerning lending and borrowing of securities and proposed amendments on regulation for trading, clearance and settlement, ownership transfer and securities custody.

The board approved two new regulations — regulation for sukuk and regulation for corporate bonds — having passed through several stages, which took into consideration the best international practices. A specialised international consultancy firm was tasked with drafting the first draft of the two regulations.

The regulation, which deals with sukuk as an ownership tool and not as a debt one. The new sukuk regulation conforms to UAE’s policy, particularly Dubai’s ambitious programme of becoming the capital of Islamic economy.

The 28-article regulation covers several scope of application, including compulsory listing of companies and approval, issuance and listing rules, procedures and documents required for approval of listing, record for application for listing and issuance of sukuk, listing, trading, clearance and settlement of sukuk, suspension and cancellation of listing and many other related issues.

And regarding principal listing of retail sukuk, applicant must have been established in the UAE outside a financial free zone. The regulation also demands the listing of sukuk on the markets to avoid doing business outside the official framework.

The new regulation, which replaces the old one aims at boosting the bond market. The regulation was prepared based on studies earlier conducted on international practices and inputs and feedback from various categories of the financial market industry. 
It covers various scopes of application, including compulsory listing of companies and approval, issuance and listing rules, procedures and documents required for approval of listing, record for application for listing and issuance of sukuk, listing, trading, clearance and settlement of sukuk, suspension and cancellation of listing and many other related issues.

As part of its commitment to sustainably develop the legislations regulating the country’s financial markets, the board approved a proposed amendment on Article (14) of SCA Decision No. (2) of 2001 concerning regulation for trading, clearance and settlement, ownership transfer and securities custody. 
To clear any ambiguity that may occur regarding the ban on doing business during a particular period of time in the interest of the person covered by the ban, or for being a representative of a third party or a legal representative of a corporate body. This is to avoid the suspicion or doubt of conflict of interest against the person covered by the ban.

Another regulation amendment that was approved concerning lending and borrowing of securities to facilitate borrowing by brokers in time of need and to encourage foreign establishments to do business on the local markets. It is also to allow brokerage firms to borrow in case they failed to deliver securities as per the Delivery versus Payment (DVP) procedures without necessarily having to go for SCA approval, enable the execution of contracts between foreign establishments through direct clearance and other borrowing circumstances that match with international practices. - haseeb@khaleejtimes.com