UAE stocks regulator weighs stricter reporting measures

The SCA is considering reducing the grace period that corporates will have to disclose their annual financial results.

The federal stock market regulator is mulling a plan to halve the period allowed for public companies to report earnings.

The Securities and Commodities Authority is considering reducing the grace period that corporates will have to disclose their annual financial results to 45 calendar days from 90 days after the end of the financial period. Quarterly results would have to be disclosed within 30 days instead of 45 days.

“The current grace period was set according to international best practices,” said Abdullah al Turifi, the SCA chief executive, during a session of the Federal National Council. “But we are considering shortening the time period.”

If approved, the new reporting regime would put the UAE closer to regulations in Saudi Arabia, where companies must provide the authority and shareholders with annual financial statements within 40 trading days and interim results within 15 trading days after the end of the financial period.

“This is good for the companies and the investors in terms of transparency,” said Nabil Farhat, a partner at Al Fajer Securities in Abu Dhabi. “The longer companies take to report the result, the more rumours arise and people speculate on the stock.”

Plunging oil prices has ushered in a period of volatility across regional markets. Dubai shares had a particularly rocky ride last month with the Dubai Financial Market losing more than 7 per cent on consecutive trading sessions before rising 13 per cent four days later.

“From the perspective of transparency, the information has to be shared at the same time for everybody,” said Tariq Qaqish, the head of asset management at Al Mal Capital in Dubai.“If you have a longer period, you would expect to see more info leaking out that will drive more volatility in the stock price and disadvantaging investors that are lacking that information.”

Companies with weak earnings or with other negative corporate news to report that could drag their share price down sometimes delay the release of their earnings.

In November, the DFM said it suspended trading on four dual-listed companies – Almadina for Finance and Investment Company, Hits Telecom Holding, National Industries Group Holding, and International Financial Advisors – after the firms “missed the deadline to disclose the financial statements as per the UAE SCA and DFM requirements”.

The DFM “also submitted a detailed report to (SCA) including the disclosure dates and its observations on the disclosures,” the exchange reported.

The UAE markets regulator has clamped down on trading irregularities, enforced penalties and rooted out excessive margin lending since shares began to tumble in October amid lower oil prices.

Last month SCA said that it banned four investors from trading after they committed violations. It did not name the violators in its statement.

The UAE and its exchanges were upgraded from frontier to emerging markets status in June 2013 and incorporated into MSCI’s Emerging Markets Index one year later. The move has ushered in a new focus on corporate governance standards and reporting rules as the country’s markets are opened up to more institutional investors from around the world.

“When institutional investors see the regulators are becoming strict but at the same time flexible, it’s going to be a positive outcome, because we are still in a developing stage,” said Mr Qaqish.

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