The Securities and Commodities Authority (SCA) recently issued amended market disclosure rules that mainly concern shares of companies listed on the Dubai Financial Market (DFM) or the Abu Dhabi Securities Exchange (ADX). The new rules mainly amend Decision No (3/R) of 2000 on disclosure and transparency rules (disclosure and transparency rules) by strengthening the early warning regime in order to inform the market about stakeholder training in DFM/ADX companies. The new rules appear to have been released in response to recent equity investment activities in Arabtec Holding PJSC, which took the market by surprise. These guidelines help companies disclose ESG measures on environmental, sustainability and governance issues. The report`s 31 key performance indicators (KPIs) are assigned to both the Global Reporting Initiative (GRI) and the Sustainable Development Goals (SDGs). The new rules also include a change to the SCA rules for listing securities and commodities. Article 17 of this Regulation prohibits the chairman, the members of the board of directors, the managing director and any other employee of an undertaking listed on dfM/ADX from carrying out transactions in the securities of such an undertaking unless the proposed transaction has been disclosed to the market, including the quantities and prices of the securities which are the subject of the transaction and the prior approval of the market manager for the transaction in question has was obtained. Obtained. The new rules broaden the scope of this rule by requiring the disclosure of all transactions in securities of parent companies, subsidiaries or affiliates of companies listed in DFM/ADX, provided that they are also listed on the stock exchange themselves. As amended, this new regulation would not require the disclosure of transactions in group companies, unless those group companies are also listed on the ADX/DFM. This is unusual because the 10% rule mentioned above applies to investments in the group companies of companies listed in DFM / ADX and does not also require the listing of other companies in the group. The ADX notes that the investor community often interprets the lack of disclosure of key sustainability indicators as a signal that a company may not be able to mitigate sustainability risks or seize opportunities.
It also highlights its importance in improving the competitiveness of enterprises by understanding the needs of business stakeholders in order to increase market competitiveness. Under the previous rules, natural persons, as well as their minor children, as well as sole proprietorships (but without pooling the holdings of their affiliated companies), had to disclose to the market their ownership of 5% or more of the shares of a company listed on the DFM/ADX. This rule has been amended to require the disclosure of 5% of the shares of DFM/ADX listed companies held in total by companies or their affiliates, which include parent companies, subsidiaries or other companies belonging to the same group. There are no guidelines on what constitutes membership in the same group of companies, but we believe that co-ownership is probably sufficient. Despite the uncertainty about the definition of group companies, this is a sensible change to prevent companies from circumventing the disclosure regime through share purchases by affiliates. These rules, in turn, are in line with the recommendations of the Sustainable Stock Exchange Initiative (SSE) and the World Federation of Exchanges (WFE), of which ADX is a member. The Abu Dhabi Securities Exchange (ADX) announced in July that it had issued a directive on disclosure of the social environment and governance (ESG) for listed companies. The introduction of this set of 31 KPIs is in line with the ADX strategy, which aims to support economic growth while creating a sustainable business environment and encouraging the business community to adopt social sustainability practices. According to the ADX initiative, listed companies are required to submit an independent sustainability report because these reports comply with GRI standards. Sustainability reports provide the company`s environmental, social and business disclosure content in one place and address the need for environmental and social information and governance in relation to investors and other stakeholders such as consumers and civil society. Recent rule changes set out in this Customer Advisory impede the ability of corporate groups to implicitly constitute significant interests in companies listed in DFM/ADX or to acquire control of such companies below a base 10% stake.
Timely disclosure of changes in significant holdings should enhance investor confidence and warn investors of impending changes in control. The next step will be for the UAE to introduce a meaningful shareholder-focused regime to regulate changes in the control of DFM/ADX companies. The Abu Dhabi Securities Exchange (ADX) has issued a set of ESG disclosure guidelines for listed companies. Under the previous rules, all natural persons and sole proprietorships that held 10% or more of the shares of a company listed on the DFM/ADX had to immediately inform the market of any intention to acquire 20% or more of the shares of the same company and give the DFM/ADX the right, after consultation with the SCA, to prohibit the acquisition, if this would harm the interests of the national economy. The new rule lowers the basic requirement for a 10% stake, aggregates the holdings of corporate groups (as amended by the 5% rule discussed above) and provides for a new disclosure threshold of 30%. In addition, DFM/ADX have the possibility to block such a transaction if the exchange determines that the acquisition would harm the interests of the exchange itself or the national economy. These are sensible changes that bring the UAE closer to many other jurisdictions. However, it would be preferable for shareholders to have the opportunity to decide on a transaction with a change of control or otherwise participate in it, rather than the regulator of an exchange having broad discretion to block a transaction.
