Dubai’s financial free zone regulator has warned that some firms continue to flout corporate governance guidelines.
In its first Corporate Governance Thematic Review, the Dubai Financial Services Authority (DFSA) found that although the overall level of compliance among companies within the Dubai International Financial Centre was good, and that governance structures and arrangements were sound, the practices of a number of institutions fell short of their own stated policies.
The regulator found that a number of firms’ corporate governance documents contained imprecise information about the number of appointed directors and failed to provide solutions to resolve deadlocks in governing body determinations.
“As business plans and strategies change, so too will governance arrangements and responsibilities,” said the DFSA in the review’s executive summary.
“Firms should seek to comply with their stated policies or amend them to reflect current practices.”
Such governance issues were particularly prevalent in smaller organisations that lacked committees tasked with functions including risk management, audit and compliance.
Of particular note was the failure by directors and governing bodies to enhance their education and development through ongoing initiatives.
Only one firm reviewed provided evidence of corporate governance training for its directors, according to the DFSA.
“This [failure] represents a significant risk to the effective governance of institutions,” the regulator noted.
“Governing bodies need to recognise the need for the ongoing personal development of their directors and implement strategies to achieve that goal.”
The review, which began last year, took into account responses from 220 of the then 301 firms authorised in the DIFC. The free zone currently has 353 authorised firms.
“The findings of the review provide a benchmark and reference that should be used by institutions to assess their corporate governance frameworks and practices,” said the DFSA’s chief executive Ian Johnston.
“The DFSA is working to enhance the quality of governance of regulated businesses in the DIFC and where we detect governance failures, we will rectify them through supervisory methods or enforcement action.”
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