The market regulator yesterday unveiled a major reform of share ownership rules that require greater disclosure by investors building big stakes in listed companies.
The new rules require investors to inform the market immediately if they intend to acquire a shareholding in a listed company of 30 per cent or greater.
The market and regulator have the right to reject the transaction if they believe it would be contrary to the interests of the national economy, the ruling said. The regulations also require all investors to disclose so-called direct and indirect holdings in publicly listed companies.
Investors are required under the new rules to add together all shareholdings in a single public company owned by themselves, their "under-age" children, their companies and any affiliated entity and inform the market if the total holding is 5 per cent or more.
Investors will also be required to disclose when they own 10 per cent or more in a so-called parent entity, subsidiary or affiliated company of any publicly listed company.
The new rules go some way to address calls for more disclosure by companies seeking to buy big stakes in listed firms.
The share price of Arabtec Holding more than doubled this year as reports of an accumulation of shares by a strategic investor - now known to be Aabar Investments, the Abu Dhabi government-controlled investment fund - became an open secret in trading room s.
In March, the Dubai Financial Market (DFM) announced Aabar had built up a 5 per cent stake in Arabtec. But in May, the DFM revealed Aabar had amassed a 21.57 per cent stake in Arabtec through its affiliated companies. Aabar's entities were not obliged to disclose their holdings in Arabtec if they were under 5 per cent.
The Financial Services Association at the time said while there was no suggestion that either Aabar or Arabtec had broken laws on disclosure, the trades may have revealed a "grey area" in market regulation that should be examined.
"The regulations stem from the keenness of the authority on the governance of financial markets and the desire to promote standards of disclosure and transparency and to ensure the protection of shareholders in line with best practices," the Securities and Commodities Authority (SCA) said yesterday.
The newly introduced requirements are expected to spark controversy in the investment community.
"Every public company will have to look at their investor registrar and may find they need to group certain owners who collectively own more than 5 per cent," said Mohammed Ali Yasin, an capital markets expert in Abu Dhabi.
"We may suddenly see new ownership names. It also means that there will no longer be a point in buying under different names or special purpose vehicles, because they will be obliged to disclose to the market."
Meanwhile, the Dubai International Financial Centre (DIFC) last night revealed that it will also update disclosure rules governing share ownership. The DIFC said it would meet the same standards required in the European Union on disclosure and further tighten rules on insider trading and other prohibited practices.
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