THINKING GLOBALLY

Abu Dhabi 2016 | FINANCE | INTERVIEW

TBY talks to HE Dr. Obaid Al Zaabi, CEO of the Securities and Commodities Authority (SCA), on securities regulation, keeping up with the latest technologies, and the UAE's capital markets.

HE Dr. Obaid Al Zaabi
BIOGRAPHY
HE Dr. Obaid Al Zaabi is the CEO of the Securities and Commodities Authority (SCA). He has over 25 years of work experience in financial legislation, accounting, banking, finance and investment, and sharia-compliant finance from many leading financial institutions in the UAE, such as the UAE Central Bank, Dubai Islamic Bank, Amlak Finance, and the SCA. Dr. Al Zaabi received his PhD in finance and banking from UK-based Durham University in 2006. Previously he served as deputy CEO for issuance and legal affairs at the SCA from 2014-2015.

What is the most challenging aspect of bringing in companies and registering them in a new financial free zone?

Ensuring that the quality of foreign companies registered is in line with international best standards is at the core of our task. Today, our capital markets are more sophisticated, larger, faster, and more technologically driven than at any time in history. This rapid change requires a new regulator to have the ability to quickly identify risks, track emerging trends, and understand how new financial products and evolving market conditions impact both investors and the capital markets. Therefore, one of the greatest challenges we face is that of receiving high-quality information and data on prospective registrants to ensure that they will be able to fit into today's fast-changing environment. Enforcement and transparency issues are also key challenge areas that the SCA must always stay on top of. Another challenging aspect is ensuring that the enforcement division of a new regulator in a financial free zone uses tools that help staff determine whether an issuer's financial statements at disclosure time require further review or not. Another growing challenge is the globalization of securities regulation. Technological advances that have impacted the domestic securities markets have also significantly affected the global securities market and accelerated the movement of capital across international borders. These developments require that a new regulator think more globally and recognize that its registrants will increasingly be global players and that rules and regulations have to take account of this increased trend toward globalization.

Fintech is a growing segment within the market. How might its development make operations evolve for the SCA?

Fintech is a growing and crucial part of our world economy. Changes in technology are happening at such a fast pace that financial regulators have clearly seen the advantage of establishing special fintech committees whose job it is to ensure that the regulator stays abreast of all the latest technology developments. As innovation is an integral part of the UAE government's strategic goals, the SCA is working on developing its fintech capabilities, which will eventually be responsible for regulatory policies and development strategies to facilitate the use of technology and innovation to better manage risks, enhance efficiency, and strengthen competitiveness in the UAE's capital markets. For example, the SCA has been working toward finalizing a comprehensive set of regulations for the establishment of equity crowd funding platforms. Crowd funding will become one of the most important future means to tap the capital market, especially for the SME sectors in this part of the world. Since fintech companies are clearly entering the MENA region, it is imperative that regulators scan the horizon for cutting-edge technologies. Currently, the SCA is working toward catalyzing greater interest toward the development of emerging technology-driven innovations in financial services. We are considering working together with relevant fintech-related stakeholders including innovators, entrepreneurs, established businesses, investors, and other authorities to accelerate growth and innovation. Here at SCA, we provide a fertile and supportive regulatory environment for nurturing innovation in fintech such as block-chain technology, crowd-funding, high-frequency trading, and robo-advisory services and are constantly trying to balance advancements in technology in relation to investor protection.

What does best practice mean for the UAE's capital markets?

Over the years, we have had to craft our rules using the concept of best practice in order to develop legislation for margin trading, capital adequacy, custody, market making, securities borrowing and lending, short selling, warrant, mutual funds, investment management and trading, clearing, and settlement. As such, our efforts at best practice were rightly focused on addressing regulatory gaps, which had not been previously addressed. For example, best practice allowed us to remedy key settlement issues surrounding delivery-versus-payment issues as well as other rules related to the issuance of clearer transparency and disclosure requirements and a wide range of other regulatory requirements across the expanse of the UAE's capital markets, impacting equity, debt, boards of directors, conflicts of interest, investment regulations, and investment funds.