THE AUTHORITY

Lebanon 2015 | FINANCE | INTERVIEW

TBY talks to Firas Safieddine, Vice Chairman of the Capital Markets Authority (CMA), on important legal developments, privatization, and improving the culture of corporate governance.

Firas Safieddine
BIOGRAPHY
Before his appointment at the CMA, Firas Safieddine served as the Senior Advisor to the Lebanese Minister of Economy and Trade, and later the Lebanese Minister of Finance for a period of almost five years. Before joining the public sector, He was the Managing Director and Head of the Investment Committee of a regional family office, overseeing investments and operations at the firm. He served on the Board of Directors of several investment companies in Lebanon, Saudi Arabia, Singapore, the UAE, and the UK, and was also an instructor at the American University of Beirut. Firas Safieddine holds an MBA from the University of Chicago, Booth School of Business.

What are the main challenges and respective opportunities facing the CMA and what are the key steps that CMA has undertaken towards effectively implementing its mandate?

The CMA was established two and a half years ago. Law 161, which governs capital markets was passed in 2011, and the government appointed the Board of Directors in Mid-2012. Before the establishment of the CMA, a dedicated capital markets regulator did not exist in Lebanon. The stock exchange was a self-regulatory organization, and Banque du Liban (BDL) as the overseer of the capital markets had limited scope through one of it's departments; the Financial Markets Department. Law 161 is important because it is one of the most complete in the region, and has divided capital markets into three main pillars: The CMA Board, the Sanctioning Committee, and the Tribunal. Those are the governing pillars of capital markets in Lebanon and they are independent from each other, and as such, the structure of the law insured a major advantage in favor of more transparency in the market. The Board of Directors of the CMA issues regulations, develops, oversees and supervises the market, whereas the Sanctioning Committee is responsible for sanctioning any foul play and determines where fines should be applied. As CMA Board, we cannot apply any fines, only the Sanctioning Committee does. However, it is in our legal capacity to penalize participants by revoking licenses, or demand partial or complete stoppage of activities by any participant when deemed necessary. Also, the Capital Markets Law has established an independent tribunal, the first of its kind in Lebanon, specific to and specializing in capital markets. This tribunal is also governed by an independent board, and by law, the tribunal should deal with any case that is presented to it by a maximum period of six months. Such a legal condition carries great significance; it ensures efficacy and efficiency in market activities, while also increasing the confidence of investors in the local market. Should any problem arise with any institution or any capital market issue, they can go straight to the Tribunal and know that within six months they will have a verdict. Those who do business in Lebanon shall attest to how revolutionary such a tribunal is. The stock exchange is a government institution, and this affects its performance. The law stipulates that the government should transfer the Beirut Stock Exchange from an existing government institution into a joint stock company within a year, and then a year later they will have to privatize it. This should be the first thing on the cabinet's agenda. Ideally, we would like to see the Beirut Stock Exchange carry the flag and be the only exchange in the market—having its primary platform, its alternative investment platform, and commodities platform.

What role does the CMA play in encouraging and enforcing the culture of good corporate governance?

We actually transferred the existing regulations from the Central Bank to the CMA, and within six months we rewrote all the existing regulations together with the World Bank taking into consideration IOSCO standards and best business practices. When the internal work was complete, we took those regulations and went to the market, invited everybody, had a town hall meeting, and discussed the regulations in details with the market. Not only was the market ready, but the way we saw it is that they were eager for a regulator that understands how things should move forward, and they are changing the way they do business today. We are greatly encouraged about how the market is proceeding and are embracing these changes.