UAE financial system

Regulators

Financial Intermediaries / Institutions

Financial Markets

Financial Instruments

Financial Services All the services which are discussed by us are part of UAE
Financial system as well

Regulators in UAE:
The formal financial system comes under the regulations of the Ministry of finance (UAE -
MOF), Central bank of the UAE, Securities and Commodities Act (SCA) and other regulatory
bodies.

UAE-MOF

1. Development and ensuring the sustainability of the financial resources of thefinancial

resources of the Federal Government.

2. Raising and developing the efficiency of financial planning and the implementaion of the
public budget of the state.

3. Raising and developing the efficiency and effectiveness of the financial work systems of
the federal government.

4. Development of the legislation and financial policies and providing a completive

environment.

5. Enhancing the financial position of the state on the regional and international levels.

6. Ensure the provision of all the administrative services in accordance with the standards
of quality, efficiency and transparency.

Central Bank of the UAE

The Bank shall direct the monetary, credit and banking policy and supervise over its
implementation in accordance with the States general policy and in such ways as to help
support the national economy and stability of the currency.

For the attainment of its objectives, the Bank shall:

1) Exercise the privilege of currency issue in accordance with the provisions of this Law;
2) Endeavor to support the currency, maintain its stability internally and externally, and ensure
its free convertibility into foreign currencies.
 3) Direct credit policy in such ways as to help achieve a steady growth of the national economy;
4) Organize and promote banking and supervise over the effectiveness of the banking system
according to the provisions of this Law;
5) Undertake the functions of the bank of the Government within the limits prescribed in this
Law;
6) Advise the Government on financial and monetary issues;
7) Maintain the Governments reserve of gold and foreign exchange;
8) Act as the bank for banks operating in the Country;
9) Act as the States financial agent at the International Monetary Fund. The International Bank
for Reconstruction and Development, and other international and Arab Funds
and Institutions. And carry on all dealings of the State with such concerns.

http://www.centralbank.ae/en/index.php?option=com_content&view=article&id=76&Itemid=96

Securities and Commodities Act (SCA)

Strategic Goals:
- First: Developing a supervisory system of work at the SCA in accordance with the best
international practices.
- Second: Developing legislations that regulate business activities in the UAE capital markets.
- Third: Excellence and creativity in providing services to all parties in the capital markets.
- Fourth: Developing and providing the central/non-central administrative services with utmost
transparency and efficiency.

Dubai Financial Services Authority

The DFSA is the independent regulator of all financial and ancillary services conducted through
the DIFC, a purpose-built free-zone in Dubai.
The DFSAs regulatory mandate covers asset management, banking and credit services,
securities, collective investment funds, custody and trust services, commodities futures trading,
Islamic finance, insurance, an international equities exchange and an international commodities
derivatives exchange.
The DFSA is also responsible for the regulation and supervision of persons in the DIFC in
relation to anti-money laundering, counter-terrorist financing and sanctions compliance.In
fulfilling its mandate as the sole independent financial services regulator for the DIFC, the DFSA
performs a number of functions.

Policy and Rulemaking

Authorisation
Recognition
Supervision
Enforcement
International Co-operation

Financial Intermediaries / Institutions

Commercial Banks
The Central Bank is entrusted with the task of organizing banks in upgrading their management
and to ensure their financial soundness. Circulars and regulations are being issued from time to
time by the Central Bank to achieve this objective. The Central Bank is also continuously
studying various ways and means to make the UAE a noted regional financial center.
1. Locally Incorporated and Foreign Banks - Banks in the UAE are divided into two major
categories:
- Locally Incorporated Banks - these are public shareholding companies licensed in accordance
with provisions of Union Law No. (10) of 1980, and
- Branches of Foreign Banks which have obtained Central Bank's licenses to operate in the
country as per provisions of the said Law. Islamic banks refer the laws provided separately.

Investment Banks

Union Law No. (10) of 1980 defined investment bank as bank that does not accept deposits
whose maturities are less than two years, but may borrow from its head office, from local or
foreign banks, or from financial markets. Investment banks are licensed under the Regulation
No. 21/2/88 dated 14/6/1988.

Financial Investment Companies

In order to organize and promote the business of financial investment companies to the
appropriate internationally recognized standards and protect investors, the Board of Directors of
the Central Bank issued Resolution No. 164/8/94 dated 18.4.1995. The resolution defines
financial investment companies as those conducting one or more than one of the following
business:

1. Opening investment accounts and managing portfolios on behalf of others, whether

individuals or companies.
2. Preparing feasibility studies for projects and marketing allotments and stocks of
shareholding companies.
3. Establishing and/or managing investment trust funds.
4. Establishing and/or managing other investment funds and act as trustee of funds
entrusted to it by a trust to manage on behalf of a beneficiary.
5. Subscribing to companies capital and participating in syndicated loans.

A financial investment company should be a juridical person with a minimum capital of dirham
twenty five million dirhams liable to be increased according to the business the company intends
to undertake. The resolution also requires that national shareholding should not be less than
51% of the paid-up capital, in addition to other terms and conditions set forth in the regulation.

Moneychangers

Money exchange is a thriving business in the UAE owing to a demographic structure which
contains large numbers of expatriates regularly transferring remittances to their families and
relatives in their home countries. The number of moneychangers operating in the country and
volume of their transaction have increased rapidly in recent years, hence prompting the Central
Bank to issue Resolution No. 123/7/1992, dated 29.11.1992 promulgating the new regulation for
moneychangers. One of the most important provisions of the resolution confines licencing for
carrying on moneychanging business to institutions and companies established per provisions
of the commercial companies' law. The resolution also requires that the natural person be a
UAE national of not less than 21years of age. In case of companies, the national shareholding
should not be less that 60% of the total paid-up capital. The regulation set the minimum capital
at One Million Dirhams or Two Million Dirhams, depending on the scope of activities the
applicant wishes to undertake.

Finance Companies

The Central Bank's Board of Directors Resolution No. 58/3/96 dated 14/04/1996 and Resolution
No. 165/06/2004 dated 06/12/2004 regulate the business of finance companies (conventional)
and finance companies which conduct their business per Islamic Sharia'a Principles
respectively. Finance companies undertake one or more of the following major financing
activities.:
1. Extend advances and/or personal loans for personal various consumption purposes.
2. Financing trade and business, opening credit and issuing guarantees in favor of
customers.
3. Subscribing to the capital of projects and/or issues of stocks, bonds and/or certificates of
deposit.

However, contribution of the financing company to the capital of projects, issues of stocks
and/or bonds, or certificates of deposit should not exceed 7% of its own capital.

The paid-up capital of a finance company should not be less than dirham thirty five million and
national shareholding should not be less than 60% of total paid-up capital, without prejudice to
provisions of Federal Law No. 8 of 1984 and any subsequent amendments thereto.

Financial & Monetary Intermediaries

CENTRAL BANK OF THE UAE THE CENTRAL BANK BOARD OF DIRECTORS

RESOLUTION No. 126/5/95 AND RESOLUTION No. 153/5/97 egarding the Regulation for Financial and
Monetory Intermediaries

The Central Bank's Board of Directors Resolution No. 126/5/95, dated 25.6.1995 regulates the
business of intermediating in the sale and purchase of domestic and foreign stocks and bonds,
currencies and commodities, as well as intermediating in money market transactions. According
to the resolution, the intermediary should be a UAE citizen in the case of natural persons, and
national shareholding should not be less than 60% of total paid-up capital in the case of
companies. The regulation sets a minimum capital of one million dirhams, two million dirhams or
three million dirhams according to the scope of activities the intermediary intends to carry on.
Granting of licence to brokers and intermediaries dealing in local and foreign shares is the
responsibility of the Securities and Commodities Authority of the UAE. Central Bank of the UAE,
however, grants licence to brokerage firms dealing in currencies and commodities as well as
intermediating in currency market transactions.

Representative Offices
A representative office undertakes one or more of the following activities. The Central Bank's
Board of Directors Resolution No. 57/3/1996 dated 14/4/1996 regarding Representative Offices:

1. Representing the financial institution licensed to deal inside the country, including
contacts on its behalf with concerned agencies as well as promoting its services in the
local market.
2. Providing the head office of the licensed financial institution with data relating to
economic developments in the country.
3. Providing customers of the licensed financial institution with information on the local
market.
4. Providing data to local agency, which intends to develop its business at countries
wherein the licensed institution conduct its business.
5. Providing customers with banking, financial and investment consultation services.

The representative offices should represent a bank or any other financial institution incorporated
outside the country, holding a valid license obtained from competent authorities. Such bank or
financial institution should also be subject to the direct supervision and examination of the said
authorities at the country of origin and/or the head office as per laws of the country.

Financial Markets

Emirates Securities Market:

The Securities & Commodities Authority (SCA) has been founded based on the Federal Law no.
(4) of 2000, that has stipulated on establishing the Emirates Securities & Commodities Authority
& Market. Accordingly, the SCA laid out its administrative and technical structures and
subsequently took the initiative to set up the Emirates Securities Market ESM.

As a matter of fact, both of the Abu Dhabi Securities Exchange ADX & Dubai Financial Market
DFM are the actually bourses eligible for trading transactions of the listed companies shares.
Therefore, the SCA has successfully managed to link both markets via electronic installation of
the live-market-watch screens for the Emirates Securities Market ESM.

Moreover, the SCA issues on daily-basis the ESM index which respectively reflects the trading
movements of the listed companies shares in both markets. While the index issued bearing the
name of the Emirates Securities Market ESM, it is called, at the same time, the SCA index
which is currently being considered the official index of the UAE capital market.

It is worth mentioning that, there are quite reasonable number of the live-market-watch screens
that are presently dispersed in the trading halls of ADX, DFM as well as in Sharjah, Ras Al-
Khema, and Fujairah emirates in addition to the newly fixed one in Al-Ain city.

Abu Dhabi Securities Exchange aspires to become the market of choice in the region"
The Abu Dhabi Securities Exchange (ADX) was established on 15 November 2000 by Local
Law No. (3) of 2000, the provisions of which vest the Market with a legal entity of autonomous
status, independent finance and management, and give ADX the necessary supervisory and
executive powers to exercise its functions.

These functions are:

1. Provide opportunities to invest savings and funds in securities in order to benefit national
economy.
2. Ensure the soundness and accuracy of transactions and to ensure the interaction
between demand and supply in order to determine prices.
3. Protect investors through establishing fair and proper dealing principles between various
investors.
4. Impose stringent controls over securities transactions to ensure sound and conduct
procedure.
5. Develop investment awareness by conduction studies and issuing recommendations in
order to ensure that savings are invested in productive sectors.
6. Ensure financial and economic stability and develop trading methods in order to ensure
liquidity and stability of prices of Securities listed on the market.

Moreover, ADX has the authority to establish centers and branches outside the Emirate of Abu
Dhabi. To date it has done so in Fujeirah, Ras al Khaimah, Sharjah and Zayed City.

The Abu Dhabi Securities Exchanges board of directors is comprised of seven members
nominated by Amiri Decree. The members of the board hold office for a term of three years. The
first board of directors was constituted by Amiri Decree No. (8) of 2000.

Dubai Financial Market was established as a public institution having its own independent
corporate body by a Resolution from the Ministry of Economy No 14 of 2000.

DFM is operating as a secondary market for trading of securities issued by public joint-stock
companies, bonds issued by the Federal Government or any of the Local Governments and
public institutions in the country, units of investment funds and any other financial instruments,
local or foreign, which are accepted by the Market. The Market commenced operations on 26th
March 2000.

As decided by the Executive Council Decree on 27th December 2005, DFM us set up as a
Public Joint stock Company in the UAE with paid up capital of AED 8 Billion allocated over 8
Billion shares, with a par value of AED 1.6 per share, and the twenty percent (20%) of DFM
shares be offered for public subscription. This IPO, the first of its kind in the region, was highly
oversubscribed and generated more than AED 201 billion.

The trading of shares of Dubai Financial Market (DFM) began on Wednesday 7th March 2007.
 Dubai Gold & Commodities Exchange (DGCX) commenced trading in November 2005 as the
regions first commodity derivatives exchange and has become today, the leading derivatives
exchange in the Middle East.

DGCX is majority owned by Dubai Multi Commodities Centre (DMCC), a strategic initiative of
the Government of Dubai, with a mandate to enhance commodity trade flows through the
Emirate by providing the appropriate physical, market, financial infrastructure and services
required. The Management team of DGCX comprises senior personnel from the commodities,
securities and financial services industries bringing a wealth of experience and expertise to
ensure the success of DGCX.

The range of futures contracts offers participants of the physical commodities markets, such as
producers, manufacturers and end users, with a sophisticated means of hedging their price risk
exposure. Such price risk management has previously been unavailable to producers in the
Middle East. In addition, DGCX offers trading opportunities to financial communities and
investment houses in both the Middle East and around the globe who wish to access the
growing asset class of commodity and currency derivatives.

Guaranteed settlement and reduced counterparty risk provided by Dubai Commodities

Clearing Corporation (DCCC), a subsidiary 100% owned by DGCX

The advantage of transacting and clearing business within the UAE and thus the local
taxation and regulatory regimes

A simple fee structure - one fee for all participants. All participants also pay the same
margin, whether commercial or non-commercial entities

An opening to both regional and international liquidity pools

Robust risk management and surveillance systems

Uninterrupted trading hours from 7:00am 11:30pm (GMT +4)

Regulated by the Securities & Commodities Authority (SCA)

The UAE enjoys an ideal location between the time zones of Europe and the Far East and
DGCX offers a range of products from the precious metal, base metal, energy and currency
sectors.

New issue market in UAE In May 2014, The Securities and Commodities Authority of the UAE
(SCA) recently issued a new Regulation to give private joint stock companies with two full
financial years performance history a fast track to listing on the DFM and ADX, without the
need to convert to a public joint stock company and undertake the IPO process.

The new Regulation opens the UAE equity market to a new range of issuers. Any UAE private
joint stock company which meets the following criteria is eligible to apply for listing on DFM or
ADX.
 published audited financial statements for two complete financial years;

at least 30 shareholders; and

shareholder equity not less than paid up capital.

A significant advantage for issuers and shareholders is that existing owners are not restricted
from selling down their interest to buyers in the market. In contrast, where there is an IPO the
founders cannot sell their shares for two years after listing. The new pathway may offer a faster
exit for private equity firms and other shareholders choosing to sell down.

The DFM and ADX both are involved in the listing of the companies for the first time.

http://www.albawaba.com/business/uae-sca-warrants-545231 - Warrants

Financial Instruments

The Instruments listed on the DFM consists of:

1. Securities of Banks, Investment and Financial services, Insurance Companies, Real

estate and construction cos., Transportation cos, Industries, Consumer staples,
Telecommunication cos., Services and NASDAQ Dubai.

2. Bonds issued by Government and Govt. owned Cos.

3. Islamic sukuks - An Islamic financial certificate, similar to a bond in Western finance, that
complies with Sharia, Islamic religious law. Because the traditional Western interest
paying bond structure is not permissible, the issuer of a sukuk sells an investor group
the certificate, who then rents it back to the issuer for a predetermined rental fee. The
issuer also makes a contractual promise to buy back the bonds at a future date at par
value. Sukuks must be able to link the returns and cash flows of the financing to the
assets purchased, or the returns generated from an asset purchased. This is because
trading in debt is prohibited under Sharia. As such, financing must only be raised for
identifiable assets.

4. Mutual funds

5. Foreign Investment Actual owned foreign investment

The Instruments listed on the ADX consists of:

1. Listed companies

2. Investment funds open ended, closed ended, Exchange Traded Funds (A security that
tracks an index, a commodity or a basket of assets like an index fund, but trades like a
 stock on an exchange. ETFs experience price changes throughout the day as they are
bought and sold.)

3. Debt Instruments NBAD Subordinated Convertible notes and Abu Dhabi Government
bonds

The instruments listed on DGCX are;

1. Options

2. Metals

3. Currencies

4. Hydrocarbons

5. Equities