* Move to boost transparency and disclosure in takeovers
* Need to say if any intention to buy stakes over 30 pct
* UAE lacks takeover code for publicly listed companies
* Analysts say enforcement action needed
(Adds analyst comment, background)
DUBAI, June 12 (Reuters) - Stock ownership rules in the
United Arab Emirates have been overhauled to boost transparency
in the Gulf Arab state's two stock markets and lead to better
disclosure during takeovers.
Enforcing the regulations will be the main challenge for the
Securities and Commodities Authority, analysts said on Tuesday.
While the SCA did not say when the changes come into effect
nor what penalties would apply to infractions, the new rules
will require investors to tell the stock market if they intend
to buy 30 percent of a UAE-listed company and call for detailed
disclosure about ownership in listed companies.
"The board agreed ... to make adjustments to the disclosure
and transparency system in order to develop the legislation
governing the functioning of financial markets," the SCA said.
The move came a month after Abu Dhabi state-owned firm Aabar
Investments quietly accumulated a 20.8 percent-stake in Dubai
contractor Arabtec Holding from the market using
different subsidiaries.
Aabar's chairman - now also Arabtec's chairman - was quoted
by a local newspaper at the time as saying the fund had a 53
percent position. A stock market source told Reuters Aabar owned
53 percent of Arabtec.
The new rules require that an investor pool together all
holdings in a specific company - whether held by family members,
companies and affiliates - and inform the regulator if the
combined ownership is above the five percent mark that normally
triggers mandatory market disclosure.
"It definitely sounds great on paper but will it do enough
to significantly change what is happening now? We will have to
wait and see," said a Dubai-based fund manager, speaking on
condition of anonymity due to the sensitivity of the matter.
Under the guidelines, the SCA can reject transactions if it
deems them to be against the interests of shareholders or the
economy.
The UAE lacks a takeover code which makes mergers of
publicly listed companies difficult. Gauging ownership levels in
listed companies is complicated by cross holdings through
affiliates and separate vehicles which can belong to the same
entity.
"It is a positive initiative and something that the market
really needs but we will have to wait and see how well these
initiatives can be enforced upon," said Mohammed Ali Yasin, an
Abu Dhabi-based capital markets analyst.
"The question also is how do you penalise the institutions
who are not complying with these rules, when are these rules
effective from and what happens to previous such transactions."
Dubai's benchmark index fell 1.0 percent, while
neighbouring Abu Dhabi was down 0.6 percent.
MSCI REVIEW
The UAE, classified as a frontier market by index complier
MSCI, has been seeking an upgrade to emerging market status for
the past three years.
MSCI is expected to decide later this month on the upgrade,
which could attract renewed interest in UAE markets from
long-term investors and global fund managers.
"These kind of steps will go a long way in gaining
recognition from foreign investors and help in the process of
gaining an upgrade," Haissam Arabi, chief executive of Gulfmena
Investments in Dubai said. "It is definitely a sign of markets
maturing in the region and the regulator getting more active."
Calls for more governance and transparency heightened after
the Aabar/Arabtec moves with the construction company's shares
more than doubling this year.
Aabar, which tried to buy Arabtec for $1.7 billion in a
failed 2010 takeover, has not disclosed what its intentions are
with regard to the stock build up and minority investors have
been concerned their interests would be overlooked.
Aabar itself delisted abruptly from the Abu Dhabi stock
market in 2010, causing an uproar among minority investors.
Several regulations have been enacted in the UAE previously
to boost local financial markets but enforcing these laws has
been a challenge for the regulator.
Last year, the UAE postponed draft regulations on its
nascent asset management industry, which were seen as a key step
for investor protection and boosting market confidence, after
market players voiced concerned that some of the proposals
lacked clarity, sources said.
(Additional reporting by Isabel Coles; Editing by Dan Lalor and
Amran Abocar)