The long-heralded independent Kuwait Capital Markets Authority (CMA) came into being in April 2011 with the implementation of Law No. 7 of 2010 for the Establishment of the Capital Markets Authority and the Regulation of the Activity of Securities. Kuwait is the last GCC country to introduce such legislation.
The principal driving force behind the establishment of the CMA was long-standing concern over the volatility of the Kuwait Stock Exchange (KSE), the oldest stock exchange in the Gulf Region and the second largest behind the Saudi Arabian Stock Exchange. Minority shareholders have for a long time been particularly active on the KSE, and with the recent global financial crisis this investor class had suffered very badly as stock prices plummeted; it was clear that, amidst the turmoil, there had been extensive market manipulation in play as well.
The CMA's executive will be a five member Authorised Council. The terms of reference for the Council will be very broad indeed, as the CMA assumes not only ultimate responsibility for the listing of companies on the KSE but also a host of other areas of regulation: licensing of brokers, portfolio managers, clearing agents and investment consultants; required disclosures of ownership (direct or indirect) of more than 5% of a listed company's shares; a mandatory bid obligation where 30% or more of a listed company's shares are held; and regulation of offerings of collective investment schemes and other securities (by public solicitation or private placement).
The Council will work closely with the Central Bank of Kuwait, the Ministry of Commerce & Industry (which will supervise the CMA's operations) and the management of the KSE. As with much recent Kuwait legislation, the devil will most certainly be in the detail, as executive by-laws are issued to cover each area set for regulation; it is expected that it may be six months before all these are brought into effect. In the interim, there will necessarily be a regulatory vacuum as the new regime is set up, although some assurances have already been given that certain material transactions agreed before implementation of the new law will not be disrupted with retrospective effect.
Anthony J Coleby
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