|Anthony J Coleby|
It would be wrong to describe the new Capital Markets Law in Kuwait as a further example of reactive, hastily drawn legislation rushed through in response to an urgent need for legislative intervention – as many commentators have criticised the 2009 Financial Stability Law for being, in response to the global financial crisis. Instead, for some two decades the need for reform in this area of law had been increasingly seen as essential, not only to bring Kuwait into line with its GCC partners but also to enable the country to begin the long climb to its aspired status as a major financial hub in the region by 2035.
Long perceived as inherently resistant to Western-driven efforts to bring standards of best practice to world markets, Kuwait, although it has been a member of the International Monetary Fund since early 1962, has maintained a working relationship with the IMF that has for much of the time been frosty at best, especially in the area of securities regulation.
There is perhaps no better illustration of this than the IMF's Country Report for Kuwait of 2004, containing an assessment of Kuwait's compliance record with the 30 Objectives and Principles of Securities Regulation (as updated in May 2003) issued by the International Organisation of Securities Commissions (the Iosco Principles). The Report indicated that, of all the Iosco Principles, 25 had been only partly complied with, and the remaining five had received no attention at all – a fairly damning appraisal by most standards.
When fully implemented, the Capital Markets Law will have set this right, at least on paper: an independent regulatory agency for securities supervision has been delivered with the necessary powers sought in the Report in respect of the key areas referred to in this firm's last IFLR briefing on the Law.
The new law represents a new direction for Kuwait securities regulation with so many of the new measures having very little precedent in the country's regulatory structure. There are other areas where Kuwait will continue to be pressed to follow international models of best practice: banking supervision, money laundering, corporate governance, free trade and IPR protection, for example. The successful implementation of the Capital Markets Law will augur well for progress in those other sectors and serve to ease historic tensions with the IMF and other global regulatory agencies.
Anthony J Coleby