A US regulator -- the Securities Exchange Commission -- has frozen the assets of an Emirati man accused of insider trading:
Despite legal structures covering insider trading, most regulators in the Gulf do not actively pursue such cases, according to Robert McKinnon, the head of research at Al Mal Capital in Dubai.In a companion op-ed in The National, Nasser Saidi, director at Hawkamah Institute for Corporate Governance and chief economist at the Dubai International Financial Centre, writes:
While the SEC employs complex algorithms to track the trading of the family and friends of people involved in mergers and acquisitions to root out any illegal activity, regulators in the Gulf typically rely on tipoffs before starting investigations.
“I don’t think it’s culturally accepted in any market, but wherever people have an opportunity, whether it is because of weak regulations or lax discipline in terms of Chinese walls and lax enforcement, you can have problems like these,” Mr McKinnon said.
The key point, however, is that insider trading is difficult to prove and is more prevalent in a climate of poor disclosure. Improved transparency by companies with full and timely disclosure on all material matters will do more to reduce the opportunity and incentive for insider trading than tough enforcement of laws and regulation. Better disclosure by companies is still a key challenge for the region: as much as one third of GCC listed companies do not have a publicly available annual report in English, nor a website.
A corporate culture of secrecy and relationship-based transactions still prevails in the region. The main idea behind insider trading frameworks is to clarify the distinction between what is confidential or inside information and what information should be publicly disclosed. Individuals that may come across what would be considered “insider information” should be beholden to act responsibly. Transparency, fairness, accountability and responsibility are core governance values that help build trust in businesses and modern financial markets. As the region’s capital markets take to the global stage, we need to internalise these values and start looking at our old habits with an eye towards reform.