New investment rules on the cards

23 June 2006

The Central Bank of the UAE is consulting with banks and fund managers to draw up new rules to regulate the mutual fund industry. Currently, the central bank issues licences for mutual funds but there are few other regulations to govern the manufacture, distribution or operation of funds.

'There is a need to legislate on these issues to create better regulatory space for the industry to thrive to the full benefit of the economy and investors,' Saif Hadaf al-Shamsi, executive director of the central bank treasury, said in an address on behalf of the governor to a seminar on 18 June.

'Mutual funds, due to their exposure to the small investor, owe greater moral responsibility to their investor base By focusing on regulations related to the mutual funds industry, we are trying to bridge the gap that we have in our regulatory environment.'

Dubai-based Shuaa Capital estimates that there are $56,890 million of assets under management in the GCC, 21 per cent of which are in the UAE. Of the 400 funds in the GCC, only about 40 are in the UAE as a result of a poor regulatory environment that has undermined investor confidence and deterred foreign investment.

Globally, mutual funds hold 37 per cent of stock market capitalisation, but only 7 per cent in the GCC. Shuaa forecasts that GCC mutual funds' share of market capitalisation will reach the emerging market average of 20 per cent, the equivalent of $160,000 million, by 2010, and generate revenues of $1,600 million.

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