Single regulator to target market abuse in Qatar

22 August 2008
Rogue traders are currently going undetected, unpunished and undermining investor confidence.

Rooting out market abuse will be at the top of the agenda for Qatar’s new single financial services regulator when it launches later this year, one of the country’s existing regulators tells MEED.

“You should expect more action [in pursuing rogue traders] as the new system comes into play and more transparency,” says Phillip Thorpe, the chairman and chief executive officer of the Qatar Financial Centre Regulatory Authority (QFCRA).

The QFCRA is one of three regulators that will be amalgamated into the new single regulator when Qatar’s Council of Ministers gives its approval in September or October. It will merge with the Qatar Financial Market Authority, which regulates the Doha Securities Market, and the supervision division of Qatar Central Bank.

Just one rogue trader has been prosecuted and imprisoned under Qatar’s existing rules for market abuse in recent years. Thorpe says the failure by Qatar’s incumbent regulators to detect and punish abuse is undermining confidence in the markets. “It does not give me any confidence and it does not give most investors confidence,” he says. “Part of it is a lack of laws and regulations that allow regulators to do very much [to stop it].”

Following approval from the Council of Ministers, the single regulator will need two to three years to bring the entire financial services sector under a single set of rules and regulations. “It does take some time for enforcement action to get up and running,” says Thorpe. “There has been a lack of enforcement staff for detection and then enforcement action at the three regulators.”

The single regulator will reduce overlap between authorities, reducing staff numbers but, Thorpe says, it will be more effective at regulating financial markets. But he adds the regulator will need the support of the courts if it is to succeed.

According to Thorpe, the Qatari courts are as much to blame for the failure to prosecute rogue traders as the three regulators. “If you are taking these prosecutions through on a criminal basis then you need courts that understand these issues. What we have also found is that many of the domestic laws are not well suited to prosecutions for market abuse,” he says.

The QFCRA, which regulates companies located in the Qatar Financial Centre, has already set up its own court to enforce its regulatory decisions, as a means of bypassing Qatar’s existing criminal courts. The commercial court, which has no criminal jurisdiction, will probably be used by the single regulator to enforce its rulings.

The QFCRA has already modernised its rulebook by borrowing rules and practices from the UK’s Financial Services Authority.

Other regulators have also moved their systems in line with international standards. The Qatar Central Bank follows the Basel II banking regulations, which are used by most international banks, and the Qatar Financial Markets Authority has started to adopt the rules laid down by the International Organisation for Securities Commissions.

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