Transforming brokerage firms into a model of integrated financial services companies
07/11/2019
The Initiative has been launched to coincide with applying an integrated methodology to upgrade financial markets in the State to advanced markets in accordance with the UAE Government 2021 vision, which aims at establishing a competitive environment among financial services companies to ensure the highest standards of excellence, allowing investors to choose the most distinguished, committed and capable financial services provider that is capable of providing high quality, transparent and fair services. It also contributes to reaching of record levels of institutional maturity of financial services companies to compete with their counterparts in developed markets, diversification of sources of income, non- dependence on trading revenue as a single source, diversification of operational risks, compliance with governance and systemic risk requirements and disclosure, particularly with regard to money laundering and terrorist financing.
Accordingly, by studying the international best practices, the various activities carried out by the brokerage companies were counted in several advanced markets, which included financial consulting, margin trading, hedging, market making, data collection, tabulation and sale, marketing of securities related to real estate investments, investment management (funds and portfolios), providing various services for funds, brokerage for their own account and brokerage for others.
The Initiative took into account the application of vision of diversifying the income sources of brokerage companies so that they are not limited to commission earned from the sale and purchase of shares. It also exceeds what these companies can earn from accounts management fees, investment-consulting fees, investment portfolios management fees, fees for providing various services to funds, proceeds from the sale of information and data, margin trading fees and benefits, hedging fees, trading commissions and other transaction fees.
The initiative put forward several requirements for the brokerage company to become an integrated and certified securities company. These requirements include that these companies shall have qualified professional cadres in the field of brokerage, investment management and other financial services, have sufficient capital to cover the volume of activity and bank guarantees and pledge to abide by CMA's regulations and laws.
In pursuance of the initiative, brokerage companies in their new concept take the role entrusted to them in marketing their products and services and educating investors in the financial markets in the State and abroad through multiple activities including marketing campaigns for its services and products through social media, text messages, and the announcement of additional services with special features that the brokerage companies can provide for encouraging customers and investors to engage in the financial market, as well as holding seminars and events to raise the awareness of customers.