Media Clips

Markets to face tough regulations
By Mohammed Al Kady

Capital markets around the world are expecting regulatory authorities to impose stricter rules regarding transparency and disclosure as a result of the recent credit crunch and turmoil in the markets.

United States authorities are expected to start introducing new regulations for capital markets immediately after the presidential elections, while the UK and Germany are already preparing such regulations.

There are worries that the credit crunch would lead to a hasty framing of rules or over- regulation of the global capital markets, according to Ira Millstein, Senior Partner at Weil, Gotshal & Manges and founder of the Millstein Centre for Corporate Governance and Performance at Yale School of Management.

Millstein is leading a team from the centre on a global tour to prepare a report about corporate governance in capital markets. He held talks with senior officials in the UAE about regulations in the stock markets and corporate governance.

"We will submit the report to the Organisation of Economic Co-operation and Development next September and we hope this report will help authorities in OECD countries to avoid hasty regulations in response to the credit crunch that may affect the future of capital markets," said Millstein.

He told Emirates Business that the expected regulations would focus on imposing new rules for transparency and disclosure for everyone dealing with the markets. "The expected regulations will require transparency from listed corporations as well as all individual or institutional investors, including hedge funds, mutual funds, private equity funds, investment and insurance companies, banks, sovereign wealth funds and government-oriented enterprises.

"The new regulations will also pertain to credit rating companies and organisations, after the credit crunch raised concerns about their role due to conflicts of interest. Our study aims to discourage unnecessary regulations that may undermine the developments in capital markets" he said.

Millstein explained the aim of his global tour is to collect information about global efforts to ensure corporate governance in different geographies. "Capital markets are witnessing dramatic changes which will have deep impacts on everyone dealing with the markets. Traditional single shareholders are being replaced by institutional investors, including a huge variety of funds. So the ownership of any particular corporation is now dispersed among many kinds of institutions with different agendas, and they have different demands and expectations from the boards of directors."

He said only professional and intelligent boards would be able to manage this complicated situation. "Part of our study will focus on how boards can respond to new trends in the capital markets and how authorities in the markets are prepared to deal with the increasing institutional investors, especially concerning transparency and disclosure."

Millstein said there was no similarity among different regions regarding the new developments in capital markets. "In the US and Europe, the credit crisis led to deep changes and we can see their impact, while in countries like Russia, the government controls everything and there is no clear impact."

Regarding the Middle East, he said correlation with global markets was still marginal here and the region could avoid crises due to increasing wealth generation.