DFM Investors’ Rights and Responsibilities
The Investor Handbook
DFM Investors’
Rights and
Responsibilities
www.dfm.ae
The Investor Handbook
DFM Investors’ Rights and Responsibilities
The Purpose of this Booklet
Dubai Financial Market (DFM) endeavors to ensure its investors are aware of their rights
and responsibilities and aims to provide the necessary information and data which
support them in making informed investment decisions, in their trading transactions and
settlement of securities. This supports DFM’s aim of building a fruitful relationship with its
investors.
This booklet outlines DFM investors’ rights, responsibilities and obligations when trading
on the DFM and is categorized into two key areas: Investors’ Rights and Investors’
Responsibilities and Obligations.
We value your feedback and input to continuously enhance our products and services. If
you have any questions or comments, please email [email protected]
Disclaimer
Dubai Financial Market (DFM) endeavors to provide and publish correct real time data and
information; however it is not guaranteed to be timely or accurate and is for information
purposes only. DFM shall not assume any responsibility for any diminution, error and/or delay
of data and information published. Consequently, DFM will not be liable for any claim or loss
of any nature that may occur directly or indirectly, from the use of the data and information
available at DFM or in any of its publications.
The Investor Handbook
DFM Investors’ Rights and Responsibilities 01
Contents
Overview 02
Investors’ Rights 02
Investors’ Responsibilities and Obligations 04
Important Considerations when Making Investment Decisions 06
Benefits and Risks of Investing in Securities 08
How to find out more... 09
The Investor Handbook
02 DFM Investors’ Rights and Responsibilities
Overview
Dubai Financial Market (DFM) is a market regulated by the Securities and Commodities
Authority (SCA), and also supports and trains its licensed brokers to ensure that the
utmost transparency, confidentiality and protection of investors are upheld. DFM has in
place highly sophisticated systems such as “SMARTS”, the market and surveillance system,
to closely monitor trading activity and continues to work closely with the SCA to apply
best international practices for ease of trading and surveillance.
At DFM, we believe that the needs of the investor always come first. As an investor, you
have important rights, including your rights as a company shareholder and more. At
the same time, investors need to shoulder certain responsibilities themselves; to plan
carefully to meet their investment goals and to stay informed about the risks and rewards
of their investments.
Investors’ Rights
The legislation in force in the UAE grants shareholders and market participants many
rights and benefits, particularly the shareholders’ right in the company whose shares are
traded on the market to ownership and the transfer thereof, to the dividends distributed
by the company and to the proceeds in case the company goes into liquidation. They also
have the right to take part in the decision-making process within the company in which
they hold shares by attending and voting at the company’s General Assemblies as well as
electing and dismissing the Board members.
Shareholders also have the right to monitor the company’s management by accessing
information and data on the company’s performance, holding the Board of Directors
accountable, asking the company’s auditor questions. They also have the right to raise
complaints to the relevant authorities against any party/parties of DFM in the case of a
valid justification or harm to the investor.
Shareholder Rights 1. Participate in the company ownership, assets and
reserves when the company goes into liquidation.
2. Participate in the company management by
exercising their rights to vote during the company’s
General Assembly (voting is based on the number of
securities).
3. Obtain their annual share dividends.
4. Sell securities on the market.
The Investor Handbook
DFM Investors’ Rights and Responsibilities 03
Bondholder Rights 1. The right to receive their funds at the end of the
bond period agreed upon (three months - one year).
2. The right to obtain the fixed interest agreed upon at
the time of purchasing the bond.
3. The right to sell the bond at any time on DFM if this
type of bond is listed for trading.
Equityholder Rights 1. The right to obtain dividends.
2. The right to obtain the shareholder’s share in the
company in case the company goes into liquidation.
Right to take part in 1. Attend and vote in General Assemblies.
decision-making 2. Elect and dismiss members of the Board of Directors.
Right to monitor 1. Examine and obtain information and data.
company management 2. Hold the Board of Directors accountable.
3. Ask auditors questions.
4. Priority in case of conflict of interest with company
management.
Right to complain and 1. To relevant administrative authorities.
litigate 2. To the courts.
As an investor, when you buy shares in a given company, you expect the company
to achieve earnings or some other return on your investment, but sometimes such
investments fail due to unsuccesful company management or weak implementation of
corporate governance principles.
These losses may go on for many years without the investors raising any objections
because they are not aware of their rights in the company nor do they know how to claim
such rights.
Hence the importance of knowing all your rights of the company you are investing in.
The Investor Handbook
04 DFM Investors’ Rights and Responsibilities
Investors’ Responsibilities and Obligations
Before executing any trading transaction, an investor should fulfill the following general
responsibilities and obligations:
1 Determine your investment objectives, the amount to be invested as well as the expected
investment duration.
2 Invest surplus income, retain sufficient liquidity to meet your daily needs and obligations
and refrain from entering into financial obligations exceeding your financial capacity.
3 Become acquainted with the legislation issued by the Securities and Commodities
Authority (SCA) as well as the other relevant authorities concerning securities investments
and investors’ rights.
4 Choose from the list of SCA licensed brokerage firms operating on DFM, and sign with
the brokerage firm a written agreement which stipulates the services provided by the
company to the investor and the commissions collected by the company.
5 Read the memorandum of association, articles of association and prospectus of the
company you wish to invest in.
6 Research and analyze the financial data of the company you wish to invest in.
7 Refrain from taking investment decisions based on rumors and hearsay.
8 Track the market trends and economic indicators and the relation between them.
9 Track the detailed data of your investments by requesting periodical statements of
accounts showing the movements in the account.
10 Diversify your investment portfolio by investing in more than one type of security and
more than one sector to avoid the risk of an investment focused on a particular type of
security or on one sector only.
11 Attend meetings held by the companies in which you are investing.
12 Track the disclosures released by these companies.
13 Track the decisions issued by control and surveillance authorities concerning the public
shareholding companies and brokers.
14 Track the receipt of dividends distributed periodically by the companies in which you are
investing.
15 Track the listed companies’ information available on the DFM website.
An investor can also obtain legal, financial or specialized advice before taking any
investment decisions through accredited and trusted channels and resources.
The Investor Handbook
DFM Investors’ Rights and Responsibilities 05
As an investor it is essential to fulfill the below obligations. Failure to do so will hold him/
her legally liable and will result, in some cases, in penalties of imprisonment and payment
of maximum fines:
• Comply with the common code of conduct when dealing with officials and
employees of listed companies, brokers, DFM officials and other investors, and
refrain from tarnishing the reputation of any of them, from accusing them of
negligence or misconduct, or from spreading rumors concerning thereof.
• Use a single Investor Number when trading DFM listed securities. In case you
have more than one Investor Number, you should notify the Clearing, Settlement
and Depository Division in order to merge your information into a single Investor
Number.
• Fulfill all the obligations resulting from the executed order for which yourself or
your representative has instructed the broker, and settle these obligations according
to what was agreed upon with the broker in the account opening agreement or in a
registered telephone conversation.
On the Trading Floor, investors are required to:
• Refrain from entering the brokers’ offices at any
time.
• Refrain from distributing, publishing, presenting
or promoting any issues, documents, reports or
financial analysis in DFM without obtaining prior
approval from Market operations.
• Refrain from smoking, eating or drinking on the
trading floor.
• Dress in formal attire on the trading floor.
DFM Trading Floor, World Trade Center, Dubai, UAE.
The Investor Handbook
06 DFM Investors’ Rights and Responsibilities
Important Considerations when Making
Investment Decisions
Investors should also be well aware of all the important considerations which could affect
your investment decision-making, including but not limited to the following:
1. Important Securities-Related Laws
Issued, subscribed and traded securities in the UAE are subject to the country’s general
legislative framework, particularly the provisions of a number of federal laws and
regulations issued by virtue thereof, namely:
• The Commercial Companies Law.
• UAE Securities and Commodities Authority and Market Law.
• UAE Central Bank Law.
These laws and regulations aim to create an investment environment characterized by its
transparency, fairness and equal investment opportunities and guaranteeing the rights of
all parties involved.
2. Factors Affecting Price Movement
a. Supply and demand: The prices of DFM listed securities are in constant fluctuation
depending on the force of supply and demand. The price and quantity of every executed
transaction is set at any moment during the trading session through the electronic
bidding system adopted by DFM once the buying order meets a selling order of equal
price.
b. Disclosure: The prices of securities on DFM are affected by the disclosures of
listed companies and of DFM, as well as by the region’s overall market and economic
developments in general. The disclosure instructions in force in the UAE bind companies
to disclose any essential information which might affect the price movement on the
market and also to disclose their financial statements on a quarterly, semi-annual and
annual basis for the periods set in these instructions.
c. Tracking insiders’ transactions: Insiders are persons who have in their possession
or are informed due to their work or position of inside (undeclared) information which
might affect one or more issue prices of DFM listed securities in case it is declared and
made public.
The Investor Handbook
DFM Investors’ Rights and Responsibilities 07
Under the laws and regulations in force, insiders shall be subject to the strictest
financial and criminal penalties if they make use of inside information they have in their
possession to make profits to the detriment of those unaware thereof. They are under the
obligation to disclose their intentions to DFM before dealing directly with the relevant
securities, and should also refrain from disclosing any information to others with the view
of benefiting from it before it is made public.
d. Recognizing risks and returns: The investor should be aware that every investment
results in returns and risks. The return is the actual yield you obtain as a result of your
investment on the market. It is divided into two parts: The dividends (gains distributed
by the company to its shareholders) and the return on capital (difference between the
buying price and the selling price).
As an investor, you should also be aware of the potential risks resulting from your
investment in shares, whether they are general risks affecting the market as a whole, even
if disproportionately, or specific risks that affect a particular company.
The Investor Handbook
08 DFM Investors’ Rights and Responsibilities
Benefits and Risks of Investing in Securities
Securities are considered as one of the best financial tools for long-term investment,
particularly if the investment aims at achieving growth. When the investor purchases
shares, he becomes the owner of part of the company to the extent of the value of the
securities.
The ownership of the securities offers their holder the following benefits:
• An increase in ownership of the company, represented by the value of the securities
the investor owns. Any growth of the company is directly reflected in the securities
price, which should register an increase in the return on capital.
• Receive company dividends.
On the other hand, investing in securities involves some risks which include:
• Fluctuation in company profits.
• Decrease of share price.
• Lack of liquidity of shares, meaning a reduced demand for the shares.
There are a number of risks which should be taken into account by the investor
before carrying out margin trading operations. These include:
1. Potential losses that might exceed the initial investment.
2. Being constantly prepared to deposit funds or securities if the brokerage firm makes
any claims.
3. The right of the custodian to sell all the securities or part thereof without consulting
the investor if he fails to meet its requirements.
4. Possible structural problems in the stock market in case of a sharp drop in prices,
even though margin trading increases trading volumes on the market in general.
5. The custodian may charge the investor interest on borrowed funds, hence affecting
the investor’s total return on investment.
The Investor Handbook
DFM Investors’ Rights and Responsibilities 09
How to find out more...
Ever since its establishment in 2000, Dubai Financial Market (DFM) has been committed
to developing and launching numerous educational programs for increasing investment
awareness and creating a culture of well-researched securities investment among its
different market participants. The awareness and education programs provided for
investors by DFM include and are not limited to:
DFM Training Seminars and Workshops
DFM organizes training workshops for its participants, including listed companies,
brokers and investors. In this respect, DFM collaborates with all the respective authorities
such as the Securities and Commodities Authority (SCA) and the financial institutions
active in this sector to develop and implement comprehensive workshops.
DFM Online Guides and Publications
DFM provides a number of publications and newsletters containing important
information which help investors in their investment decision-making. In addition to
daily, weekly and monthly newsletters, DFM issues various publications which raise
awareness and understanding of DFM and its listed companies, particularly the “DFM
Listed Companies Guide” which contains the financial statements of these companies
over several years. Moreover, DFM has published several booklets available on its website,
including but not limited to guides targeting its different market participants, such as the
“DFM Guide to Going Public”, the “DFM Guide to Investor Relations” and more.
The Investor Handbook
DFM Investors’ Rights and Responsibilities
Stay in touch...
Stay abreast of the latest developments at DFM and NASDAQ
Dubai with monthly rounds ups of news, listed company
disclosures and market performance by accessing the monthly
eNewsletter at www.dfm.ae
Contact Us
DFM Client Services Affairs, CSD, DFM Trading Floor, World Trade Centre, Dubai, UAE.
T: +971 4 305 5555, F: +971 4 305 5191, E: [email protected]
The Investor Handbook
