The DFSA is now by law a fully independent statutory authority (and has been since September 2004). Despite the inferences made in Mr Hay Davison’s account, the creation of this legal framework (involving changes to the UAE Constitution, Federal Decree and Dubai Decree) was always intended but was a complex matter that took time to implement.
The DFSA is accountable directly to the government and not to the DIFC.
Our funding is assured by law and provided directly by the government.
As chief executive, I report solely to my board, which has been expanded and strengthened by the appointment of additional directors. The board includes leading individuals from financial, business and regulatory communities in the USA, the UK, Germany and Hong Kong. Out of a total of 10 independent directors only two are resident in Dubai.
Regulatory standards applying to authorized firms within the DIFC are set exclusively by DFSA and are based on international principles of best practice laid down by the BIS (banking), IAIS (insurance) and IOSCO (securities).
The authorization of regional firms to conduct business within the DIFC is entirely a matter for the DFSA and is being managed under risk assessment criteria that ensure that the high regulatory standards established by the DFSA are not compromised.
Judged against these facts there is absolutely no basis for questioning the administrative safeguards, legal framework or international standards under which DFSA operates.
The efficacy of the 2004 reforms was independently tested in April 2005 when they were reviewed by IOSCO, the world’s leading body of international securities regulators. Following that review, IOSCO admitted the DFSA to Associate Membership, something it would not do if the issues raised by Mr Hay Davison retained any validity.
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All of these initiatives have consolidated a first class regulatory environment that is attracting support from around the world. A steady stream of international blue chips are being authorized by the DFSA – for example, Barclays Bank, Credit Suisse, Deutsche Bank, KPMG, Merrill Lynch (Suisse) and Standard Chartered. The increasing participation of global majors; the impending launch of the DIFX; and the announcement that Nymex intends to commence operations in the DIFC in early 2006 are convincing demonstrations of industry’s confidence in the legislative and regulatory framework of the centre.
That confidence has been established by a combination of sound policy reform and hard work by many people who strongly believe in the contribution that a well-regulated financial capital market can make to the future of the Middle East.
David Knott became chief executive of the DFSA in June 2005. He previously held a number of senior regulatory positions in Australia.
Ian Hay Davison, Dealing with Dubai: The regulator’s tale
September 2005
