Truth: “Increase in the Total Amount of Money Invested in Stockbrokerage Companies to AED 8.8bn by the End of 2014”Truth Consultancy
An economic study claimed encouraging stockbrokerage companies working locally for merger; so, we can have strong brokerage companies which are able to face future difficulties, increase their growth potential, and enhance their profitability.
In the study made by Truth Economic Consultancy Company, stockbrokerage companies were asked to increase their solvency ratios by building reserves and provisions. Accordingly, they can face unexpected crises, attract capitals by gaining investors’ confidence, and increase their ability to manage risks through diversification of their investment portfolios.
The GM of Truth Economic Consultancy Company, Reda Mosallam, said that brokerage firms should develop their technical cadres to be able to face international, regional, and local developments after upgrading the state markets to the rank “emerging”. This new rank necessitates rehabilitating technical work teams in those firms to keep pace with such paradigm shifts. Accordingly, they can apply the ongoing decisions issued by the ESCA on the sustainable development of the two state markets, the most important of which is allowing brokerage companies, according to certain conditions and rules, to “trade on margin basis”, and abidance by the governance and transparency rules upon dealing with the different market elements.
Mosallam asked stockbrokerage firms to set mechanisms and controls for analyzing and determining the local and international market risks, establish an association gathering all the brokerage companies with the aim of developing common standards, to which their works will be subject. Further, Mosallam asked them to develop training programs in this sector, establish technical standards to be met and to be known by officials in this sector especially the ESCA and Abu Dhabi Securities Exchange and Dubai Securities Exchange, and speak in the name of the Financial Brokerage Sector concerning presenting their points of view before the official entities.
In addition, Mosallam called for preparing an extensive annual conference comprising all representatives of stockbrokerage firms, in which the help of great local and international experts and consultants will be asked to discuss the problems and hurdles facing this sector, set proper solutions, resolve any technical or legal problems and avert aggravation of their consequences, make up code of conduct, hold violating companies accountable, prevent referral of matters to arbitration centers or civil courts.
Mosallam gave an emphasis on the necessity of hiring competencies at a high technical level to perform the duties required by stockbrokerage firms in the state. He supported the viewpoint adopted by the ESCA concerning rehabilitation of brokers by preparing habilitation program for workers in the brokerage domain in favor of developing the brokerage profession, upgrading its efficiency and performance. Such program will aim at firmly establishing professional excellence standards, guaranteeing the soundness of the practices related to all dealings made in the securities sector.
The study, in which the financial statements for 49 stockbrokerage firms of 2014 and 2013 are used, indicated a rise in the total money invested in the stockbrokerage firms working in the UAE from AED 7.1bn by the end of 2013 to AED 8.8bn by the end of 2014. This represents an increase of AED 1.7bn at 23.9%.
The total rights of stockholders of stockbrokerage firms increased from AED 2.3bn at the end of 2013 to reach AED 3.3bn at the end of December 2014 at a percentage beyond 43% because of a rise in the capital.