<p>As most of us remember, NASDAQ Dubai is a stock exchange registered and  operating in the Dubai International Financial Centre (&ldquo;DIFC&rdquo;) that was formerly  known as &ldquo;Dubai International Financial Exchange&rdquo;.&nbsp; <br /><br />Since 2005, it has  been operating an exchange and a clearing house as an &ldquo;Authorised Market  Institution&rdquo;, regulated by the Dubai Financial Services Authority (&ldquo;DFSA&rdquo;).&nbsp;  <br /><br />Based in the DIFC and supervised by the DFSA, NASDAQ Dubai has been  governed under a separate set of rules and regulations, based on common law  principles and best international practice as far as global capital markets are  concerned. <br /><br />Finally, effective from 11 July 2010, NASDAQ Dubai has  outsourced its key market operations functions for equities to Dubai Financial  Market, a UAE &ldquo;on-shore&rdquo; securities exchange (&ldquo;DFM&rdquo;) and merged its trading  platform with the DFM which has brought DFM&rsquo;s individual investors and NASDAQ  Dubai&rsquo;s institutional investors together.&nbsp;&nbsp; <br /><br />The legal framework for  listings on NASDAQ Dubai used to be governed by NASDAQ Dubai Listing Rules  (&ldquo;Listing Rules&rdquo;) and DFSA Offered Securities Rules Rulebook Module (&ldquo;OSR&rdquo;).&nbsp;  The Official List of Securities (&ldquo;List&rdquo;) comes to mind as maintained by NASDAQ  Dubai. <br /><br />The Listing Rules have been subject of discussion and public  consultations, its various drafts have been exchanged between the Exchange, the  DFSA, professionals in the fields of banking, finance and law for about two  years, aimed at aligning them with international standards but at the same time  ensuring listing and on-going reporting requirements would not be unduly  burdensome towards issuers. <br /><br />Lately, we have witnessed a significant  progress in implementation of the new listing regime.&nbsp; <br /><br />A brief outline  of the most essential developments in this regard has been set out  below.<br /><br /><strong>LIST WITH THE DFSA</strong><br /><br />From 1 October 2011,  the responsibility for maintaining the List has been transferred from NASDAQ  Dubai to the regulator of the financial merket, namely the DFSA. <br /><br />The  transfer of the List has been implemented in order to streamline the regulatory  process for approving prospectuses and listing (now centralised with the DFSA),  for the benefit of issuers and investors and in compliance with international  best practice.&nbsp; <br /><br /><strong>NASDAQ DUBAI ISSUER AND SECURITIES RULES </strong><br /><br />Although the DFSA had initially adopted the Listing Rules,  further to the transfer of the List from NASDAQ Dubai to the DFSA some  legislative changes to the Listing Rules were necessary.<br /><br />In light of the  above, NASDAQ Dubai Issuer and Securities Rules of 1 October 2011 (&ldquo;Interim  Listing Rules&rdquo;) were enacted and replaced the Listing Rules.&nbsp; <br />The Interim  Listing Rules are less comprehensive than the Listing Rules, as the entire  regime related to admission of securities to listing has been left out.&nbsp; The  Interim Listing Rules set out the legal framework for the admittance of  securities to trading on NASDAQ Dubai and the continuing obligations imposed on  issuers of securities which are admitted. <br /><br />The Interim Listing Rules have  been introduced on an interim basis and will be superseded and replaced by  updated NASDAQ Dubai Issuers and Securities Rules (&ldquo;Final Listing Rules&rdquo;) when  the new DFSA legal framework comes into place.&nbsp; <br /><br /><strong>NEW  OSR</strong><br /><br />As the Interim Listing Rules provide for trading, only, the  OSR have been amended (version 16/08-11) and most listing provisions have been  set out under Chapter 6 (&ldquo;New OSR&rdquo;). <br /><br /><strong>CONSULTATION PAPER NO  78</strong><br /><br />1.&nbsp;FRAMEWORK<br /><br />In consistency with the steps referred to  above, and following the DFSA Consultation Paper No 75 of earlier this year, the  DFSA announced Consultation Paper No 78 of 6 October 2011 (&ldquo;Paper&rdquo;).&nbsp;  <br /><br />The changes introduced under the Paper are aimed at achieving  centralisation of the prospectus and listing approval process with the DFSA so  that issuers better understand the role that the DFSA and NASDAQ Dubai play in  the listing and trading admission process.&nbsp; <br /><br />The DFSA is now going to be  in charge of the listing process, whereas the main function of NASDAQ Dubai has  become supervision of the admittance to trading of securities on its market and  monitoring of orderly trading.&nbsp;<br /><br />The DFSA has opened a public consultation  period in respect of the provisions proposed under the Paper and will be  accepting comments from the public till 15 November this year.  <br /><br />2.&nbsp;MARKETS RULES<br /><br />Draft Markets Rules that are to form part of the  DFSA Rulebook, with a new Chapter 9 (&ldquo;Markets Rules&rdquo;) consist of the core of all  the changes to the listing regime that have been introduced under the  Paper.&nbsp;<br /><br />Numerous solutions proposed under the Markets Rules have been  modeled on those currently in place in the United Kingdom, Hong Kong or  Singapore.&nbsp; The DFSA were of the view that many expat professionals practising  in the DIFC have experience in advising on transactions in those jurisdictions;  therefore, it decided to respond to their expertise by referring to the  principles and practices these professionals are already familiar with.  <br /><br />The most essential changes to the listing regime that have been proposed  under the Market Rules are: <br /><br />2.1.&nbsp;Listing Principles <br /><br />Whereas  listing principles had no participation under the provisions regime, the Markets  Rules, under Chapter 9, set out five listing principles, i.e.:</p>
<ol>
<li>Staff Compliance - a listed entity must take reasonable steps to ensure that  its senior management and any other relevant employees understand and comply  with their responsibilities and obligations under the Interim/Final Listing  Rules.</li>
<li>Establishing and Maintaining Policies and Internal Controls - a listed  entity must take reasonable steps to establish and maintain adequate policies,  procedures, systems and controls to enable it to comply with its obligations  under the Interim/Final Listing Rules.</li>
<li>Integrity - a listed entity must act with integrity towards holders and  potential holders of its securities.</li>
<li>Clear and Non-misleading Communication - a listed entity must communicate  information to holders and potential holders of its securities in such a way as  to avoid the creation or continuation of a false market in such securities.</li>
<li>Cooperation - a listed entity must deal with the DFSA in an open and  co-operative manner.</li>
</ol>
<p>2.2.&nbsp;Shares in Public Hands<br /><br />In line with the legal approach adopted  under EU legislation, under the Markets Rules the DFSA has proposed that at  least 25 per cent of the securities that are to be admitted to listing on NASDAQ  are in public hands, which shares do not include those held, directly or  indirectly, by:</p>
<ol>
<li>a director of the listing applicant or of any of its subsidiaries;</li>
<li>a person connected with a director of the listing applicant or any of its  subsidiaries;</li>
<li>the trustees of an employee share scheme or pension fund established for the  benefit of any directors or employees of the listing applicant and its  subsidiary;</li>
<li>any person who under any agreement has a right to nominate a person to the  board of directors of the listing applicant; or</li>
<li>any person or persons in the same group or persons acting in concert who  have an interest in 5% or more of the securities of the relevant  class.</li>
</ol>
<p><br />The listed entity is required to adhere to that requirement at all times,  i.e. also after listing. <br /><br />Note: The DFSA may, however, in exceptional  circumstances, accept a percentage lower the 25 per cent if it considers than  the market will operate properly, with a lower percentage in view of additional  factors, e.g. a large market capitalisation of the issuer with a large number of  securities of the same class listed and where such securities would nonetheless  expect to have a wide distribution to the public and be  liquid.<br /><br />2.3.&nbsp;Working Capital Adequacy<br /><br />Under the Market Rules, the  issuer is obliged to comfort the DFSA that it and any of its subsidiaries have  sufficient working capital available for its present requirements or, if not,  how it proposes to provide the additional working capital needed.&nbsp; The issuer  must also confirm in the prospectus that it is going to meet the capital  adequacy requirement for the period of at least 12 months after prospectus  admission.&nbsp; An issuer that is not comfortable representing the same will not be  eligible for listing on NASDAQ Dubai. <br /><br />2.4.&nbsp;Controlling Shareholders and  Conflicts of Interest<br /><br />An applicant for listing which has one or more  controlling shareholders must be able to demonstrate to the DFSA that it can  operate its business independently of such controlling shareholder and any  associate thereof, unless holders of the issuer&rsquo;s shares would have no  appreciable risk of prejudice by the involvement in the relevant business of a  controlling shareholder.<br /><br />A new definition of a &ldquo;controlling shareholder&rdquo;,  based on a Hong Kong model, has been introduced under the Market Rules, whereby  a controlling shareholder has been defined as:<br /><br />&nbsp;&ldquo;any Person, or Persons  acting jointly by agreement, whether formal or otherwise, who is: (a) entitled  to exercise, or control the exercise of, 30% or more of the voting rights at a  general meeting of the Applicant; or (b) able to control the appointment of one  or more Directors who are able to exercise a majority of the votes at board  meetings of the Applicant&rdquo;.<br /><br />An applicant must ensure prior to listing  that it has adequate systems and controls to eliminate or manage material  conflicts of interest (e.g. related party transactions, situations in which  interested persons lend to or borrow from the issuer or its group, lease  property to or from the issuer or its group; or have an interest in businesses  that are competitors, suppliers or customers of the issuer or its group) in its  business prior to listing.<br /><br />2.5.&nbsp;Other Changes<br /><br />Some other changes  the DFSA introduced under the Market Rules that are worth mentioning  concern:</p>
<ol>
<li>Market capitalization requirement (i.e. expected aggregate market value at  the time of listing) that has been reduced to USD 10 million (and USD 2 million  for debentures);</li>
<li>Share repurchase requirements, whereby a listed entity must not purchase its  own shares without the prior written approval of the DFSA; a listed entity which  proposes to purchase more than 15% of any class of its shares must do so only by  way of a tender offer to all shareholders of that class; and&nbsp;</li>
<li>Continuing obligations, e.g. to be admitted to the List, securities will  need to be admitted to trading on NASDAQ Dubai; reporting entities will need to  be fully aware of their ongoing reporting obligations and unlike it has been to  date, will not receive any reminders from the DFSA or NASDAQ Dubai about due  periodical disclosures.</li>
</ol>
<p><br />3.&nbsp;LISTING AND ADMISSION TO TRADING PROCESS<br />Finally, as a consequence  to the changes to NASDSQ Dubai listing regime, the listing process will now be  as follows:<br /><br /></p>
<p><img alt="graph" border="0" height="416" src="https://admin.newsweaver.com/notessa/repository/s1/169641484993255628/Hx/arvp7dfuahxu9hn7dy25tsgqqgyo8zl25yr8ii1b18ctfdgi.gif" width="427" /></p>
<p><br /><strong>FINAL THOUGHTS</strong><br />In summary, as of today, the legal  framework for listing and trading in securities on NASDAQ Dubai is governed by  the Interim Listing Rules and the New OSR. <br /><br />As soon as the DFSA finalise  looking into the comments to the Paper made by the public, the new listing  regime, consisting of: (i) the Final Listing Rules; (ii) the Markets Rules;  (iii) new DIFC Markets Law; as well as (iv) amended: Glossary Module, DFSA  Rulebook and Fees Module, DFSA Rulebook; will be enacted.<br /><br />The changes  proposed under the Paper seem to deal with the matters of listing and ongoing  disclosure obligations in an advanced and internationally recognised manner.&nbsp;  The DFSA and NASDAQ Dubai have utilised these economically challenging times in  a very efficient way and managed to make a significant progress improving the  legal framework for listing and trading in securities on NASDAQ Dubai.&nbsp;  <br /><br />At present, Middle Eastern equity markets are relatively subdual/subdue.  However, NASDAQ Dubai is clearly positioning itself as the Middle Eastern first  option closest to international practices.&nbsp; Listing on NASDAQ Dubai also gives  primary access to the DFM/ NASDAQ Dubai common trading platform, without hurdle  to submit to the more proscriptive UAE on-shore listing regime.</p>