New law to spur growth of securities market

The government of Oman is finalising a new Securities Law designed to stimulate the growth of a sound and vibrant securities market in the Sultanate.

The new statute, according to a high-level official of the Capital Market Authority (CMA), is part of a series of legislative and regulatory measures either promulgated in recent weeks and months or currently on the anvil and collectively designed to develop strong and stable, capital and securities markets in the Sultanate.

The new Securities Law, a revised draft of which is currently being reviewed by the Ministry of Legal Affairs, will provide strong legal underpinnings for the strong and sustainable growth of a securities market in Oman, in addition to promoting innovation in this sector, said Mohammed Said al Abri, Vice President � Capital Market Sector, CMA. As a principles-based statute, the new law will be simple and uncomplicated, yet possessing a high degree of flexibility to support the growth of the securities market over the foreseeable future.

Speaking to the Observer, Al Abri said the proposed Securities Law will serve as a separate standalone piece of legislation that will be distinct from the rest of the legal framework governing the capital market in Oman. Most importantly, it will enhance the level of confidence of all participants in the sector and bring about a structure that would be in line with international best practices.

Standalone law

The Capital Market Law, in its current form, is a comprehensive statute that encompasses regulations governing Capital Markets, the Muscat Securities Market (MSM) as the operator, the Muscat Clearing and Depository Company (MCDC), the various intermediaries of the Capital Market, and so on. Now, nearly 20 years since it was enacted, the Authority felt the time was apt for securities market regulation to be separated from the main legislation and issued as a standalone law. As an independent statute in its own right, the new Securities Law will help unlock the full growth potential of this key segment of the Capital Market.

Importantly, the proposed new law will authorise the rollout of a diverse range of instruments for trading and investment in the securities market. This would include derivatives such as swaps, forwards, futures, mortgage-backed securities and options, none of which are currently available for trading in Oman.

Also promising is the potential for introducing trading in commodity derivatives, currency swaps, interest rate futures, credit default swaps, CFDs and international indices, and so on. Introduced progressively over a period of time, these instruments will contribute to both transactional activity and volume on the securities market, he said.

The new law will also introduce Trusts as a vehicle for Collective Investment Schemes, which will allow greater flexibility in structuring and higher standards of governance to be implemented.

According to the official, a growing economy like Oman’s, needs a vibrant securities market to provide the capital it needs and to manage the level of the various risks that it faces from time to time. Whenever any Omani firm or investor uses a foreign intermediary for raising capital or investing their surpluses, it effectively imports such financial services, mostly due to lack of suitable alternatives in the local market. The strategic aim is towards developing our capital market in a way that can serve our economy and the region adequately and also contribute towards generating more employment for the youth in a sophisticated sector. The new law can catalyse the political stability of Oman, its fantastic relations in the region and its neighbours and its tax friendliness into a package that even foreign investors would find difficult to resist, Al Abri noted.

SME Exchange

Additionally, the new law will legalise crowdfunding as a means for small and medium enterprises (SMEs) to raise finance for their operations and growth, said Al Abri. As Limited Liability Companies (LLCs), many SMEs just don’t have the means to tap the capital market for their funding requirements. With this new Securities Law, the securities market will serve as platform for small businesses to crowdfund their operations. In effect, a dedicated SME Exchange will be created and brought under the jurisdiction of the CMA. The idea is to aggregate the entire start-up ecosystem in a way that maximises the synergies between the incubators, angel investors, venture capitalists, disruptors, entrepreneurs, and so on, and pave the path for the nascent ideas of today to become the large, publicly listed companies of the main board in the future. CMA also intends to promote Fintech in a big way and will set up regulatory sandboxes for the innovators to experiment and evolve into main street products.

The new law is expected to be issued by the first quarter of 2020, if not earlier, he added.

Source: Oman Observer