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Corporate Governance

Corporate governance is the system by which companies are directed and controlled by management in the interest of stakeholders and others. Good governance ensures fairness, transparency and integrity of a company’s business.

The NASDAQ Dubai Board adopts the view that corporate governance should promote performance and integrity as well as conformance with the legislation.

NASDAQ Dubai is committed to maintaining high standards of conduct and corporate governance. It believes that sound governance practices enhance the Company’s ability to achieve its strategy in accordance with the interests of its shareholders. In developing and implementing its governance practices, it has referred to best practice corporate governance principles, the DIFC laws and the Dubai Financial Services Authority (DFSA) Rulebook.

Board of Directors

The NASDAQ Dubai Board comprises 8 Non-Executive Directors including the Chairman, Mr Abdul Wahed Al Fahim. Biographical details of the Directors, the Committees on which they serve and a reference to which Directors are considered by the Board to be independent are set out below. The biographies demonstrate a wide range of experience and skills to discharge the Board’s responsibilities and to bring independent judgement on matters of strategy, performance and standards of conduct which are important to the success of the exchange.

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The Board is responsible to its shareholders, Dubai Financial Market and Borse Dubai, for NASDAQ Dubai’s system of corporate governance, its strategic objectives and the stewardship of the Company’s resources.

It determines the policies and practices which govern the operation and management of NASDAQ Dubai and has the responsibility to ensure that the Company carries out its objectives. It is the purpose of the executive and senior management to manage NASDAQ Dubai in accordance with the directions of the Board. There is a clear division of responsibilities between the Chairman and the Chief Executive.

The Board has a formal schedule of matters specifically reserved for its decision-making, which includes the annual budget, strategy and long term business objectives, major projects and contracts, and significant capital expenditure. Certain matters are delegated to the three Committees of the Board in accordance with their respective Charters.

During the financial year, the Board met 5 times and all of these meetings were held in person in Dubai. At the end of 2011, the Board took the decision to move to fully electronic board meetings with iPad using NASDAQ OMX’s online board portal, Directors Desk. In additional to making the board process more efficient, this has had the benefit of considerable savings in resources, paper and printing.

Board Charter

NASDAQ Dubai’s governance framework is set out in its Board Charter which describes this framework, co-ordinates and aligns supporting policy documents and establishes an environment that enables the Board and officers of NASDAQ Dubai to meet their responsibilities under the prevailing law and to demonstrate good governance practices.

Non-Executive Directors / Independence

In accordance with the DFSA Authorised Market Institution regulation and the Articles of Association, at least one half of the Board comprises Independent Non-Executive Directors. The Non-Executive Directors, four of whom are Independent, bring wide and varied commercial experience to Board and Committee deliberations.

A review of Directors’ independence is carried out at appointment for new Directors, and annually. The latest annual review was carried out in January 2012, by means of a questionnaire. Each Director provided answers to questions based on criteria covering independence as set out in the DFSA’s Authorised Market Institution Rules. Responses were reviewed by Legal and Compliance which, in reference to the criteria, made an assessment as to whether a Director is independent. The assessment was reviewed by the Nomination and Remuneration Committee and its recommendations made to the Board for its approval.

It is standard practice for each Non-Executive Director to have a service agreement detailing their duties, terms and obligations. The term of the agreement is one year which is renewable by mutual agreement and is subject to the annual re-election of the Director by shareholders at the AGM. All Non-Executive Directors are paid an annual retainer together with meeting attendance fees for Board and, where applicable, Committee meetings.

Board Evaluation

An evaluation of the Board and the three Committees for 2011 was undertaken by means of online questionnaires in January 2012. This self-assessment, focusing on performance during 2011, was carried out by the respective members of each Committee in relation to that Committee’s performance and by the full Board in relation to the Board’s performance. The completed questionnaires and the feedback were collated anonymously and the results and recommendations presented at the January 2012 Board and Committees meetings.

Board Attendance

The following table details the Directors’ attendance at Board and Board Committees meetings during 2011.

  Board Audit & Risk Management Market Oversight Nomination & Remuneration
No. of Meetings: 5 6 5 5
Abdul Wahed Al Fahim 5 of 5 6 of 6    
Majid Saif Al Ghurair 3 of 5   2 of 5 3 of 5
Rashid Al Shamsi 5 of 5     5 of 5
Abdulla Ghobash 3 of 5 3 of 6    
Essa Kazim 5 of 5      
Edward Knight 5 of 5   5 of 5  
Jamal Nasser Lootah 5 of 5 6 of 6   5 of 5
George Möller 5 of 5 6 of 6 5 of 5  


Board Committees

The following three Committees of the Board deal with specific aspects of the Company’s affairs. Each Committee has a Charter, detailing written terms of reference that define its authorities, duties and membership.

Audit and Risk Management Committee

The Audit and Risk Management Committee is chaired by Jamal Nasser Lootah. The other members are Abdul Wahed Al Fahim, Abdulla Ghobash and George Möller. The company secretary acts as secretary to the Committee. The Committee is responsible for the independent and objective oversight of internal control and risk management, internal compliance, governance issues, financial reporting, external and internal auditors and financial controls.

During the year, the Committee met on 6 occasions. It reviewed preliminary annual budgets, management accounts and annual financial statements, and recommended for Board approval the final budget and annual financial statements. The Committee received quarterly risk management reports from the Head of Risk Management, reviewed and recommended changes to the transaction limits and signing authority matrix and approved the Money Laundering Reporting Officer annual report.

The Internal Audit function, which is provided by Dubai Financial Market, has direct access to the Chairman of the Audit and Risk Management Committee. The Committee received regular progress reports on the Internal Audit Plan together with the internal audit reports following the completion of each audit.

At the beginning of 2012, the Committee met with the independent auditors, Deloitte to review the annual financial statements and consider the results of the annual audit.

Market Oversight Committee

The Market Oversight Committee is chaired by George Möller. The other members are Majid Saif Al Ghurair and Edward Knight. The company secretary acts as secretary to the Committee. The Committee is responsible for the independent oversight of Market Regulation which includes Issuer Surveillance, Member Compliance and Market Surveillance functions. It also supervises the regulatory functions carried out by other areas of NASDAQ Dubai, including the application of the exchange’s Rules, Members' conduct of business and the clearing and settlement function.

During the year, the Committee met on 5 occasions. It met on each occasion with, and received a report from, Market Regulation and its functions including feedback on regular meetings with the DFSA. The Committee also received ad hoc reports on any market incidents as part of its oversight function.

During the year, the Committee discussed and received updates on the transfer of the Official List and Listing Authority function to the DFSA. It discussed and reviewed the proposed new Admission and Disclosure Standards and its consultation paper. The Committee reviewed the annual budget and resources for Market Regulation, it discussed any changes to key regulatory individuals and reviewed its Charter to satisfy itself that the content was up to date and adequate to carry out its responsibilities.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee is chaired by Majid Saif Al Ghurair. The other members are Jamal Nasser Lootah and Rashid Al Shamsi. The company secretary acts as secretary to the Committee. The Committee is responsible for new appointments to the Board, succession planning for the Board and executive management, and reviewing the independence of Directors. It is also responsible for recommending Non-Executive Directors remuneration for Board approval, approving performance measures and target setting for the Chief Executive, service agreements for Non-Executive Directors and broad policies and programs for employee benefits.

During the year, the Committee met on 5 occasions. It considered the composition of the Board and its Committees and amendments to the Chief Executive service agreement. The Committee considered the findings and determinations of the annual Directors’ independence review and recommended these for Board approval. It considered the year end performance for the Chief Executive and set the targets and objectives for the following year, and also reviewed the Employee Performance Development Plan for the year and new staff policies. The Committee received regular reports from Human Capital on key issues, reviewed the results of the Staff Engagement Survey 2011 and was updated on the renewal of key insurance policies.

Internal Control & Risk Management

Internal control

The Board has overall responsibility for ensuring that Management maintains an effective system of internal control and for reviewing its effectiveness. Such a system is designed to support the identification and management of risks affecting NASDAQ Dubai and the business environment in which it operates. Throughout the year and to date, NASDAQ Dubai has operated a system of internal control which provides reasonable assurance of effective and efficient operations covering all controls, including financial and operational controls and compliance with laws and regulations. Processes are in place for identifying, evaluating and managing the significant risks facing the exchange. The Board, through the Audit and Risk Management Committee, regularly reviews these processes. The effectiveness of controls is periodically reviewed within the business areas. Regular reports are made to the Audit and Risk Management Committee by Management, Internal Audit, Head of Risk Management and the compliance and legal functions covering matters such as financial controls, compliance and operational controls. The Audit and Risk Management Committee monitors resolution of any identified control issues of significance through to a satisfactory conclusion.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. In accordance with International Financial Reporting Standards (IFRS), the internal control over financial reporting is a process designed under the supervision of the Chief Executive and the principal financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes.

NASDAQ Dubai’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS and that receipts and expenditures are being made only in accordance with authorisations of Management and the Board; and provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

Management has assessed the effectiveness of internal controls and is satisfied that the processes followed for the financial year and to date is effective. The system of internal financial and operational controls is also subject to regulatory oversight by the DFSA.

Risk Management

Risk management is a systematic and continuous process which aims to identify, evaluate, manage, control and report significant risks to which NASDAQ Dubai may be exposed. NASDAQ Dubai has integrated the risk management in the business activities, and thus decentralized it to each unit and function. Management is responsible for establishing and maintaining pertinent risk management. The functions and systems for internal control and internal audit are part of the overall risk management process.

NASDAQ Dubai’s exchange, clearing and central securities depository operations require focus on business continuity and incident management. As an exchange and clearing house and, indirectly, central securities depository, NASDAQ Dubai is subject to specific regulation and supervision. Furthermore NASDAQ Dubai is as a clearing house exposed to specific risks related to the central counterparty clearing, whereby NASDAQ Dubai acts as counterparty for transactions between the buyer and the seller. One of the primary obligations of clearing members is to provide collateral to NASDAQ Dubai as required by the applicable rules as protection against the counterparty risk assumed. The Head of Risk Management is responsible for the policy setting of the management and mitigation of these clearing risks. The clearing risks are among other things mitigated by collateralization of obligations, pertinent clearing membership requirements, dedicated clearing capital, netting arrangements and a proactive risk management including, reports and the use of watch lists.

Internal Audit

The purpose of the Internal Audit function is to assist the Board and Management in the effective discharge of their fiduciary and administrative responsibilities by providing independent, objective assurance and consulting services with respect to evaluating risk management, control, and governance process. To ensure independence and objectivity, Internal Audit reports directly to the Audit and Risk Management Committee. The Internal Audit function adopts standards issued by the Institute of Internal Audit (IIA).

Internal Audit services are provided by Dubai Financial Market which follows a risk based audit approach. An annual risk based internal audit plan is prepared based on risk factors and inputs from Management and other stakeholders. The plan is both inclusive and exclusive meaning that all key areas subject to high risk are included in the plan while the non-priority and low risk areas are excluded. During the planning process key business areas and operational risks are identified, compiled, risk rated and ranked to draw a final risk assessed audit scope of work that factors in high and medium risk areas. The audit plan executive summary, submitted to Management and the Audit and Risk Management Committee for approval, provides information about the risk assessment, the current order of priority of audit projects and how they are to be carried out. The audit plan outlines the key departments, activities and processes to audit together with an estimate of resource requirements, budgeted hours and estimated start dates and completion timelines. The Internal Audit submits regular activity reports to the Audit and Risk Management Committee and Management summarizing the results of the audit work including significant risk exposures and control issues and follow up on the issues raised in the audit report. Internal Audit liaises regularly with internal stakeholders to maintain and uphold communication and relationship to a high level. The key internal stakeholders include legal and compliance, company secretariat and risk management functions.

Corporate Responsibility

NASDAQ Dubai is committed to the highest ethical standards of professional conduct and integrity. In order to meet this objective, employees are required to comply with the spirit and letter of the company’s Code of Ethics and Conduct and receive annual training to support this objective.

Due to the nature of its business, NASDAQ Dubai does not have a high environmental impact. Its principal impact arises from energy, paper and water consumption. In an effort to responsibly manage this impact, we encourage a reduction in energy wastage and recycling. In 2011 we recycled 1120kg of paper, 73kg of plastic and 16kg of toner cartridges.

In order to take advantage of technology and the benefits of the internet, NASDAQ Dubai continues to publish its Annual Review online. This has the added benefit of enhancing the way we provide information about the Company to our stakeholders and community and by replacing printed copies it helps reduce our consumption of paper in line with our corporate responsibilities.

As part of its community support, NASDAQ Dubai’s employees took part in the 10km Road Race and 3km Fun Run as part of the Standard Chartered Dubai Marathon 2011 and raised funds for charity.

Corporate Responsibility

NASDAQ Dubai’s principal impact arises from energy, paper and water consumption. In an effort to responsibly manage this impact, we encourage a reduction in energy wastage and recycling. In 2011 we recycled 1120kg of paper, 73kg of plastic and 16kg of toner cartridges.