ESA Upholds Decision to Suspend Dubai Commodities Clearing Corporation

The European Supervisory Authorities’ (ESA) Joint
Board of Appeal has confirmed the decision of the European Securities and
Markets Authority (ESMA) to withdraw the recognition of Dubai Commodities
Clearing Corporation (DCCC).

The withdrawal results from the European Commission’s
inclusion of the United Arab Emirates (UAE) on the list of high-risk third
countries with deficiencies in their anti-money laundering and
counter-financing of terrorism regulations.

Impact of the Decision

The decision to withdraw recognition affects DCCC’s
status as a tier 1 third-country central counterparty (CCP). It followed an
appeal brought by DCCC against ESMA’s withdrawal.

With the Joint Board of Appeal’s unanimous dismissal
of DCCC’s appeal, ESMA ‘s withdrawal decision has been implemented.
Despite DCCC’s efforts, the suspension of ESMA’s decision, which was initiated
in October 2023, pending the outcome of an appeal, has expired.

The confirmation of withdrawal necessitates
strategic reassessment and potential adjustments to align with EU regulatory
requirements by DCCC.

— ESMA – EU Securities Markets Regulator 🇪🇺 (@ESMAComms) February 6, 2024

Future Considerations

The regulator mentioned that as the regulatory
landscape evolves, entities operating as CCPs and third-country entities must
remain vigilant in addressing compliance obligations to mitigate regulatory
risks and ensure continued market access.

In 2022, ESMA took enforcement action against 225
securities issuers, highlighting significant deficiencies in their financial
statements. The actions resulted from reviewing 640 financial statements compliant with International Financial Reporting Standards (IFRS). This highlighted a thorough examination of financial practices in European regulated markets.

The regulator highlighted shortcomings related to
accounting for financial instruments, impairment of non-financial assets,
presentation of financial statements, and revenue recognition. Representing 16%
of all issuers, these enforcement actions underscored the imperative for
adherence to the IFRS guidelines, which are essential for maintaining
transparency and trust in financial reporting.

The regulator emphasized the assessment of material
departures from IFRS concerning recognition, measurement, and presentation of
assets and liabilities, along with related disclosures.

The European Supervisory Authorities’ (ESA) Joint
Board of Appeal has confirmed the decision of the European Securities and
Markets Authority (ESMA) to withdraw the recognition of Dubai Commodities
Clearing Corporation (DCCC).

The withdrawal results from the European Commission’s
inclusion of the United Arab Emirates (UAE) on the list of high-risk third
countries with deficiencies in their anti-money laundering and
counter-financing of terrorism regulations.

Impact of the Decision

The decision to withdraw recognition affects DCCC’s
status as a tier 1 third-country central counterparty (CCP). It followed an
appeal brought by DCCC against ESMA’s withdrawal.

With the Joint Board of Appeal’s unanimous dismissal
of DCCC’s appeal, ESMA ‘s withdrawal decision has been implemented.
Despite DCCC’s efforts, the suspension of ESMA’s decision, which was initiated
in October 2023, pending the outcome of an appeal, has expired.

The confirmation of withdrawal necessitates
strategic reassessment and potential adjustments to align with EU regulatory
requirements by DCCC.

— ESMA – EU Securities Markets Regulator 🇪🇺 (@ESMAComms) February 6, 2024

Future Considerations

The regulator mentioned that as the regulatory
landscape evolves, entities operating as CCPs and third-country entities must
remain vigilant in addressing compliance obligations to mitigate regulatory
risks and ensure continued market access.

In 2022, ESMA took enforcement action against 225
securities issuers, highlighting significant deficiencies in their financial
statements. The actions resulted from reviewing 640 financial statements compliant with International Financial Reporting Standards (IFRS). This highlighted a thorough examination of financial practices in European regulated markets.

The regulator highlighted shortcomings related to
accounting for financial instruments, impairment of non-financial assets,
presentation of financial statements, and revenue recognition. Representing 16%
of all issuers, these enforcement actions underscored the imperative for
adherence to the IFRS guidelines, which are essential for maintaining
transparency and trust in financial reporting.

The regulator emphasized the assessment of material
departures from IFRS concerning recognition, measurement, and presentation of
assets and liabilities, along with related disclosures.