CMA sets compliance rules for investment firms

KUWAIT CITY, March 27: The Capital Markets Authority has instructed investment firms specializing in asset management to ensure compliance with qualified regulatory capital requirements based on risk assessments, reports AlJarida daily.

According to reliable sources, some investment firms have seen their regulatory capital fall below the risk-based capital requirements, dipping below the specified threshold of 100 percent. These sources emphasized the importance for licensed entities to maintain qualified regulatory capital levels exceeding the risk-based capital requirements.

This ensures that firms have sufficient capital to manage associated risks, assess solvency, meet obligations, and mitigate potential losses in the future. Setting a capital adequacy ratio is crucial for stabilizing market conditions and instilling confidence in listed companies, similar to the regulatory frameworks set for local banks by the Central Bank of Kuwait.

The required capital is determined by considering various risk factors, including market, operational, investment, and credit risks, among others. Compliance with capital adequacy standards helps classify companies based on their ability to withstand market shocks and manage risks effectively. Adherence to these standards serves as a reliable indicator of a company’s resilience to potential risks and crises.

Furthermore, aligning with international regulations and standards enhances investor confidence in the financial sector’s stability, particularly in managing customer funds. Implementing capital adequacy standards ensures financial efficiency, sustainability, and flexibility for licensees, enabling them to anticipate, hedge against, and mitigate risks effectively.