Lebanon has suspended the oversight authority for capital markets, which had previously uncovered important financial scandals – a decision that was condemned as “dangerous” by one of its board members.
The institution's mission is to oversee capital markets – which are financial markets that bring buyers and sellers together to trade financial assets – and protect investors from fraudulent activities.
“It's a dangerous turning point: the financial sector will find itself lacking a major supervisory authority,” Walid Kadri, one of the board members of the Capital Market Authority (CMA), told The National.
The decision is not final. A meeting is scheduled on Tuesday to explore financing options in response to internal dissent.
The CMA board voted to suspend the institution, citing financial reasons at the end of December 2023. Employees were given the option to take unpaid leave for at least six months or resign by January 10, while board members are expected to retain their positions.
“The financial reasons put forth for the suspension are not acceptable,” said Mr Kadri. “There is enough financing for 2024 from the contributions of the institutions we licence,” he added, planning to present this argument during Tuesday's meeting.
The quorum for the CMA board to convene is four out of seven members, which comprise three government-appointed independent members and five permanent positions, including its chairman, the governor of the Banque du Liban. Decisions are reached by a majority vote.
Lebanon's once seemingly robust financial sector collapsed in 2019 collapsed in 2019, with losses surpassing $70 billion and causing insolvency in banks and the destruction of the local currency.
As financial scandals continue to emerge, calls for increased accountability have grown to uncover the reasons behind the collapse, described by the World Bank as one of the worst financial crises in over 150 years.
Central bank scandal
The CMA's Financial Control Unit, responsible for investigations and audit missions, played a crucial role in exposing irregularities related to Optimum Invest SAL, a broker closely associated with Lebanon's central bank.
In its audit, the CMA accused Optimum of “extravagant” irregularities in transactions with commercial banks.
Optimum has “forcefully” rejected the “baseless allegations” concerning its transactions with BDL uncovered in another audit conducted by Alvarez & Marsal, stressing their “commitment to compliance with applicable laws and regulations”. It did not comment on the CMA report.
The revelations follow the Forry Associates scandal, another brokerage firm suspected of siphoning off more than $300 million from the central bank.
Arrest warrants have been issued by France and Germany for Riad Salameh, the former central bank governor, on charges of money laundering, while the US and the UK have imposed sanctions on him and his relatives.
Mr Salameh has consistently denied the accusations.
Lebanon's Central Bank Governor, Riad Salameh, greets employees on his last working day as the head of the Central Bank in Beirut, Lebanon, 31 July 2023. EPA
“It’s obvious that the suspension is not a matter of financing or resources. For me, the real reason remains unclear,” Nadine Abdelnour, the secretary general of CMA told The National.
Mr Kadri pointed out that the suspension of the CMA coincides with an increase in unlicensed institutions providing financial products and asset management services on the black market – which would thrive without regulatory oversight.
He voiced concerns that the decision might favour networks of vested interests at the expense of the public. “Many of these companies ultimately end up misappropriating their clients' funds,” Mr Kadri said.
'Empty shell'
Other industry insiders maintain that the decision is purely driven by financial considerations and is intended as a temporary measure until a solution to find additional funding is identified.
The employees' low salaries, which have been greatly diminished by hyperinflation and are now a few hundred dollars per month, have prompted the departure of many qualified professionals from their positions, according to a source close to the CMA.
This is especially the case within the financial investigation unit, the CMA's core competency, where only one employee remains, according to the source.
“The current financing does not allow a re-evaluation of employees' salaries, and it will be challenging to attract new hires given the current salary levels,” the source said.
The building housing the Optimum offices in Beirut.
“The decision is only temporary. The essential thing is to exert pressure to secure adequate funding to effectively sustain the institution, but there is no point in keeping an empty shell and maintaining an institution that is not able to do its job,” the source added.
The source said the decision would be reversed if financing was found. Otherwise, it emphasised that the board would maintain essential functions, such as receiving files, while preserving current data, allowing for a quick restart when funding permits.
“Information regarding Optimum transactions has already been sent to the judiciary,” the source said, denying allegations that there might be an attempt to bury sensitive files.
‘General settlement’
However, for Lebanese lawyer Karim Daher, this decision is part of a “general settlement” regarding financial crimes in Lebanon.
The decision to suspend the CMA “eliminates a crucial path for exposing all the wrongdoings committed”, he told The National. “This perpetuates a sense of impunity and the absence of accountability”.
The move “also goes against good practice; every functioning country has capital market authorities to supervise the financial sector”.
It also reduces the possibility for any investors affected by Lebanese banks' wrongdoings to denounce and claim their rights before the CMA, Mr Daher said.
“The CMA can take regulatory measures against banks and financial institutions and imposes sanctions in case of violation, while also claiming damages and penalties. I have personally received many requests from investors affected by banks' misconduct, which I have redirected to the CMA or pool of specialised lawyers”.
Affected investors are mainly holders of preferred shares, bonds’ and notes’ holders, he said.
Lebanon's security situation, with a border conflict at its southern frontier with Israel threatening to evolve into a full-scale war, has diverted attention from the financial crisis.
Yet, accountability for the economic downturn, which has left Lebanese depositors unable to access their lifelong savings, remains elusive. Despite a series of financial scandals, the Lebanese judiciary has yet to hold any officials or members of the banking sector accountable.
“It has been six months since the findings from Optimum's audit were presented to the judiciary, and yet, no action has been taken,” said Mr Daher.
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
Sheer grandeur
The Owo building is 14 storeys high, seven of which are below ground, with the 30,000 square feet of amenities located subterranean, including a 16-seat private cinema, seven lounges, a gym, games room, treatment suites and bicycle storage.
A clear distinction between the residences and the Raffles hotel with the amenities operated separately.
Sunday, February 3, 2019 - Rome to Abu Dhabi
1pm: departure by plane from Rome / Fiumicino to Abu Dhabi
10pm: arrival at Abu Dhabi Presidential Airport
Monday, February 4
12pm: welcome ceremony at the main entrance of the Presidential Palace
12.20pm: visit Abu Dhabi Crown Prince at Presidential Palace
5pm: private meeting with Muslim Council of Elders at Sheikh Zayed Grand Mosque
6.10pm: Inter-religious in the Founder's Memorial
Tuesday, February 5 - Abu Dhabi to Rome
9.15am: private visit to undisclosed cathedral
10.30am: public mass at Zayed Sports City – with a homily by Pope Francis
12.40pm: farewell at Abu Dhabi Presidential Airport
1pm: departure by plane to Rome
5pm: arrival at the Rome / Ciampino International Airport
- make sure you have at least Dh15 on you Nol card, as there could be big queues for top-up machines
- enter the right cabin. The train may be too busy to move between carriages once you're on
- don't carry too much luggage and tuck it under a seat to make room for fellow passengers
Company profile
Date started: December 24, 2018
Founders: Omer Gurel, chief executive and co-founder and Edebali Sener, co-founder and chief technology officer
Based: Dubai Media City
Number of employees: 42 (34 in Dubai and a tech team of eight in Ankara, Turkey)
Sector: ConsumerTech and FinTech
Cashflow: Almost $1 million a year
Funding: Series A funding of $2.5m with Series B plans for May 2020
Ziina users can donate to relief efforts in Beirut
Ziina users will be able to use the app to help relief efforts in Beirut, which has been left reeling after an August blast caused an estimated $15 billion in damage and left thousands homeless. Ziina has partnered with the United Nations High Commissioner for Refugees to raise money for the Lebanese capital, co-founder Faisal Toukan says. “As of October 1, the UNHCR has the first certified badge on Ziina and is automatically part of user's top friends' list during this campaign. Users can now donate any amount to the Beirut relief with two clicks. The money raised will go towards rebuilding houses for the families that were impacted by the explosion.”
The Nobel Prize was created by wealthy Swedish chemist and entrepreneur Alfred Nobel.
In his will he dictated that the bulk of his estate should be used to fund "prizes to those who, during the preceding year, have conferred the greatest benefit to humankind".
Nobel is best known as the inventor of dynamite, but also wrote poetry and drama and could speak Russian, French, English and German by the age of 17. The five original prize categories reflect the interests closest to his heart.
Nobel died in 1896 but it took until 1901, following a legal battle over his will, before the first prizes were awarded.
The Year Earth Changed
Directed by:Tom Beard
Narrated by: Sir David Attenborough
Stars: 4
GIANT REVIEW
Starring: Amir El-Masry, Pierce Brosnan
Director: Athale
Rating: 4/5
Results
5pm: Maiden (PA) Dh80,000 (Turf) 2,200m; Winner: Gurm, Antonio Fresu (jockey), Eric Lemartinel (trainer)
5.30pm: Handicap (PA) Dh80,000 (T) 1,600m; Winner: Al Nafece, Al Muatasm Al Balushi, Mohammed Ramadan
6pm: Wathba Stallions Cup Handicap (PA) Dh70,000 (T) 1,200m; Winner: Ashton Tourettes, Adrie de Vries, Ibrahim Aseel
6.30pm: Arabian Triple Crown – Group 3 (PA) Dh300,000 (T) 2,200m; Winner: Ottoman, Adrie de Vries, Abdallah Al Hammadi
7pm: Liwa Oasis – Group 2 (PA) 300,000 (T) 1,400m; Winner: Hakeemat Muscat, Szczepan Mazur, Ibrahim Al Hadhrami
7.30pm: Handicap (TB) Dh80,000 (T) 1,600m; Winner: Ganbaru, Antonio Fresu, Musabah Al Muhairi
Option 1: 70% in year 1, 50% in year 2, 30% in year 3
Option 2: 50% across three years
Option 3: 30% across five years
Results
Ashraf Ghani 50.64 per cent
Abdullah Abdullah 39.52 per cent
Gulbuddin Hekmatyar 3.85 per cent
Rahmatullah Nabil 1.8 per cent
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
