International Standards and the Administrative Model of Capital Market Regulation in Kuwait

Dr. Asim Jusic, Asst. Prof.
Kuwait International Law School
Dr. Farah Yaseen, Asst. Prof.
Kuwait International Law School


In light of international standards for the governance of capital markets set by the International Organization of Securities Commissions (IOSCO) and related international accounting and auditing standards, we evaluate the Kuwait Capital Markets Authority Law (CMA Law) and the institutional position, capabilities and regulatory powers of the Capital Market Authority (CMA) and capital markets courts. Our analysis shows that, overall, the CMA Law is largely compliant with the selected IOSCO standards.
However, the institutional positioning and functioning of the CMA is susceptible to multiple challenges and sources of systemic risk, brought about by informational asymmetries, moral hazard, and adverse selection. These risks and challenges have not only to do with the CMA Law itself, but also with the very nature of capital markets, and weaknesses inherited from the pre-2010 period. Among these, we single out the following ‘top-down’ and ‘bottom-up’ risks and challenges. Firstly, the position of the CMA as an administrative regulator with formally high independence comes at a cost of limited accountability, which is potentially a source of systemic risk. Secondly, the consistency, clarity, and timeliness of the CMA’s rule-enforcing and supervisory decisions, and their review by capital markets courts, are suboptimal and require a bottom-up strengthening. Finally, within the Kuwait capital market, consistent application of international accounting and, to a somewhat lesser extent, auditing standards is still lax, and in need of capital-market-wide regulation.

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