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The Engine Behind Nasdaq Dubai's New Growth Market: A Guide For Dubai's SME Sector The benefits of listing include a reduced dependence on bank funding, a higher degree of diversification of investors, easier access to additional equity capital and debt finance, and a higher public profile and brand recognition.

By Eric Salomons

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The Nasdaq Dubai Growth Market for SMEs, a new market designed to support small and medium-sized companies that was recently launched by the Crown Prince of Dubai, H.H. Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, is a platform that will hopefully help the development of the Dubai International Financial Centre (DIFC) and the wider UAE economy.

A stock exchange listing can give a significant boost to SMEs. The benefits of listing include a reduced dependence on bank funding, a higher degree of diversification of investors, easier access to additional equity capital and debt finance, and a higher public profile and brand recognition.

In this article, I aim to provide some clarity around the regulatory framework that sits behind the new growth market, the importance of the compliance adviser, the listing process, and why preparation for an initial public offering (IPO) is so critical. I'll not be looking at the specific rules themselves, but rather the spirit of what the rules are trying to achieve– essentially, what we at Dubai Financial Services Authority (DFSA) would like to see actually happening in practice.


The good news is that the rules are pretty straight forward. The table below summaries the more important ones and how they compare to a listing on the main market.

Source: Eric Salomons

Understanding the role of the compliance advisor

From a regulatory compliance perspective, this is the most important adviser role in the IPO process. A company must appoint and maintain a compliance adviser for at least three years post listing. Compliance advisers are, essentially, corporate finance advisers approved by the DFSA to act in this capacity. We may suspend the listing of a company if it ceases to retain a compliance adviser and if a new compliance adviser is not appointed within an agreed period of time.

Our compliance adviser regime offers a balanced approach to regulation providing firms with the flexibility to manage their own risks, together with the expectations of their clients. That said, it is our expectation that a compliance adviser undertakes rigorous and appropriate due diligence to ensure that applicant companies are suitable for listing.

Typically, a compliance adviser would be required to guide companies through the listing process, advise and guide management on their responsibilities in relation to relevant laws and regulations, as well as their continuing obligations once listed, and to coordinate and oversea the drafting of the prospectus document. In other jurisdictions where this role works best, the compliance adviser has a long and close relation with the company.

Although we do not define what "suitability for listing" means, we would expect a compliance adviser to undertake appropriate documented due diligence on a new applicant company. For example, it is market practice for an advisor firm performing this role to review and document a company's management history and credibility, corporate structure, corporate governance controls, financial reporting procedures, and working capital adequacy.


This is a relatively straight forward process if the company has prepared well in advance. A typical listing process would involve:

  • the appointment of the compliance adviser and other advisers
  • a preliminary meeting to discuss the company and its IPO
  • a meeting to agree the company's suitability for listing
  • a formal application for listing
  • a prospectus preparation and review period
  • pricing and capital raising
  • listing and trading on Nasdaq Dubai

A common question often asked here is: "How long does this process take?" The answer, I'm afraid, is that it depends. The attributes of an efficient and successful listing process tend to be all of the following: a company that is well prepared, and has a proven commercial equity and growth story, a compliance adviser with a proven track record of delivery IPOs for companies in similar sectors, and also is a DIFC incorporated company with a clean corporate structure, no material issues arising during the listing process, and market conditions for a successful capital raising.

At this point, it is worth mentioning different listing methods and structures as they may impact on the listing process. Nasdaq Dubai's new SME growth market is designed for SMEs to list and raise capital through the traditional IPO method. Clearly, this is the favoured approach, because it provides for the necessary conditions to achieve a fair market valuation. However, the following listing methods and share structures are also open to a new applicant company:

  • A secondary listing A company that has its primary listing on another recognised exchange, and is interesting in obtain a secondary listing.
  • A direct listing (also known as an introduction or a technical listing) A company lists without raising any capital. Typically, this suits companies which have already raised capital through other means and have a diverse set of investors on their shareholder register before listing.
  • Dual class share structures A structure that gives certain shareholders voting rights disproportionate to their shareholding. Such structures may encourage entrepreneurship and innovation.

The importance of preparation

If there is a secret to a successful IPO, it is proper preparation. This is even more important for SMEs, who may not have the management experience, financial track record, internal systems and controls, and general governance structures that more mature companies enjoy. During the listing process, a company will need to engage with the investment banking community and investors explaining its strategy with well thought-out reasons for considering an IPO. An early assessment of what aspects of the company's operations will be attractive to investors, and of how an IPO will benefit its business, will likely save time and expense later in the process.

Some questions to consider include:

  • Are the reasons for pursuing an IPO and listing clear? This is especially important if the company's operations are based overseas.
  • What are the proceeds of the offer to be used for?
  • Have your company's financial statements been audited and have the auditors reported without qualification?
  • Has the current management team been in place throughout the last year? Does the team have a full range of and sufficient depth of experience?
  • Does the management team have any conflicts as a result of their private interests?
  • Is the structure of the Board appropriate for a public company?
  • To what extent are non-executive directors already involved?
  • Are there uncertainties over the company's ability to generate cash in the future?
  • Will your company's cash requirements be met by the proceeds of the offering and banking facilities?
  • Does your company have established procedures for producing budgets and forecasts?
  • Will the shares be offered to a wide range of investors (that are independent of the company)?
  • Will your company take any actions to facilitate a liquid market post-IPO?

I hope you found this article on good markets regulation relevant and insightful. I welcome any feedback that you have, as well as any suggestions on other aspects of our SME regulatory regime that you would like us to cover. Reach out to us in the DFSA Markets team on

Related: A Guide For Listing Your SME On The Nasdaq Dubai Growth Market

Eric Salomons

Director - Markets, Dubai Financial Services Authority (DFSA)

Eric Salomons is a Director and leads the Markets division at the Dubai Financial Services Authority (DFSA). He is a member of the DFSA’s executive committee, and he has developed his career in derivatives and securities markets over the last two decades.

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