Kuwait has appointed its first independent regulatory body, the Capital Market Authority, to oversee its stock exchange, Commerce Minister Ahmad al-Harun said on Wednesday.

The managing director of the Kuwait exchange, Saleh al-Falah, was appointed chairman of the new body which has four other members, the official KUNA agency quoted Harun as saying after a cabinet meeting.

Before becoming bourse boss five years ago, Falah served for some three years as managing director of the Kuwait Investment Authority, the oil-rich emirate's sovereign wealth fund.

The appointment comes seven months after the Kuwaiti parliament passed legislation to set up the regulatory body with the aim of boosting transparency in the Arab world's second largest stock market.

Under the law, the main duties of the Authority are to ensure complete transparency and to prevent insider dealing and other forms of illegal trading and fraud.

Since its foundation as the region's first bourse in the early 1970s, the Kuwait exchange has been run by government-appointed administrators who have been criticised by MPs for a lack of transparency.

The law also calls for the setting up of a special tribunal for the stock market and stipulates hefty jail terms and fines for an array of offences.

The Kuwait exchange has been the only one in the Gulf without a market authority as the law took many years to secure parliamentary approval.

The market has a capitalisation of around 117 billion dollars and lists more than 210 local and foreign companies.

The Kuwait and Bahrain exchanges were the only ones in the Gulf to record losses in 2009, with Kuwait dropping 10 percent. So far this year, the market has dipped 3.6 percent.