The Securities and Commodities Authority (SCA) of the UAE actively enforced a regulation (pdf) since last Sunday, prohibiting onshore banks from promoting or marketing foreign funds to retail investors. This regulation allows only funds registered with the SCA to be marketed in the UAE to retail investors.
The SCA issued this ruling in January last year, which barred funds and asset managers located outside the UAE from publicly offering subscriptions in the country.
Certain professional investors, such as federal or local governments, government bodies, and wholly-owned state-owned companies, can still invest in foreign funds and foreign assets, as long as their investments exceed AED 500k.
They must also possess assets worth no less than AED 75M and an annual income of at least AED 150M, as outlined by Gulf News. Additionally, foreign residents can subscribe to overseas funds, provided they do so through their offshore bank accounts.
Alternative avenues: Foreign fund managers aiming to continue serving the retail market in the UAE have several options. These include acquiring a fund management license from the SCA to establish a local feeder fund enabling retail investors to invest in a foreign master fund or applying for a management company license, as explained by law firm Simmons and Simmons. Alternatively, they could engage a local, third-party SCA-licensed management company as an initial step, according to Gulf News.
Encouraging fund managers to operate in the UAE: As part of this decision, the SCA has streamlined the requirements for foreign managers establishing a local presence by reducing minimum capital requirements from AED 50M to AED 1M, lowering registration fees, expediting license processing time, and relaxing accreditation criteria.
Impact and objectives: This measure aims to strengthen the domestic funds market by curbing capital outflows, thereby facilitating more sustained inflows into local stocks, according to Naqqash Ahmed, managing director of Capital Plus, as reported by Gulf News. It also seeks to clamp down on the unregulated activities of unlicensed foreign funds in the Emirates.
Successful outcomes: The SCA’s initiatives have attracted numerous foreign asset managers to the UAE over the past year.
Future plans: The SCA aims to attract more foreign funds to establish operations in the UAE and promote the creation of local funds. It is collaborating with other financial regulatory bodies in the GCC to develop the GCC Funds Marketing Passport, pending final approval from the GCC council, according to Simmons and Simmons.
Additionally, the SCA is exploring the possibility of implementing a dual licensing framework for fund managers in partnership with the Dubai Financial Services Authority and the Abu Dhabi Global Market.
