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UAE regulator suspends foreign investment fund renewals

SCA’s sudden shift applies to public offerings only – private ones are not affected

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The UAE’s Securities and Commodities Authority has caught the financial services industry on the back foot by hitting pause on the renewal of foreign investment funds aimed at the public until further notice.

There are currently few details beyond confirmation of the suspension and exemption for the renewal of private funds.

A source told International Adviser that the watchdog cited “keeping pace with the evolving market practices” and it “constantly reviewing regulations” as drivers behind the decision.

“The announcement has come out of the blue,” Nigel Sillitoe, founder and chief executive of Insight Discovery, told IA. “It is starting to reverberate around the funds industry in the UAE.

“It is too early to determine what the impact will be, however investment managers who have funds already registered with SCA will be mighty relieved.”

The difficulty in finding on-the-ground sources willing and able to provide commentary offers, perhaps, an insight into how unexpected the move was and how the industry is still grappling with its implications.

SCA started the new year with a campaign to confront unlicensed financial activities and protect investors. Messages across its Twitter and LinkedIn accounts focus on reminding consumers to be “conscious and careful”, not “get carried away by the temptation of profits” and to “watch out for your wallet”.

There does not appear to be any announcement regarding the fund renewal suspension on either social media platform or on the regulator’s own website – at least one that is available in English.

Whether the two campaigns and suspension are connected is not clear.

But recent history has shown that the UAE regulators have a tendency to publish updates at their own pace, which means that providers looking to renew their funds face considerable uncertainty.

Meeting the minimum requirements

According to Waystone, a provider of compliance solutions to the asset management industry, a foreign investment fund looking to get SCA approval to promote its offering to the public in the UAE must meet the following conditions:

  • The fund is either established outside the UAE or within a financial free zone in the UAE and is regulated by a regulator similar to the SCA;
  • The fund cannot be exempt in its country of domicile from any regulatory oversight or regulatory controls particularly in respect of regulations concerning the preparation and distribution of periodic reports;
  • The fund should be licensed in its country of domicile to be promoted on a public offering basis; and
  • The minimum subscription per investor in the units of the fund distributed on a public offering basis shall be set out in the prospectus, a copy of which shall be submitted to the SCA for approval.

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