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UAE financial regulators to cooperate on investment funds

Financial regulators in the UAE have agreed to implement a passporting regime, facilitating the licensing of funds by each regulator for promotion across the UAE.06 Dec 2018

The agreement will strengthen the UAE's position as an international financial and business hub and attract new participants to the market, according to the regulators. While details of the new legislative framework will require further consultation, any funds licensed in accordance with the agreement may be promoted and sold anywhere within the UAE, including in each of the financial free zones, namely the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM), under a single licence.

The agreement was signed by the Securities and Commodities Authority (SCA), which regulates 'onshore'; the Dubai Financial Services Authority, which regulates the DIFC (DFSA); and the Financial Services Regulatory Authority, which regulates the ADGM (FSRA). The DFSA and FSRA will now consult on related licensing regulations.

"Signing this agreement and implementing its provisions will foster the relations between the three authorities," said Sultan Al Mansoori, Minister of the Economy and Chair of the SCA. "It will facilitate the licensing and promoting of investment funds to attract foreign investment."

"It will also pave the way for savings to be directed towards new financial instruments such as investment funds and activate a number of financial services and activities related to investment funds such as custodian, investment management, and promoting, as well as the management of investment funds," he said.

The agreement provides that funds licensed in accordance with the provisions of the agreement and the licensing regulations may be promoted in or from the financial free zones in the UAE. It also commits each regulator to setting up a notification and registration facility to "facilitate the promotion and sale of domestic funds, set up within the UAE, outside the financial free zones, or in either of the DIFC or ADGM, to potential investors based anywhere in the UAE and under a single licence".

The SCA, DFSA and FSRA have agreed to establish common rules to implement the regulatory agreement. It is also expected to provide greater protection to investors, by making it easier for the regulators to exchange information about the promotion and sale of local investment fund units in the UAE.

"This is a big step towards unifying an otherwise confusing and fragmented promotions regime," said financial services expert Marie Chowdhry of Pinsent Masons, the law firm behind Out-Law.com. "The agreement is also likely to foster an enhanced exchange of regulatory information amongst the regulatory bodies in relation to the promotion and sale of local investment fund units in the UAE."

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