UAE authorities introduce passporting regime for investment funds

The Emirates Securities and Commodities Authority (SCA), the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM) and the Dubai Financial Services Authority (DFSA) of the Dubai International Financial Centre (DIFC) have now implemented rules relating to the funds passporting agreement, which was recently signed into law by each of the three regulators.

The agreement and new rules will enable investment managers authorised by either SCA, the FSRA or the DIFC to market and sell their domestic funds to potential investors based anywhere in the UAE, including in one of the financial freezones.

For example, a fund manager authorised by the DIFC will be able to market their funds more widely without the need for further authorisation or approval, provided they meet the relevant requirements and notify the DFSA.

Managers will have to identify the jurisdictions in which they plan to promote their funds, provide a copy of the offer document, and if relevant, identify the agents who will promote the fund.

The regulators will maintain a register of passported funds and will have the ability to take a fund off the register if they are not complying with the rules, are wound up, or if one of the other regulators or the fund manager requests that the fund be removed.

Financial services expert Tom Bicknell of Pinsent Masons, the law firm behind Out-Law.com, said: "Coordination between the UAE’s financial regulators is always a welcome occurrence. This latest development provides certainty for foreign investment into the UAE’s funds industry and will allow for a greater range of funds for UAE investors to choose from."

The implementation of the legislation follows an agreement signed by the regulators in December last year.

SCA chairman Sultan bin Saeed Al Mansouri said the passporting agreement was an important step towards diversifying investment opportunities and products on the UAE mutual funds market.

ADGM chief executive Richard Teng said: “The UAE funds market is on the cusp of exponential growth and the new funds passporting regime will stimulate the development of the domestic investment funds industry with a broader variety of funds and enable funds to be supported across the UAE. With the closer cooperation with our regulatory partners, we are able to share pertinent regulatory information and supervisory updates to support licensing of domestic funds.”