UAE regulator pledges to review funds regime
Abu Dhabi, April 25, 2013
The UAE securities regulator will review its funds regime regularly in consultation with investors and fund sponsors, the body said after relaxing rules to make it easier for foreign fund managers to sell to institutions.
New rules set by the Securities and Commodities Authority (SCA) last August tightened requirements for foreign funds in the UAE. The funds were told to obtain written approval from the SCA to offer products, and to operate through locally licensed promoters.
This threatened to raise fund managers' costs and could have been particularly damaging to the Dubai International Financial Centre, the emirate's financial free zone, by reducing any benefits that funds could obtain by operating from the DIFC.
Big UAE-based customers of the fund managers such as the Abu Dhabi Investment Authority, one of the world's largest sovereign wealth funds, could also have faced delays and higher costs.
But last month, the SCA relaxed the rules to say they did not apply to the marketing of products to sovereign wealth funds, other institutional investors and financial managers. Most funds sold in the UAE are to institutions, not to retail investors.
The SCA told Reuters that the decision was made after comments from stakeholders, whom it did not identify.
"Funds regimes around the world are evolving regulations and the SCA intends to review its funds regime on a regular basis as per best practices, as well as continuously consult with all stakeholders, investors and funds sponsors," it said in an emailed statement this week.
Jeffrey Singer, chief executive of the DIFC Authority, which manages the financial zone, said the amendment was important in developing the funds industry.
"There are some other issues like distribution of research on UAE companies from DIFC, regulations on retail offerings into UAE etc. which are still pending," he said.
"If we can continue to get solutions like these, which will be very encouraging, I think the market will love to see things like that happen."
The amendment to the SCA's rules will take effect when it is published in the Official Gazette. In its statement, the SCA said publication "should be quite imminent".
"They're trying to protect investors from those bankers who fly in selling to unsophisticated investors," said Farah Foustok, chief executive officer at ING Investment Management (Middle East & Africa).
"They obviously cannot control the ones that are talking to sovereign wealth funds and to sophisticated investors, but the rule is to protect the unsophisticated investors."
The SCA has set an Aug. 26 deadline for funds affected by its new rules to obtain SCA approval. Some fund managers have been hoping for an extension to the deadline, but in its statement to Reuters, the SCA said that was not on the cards.
"There are no plans at this time to extend the August 26th date which marks the end of the grace period indicated to existing business relevant to Mutual Funds," it said.-Reuters