Amendments to Foreign Fund Private Placement Exemptions in the UAE
By James Stull, King & Spalding and Dora Chan, King & Spalding
In August 2016, the Emirates Securities and Commodities Authority (SCA), the federal securities regulator of the United Arab Emirates (UAE), adopted new investment funds regulations (the 2016 Fund Regulations), which repealed the prior funds regulations adopted in 2012 and amended in 2013 (the 2013 Regulations). This clarified the formation process for the establishment of locally domiciled funds and introduced significant changes to the marketing of foreign domiciled investment funds in the UAE. The 2016 Fund Regulations impose substantial hurdles and costs for managers seeking to promote foreign funds in the UAE and have generally been subject to negative feedback.
Managers wishing to market foreign funds onshore in the UAE now have far fewer options: they can register the fund with SCA and enter into a distribution arrangement with a locally licensed placement agent, engage in reverse solicitation (where the investor inside the UAE initiates the transaction) or rely on a private placement exemption when offering to sovereign entities (which is the lone exemption remaining from the 2013 Regulations). Funds established in a free zone inside the UAE, including funds established in the Dubai International Financial Centre (DIFC) or the Abu Dhabi Global Market (ADGM), are considered by SCA to be foreign funds.
However, it is widely expected that SCA will issue further clarification regarding additional exemptions, potentially reintroducing the private placement exemptions set out in the 2013 Regulations and introducing additional exemptions for certain other classes of investors, such as multilateral institutions. SCA has not confirmed the timing for the issuance of the clarification or the specific terms and requirements of any additional exemptions.