UAE – CM P – Update 2023

Country Manuals Products –

We would like to inform you that BRP has updated its COUNTRY MANUALS PRODUCTS for the following jurisdictions:

• UNITED ARAB EMIRATES

Definitions & Concepts, Regulatory Overview and Behaviour Template

The Country Manual has been reviewed to ensure that the content of all the documents remains accurate and up to date.

Regulatory changes

• The Securities and Commodities Authority (SCA) has repealed the Board of Directors’ Decision No. 9/R.M of 2016 concerning the regulations of investment funds, as amended (“SCA Decision No. (9/R.M) of 2016”) and issued new regulations regarding the promotion of foreign funds in the UAE (SCA Resolution No. 4/R.M of 2023 concerning status regularisation mechanisms to promote foreign fund units in the UAE (“Resolution No. 4/R.M of 2023”)) and the establishment of domestic UAE funds (SCA Decision No. 1/R.M of 2023 concerning the regulation of investment funds (“Decision No. 1/R.M of 2023”)).
• In particular, a public offering/distribution of foreign funds onshore in the UAE (at target) is no longer permitted and foreign funds can no longer be registered with SCA for a public offering. As such, investors appear to have limited access to foreign public funds.
• Thus, foreign funds may only be promoted/distributed onshore in the UAE (at target) on a private placement basis to Professional Investors subject to prior registration with the SCA and appointment of a SCA licensed entity or locally licensed promoter which have been provided a grace period of 6 months, from 1 January 2023, to continue with existing promotion arrangements (or until the remaining period of those arrangements expire, whichever is earlier). In this regard, please note that this grace period was recently extended by the SCA to 31 March 2024.

Material changes

In line with the regulatory changes outlined above, the Country Manual has been reviewed to ensure that the content of all the documents remains accurate and up to date. The changes/modifications are as follows:

• Accordingly, the Country Manual Products Behaviour Template (CM P BT) now answers the relevant onshore scenarios (at target) with “NO” (for the active provision of advisory services/product-related marketing activities in relation to foreign (unregistered) funds to Retail and Professional Investors) and “Grey zone – Via a private offering by a locally licensed promoter” (for forgeign registered funds to Professional Investors).
• In this regard, please note that the promotion/distribution of foreign funds by foreign (unlicensed) service providers to Retail Investors onshore in the UAE (at target) is no longer permitted even under a documented reverse solicitation, albeit this is still permitted on a cross-border basis from outside of the UAE.
• However, foreign (unlicensed) service providers may – in compliance with local licensing requirements for financial consultancy activities – continue to promote/distribute foreign funds onshore in the UAE (at target) on a reverse solicitation basis to Professional Investors (or as an exemption under the SCA Rulebook – even actively – to certain “Professional Investors (by nature)” such as federal or local governments, government agencies and institutions, or companies wholly owned by any of them).
• As the promotion and distribution of foreign funds to Professional Investors is (no longer) exempt under the SCA Rulebook, the “current market practice” for the cross-border promotion/distribution of foreign funds also had to be adjusted accordingly. However, based on advice from our local lawyers, the following “current market practice” continues to apply on a cross-border basis as follows: 
  • The promotion/distribution of funds will only be made to Professional Investors on a one-to-one basis;
  • All payments are sent to an offshore jurisdiction; and
  • All contracts are entered into offshore (i.e. they are governed by foreign law and signed by at least one party outside the UAE).

However, due to the regulatory change outlined above, it should be noted in this context that additional caution is required when promoting/distributing foreign funds even on a cross-border basis.

• Finally, in line with the Country Manual Private Banking (CM PB), the CM P BT clarifies that (locally) registered financial products may generally be distributed on a cross-border basis (in accordance with local distribution rules) (even without/outside the scope of an ongoing advisory agreement (“spot advice”)) when providing advice on a certain locally (registered) financial products, as this is considered an “unofficial tolerated practice”.

For more information, please contact us: info@brpsa.com

Best regards,