United Arab Emirates: Fund Raising In The United Arab Emirates To Be Regulated

Last Updated: 1 March 2011
Article by Daniel Partovi

The Securities and Commodities Authority of the United Arab Emirates ("ESCA") has recently published draft regulations that, if enacted as proposed, will significantly increase the regulation of both foreign and local investment funds active in the United Arab Emirates (the "UAE").

Shift in Regulatory Approach in the UAE

The operation and marketing of investment funds in the UAE (outside of the Dubai International Financial Centre1) has historically been regulated by the UAE Central Bank (the "Central Bank").

This regulatory responsibility has now passed to ESCA, which has recently released draft proposals (the "Proposals") to alter, among other items, the regime relating to the promotion of foreign funds in the UAE.

The Proposals are contained in:

  1. A Draft Decision on Investment Funds (the "Investment Funds Regulation"), which would apply to the promotion of foreign funds in the UAE and to the operation of local UAE investment funds; and
  2. A Draft Decision on Regulating Investment Management Activity (the "Investment Management Activity Regulation"), which deals with undertaking investment management activity in the UAE and required regulatory approval from ESCA.

The Proposals are currently in a consultation phase but, if enacted in their current form, will establish a new investment fund and investment management regulatory regime for both foreign and local funds active in the UAE.

The Proposals are indicative of a material shift in regulatory approach to the operation of funds and fund raising in the UAE.

Proposed Regulation of Foreign Investment Funds

The draft Investment Funds Regulation contains a number of specific provisions aimed at regulating the cross-border promotion of foreign funds in the UAE.2

Key aspects of the draft Investment Funds Regulation relevant to foreign funds include requirements that:

  • Preapproval must be obtained from both the UAE Central Bank and ESCA before any foreign fund may promote its units in the UAE;
  • The foreign fund must be licensed and supervised by an authority in its home jurisdiction that is the equivalent of ESCA (or supervised by an authority in a UAE free zone);
  • All parties related3 to the foreign fund must be licensed and supervised by an authority in their home jurisdiction that is the equivalent of ESCA; and
  • The foreign fund must contract with a local UAE company (an "Authorized Local Distributor") that is duly authorized by ESCA4 (i.e., a local promoter and distributor).

Compliance with the Proposals

The Investment Funds Regulation, as currently drafted, may cause foreign funds active in the UAE some concerns.

Although it is important to recognize that the Proposals are currently in draft form, the following issues may be relevant to some foreign funds:

  • The dual requirement to obtain approval from both ESCA and the UAE Central Bank may result in delays in the ability to promote a foreign fund in the UAE.
  • A requirement for the foreign fund to be licensed in its home jurisdiction may be at odds with the structure of many foreign funds which may not be subject to such licensing or regulatory supervision in their home jurisdiction.
  • The extension of similar licensing and regulatory requirements to cover all parties that are related to the foreign fund may have wide-ranging ramifications to certain foreign funds with complex cross-border structuring arrangements.
  • In addition, the necessity of contracting with anAuthorized Local Distributor may result in logistical delays in fund raising and increased expense to local investors seeking to access foreign funds.

Appointment of Authorized Local Distributor and Reporting Requirements

The requirement to appoint an Authorized Local Distributor appears from the Proposals to extend to using the Authorized Local Distributor to carry out multiple tasks associated with the fund.

The draft Investment Funds Regulation also imposes significant reporting requirements in respect of the foreign fund on the Authorized Local Distributor.

As well as potentially having to provide daily pricing information on fund units, the Authorized Local Distributor would be required to provide a means of enabling investors to have access to reports and quarterly financial statements prepared by the fund's auditors within 30 days of the end of each quarter.

The Authorized Local Distributor would also have to provide a report and audited annual financial statements of the fund to ESCA within three months of the end of the foreign fund's financial year, in addition to any other reports or data that ESCA may require.

The reporting requirements set out in the Proposals may be seen to be significantly different from generally accepted reporting practices and related timescales recognized internationally by the funds industry, and compliance with them may be difficult to achieve in funds with illiquid holdings.

No Exemption for Private Placings or Limited Offers

Under the existing regulatory regime, a view has historically been taken that the promotion of funds in the UAE on a discrete basis to a small number of sophisticated investors was tolerated by the UAE authorities.

The draft Investment Funds Regulation does not currently contain specific provisions that would exempt non-retail private placements made to sophisticated or high-net-worth investors from the proposed new regime.

The fact that the Proposals specifically address the promotion of foreign funds in the UAE in some detail and yet do not contain any such private placement exemption is likely to raise significant concerns about whether previous tolerated fund-raising practices will be permitted in the future.


The Proposals contained in the draft Investment Funds Regulation and draft Investment Management Regulation are currently in consultation phase.

In the event that they are enacted in their current form, fund raising in the UAE will be the subject of significantly increased levels of local UAE regulation.


1. The Dubai International Financial Centre is an economic free zone located in Dubai, established in 2005 as an international financial hub with its own laws and regulations.

2.For the purposes of the draft Investment Funds Regulation, a fund is deemed to be a foreign fund if it is "established outside the UAE in accordance with the applicable laws and regulations of a foreign state" or established in a free zone in the UAE (and would therefore include funds established in the Dubai International Financial Centre). The concept of promotion is construed widely and includes offering, marketing, distributing, or advertising a fund or its units.

3.The draft Investment Funds Regulation defines "related parties" as the founding company of the fund, its board of directors, and any entity contracted to provide services to the fund.

4.The draft Investment Funds Regulation defines "local companies" as companies established in accordance with the provisions of the UAE Commercial Companies Law, excluding companies established in free zones (and therefore excluding companies established in the Dubai International Financial Centre).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions