- September 19, 2024
- Posted by: admin
- Category: Financial Services
Funding structures have undergone significant changes in recent years, offering various options to meet investor needs. The Dubai Financial Services Authority (DFSA) and the Financial Services Regulatory Authority (FSRA) have developed a facilitative, business-friendly regulatory framework that remains compliant with the principles set by the International Organisation of Securities Commission (IOSCO). This framework ensures flexibility, investor protection, and alignment with international standards for regulating collective investment schemes within this framework, the DFSA and FSRA provide a range of fund structures designed to cater to diverse investor needs and regulatory requirements.
This overview will guide you through the various fund structures available, helping you make informed choices in the ever-changing investment field.
The DFSA provides for two types of funds.
- The domestic funds.
- The foreign funds.
The domestic funds are divided into three categories:
- The public funds.
- The exempt funds.
- The qualified investor funds.
Public Funds (PF): are subject to detailed regulations in line with IOSCO standards. Designed for retail investors, these funds must either have or intend to have more than 100 unitholders or offer units through a public offer. They ensure a high level of investor protection through rigorous requirements, including detailed prospectus disclosures.
Exempt Funds(EF): for professional investors, Exempt Funds benefit from a fast-track notification process. These funds must either have or intend to have (up to 100) unitholders and require a minimum subscription amount of USD 50,000, enjoying lighter regulatory requirements compared to Public Funds, thus providing more operational flexibility.
Qualified Investor Funds (QIF): offer even more flexibility with significantly less stringent regulations compared to Exempt Funds. These funds allow for self-certification of systems and controls and are intended only for professional clients. QIFs can have up to 50 unit holders and must offer units through private placements with a minimum subscription amount of USD 500,000. They also benefit from a fast-track notification process.
Foreign Funds are investment funds domiciled outside the DIFC/ ADGM. These funds are open to 100 or fewer professional clients, require a minimum subscription of USD 50,000 per investor, and do not offer units through public offers. [MHB1] Additionally, if a Foreign Fund cannot be marketed to retail investors in its home jurisdiction, it cannot be marketed to retail investors in or from the DIFC.
Key Considerations for Fund Structures
In ADGM, the Financial Services Regulatory Authority (FSRA) grants licenses tailored to the specific financial services a company intends to offer. Some of these licenses are:
- Regulatory Compliance: Each fund structure has specific regulatory requirements regarding disclosure, reporting, and investor protection.
- Investor Eligibility: Different fund structures target various investor categories, such as retail, professional, or qualified investors, each with distinct subscription minimums and limits on the number of investors.
- Flexibility and Restrictions: The level of regulatory oversight varies, with public funds having the most stringent requirements and qualified investor funds offering the greatest flexibility in terms of investment strategies and operations.
Summary:
In both the DFSA and FSRA jurisdictions, fund structures are designed to cater to different types of investors and investment strategies. Public funds provide broad investor access but come with rigorous regulatory requirements, while exempt and qualified investor funds [MB1] offer more flexibility and fewer regulatory constraints, targeting professional investors. Understanding these structures and their respective regulations is important for fund managers and investors operating within the UAE’s financial markets.
Disclaimer: The purpose of this publication is to create awareness and has been written in general terms. This publication is not for any specific situation and therefore no opinion should be drawn from it for any particular circumstances. Limitless Consulting recommend that the reader of this publication should refer to the official documents referred in the document, seek appropriate professional advice for any particular situation and accepts no liability for any loss as a result of any information mentioned in this publication.