On 13 January 2014, the Securities and Commodities Authority (SCA) passed its Board of Directors’ Decision No. (1) of 2014 Concerning the Regulations on Investment Management (Regulations). The Regulations were published in the UAE’s official gazette on 27 February 2014 and came into force the day following their publication.
The Regulations outline the licensing requirements, conditions and ongoing obligations of licensed entities to both investors and to the SCA. The Regulations aim to provide a more regulated regime for investment and fund management activities in the UAE and to provide investors with greater security and protection over their assets and accounts.
The Regulations transfer the regulation of investment management and fund management activities from the UAE Central Bank (Central Bank) to the SCA. This development is a result of the delegation of certain responsibilities of the Central Bank to SCA, pursuant to an internal Memorandum of Understanding entered into between the Central Bank and the SCA in 2009.
According to the Regulations:
(i) “Investment Management” activities cannot be carried out in the UAE prior to obtaining a licence from the SCA in accordance with the provisions of the Regulations; and
(ii) subject to limited exemptions, “Investment Management” activities cannot be promoted in the UAE except by those licensed by the SCA to carry out such activity.
The Regulations define “Investment Management” as the management of securities portfolios of third parties or the management of mutual funds, in accordance with the investment objectives and policies set out in the investment management agreement entered into between the investment manager and its clients (e.g. individuals, corporates or investment funds).
In light of this development, unless one of the exemptions applies, foreign financial institutions cannot promote their investment management activities in the UAE in any form without obtaining a licence from the SCA.
We also understand, from informal discussions we have had with officials at the SCA, that the regulation in relation to the promotion of all financial securities (other than structured products) in the UAE has also been transferred from the Central Bank to the SCA. The SCA has not yet, however, issued any regulations in this regard.
Therefore, the SCA now regulates, in practice, the promotion in the UAE of all financial securities (other than structured products), units of a fund and investment management activities.
View Decision No.1 of 2014 Concerning the Regulations on investment management, 13 January 2014