Dubai: Individual investors based in the UAE will no longer be able to directly subscribe to foreign funds through their bank accounts here, according to new rules from the regulator.
Banks in the UAE have been communicating this to their clients as the new rule became effecting from April 1. It is believed that the new rule applies only to subscriptions made after this date – all existing investment commitments can still proceed, according to banking sources.
What this means is that ‘ordinary investors’ in the UAE will find that foreign funds will no longer be available for subscription.
As for ‘professional investors’, their participation in foreign funds can still go ahead, provided they meet the minimum threshold investment of Dh500,000 per foreign fund.
And ordinary investors will find only 'local funds' will be directly accessible via their bank accounts in the UAE.
Defining 'ordinary' and 'professional' investors:
- ‘Ordinary investors’ will be those with funds of up to Dh500,000 available for deployment.
- To qualify as ‘professional investors’, they must have assets of not less than Dh75 million before deducting short- and long-term liabilities. And annual income of not less than Dh150 million.
The UAE’s Securities & Commodities Authority has issued these directives to banks, and which in turn are communicating the same to clients. The regulator wants to limit the risks to UAE based investors committing to foreign funds that are not licensed to sell here. Not being licensed means these funds do not have a localized regulatory oversight – and if investors find themselves caught out by these funds, that adds to the risk factor.
Financial services sources say there have been multiple funds from overseas trying to get the eye of UAE based investors and promising market-beating returns if they sign up with them.
UAE based residents can still sign up to these foreign funds, but they will have to do so through their bank accounts in their home countries.
Boost for UAE licensed funds, stock markets
Retail investors have already been fueling the UAE stock market spikes for the last two years, helped by the spate of IPOs coming through in Dubai and Abu Dhabi.
“The change in regulation augurs well for UAE capital markets and expected to increase retail inflows,” said Naqqash Ahmed, Managing Director of Capital Plus. “In fact, these had already spiked because of the IPO activity.
“But now, the new rule sets up more sustained inflows into local stocks – it is a subtle but exciting evolution in the regulatory infrastructure of the UAE.”
