UAE to allow flexibility in fund distribution

Fund passporting is expected to give the asset management company the flexibility to distribute their funds in pre-approved jurisdiction. Earlier the fund had to get approval from each jurisdiction. This move will help in attracting more foreign investment and in providing more options for channelling savings to new financial instruments such as mutual funds.

Sultan Bin Saeed Al Mansouri, Minister of Economy and chairman of the board of directors of the Emirates Securities and Commodities Authority (ESCA), said the start of implementing the recently-signed Passporting Agreement as a regulatory mechanism for the mutual promotion and oversight of investment funds established in the different jurisdictions within the UAE is an important step to inspire the development of the mutual funds’ market so as to achieve the goal of having more diversified investment opportunities and products.

Welcome development

“As a foreign asset manager, this is a welcome development which, although could potentially be a competition to foreign funds since it promotes the set-up of domestic funds, would boost local product knowledge and maturity in the domestic markets. This in turn makes for more informed investors and local relationship managers leading to a more transparent and level playing field,” Nisarg Trivedi, Director-Middle East, Schroders, told Gulf News. The new passporting regulations is expected to positively impact domestic fund managers, thereby increasing the availability of onshore funds.

The ADGM will come out with more pertinent regulatory information and supervisory updates to support licensing of domestic fund.

“The UAE funds market is on the cusp of exponential growth and the new funds passporting regime will stimulate the development of the domestic investment funds industry with a broader variety of funds and enable funds to be supported across the UAE. With the closer cooperation with our regulatory partners, we are able to share pertinent regulatory information and supervisory updates to support licensing of domestic funds,” Richard Teng, Chief Executive Officer, FSRA of ADGM said.

What has changed?

The regulators will have a common set of rules to allow fund managers to promote funds in multiple jurisdiction without obtaining approvals from various agencies.

Until recently asset management companies had to obtain additional licenses to promote funds in different jurisdictions.

Foreign asset management used the Luxembourg passporting rights to distribute funds in the UAE.

How this new regulation will help?

The passporting flexibility would allow development of domestic mutual fund industry. This is also expected to enhance UAE position as an international finance centre.

This will help in creation of a stronger and more diversified financial market through an adaptive and robust regulatory framework.