Dubai has announced an overhaul of the Dubai International Financial Centre (DIFC)’s regulations, in a fresh drive to attract a greater volume of investment funds to the financial free zone.
The DIFC Laws Amendment Law 2014 had been enacted by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, and would come into effect on Thursday, Wam reported yesterday.
The law amends a series of laws pertaining to the DIFC, including the Regulatory Law of 2004 and the Collective Investment Law of 2010.
The changes include the creation of the “Qualified Investor Fund”, a third class of investment fund that can be offered from within the DIFC, and an overhaul of the regulatory decision-making and appeals process.
The qualified investment fund (QIF) concept has been created specifically with high net worth and risk-tolerant investors in mind. The new type of fund is designed to be offered only via private placement to experienced investors, with a minimum investment of US$500,000 per investor, with a maximum of 50 per fund.
Crucially, QIFs will be subject to far less stringent regulation than Public and Exempt funds, with no requirement to file interim reports on their operations, and the ability to invest in funds of funds, among other exemptions.
It is hoped that this lighter burden will prove attractive, and less costly, for investment managers looking to launch funds via the DIFC.
“International financial centres have to keep on developing new propositions to keep people interested, and this is very much a part of that process,” said Tim Plews, the head of financial services and markets for Clifford Chance Middle East. “We’ll have to wait and see how such funds are received, but they could well see a slow but steady take-up.”
According to data provided by Reuters, only about nine funds have been domiciled in the DIFC since the centre opened for business 10 years ago.
In its consultation in December on the new class of funds, the regulator the Dubai Financial Services Authority (DFSA) noted that would-be fund managers looking to operate out of the DIFC had constantly sought waivers and modifications of aspects of its rules relating to matters such as governance, investment restrictions and alternative custody arrangements.
“In general, our requirements in these areas have been considered by applicants to be too onerous given the professionalism, knowledge and experience of targeted investors and the intended disclosures in the information memorandum,” the regulator noted.
The new law also mandates that the regulator will make all first instance decisions, following newly specified procedures designed to ensure its decisions are fair and reasonable.
The process for appealing against DFSA decisions is to be altered, with the Financial Markets Tribunal (FMT) continuing as an independent tribunal but with a revised role of reviewing decisions. The Regulatory Appeals Committee which used to hear appeals from DFSA decisions will be abolished, as its role will now be undertaken by the FMT.
jeverington@thenational.ae
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