For jurisdictional context, the term “onshore UAE” applies to the seven Emirates that form the UAE (Dubai, Abu Dhabi, Ras Al Khaimah, Ajman, Umm Al Quwain, Sharjah, and Fujairah), with the exception of the two financial freezones; the Dubai International Financial Centre in Dubai (“DIFC”), and the Abu Dhabi Global Market in Abu Dhabi (“ADGM”). The DIFC and ADGM each have their own respective regulations and independent regulators. The DIFC and ADGM are excluded from this analysis.
The onshore UAE private placement regime is regulated by the Securities and Commodities Authority (the “SCA”), which regulates both domestic investment funds known as ‘local funds’, and foreign investment funds known as ‘foreign funds’. The SCA defines private placement as “the invitation made to a specific person or persons to buy a security or foreign security inside the UAE”. When such invitations are made in relation to foreign funds however, this must be conducted within the UAE and should be done on a discreet and limited basis.
Local funds are covered under the SCA Rulebook as amended by SCA Decision No.2/RM of 2023, and remain subject to local registration requirements. More significantly, foreign funds are legislated under SCA Decision No.4/RM of 2023, which prohibits publicly marketing or promoting units of an unregistered foreign fund in onshore UAE. This has set a general precedent that foreign funds must be registered with the SCA to be marketed or promoted in the onshore UAE jurisdiction.
Consequently, foreign funds should be registered for private placement with the SCA. To be eligible for registration, a foreign fund will need to be incorporated in a foreign country and supervised by an SCA-similar controlling authority (such as the FCA in the UK) and licensed in the home country for promoting public offerings. The procedure for registration is to submit an application to the SCA, followed by review and the submission of discretionary documents before the SCA issues a final decision. The associated registration fee is AED 10,000.
Moreover, to be compliant with the SCA, registered foreign funds must use a locally licensed promoter to carry out the distribution and/or marketing of the fund units.
Regardless of whether the foreign fund is a registered fund marketed through a licensed local distributor or an unregistered fund marketed on a reverse solicitation basis, there is one paramount rule: foreign funds cannot be promoted or marketed to retail clients.
In addition, outside of private placement, funds can only be publicly marketed if to government entities, so long as the fund itself is registered as detailed above.
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