The Dubai Financial Services Authority (DFSA) has issued a consultation paper proposing changes to the current regime of regulating Collective Investment Funds. That regime provides for the regulation of the following:
- Arrangements that constitute collective investment funds
- Persons legally accountable to investors for the management of funds, ie the Fund Manager
- Fundraising activities involving investments in Funds
- Activities related to the management and operation of funds such as those of custodians and fund administrators.
The paper proposes a wide range of changes to the Funds regime, including to:
- Remove the number-based criterion to differentiate Public Funds, Exempt Funds and Qualified Investor Funds
- Create a regime for Exchange Traded Funds (ETFs)
- Introduce liquidity risk management controls in open-ended Funds – particularly in Public Funds
- Address a number of discrete issues relating to Property Funds, including whether we should continue to prohibit Public Property Funds from being open-ended, and the use of the term REITs
- Create an Internal Fund Manager model.
The Funds regime was first created in 2006, and took much inspiration from the UK/EU regimes. A decade later, changes have taken place in the UK/EU front and have prompted the DIFC to consider whether and to what extent these developments should be reflected in the regime to keep it up to date.
It was eventually decided that some features can be beneficial, provided they are tailored to suit Dubai International Financial Centre’s (DIFC) needs. Briefly mentioned above, these include the proposal to introduce an internal fund management model, influenced by the Alternative Investment Fund Managers Directive (AIFMD); to introduce an ETF regime & adequate controls to ensure proper liquidity risk management to address industry developments in line with international standard setters’ requirements and expectations; and to propose revisions on Property Funds and Fund definitions to address DIFC-specific needs to provide greater flexibility and certainty to industry participants.
The Consultation paper can be found here.