Fund Manager License in UAE | UAE License Categories

  • 11-06-2019

Guide to the Fund Manager Licenses in UAE

 The UAE has two Common-Law jurisdictions where a Fund Manager License can be processed – the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM).
 

DIFC

The DIFC is one of the world’s top ten onshore financial centers and offers a secure and efficient platform for businesses and financial institutions to reach into and out of the emerging markets of the region. The quality and independence of DIFC’s regulator, the prevailing common law framework, excellent infrastructure and tax efficiencies make it the perfect base to take advantage of the rapidly growing demand for financial and business services in the MENASA region.

DIFC fills the time-zone gap for a global financial centre between the leading financial centres of London and New York in the West and Hong Kong and Tokyo in the East.

UPDATE

The DIFC has some exciting offers for fund managers seeking to get licensed as a domestic fund manager at the DIFC, and setting up funds in the centre. Cumulative savings of US$ 28,000 across two years, and economical office space options. Do contact us for more information. 

ADGM

The ADGM is an upcoming financial center in the MENA region for business and fintech, with a robust governance structure and innovative corporate vehicles like Special Purpose Vehicles and Foundations.  

Fund Manager License

Firms interested in managing funds from the DIFC or the ADGM are required to submit applications to the respective regulatory bodies – the DFSA and the FSRA.  

Both regulators have a fast-track process for Fund Manager licenses, which come under Category 3C. The Fund Manager, if approved, can manage domestic (Public, Exempt and Qualified Investor Funds) and Foreign Funds in other jurisdictions as well. In case the firm wishes to also engage in discretionary portfolio management services, it has to go through a full-fledged license process.

Exempt Funds

Exempt Funds are open only to Professional Clients (as defined by the DIFC & ADGM). The other features of an EF in the DIFC are:

  • Minimum subscription of US$ 50,000;
  • Can have only 100 or fewer unit-holders; and
  • Units are offered to persons only by way of a Private Placement.

Exempt Funds in the ADGM have no restrictions on the number of unit-holders.

Qualified Investor Funds

Qualified Investor Funds are open only to Professional Clients (as defined by the DIFC & ADGM). The other features of a QIF in the DIFC are:

  • Minimum subscription of US$ 500,000;
  • Can have only 50 or fewer unit-holders; and
  • Units are offered to persons only by way of a Private Placement.

Qualified Investor Funds in the ADGM have no restrictions on the number of unit-holders.

Capital requirements

DIFC

The base capital requirement for a Category 3C Fund Manager is $ 70,000, if it manages Exempt (EF) or Qualified Investor Funds (QIF). Actual capital required will depend on the nature, quantum of business and forecasted annual expenditure, as per the financial model of the proposed firm.

ADGM

The base capital requirement for a Category 3C Fund Manager is $ 50,000, if it manages Exempt (EF) or Qualified Investor Funds (QIF). Actual capital required will depend on the nature, quantum of business and forecasted annual expenditure, as per the financial model of the proposed firm.

Costs

Setting up a Regulated Firm in the DIFC or the ADGM involves the following interactions:

Financial Services Regulator

The DFSA is responsible for reviewing and approving all applications for financial services in the DIFC, and the FSRA does the same function for the ADGM. Costs depend on the activities applied for, which puts the applicant in one of five categories.

Generally, there are two components of regulator fees. One – an application processing fee, and the other, an annual licensing fee.

ADGM Application fee: from US$ 5,000 for a Fund Manager license application.

ADGM License fee: from US$ 5,000 for a Fund Manager license application.

The DIFC has similar fees for Fund Managers that only manage QIFs. For Fund Managers that manage EFs, the application and annual fees will be US$ 10,000.

Registrar of Companies

The ROC helps to set up the legal structure of the Regulated Firm. Shareholders can be individual, or corporate. There are many options available, such as ‘Private Company Limited by Shares’ and ‘Limited Liability Partnerships’. In case of Private Company Limited by Shares, the costs for setting up in the DIFC come up to around US$ 20,000, and annual renewals at around US$ 12,000.

The costs in the ADGM for setting up amount to US$ 15,000, with renewals costing around US$ 13,000.

Data Protection

The data protection notification is part of the process of registering a new entity in the DIFC or the ADGM. The costs involved are around US$ 1,000 initially and US$ 500 annually.

Office spaces

Every entity registered in the DIFC or the ADGM is required to lease a physical office.

Prices vary, depending on the space availed and the building. Here is an indication of the prevailing rates:

Business Centre – from a two-desk office at US$ 35,000.

Fitted Offices – from US$ 55 per square foot.

Similarities in the Fund Manager Licenses in the DIFC and the ADGM

Both regimes have a Common-Law framework, well regarded internationally and have detailed mechanisms for investor protection. The DIFC and the ADGM both offer reduced base capital requirements, flexibility and fast-track processes for fund manager applications. There are a few differences, especially in the definition of what constitutes a Professional Client, and some restrictions on the number of unit-holders (in case of the DIFC). However, overall, both jurisdictions offer a very conducive mechanism for conducting the business of managing funds, both domestic and international.

Where the DIFC is preferred:

1.  Firms that wish to setup in one of the top 10 financial centres in the world

2.  Clients mostly Dubai-base

3.  Larger operations required – easier to source talent in Dubai.

4.  Vibrant investor and banking community

Where the ADGM is Preferred:

1.  Firms that wish to setup in the world’s newest onshore financial centre

2.  Clients mostly Abu Dhabi-based, including Sovereign Wealth Funds and private offices of the ruling families

3.  Lean operations required

    
 
 
 
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