The ADGM is an upcoming financial center in the MENA region for business and fintech. The quality of ADGM’s independent 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 Abu Dhabi and the greater MENA region.
Why setup a financial services firm in the ADGM?
The ADGM is one of two onshore financial centers in the UAE. Established in 2015, it quickly rose through the rankings and is now counted as one of the top 25 financial centers in the world. ADGM’s innovative SPV regime, its initiatives in the fintech space and its issuance of the region’s first cryto-asset regulatory framework, have all contributed to its success.
Here are some specific advantages of establishing in the Abu Dhabi Global Market.
- The legal framework supports cross-border activities
- 100% foreign ownership permitted, no restrictions on capital repatriation
- No restriction on foreign employees
- Zero tax for 50 years on profits, capital or assets
- Zero tax on personal income
- Well regarded, independent regulator
- Independent, English-speaking, common law judicial system
- Distinct from the UAE civil courts
- Risk-based regulatory approach
- High prominence in deal making in the region
- Concentration of international financial institutions
- World-class regional and international professional services
- A growing fund domicile in the region
- Management offices, holding companies and family offices are located closer to the assets they own or manage
- The Middle East, Africa and South Asia (MEASA) is increasingly the center of gravity for the global economy
- The UAE plays a central role in the growing South-South trade, principally between Asia and Africa
- Well-positioned to harness the potential of emerging markets.
ADGM License Categories
The Financial Services Regulatory Authority, or FSRA, reviews applications from firms who wish to carry out financial services from the ADGM.
The type of business that the applicant wishes to engage in defines the category of Licence that is required. For example, a firm undertaking low risk activities such as advising or arranging will require a Category 4 Licence, while a discretionary portfolio manager will require a Category 3C Licence. A STP broker, dealing on a matched principle basis will require a Category 3A Licence, whereas a market maker or provider of credit provider will require a Category 2 Licence. Full-fledged banks, that accept deposits, will come under a Category 1 License.
ADGM Capital Requirements
The category of license determines the amount of base capital required. The capital requirement for a Category 4 firm is $10,000. This rises to $500,000 for a Category 3 firm, $2 million for a Category 2 firm and $10m for a Category 1 firm.
Activities are grouped into 5 main categories, as below:
Category 1 – Banks
Base Capital – US$ 10 million
Activities – Accepting Deposits, Managing a PSIAu
Category 2 – Market maker, provider of credit
Base Capital – US$ 2 million
Activities – Dealing in Investments as Principal, Providing Credit
Category 3A – Brokerage
Base Capital – US$ 500,000
Activities – Dealing in Investments as Matched Principal, Dealing in Investments as Agent
Category 3B – Custodian
Base Capital – US$ 4 million
Activities – Providing Custody for a Fund, Acting as Trustee for a Fund
Category 3C – Asset Manager, Fund Manager
Base Capital – US$ 250,000
Base Capital for EF, QIF Managers – US$ 50,000
Activities – Managing Assets, Managing a Collective Investment Fund, Providing Custody, Managing a PSIAr, Providing Trust Services
Category 4 – Investment Advisor, Insurance advisor
Base Capital – US$ 10,000
Activities – Arranging Deals in Investments, Arranging Credit and Advising on Credit, Advising on Financial Products, Arranging Custody, Insurance Intermediation, Insurance Management, Operating an ATS, Providing Fund Administration, Providing Trust Services, Operating a Crowdfunding Platform
Category 5 – Islamic Business
Base Capital – US$ 10 million
Activities – Operating an Islamic Business