Why setup a financial services firm in the ADGM?
The ADGM is one of two international financial centres in the UAE. Established in 2015, it quickly rose through the rankings and is now counted as one of the top 25 financial centres 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.
Clients who wish to cater primarily to the Abu Dhabi market, sovereign wealth funds and Abu Dhabi family offices may consider setting up in the ADGM.
Here are some specific advantages of establishing in the Abu Dhabi Global Market:
LEGAL AND REGULATORY FRAMEWORK:
- Legal framework supports cross-border activities
- 100% foreign ownership permitted
- No restriction on foreign talent or employees
- No restrictions on capital repatriation
- Zero tax for 50 years on profits, capital or assets from 2004
- Zero tax on employee income
- Well regarded, independent regulator
- Independent, English-speaking, common law judicial system
- Distinct from the UAE legal system
- Risk-based regulatory approach
- Central to regional deal making
- High concentration of international firms, investment funds, wealth management firms, banks, and financial institutions
- World-class regional and international law and auditing firms, and other 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 centre 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.
Firms interested in engaging in financial services from the ADGM are required to submit applications to the independent regulator - Financial Services Regulatory Authority, or FSRA.
The FSRA offers a wide range of financial service activities, from investment advisory to asset management, brokerage and wholesale banking. For the purposes of authorisation and supervision, the FSRA categorises applicants based on the activities applied for. There are five main categories of Authorised Firms in the ADGM. Read more about the ADGM Licensing categories here:
The ADGM application process:
The FSRA has a fast-track process for Fund Manager licenses, which come under Category 3C. The Fund Manager, if approved, can manage domestic professional (Exempt and Qualified Investor Funds) and Foreign Funds in other jurisdictions as well. For all other financial services, applicants have to go through a full-fledged license process.
Step 1 – Introductory meeting with the ADGM:
The first step involves a formal meeting with the ADGM. A holistic description of the project, intended activities and expansion plans are discussed here. The outcome of the meeting is the submission of a ‘Letter of Intent’, expressing interest in setting up in the ADGM.
Step 2 – Regulatory Business Plan:
The regulatory business plan forms the backbone of the application to the FSRA. It has to be comprehensive, and detail the business model, revenue streams, corporate governance and management, control mechanisms, risks involved and every other aspect that will be relevant to the proposed business.
The first draft of the regulatory business plan is sent to the FSRA for a quick review, following which they revert either confirming the go-ahead for submissions, or suggesting a rework of the draft.
Step 3 – Formal submission to the FSRA:
The next step is submission of the formal application to the FSRA. This is a comprehensive submission and includes the regulatory business plan, financial model, manuals and policies, KYC and other details on the shareholders, directors, controllers and senior management, and IRAP/ICAAP reports if applicable. The FSRA application fee has to be paid as well.
Step 4 – Detailed review process:
The FSRA conducts a detailed review process for all applications. A case officer is appointed, and he/she reviews the application and sends across a list of questions that the applicant clarifies. This process can take upto two-three months, with multiple rounds of follow up queries and clarifications. The FSRA also, at some point during this process, conducts an interview with the Senior Executive Officer, Compliance Officer and controllers, to better understand the project and their roles.
Setp 5 – Issuance of In-Principle approvals:
A satisfactory review process at an internal FSRA authorisation committee meeting results in the FSRA issuing an In-Principle Approval (IPA). The IPA states that the FSRA welcomes the applicant to the centre, subject to the completion of conditions stated in the IPA. These conditions usually include setting up the legal structure, opening the bank account and deposit of the share capital.
Step 6 – ADGM Registration Authority Process:
The ADGM Registration Authority is the body that is responsible for processing applications for setting up legal structures in the ADGM. Part of this process is availing office space within the ADGM. The process ends with issuance of the ADGM Commercial License.
Click here to know more about the costs involved in setting up a regulated company in the ADGM.
Step 7 – Bank account opening:
A bank account of the firm has to be opened in a local bank. This process can take 2-4 weeks. Once opened, the share capital will have to be deposited into the account.
Step 8 – Final submission to the FSRA:
Evidence of fulfilment of the in-principle conditions is submitted to the FSRA, following which they issue the Financial Services Permission to the applicant firm. The firm can now conduct business from the ADGM.