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Dubai makes changes to collective investment funds regime

The Dubai International Financial Centre Authority has welcomed a series of regulatory changes to the DIFC’s collective investment funds regime.

The changes were made following recommendations made by a panel of market practitioners and implemented by the Dubai Financial Services Authority on 11 July 2010.

Dubai International Financial Centre-based fund managers are now permitted to establish and manage funds in jurisdictions of their choice.

Fund managers from recognised jurisdictions outside the Dubai International Financial Centre can establish and manage a domestic fund without having to establish a place of business in the DIFC.

The scope for marketing of foreign funds in or from the DIFC has been expanded.

A more competitive fee structure has been implemented. Notably, the fund manager application fee has been reduced from USD40,000 to USD10,000.

An exempt funds regime has been established for professional clients, replacing the private funds regime, which will be completely phased out within two years. Exempt funds are subject to lighter regulatory requirements but are only accessible by professional clients who make at least a minimum investment of USD50,000 each. Such funds can only have 100 or fewer uitholders and cannot be offered to the public – distribution being only by way of private placement.

Abdulla Al Awar (pictured), chief executive of the DIFC Authority, says: “The DIFC welcomes the new funds regime as it will stimulate further growth of the funds management industry within the centre. The regulatory changes bring the DIFC in line with other leading financial hubs around the world and underline the centre’s position as the region’s most competitive financial centre for fund managers.”

The Dubai Financial Services Authority first introduced its collective investment funds regime in 2006, which was designed to provide adequate investor protection, meeting international standards for regulation. On 11 July 2010, the DFSA made significant changes to the funds regime, taking into account recommendations made by the panel of funds industry practitioners. The panel’s aim was to make the funds regime business friendly, whilst remaining true to the International Organisation of Securities Commissions principles for regulating collective investment schemes.

Jacques Visser, managing director – legal and compliance of Algebra Capital and member of the panel, says: “The DIFC and the DFSA have listened to the industry and have made changes to the DIFC’s funds regime based on a series of sensible and pragmatic recommendations. As a result, the DIFC is now more attractive as an investment centre for both foreign and domestic fund managers. The DFSA’s willingness to engage with funds industry role players in a very efficient and transparent manner should also be commended. They have illustrated a level of pro-activeness during this exercise that is very much needed to ensure the DIFC’s growth and future relevance as a key player in the global and regional fund management industry.”

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