Loss of Foreign Fund Private Placement Exemptions in the UAE

King & Spalding
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In August 2016, the Emirates Securities and Commodities Authority (SCA), the federal securities regulator of the United Arab Emirates (UAE), adopted new investment funds regulations (the 2016 Fund Regulations), which repealed the prior funds regulations which were adopted in 2012 and amended in 2013 (the 2013 Fund Regulations), clarified the formation process for the establishment of locally domiciled funds and introduced significant changes to the marketing of foreign domiciled investment funds in the UAE. The 2016 Fund Regulations impose substantial hurdles and costs for managers seeking to promote foreign funds in the UAE.

Managers and sponsors wishing to market foreign funds onshore in the UAE now have far fewer options: they can register the fund with SCA and enter into a distribution arrangement with a locally licensed placement agent, engage in reverse solicitation (where the investor inside the UAE initiates the transaction) or rely on an exemption when offering to certain sovereign entities. Funds established in a free zone inside the UAE, including funds established in the Dubai International Financial Centre (DIFC) or the Abu Dhabi Global Market (ADGM), are considered by SCA to be foreign funds.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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