UAE’s new fund regulations may oust asset managers

30 Aug 2012

(MENAFN) UAE is about to implement new rules on the sale of foreign funds in order to protect its investors from losses amid weak global markets. The new rules, which were announced in July, will take effect on an unspecified date, Reuters reported.

However, the new law may damage the Gulf state’s position as a leader for asset management in the region.

Under the new rules, the Securities and Commodities Authority (SCA) will be responsible for overseeing investment funds instead of the central bank.

The rules cover both the promotion and sale of foreign funds in the UAE, and requirements for offering and launching new local funds.

The UAE is the financial hub in the Gulf region, as investors from countries such as Saudi Arabia and Kuwait channel money through there, therefore the regulatory changes could potentially affect fund flows throughout the region.

So far, the new rules have been blown by industry experts who argue that the tighter approval rules for selling foreign funds, and the fact that the regulations require fund managers to treat sophisticated institutional clients in much the same way as retail investors, could prompt asset management firms to leave the country.

Selling foreign fund products in the UAE will now have to go through the SCA, a process which fund managers expect to involve more administrative work and compliance requirements, and therefore more time and costs.

The new rules also lack clarity on who should go to the regulator to obtain approval for the fund, the asset manager itself or the distributor of the fund, which in most cases is a commercial bank operating in the UAE. This ambiguity could potentially cause legal problems and higher costs.

SCA’s CEO Abdullah Al-Turifi defended the initiative saying that it is a positive step that would help to boost corporate investment and attract foreign investment into the UAE.

Most fund-related activity in the UAE focuses on selling foreign funds to wealthy Gulf investors, which include sophisticated institutions such as sovereign wealth funds and family firms as well as affluent individuals.