Promoting and introducing foreign securities in the UAE

The financial services regulator in onshore United Arab Emirates (UAE), the Securities and Commodities Authority (SCA), published the Promoting and Introducing Regulations (PIRs) (previously referred to as the Arranging and Promoting Regulations or the APRs) in their final form in Arabic earlier this month. The regulations will come into force on the day following their publication in the UAE Official Gazette, which we expect to happen within the next few months.

The PIRs mark a significant shift in the UAE’s regulatory treatment of the promotion of foreign securities, which has to date generally been within the ambit of the UAE Central Bank. Following the establishment of the SCA in 2000, regulations have been passed over the years to transfer regulatory oversight for securities across to the SCA. Previously, these focused on local securities or foreign securities that are locally listed. However, foreign securities have been addressed more recently by the SCA. The promotion of foreign funds was first considered by the SCA in 2012 and regulations on discretionary investment manager services followed in 2014. However, as the PIRs cover the promotion of and introductions relating to "Foreign Securities", there is now more regulatory clarity in this area.

"Foreign Securities" are defined in the PIRs as “shares, stocks, bonds, sukuk, units of investment funds, commodities contracts, derivatives and any other securities or financial instruments issued by a "Foreign Issuer"”.

The PIRs follow on from the recently revised versions of the Mutual Funds Regulations and Mutual Funds Fees Regulation (MFRs), which were implemented in August 2016 and should be read in conjunction with them when considering the promotion of foreign funds in the UAE.

The most notable change from the consultation draft of the APRs is the incorporation of a private placement exemption for certain categories of UAE-based “Qualified Investors” (as defined in the PIRs) to which foreign securities, including units of foreign funds, may be promoted to without requiring licensing or approval from the SCA.

Further guidance and amendments have been introduced for areas where obligations were not entirely clear in the draft APRs. Such areas include:

• the specific activities that constitute promoting and introducing
• the private placement registration regime in relation to foreign funds
• the licensing application process (including costs), and
• obligations in relation to the promotion of foreign funds inside the UAE.

Simmons & Simmons have been following the development of the MFRs and PIRs closely over the past year, including the representation of a working group of international and regional asset managers and life insurance companies, and working closely with the SCA to provide industry feedback.

For specific advice on the regulations, please contact Muneer Khan or Samir Safar-Aly.