UAE securities regulator extending grace period for local promoters

The Securities & Commodities Authority (the SCA), the securities sector financial services regulator in onshore UAE (which does not include the Dubai International Financial Centre (DIFC) or the Abu Dhabi Global Market (ADGM)), issued a notice (the Promoters Notice) on or around 28 June 2018 to legal representatives of foreign mutual funds advising that the grace period given to local promoters of securities (including foreign mutual funds), by virtue of SCA Administrative Decision No. 58/R.T. of 2017 Concerning Mechanisms for Adjustment of Positions for Promotion and Introduction Activity and Mutual Funds Administrative Services Activity (Decision 58), expired on 28 June 2018.

The grace period under Decision 58 effectively gave local promoters of foreign mutual funds previously approved by the SCA 12 months, from the gazetting of Decision 58 in the UAE Official Gazette, to obtain a promoter’s licence under SCA Chairman Decision No. 3/R.M. of 2017 concerning the Promotion and Introduction Regulations (the PIRs). The grace period for securities other than mutual funds was three months from the date of gazetting Decision 58 in the UAE Official Gazette (for more details on Decision 58, please see our previous client briefing note here).

The Promoters Notice indicates that no new subscriptions should be accepted from 28 June 2018 onwards in any fund registered with the SCA through a local promoter not licensed as a promoter by the SCA under the PIRs. In addition, the legal representatives of foreign mutual funds (i.e. the international asset managers) should ensure that the name of their proposed local promoter is on the SCA’s list of licensed or approved promoters before submitting any new application for registering any foreign mutual fund with the SCA and that all application-related fees are paid.

Following our discussions with the SCA, we understand that the SCA intends to issue a circular shortly to provide a further conditional grace period to local promoters seeking to become licensed under the PIRs, for up to a further 12 months. We understand that the proposed circular will state that if a previously SCA approved local promoter has submitted an application for a promoter licence to the SCA, it will receive a conditional licence for up to one year in accordance with the circular. Our understanding is that the circular will also set out when specific licensing requirements will need to be complied with within the extended grace period.

We understand that the expiration of the initial grace period under Decision 58 on 28 June 2018 is not intended to affect ongoing regular subscriptions arising from a product agreement entered into through one of the previously approved local promoters prior to 28 June 2018.

The above update is based on our general understanding of the SCA’s position following informal discussions with them. However, the SCA is currently in the process of formalising its position under the forthcoming circular mentioned above and we will provide a further update once this has been issued.

For further specific guidance, please contact Muneer Khan, Samir Safar-Aly, or your usual contact.