The Dubai Financial Services Authority (DFSA) has announced that changes to its Collective Investment Funds (CIF) regime, on which the DFSA consulted in October last year, came into force yesterday coinciding with the enactment of the DIFC Companies Law 2018 (Companies Law).
The DFSA consultation included a wide-ranging set of proposals to support the continued development of the growing Funds industry in the Dubai International Financial Centre (DIFC). The DIFC now has almost 70 Funds, most of which have been registered over the last two years.
The new provisions strengthen the DFSA’s commitment to meeting international standards, particularly those of the International Organisation of Securities Commissions and the Financial Stability Board, through measures to enhance liquidity risk management in open-ended Funds. Open-ended Funds give their investors the right to have their Units redeemed at a price calculated based on the net asset value of the Fund’s portfolio of assets.
The new provisions incorporate the Public Company and Private Company distinction, introduced by the Companies Law, into the Funds regime, so that all Investment Companies with retail investor participation would need to be Public Companies; remove the current limits on the number of investors which a DIFC Fund can have. Currently only a Public Fund is able to have more than 100 investors (including retail), with an Exempt Fund being limited to 100 or fewer investors and a Qualified Investor Fund (“QIF”) being limited to 50 or fewer investors. These changes do not alter the current focus of regulation of these Funds, which is based on the type of investors (e.g. any Fund with retail investors will receive higher levels of scrutiny).
The provisions also introduce a new class of specialist Funds for Exchange-Traded Funds (“ETFs”). These are open-ended Funds, the Units of which are listed and traded on exchanges. ETFs have become increasingly popular among both retail and institutional investors over the past several years. Their introduction would give greater choice of Funds available to investors from the DIFC, with Fund Managers also having a greater choice of Funds they could offer; and enable a Fund established as an Investment Company to be managed by its sole Corporate Director licensed as a Fund Manager to manage only that Fund and no other. This is a model available in the European Union, and we have made some adjustments to suit the DIFC regime.
Commenting on the announcement, Bryan Stirewalt, Chief Executive of the DFSA, said, “The DFSA continues to enhance its regulatory regime to facilitate the growth of the DIFC and the development of the financial sector in Dubai and the UAE. We have introduced a number of significant changes to the DFSA Funds regime to support and complement the continued development of the DIFC Funds sector, which has grown significantly during the past two years.”