UAE delays final draft on asset management rules

New guidelines seen as a key step for investor protection and boosting market confidence
Dubai International Financial Centre
By Reuters
Sun 17 Jul 2011 04:22 PM

The
UAE has postponed a final draft ruling on new guidelines to regulate its nascent
asset management industry after concerns were raised by industry players, two
sources familiar with the matter said on Sunday.

UAE
market regulator Securities and Commodities Authority (SCA) issued an initial
draft for regulating investment funds earlier in the year and a final circular
was expected by mid-July after consultations with market participants.

But
the regulator has now delayed the process with one industry source saying it
may get pushed to next year. Another asset management source said the final
draft has been postponed to September.

The
regulations are seen as a key step for investor protection and boosting market
confidence but market players have been concerned that some of the proposals
lacked clarity and held talks with the regulator to address concerns.

Firms
are wary of some proposals, including one asking banks to provide for risks
arising out of marketing third party funds to retail investors, the sources
said.

"This
[proposal] puts a lot of pressure on us to monitor the products and is shifting
the onus upon banks," one of the sources said.

The
SCA was not immediately available for comment.

The
rules require companies planning to set up a local investment fund to establish
it as a joint stock company, have permanent headquarters in the UAE and as well
as paid-up capital of no less than AED10m ($2.7m).

They
will also be required to invest a minimum of 10 percent of the capital for each
local investment fund they set up, according to the proposals.

Funds
are also domiciled out of financial free zones like the Dubai International
Financial Centre (DIFC) and under the proposals, DIFC-domiciled funds would be
considered as foreign funds by the regulator.

Some
asset management firms have come together to form an informal body called the
Emirates Investment Association to address some of the common concerns emerging
from the proposals.

The
UAE's asset management sector was earlier regulated by the country's central
bank but new rules would also mean the SCA would be responsible for oversight
of licensed entities, freeing up central bank resources to monitor other
institutions such as commercial banks.

 

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