Lagos, NG • GMT +1
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Tuesday, October 31, 2017 06.48PM / Dfsa Media
The Dubai Financial ServicesAuthority (DFSA) has today consulted on a comprehensive package of proposals tosupport the continued development of the growing funds industry in the DubaiInternational Financial Centre (DIFC).The proposals are wide-ranging and aredesigned to provide greater flexibility for investors and fund managers in theCentre.
Ian Johnston, the Chief Executive of the DFSA, said: “These proposals, toenhance our funds regime, mark yet another milestone in the evolution anddevelopment of the funds industry in the DIFC. The changes reflect our ongoingcommitment to maintaining international standards, while being fully aware of theneed to tailor our regime to take account of DIFC specific factors and theregional requirements.”
The funds industry in the DIFC has been growing steadily with 18 Funds beingregistered so far in the current year, reinforcing the status of the DIFC asthe largest fund hub in the region. The DFSA aims to provide furtheropportunities for industry development by:
1• removing the current limits on the number of investors which a DIFCfund can have. Currently only a Public Fund is able to have 101 or moreinvestors, with an Exempt Fund being limited to 100 or fewer investors and aQualified Investor Fund (“QIF”) to 50 or fewer investors. The proposals willnot change the current approach to regulation of these funds, based on the typeof investors (e.g. Public Funds, being open to retail investors, face greaterregulatory requirements). These proposals will give fund managers moreflexibility in structuring Funds.
2• introducing a new class of specialist funds for Exchange-Traded Funds(ETFs). These open-ended funds, listed and traded on exchanges, are popularwith both retail and institutional investors in other jurisdictions. Theirintroduction would give fund managers greater choice of the type of Funds theycould offer in or from the DIFC.
3• introducing a new model for internal management of an InvestmentCompany, where such a company can be internally managed by its licensed soleCorporate Director. This is a model available in the European Union and theproposals introduce it with some adjustments to suit the DIFC regime.
The proposals strengthen the DFSA’s commitment to meeting internationalstandards, particularly of the Financial Stability Board and the InternationalOrganization of Securities Commissions, through measures to enhance liquidityrisk management in open-ended funds. Open-ended funds give investors the rightto have units redeemed at a price calculated based on the net asset value ofthe fund’s portfolio of assets.
One of the key areas of recent funds growth in the DIFC is in the PropertyFunds sector, particularly in Real Estate Investment Trusts (REITs), with twoREITs already listed and traded on Nasdaq Dubai. The proposals remove thecurrent restriction that all Property Funds must be closed-ended. Instead, onlyPublic Property Funds will need to be closed-ended funds. Exempt Funds and QIFswhich are Property Funds would be able to choose whether they wish to beclosed-ended or open-ended.
The name REIT is currently restricted to Public Property Funds investing inincome generating real estate and distributing at least 80% of their net annualincome. Exempt Funds and QIFs, which are Property Funds, will, under theproposals, be allowed to use the name REIT if they invest in income generatingreal estate and distribute 80% of their annual income.
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