New UAE investment fund rules could hurt the country’s ambitions to become a more important financial center, analysts said, adding that Qatar could reap the benefits.
The new rules from the Securities and Commodities Authority (SCA) will apply to firms based in Dubai’s financial tax-free zone. They include minimum capital requirements for new domestic funds and guidelines on promoting and offering foreign funds in the UAE.
Much of the latter is done by firms in the Dubai International Financial Center (DIFC), the emirate’s free zone business hub which houses global banks and investment firms.
The authority has classified funds created inside the free zone as ‘foreign funds’, which were previously operating under offshore laws.
The foreign fund rules mean offerings must go through a local promoter such as banks, investment firms or other promoters, all of whom must be licensed by the central bank.
“It’s just one more layer of regulation that should not be a stumbling stone as long as it doesn’t impede the investment of foreign investors in funds based here,” said Amer Khan, fund manager, Shuaa Asset Management, told Reuters.
“One major concern though is from a regional perspective. Qatar is bending over backwards to attract foreign funds to its financial district. For the UAE to add another layer of regulatory framework at such a time, it might prompt some funds looking to set up over the next year or so to head to Qatar instead of the UAE,” said Khan.
According to Reuters, Law firm Clifford Chance said the new rules may inadvertently give rival free zones a competitive advantage.