UAE FINANCIAL SECTOR

Banks

UAE banks – both domestic and foreign – are the backbone of the financial industry, providing retail and corporate
services to members of the private and public sectors.

The Central Bank of the UAE is the country’s primary financial regulator. It is mandated to direct monetary, credit and
banking policy and supervise its implementation in accordance with the state's general policy. The Central Bank also
implements policies to support the national economy and stability of the currency.

Stock Markets

The UAE hosts three stock exchanges: Nasdaq Dubai, Abu Dhabi Securities Exchange and Dubai Financial Market.

The UAE as a Financial Center

Established in 2004, Dubai International Financial Center (DIFC) is a financial “free zone” that offers businesses and
investors advantages such as security of contracts, independent courts, 100 percent ownership and a business
friendly tax regime. Located strategically between East and West, DIFC hosts over 2,000 registered companies and, as
one of the top financial centers in the world, provides a stable and secure platform for businesses and financial
institutions to tap into the emerging markets of the Middle East, Africa and South Asia.

Abu Dhabi Global Market (ADGM) is an international financial center for local, regional and international institutions.
In collaboration with other international financial centers, global institutions and regulators, Abu Dhabi Global
Market develops and supports member institutions with the regulatory framework, legal jurisdiction and attractive
business environment they need for sustainable business growth. ADGM is a key pillar of Abu Dhabi’s Economic
Vision, acting as a catalyst for the growth of the dynamic financial services sector in the UAE.

In November 2020, the UAE’s President His Highness Sheikh Khalifa bin Zayed Al Nahyan issued a decree overhauling
foreign ownership rules for commercial companies, in line with government efforts to attract international
investment, increase the ease of doing business, and further open the nation’s economy to all nationalities. The
decree annuls the requirement for commercial companies to have a major Emirati shareholder or agent, allowing for
full foreign ownership of onshore companies.

Outward Investment

Overseas investments have been a critical component of the UAE’s economic development strategy for decades as
the country has sought to diversify where and how it invests its financial assets. The UAE government regards such
investment as a security net for future generations who will one day face a depletion of the country’s energy
resources.

This strategy led to the creation of a number of government-owned investment institutions such as:

Abu Dhabi Investment Authority (ADIA)

Mubadala Investment Company (MIC)

Dubai World

Dubai International Capital (DIC)

These government investment organizations have been active and responsible participants in global financial markets
for over three decades. Representing patient and responsible capital, these professionally managed entities include
some of the world’s oldest, largest and most respected government investment funds.

Like private equity firms, pension funds and other institutional investors, UAE investment organizations seek to
maximize risk-adjusted returns.

Nasdaq Dubai

1
Listing Criteria

Nasdaq Dubai has established minimum requirements that must be met by all companies applying to admit their
securities on the exchange. These requirements meet international standards without being unduly onerous.

Initial Public Offerings (IPO)

In order to IPO on Nasdaq Dubai a company must meet a number of criteria that are set out by the DFSA, the
exchange’s regulator, in line with international standards. DFSA requirements are set out below:

Prospectus

An IPO on Nasdaq Dubai requires the publication by the company of a formal document offering its shares for sale,
known as a prospectus.

A prospectus is a company’s key marketing tool in its IPO. It contains important information about the issuer, to
provide investors with an informed basis on which to decide whether or not they wish to invest, and at what price.

The publication of a prospectus requires the approval of the DFSA. The table below shows many of the prospectus
requirements:

Foreign Ownership

The DFSA imposes no restrictions on foreign ownership of listed companies, and there are no foreign ownership
restrictions under DIFC law for holding companies incorporated in the DIFC. Companies incorporated in other free
zones in the UAE are also not subject to foreign ownership restrictions. However, companies based elsewhere in
the UAE may be subject to foreign ownership limits under UAE law, whereby no more than 49% of a company may

2
be owned by foreign nationals. In practice, this may mean that a listed DIFC holding company which owns a UAE
company that is not incorporated in a free zone may itself need to be 51% UAE-owned, to satisfy UAE company law
requirements.

Admission to Trading

A company that wishes to IPO must satisfy Nasdaq Dubai, under the exchange’s Admission and Disclosure
Standards (ADS), that conditions exist for sufficient supply and demand for the securities.

Free Float

Minimum 25% on both markets

Prospectus

Prospectus content requirement remains the same

Corporate Governance

No change made to the corporate governance requirements

Working Capital Reports

Full reports will still be required

Continuing Obligations

All continuing obligations still apply to Growth Market companies

Listing Process

All listings on Nasdaq Dubai benefit from a streamlined and efficient listing process.

3
A two-stage procedure applies to a company that wishes to IPO. As well as obtaining admission of its securities to
the DFSA’s Official List, the company must also ensure that its securities are accepted for Admission to Trading by
Nasdaq Dubai under the exchange’s Admission and Disclosure Standards (ADS). The company’s shares can then list
and start to trade on the exchange.

Sukuk & Conventional Bonds

Sukuk & Conventional Bonds In order to list Sukuk or conventional bonds on Nasdaq Dubai, a company must meet
a number of criteria for listing debt that are set out by the DFSA, the exchange’s regulator, in line with
international standards.

They include a requirement that the market capitalisation must be at least two million USD and that the issuer
must normally provide three years of audited accounts.

The issuer should also provide sharia’a certification, if applicable.

The issuer should also satisfy Nasdaq Dubai’s Admission and Disclosure Standards (ADS).

Market Cap

A minimum market capitalisation of USD 2 million is required

Financials

2 years audited accounts in accordance with IFRS or other standards acceptable to DFSA

Prospectus

A prospectus in accordance with DFSA requirements

Funds

In order to list funds on Nasdaq Dubai, a company must meet a number of criteria that are set out by the DFSA,
the exchange’s regulator, in line with international standards. The funds should also satisfy Nasdaq Dubai’s
Admission and Disclosure Standards (ADS).

Funds can be equity, bond or hedge funds as well as exchange-traded funds or Real Estate Investment Trusts
(REITs).

The Units of a Fund may be admitted to the DFSA’s Official List and Admitted to Trading on Nasdaq Dubai if:

In the case of a Domestic Fund, it is a Public Fund; and

In the case of a Foreign Fund:

It is a Designated Fund from a Recognized Jurisdiction; or

It is a Fund approved by the DFSA as a Fund subject to equivalent regulation as that applying to a Public Fund; and

It meets the criteria of a Property Fund, it is a closed-ended investment vehicle and 60% or more of the Fund’s
assets comprise Real Property;

The Fund is compliant with the relevant DFSA Collective Investment Rules

4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
Capital Markets in the UAE

Law Firm in Dubai: Al Rowaad Advocates & Legal Consultancy

Capital markets are financial markets where traders exchange assets in the form of stocks or bonds. They are a
medium of generating capital in the economy, for government or businesses, in order to meet their expenses. Capital
is invested in the market by investors, through long-term investments, and these investments are protected by
financial regulatory bodies that govern the capital market of the region.

What is the Significance of a Capital Market?

A capital market may offer a number of investment methods to investors, such as equity shares, preference shares,
debentures, bonds etc. As for a borrower, the investments in a capital market are reliable and can be mobilized for
more extended periods. The markets act as a bridge between those who can supply money and those in need of
money. For the investors, once their investments start to grow, they can get returns on them and even enjoy other
benefits like dividends, ownership rights and interest.

Which Body Regulates Capital Markets in the UAE?

Unless a law specifically provides for it, financial markets in the UAE are regulated by the Securities

Search For Legal Articles

and Commodities Authority (SCA). It was established in 2000 pursuant to Article 2 of Federal Law No. 4 of 2000 and
was recognized as a juristic personality having financial and administrative independence.

When Was the Regime of Capital Markets Introduced in the UAE?

The UAE introduced the regime of capital markets in the country through the Abu Dhabi Securities Exchange (ADX)
and the Dubai Financial Market (DFM). Both are regulated by the Securities and Exchange Authority.

The Abu Dhabi Securities Exchange was established by Federal Law No. 8 of 2020 in the emirate of Abu Dhabi, and in
March 2020, it was registered as a public joint stock company, owned entirely by the Abu Dhabi government. It deals
in equities, funds and bonds. The Dubai Financial Market is also on similar lines, being established in Dubai in the
year 2000, through an Executive Council Decree, and getting registered as a public joint stock company in 2005. In
fact, the DFM is the only financial market in the world based on the principles of Sharia law and deals in equity and
debt instruments, EFTs, REITs and securities.

Is DIFC also a Financial Market?

The Dubai International Financial Centre (DIFC) is a popular capital market and a free zone, which came into
existence in 2002. It aimed to attract local, regional and global investments and businesses by following the principles
of transparency, efficiency and integrity. As a result, several banks, insurance and asset management companies, law
firms and consultancies have set up their offices in the free zone.

DIFC also offers excellent dispute resolution mechanisms by promoting ADR not only in local but international
matters as well. It is regulated by the Dubai International Financial Services Authority (DIFCA).

1. One of the two financial markets located within the DIFC is the Dubai Mercantile Exchange (DME), which was
launched in 2007 and deals with energy futures. It introduced one of the fairest and most transparent crude oil
benchmarks, the Oman Crude Oil Futures Contract.

2. NASDAQ Dubai is the international stock exchange for the Middle East region and is located in the DIFC as well. It is
regulated by the Dubai Financial Services Authority and deals in equities, conventional bonds, exchange-traded funds
and exchange-traded commodities, REITs etc.

What Does the Dubai Multi Commodities Centre Deal In?

33
Another popular centre that emerged in 2002 as part of the free zone of the Jumeirah Lake Towers is Dubai Multi
Commodities Centre (DMCC). Article 2 of Dubai Law No. 3 of 2020 stipulates the commodities the Centre deals in
gold and precious commodities, agricultural and animal commodities, natural materials and minerals. The following
financial markets are initiatives of the DMCC as well:

1. The Dubai Gold and Commodities Exchange

2. The Dubai Pearl Exchange

3. The Dubai Diamond Exchange

What are the Potential Benefits of Investing in the Financial Markets of the UAE?

There are lucrative opportunities for those looking to invest in the UAE, along with escalating benefits. In addition to
providing an open economy, the country boasts in terms of political and economic stability. Businesses have free will
to get established anywhere in the country, but mostly they are inclined towards the free zones since they offer
unmatched perks, for example, 100% foreign ownership.

The government is diligent in expanding on infrastructure and the latest technology, and the laws are formulated to
create a business-friendly environment. UAE holds membership in the Gulf Co-operation Council, the Arab League,
WTO and the UN, among other international and regional organizations, which strengthen diplomatic relations with
other countries. Businesses and investors are protected by a robust legal system, while ADR is increasingly
encouraged in disputes of commercial nature.

UAE financial markets

Abu Dhabi Securities Exchange (ADX)

ADX is a stock exchange in Abu Dhabi, started in 2000 with the purpose of providing funds investment opportunities
in securities for the benefit of the national economy.

It aims at developing investment awareness to ensure that savings are invested in productive sectors, and to maintain
financial and economic stability.

ADX deals in equities, funds and bonds.

Dubai Financial Market (DFM)

Dubai Financial Market (DFM) was established as a public institution in 2000. As decided by the Executive Council
Decree of 2005, DFM was set up as a Public Joint Stock Company. 20 per cent of DFM's shares offered for public
subscription; and that was the first of its kind in the region. It is the first financial market in the world to comply with
Islamic Sharia rules.

DFM deals in equity instruments, debt instruments, Exchange Traded Funds (ETFs) and securities lending and
borrowing.

Dubai International Financial Centre (DIFC)

DIFC is a free zone established in 2002 by Dubai Government to provide physical, market and financial infrastructure
required to set up and operate a thriving commodities marketplace. Several leading banks, asset management
companies, insurance companies, law services and consulting companies have set up offices in DIFC. DIFC aims to
establish Dubai as the global financial hub.

Dubai Multi Commodities Centre (DMCC)

DMCC started in 2002 as a part of Jumeirah Lakes Towers free zone and a strategic initiative of the Dubai Government
with the purpose of providing physical, market and financial infrastructure required to set up and operate a thriving
commodities marketplace.

34
DMCC trades in four main commodity groups: gold, diamond, pearl and tea.

Dubai Pearl Exchange (DPE)

DPE is an initiative of DMCC for supporting the global trade of both natural and farmed pearls.

Dubai Diamond Exchange (DDE)

DDE is a DMCC platform and a Dubai Government initiative and the only bourse in the Middle East affiliated with the
World Federation of Diamond Bourses (WFDB).

DDE has a unique market and platform for trading and exchange of diamonds and precious gems. Located in the
Almas Tower in Jumeirah Lakes Towers free zone, it is home to many regional and international precious gems
companies.

Dubai Gold & Commodities Exchange (DGCX)

Dubai Gold & Commodities Exchange (DGCX) commenced trading in November 2005 as the region's first commodity
derivatives exchange and has become today the leading derivatives exchange in the Middle East. It deals in metals,
currencies, hydrocarbons and equities.

DGCX is a subsidiary of Dubai Multi Commodities Centre (DMCC). It is an electronic platform for trading commodity
and currency derivatives and has 267 members from all around the world.

Dubai Mercantile Exchange (DME)

DME was launched in June 2007 with the goal of bringing fair and transparent price discovery and efficient risk
management to the East of Suez. It deals in energy futures and commodities. It lists the Oman Crude Oil Futures
Contract (DME Oman) as its flagship contract, providing the most fair and transparent crude oil benchmark for the
region.

It is located in Dubai International Financial Centre (DIFC) and regulated by Dubai Financial Services Authority.

NASDAQ Dubai

NASDAQ Dubai is the Middle East's international financial exchange. It combines regional and international wealth,
making it a globally unique platform for companies to raise money and for investors to find exciting opportunities.

NASDAQ Dubai listed companies may trade their securities globally which gives an instant recognition and visibility
around the world.

NASDAQ deals in:

equities

Sukuk and Islamic products

conventional bonds

futures and derivatives

exchange-traded funds

exchange-traded commodities

Real Estate Investment Trusts ( REITs).

NASDAQ Dubai is located in Dubai International Financial Centre (DIFC) and regulated by Dubai Financial Services
Authority.

Dubai Financial Market holds two-thirds and Borse Dubai holds one-third of the shares in NASDAQ Dubai.

35
The International Capital Markets Review: United Arab Emirates

Rahat Hussain Dar

Afridi & Angell

07 November 2022

Introduction

The United Arab Emirates (UAE) was established in 1971 and comprises the seven emirates of Abu Dhabi, Ajman,
Dubai, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain. Abu Dhabi is the capital and the site of a number of
federal ministries, the Central Bank of the United Arab Emirates (the Central Bank) and other government institutions
and agencies.

Under the UAE Constitution, each of the emirates retains substantial control over the conduct of government affairs
within the emirate. With some exceptions, regulation of capital markets is generally a matter of UAE federal law.2

The legal system in the UAE (which includes federal laws and individual emirate laws, such as those of the emirate of
Dubai) is still developing. UAE law does not recognise the doctrine of binding judicial precedent. In the absence of
such a doctrine, the results of one court case do not necessarily offer a reliable basis for predicting the outcome of a
subsequent case involving similar facts. Consequently, the UAE legal system may generally be regarded as offering
less predictability than more developed legal systems.

In contrast, the Dubai International Financial Centre (DIFC) was established as a financial free zone with its own body
of laws and regulations, which are largely separate from the UAE legal system. It also has its own courts. The DIFC
laws and rules of court are largely based on English common law and the procedural rules currently in place in
England and Wales.

Similarly, the Abu Dhabi Global Market (ADGM) was established pursuant to Abu Dhabi Law No. 4 of 2013 as a
financial free zone in the Emirate of Abu Dhabi, with its own civil and commercial laws. The ADGM commenced
operations in 2015.

The UAE Constitution provides for a federal court system, but permits each constituent emirate to opt out of this and
maintain an independent court system. The emirates of Sharjah, Ajman, Fujairah and Umm Al Quwain have joined
the federal court system. The emirates of Abu Dhabi (since 2006), Dubai and Ras Al Khaimah each maintain a
separate court system. The UAE capital markets are young and still developing. There are currently three securities
exchanges, all of which are less than 20 years old: the Abu Dhabi Securities Exchange (ADX), the Dubai Financial
Market (DFM) and Nasdaq Dubai. In addition, the UAE is home to the Dubai Multi Commodities Centre and the Dubai
Mercantile Exchange Limited. The creation of a second market, in which shares in private joint-stock companies
would be eligible for trading, was launched in 2014.

Regulation of securities and financial markets in the UAE is a potential source of confusion to investors and financial
institutions. Generally speaking, there are two regulatory schemes: the UAE federal regulatory scheme, and the
scheme applicable in the DIFC (and to a lesser extent, the ADGM). With regard to the laws and regulations affecting
capital markets, the DIFC and the ADGM are effectively different jurisdictions altogether, with rules and regulations
that differ significantly from the UAE federal regulatory scheme.3 A detailed discussion of the DIFC and the ADGM
schemes is beyond the scope of this chapter, which deals primarily with the UAE federal scheme. Historically, the
regulation of securities trading and transactions involving investment products was the domain of the Central Bank.

The principal objectives of the UAE Central Bank, as outlined in Article 4 of the Banking Law, have been amended to
include, among other things:

36
a suitable environment to develop and improve the role of the insurance industry in securing persons and properties
against any risk, to protect the national economy, to encourage fair and effective competition and to provide the best
insurance services, with competitive prices and coverage, in addition to emiratisation in the insurance market;

regulating, developing and supervising the insurance sector and its activities, and suggesting and implementing
regulating legislation in this regard; and

enhancing the performance and competence of insurance companies and requesting they abide by the practice rules
of the profession and its ethics in order to increase their ability to provide better services for customers and achieve
effective competitiveness.

In October 2020, the UAE government issued UAE Federal Law No. 25 of 2020 confirming that the Insurance
Authority was to merge with the UAE Central Bank. According to Sheikh Mohammed bin Rashid Al-Maktoum, Ruler
of Dubai, the merger will increase the insurance sector's efficiency, and increase the efficiency and competitiveness
of its local financial markets, giving them greater flexibility in their business. The UAE Central Bank has been the
regulator of onshore insurance companies in the UAE since 2 January 2021, and all powers of the Insurance Authority
under the Insurance Law were transferred to the UAE Central Bank.

The Emirates Securities and Commodities Authority (SCA) was created in 2000. Until 2009, the SCA generally limited
its regulatory oversight to publicly listed UAE companies and the public securities exchanges in the UAE. In recent
years, the regulatory responsibility of the SCA has expanded considerably, and it is now the primary regulator of
capital markets under the UAE federal scheme. The shift in regulatory responsibility over foreign securities from the
Central Bank to the SCA has occurred gradually over time pursuant to an unpublished memorandum of
understanding between the Central Bank and the SCA. The general public is informed of regulatory developments as
and when the SCA publishes new regulations. In addition, the SCA has adopted regulatory procedures and practices,
some of which are not published.

In June 2013, Morgan Stanley Capital International (MSCI), which maintains the most widely used equity index in the
world, upgraded the status of the UAE capital markets from frontier to emerging market. This promotion became
effective in May 2014 with the changes to the indexes. At that time, MSCI added nine UAE companies to its
benchmark emerging markets index for the first time. Subsequent to the decision to upgrade the UAE markets, and in
an attempt to meet listing conditions under MSCI indexes going forward (which requires, in addition to other
conditions, that listing conditions include permitting foreign ownership at acceptable rates), a number of companies
listed on the ADX and the DFM decided to raise the percentage of foreign ownership.

The year in review

i Developments affecting debt and equity offerings

One prominent recent development was the issuance of the SCA Decision No. 13/RM/2021 On the Rules Handbook
of Financial Activities and Mechanisms of Status Regularisation (the Decision No. 13/RM). Decision 13/RM came into
effect the day following its publication on 17 May 2021, and one of the main changes it has introduced is to the SCA's
regime that regulates the promotion of 'financial products' (defined as securities, foreign securities, commodities'
contracts and structured products) in the UAE (but outside the financial free zones, the DIFC and ADGM), and it
includes a Financial Activities Rules Handbook (the Rulebook). Decision 13/RM repeals 17 SCA Board Decisions,
including those in relation to financial promotions, which are now incorporated into the Rulebook.

The Rulebook continues to ensure that:

the oversight of the licensing, regulation and marketing of investment funds in the UAE remains with the SCA, which
also carries out oversight and prudential supervision tasks pertinent to the financial position of mutual funds
established and licensed in accordance with the provisions of the Rulebook;

SCA approval is required for the establishment of a local investment fund, which is any investment fund established
in the UAE, excluding the free zones, and licensed by the SCA;

SCA approval is required for the marketing and promotion of foreign funds to investors in the UAE; and

37
the marketing of a foreign fund to investors in the UAE requires the appointment of a UAE-licensed local promoter.

The new SCA's financial promotions' regime introduced by the Rulebook is a new, wider exemption for promotions
made to 'professional investors' (the New Exemption), which replaces the exemption regarding promotions to
institutional 'qualified investors' under the previous regulations. The New Exemption is available for promotions
made to professional investors, which now expressly includes regulated firms and private investment vehicles, and
natural persons who meet the criteria to be classified as professional investors; namely, individuals with a net worth
of more than 4 million dirhams, or those with sufficient experience and understanding of the relevant investments.

Under the Rulebook, a 'promotion' is defined as financial activity of communication with any person in any form or
way and includes an invitation or inducement to buy or subscribe to a Financial Product.

The promotion provisions in the Rulebook do not apply to the following:

a broker who trades for his customers in the foreign markets and the trading broker of OTC derivatives and currencies
in spot market;

financial products listed in the market;

financial products promoted to the professional investor;

securities, contracts of commodities or derivatives issued by the federal government, local government,
governmental institutions and authorities or the companies wholly owned by any thereof;

reverse promotion, by initiative of an investor in the UAE, that requests the offering or buying of any specific foreign
securities abroad, not based on the promotion of the foreign issuer or its promoters or distributors. This, however,
shall be recorded by the concerned entity;

promotion between the company and its financial group or the related parties, the parties related to mutual funds or
associated group;

the introducing broker according to the system of listing and trading of commodities and contracts of commodities;

the issuer, foreign issuer or financial adviser according to the system of offering and issue of stock of public joint
stock companies, except in connection with the general obligations of the promoter; and

the promotion of financial services.

Promotion of the foreign fund in the private placement shall be confined to the professional investor and the
counterparty.

The three new categories of professional investors under the Rulebook are as follows.

Per se professional investor

A per se professional investor should fulfil one of the following requirements:

international corporations and organisations whose members are states, central banks or national monetary
authorities;

governments and their investment and non-investment entities, institutions and corporations or companies wholly
owned by either thereof;

central bank or other national monetary authority in any country, state or legal authority;

capital market institutions licensed by SCA or supervisory authority equivalent to SCA;

financial establishments;

regulated financial institution, local or foreign mutual fund or regulated pension fund management company or
regulated pension fund;

any entity whose key activity is the investment of securities, securitisation or financial transactions;
38
any company whose stock is listed or whose stock trading is admitted in any market of a state member of IOSCO;

trustee of a trust who has during the past 12 months assets of not less than 35 million dirhams;

licence holder under (Single Family Office) laws in connection only with the practice of activities to perform duties (as
Single Family Office) and has assets of not less than 15 million dirhams;

particular partnerships or private establishment that has or had at any time in the past two years net assets of not
less than 25 million dirhams. This amount shall be calculated in cases of particular partnerships without deduction of
the loans payable to any partner; and

a person who handles a large undertaking, if at least two of the following requirements are fulfilled on the date of
the last financial statements:

total assets are not less than 75 million dirhams before deduction of long and short-term liabilities;

net annual revenues are not less than 150 million dirhams; and

total cash and investments in the balance sheet or total authorised capital minus the paid capital is not less than 7
million dirhams.

Professional investor (service-based)

A service-based professional investor should fulfil the following requirements:

a person who practises activity that involves the provision of credit facilities for commercial purposes for any of the
following:

outsourced personnel;

an entity that controls the outsourced personnel;

any member in the group to which the outsourced personnel belong; and

any joint venture in which the outsourced personnel is engaged; or

a person who practises the service of arranging credit facilities and investment deals for corporate structuring and
financing.

Professional investor (resident)

A resident professional investor should fulfil the following requirements:

a natural person who owns net assets – except the value of his or her main housing – of not less than 4 million
dirhams;

a natural person who is approved by SCA or the equivalent supervisory authority, employee at the licensee or
regulated financial institution or employee at either of these in the past two years or has adequate knowledge and
experience in the investment field and its risks as per suitability criteria, or is represented by an entity licensed by
SCA according to the conditions of licensing;

a natural person who has a joint account with a natural person who represents a resident professional investor
according to (a) (owner of the primary account). The following conditions shall be met:

(account participant) is a family member (owner of the primary account) within the second degree of relation;

account is used to manage investments of the owner of the primary account and other participants; and

written confirmation by the account participant that investment decisions of the joint account are taken on his or her
behalf by the owner of the primary account;

39
any establishment of special purpose or special legal form such as a trust and the establishment established only to
facilitate the management of investment portfolio of a natural person represents a resident professional investor
according to (a);

an undertaking person who meets the following conditions:

total cash and investments in the balance sheet or total authorised capital minus the paid capital is not less than 4
million dirhams; and

has adequate experience and understanding of the markets and the related financial products and financial
transactions and the associated risks according to suitability criteria; or

an undertaking person who meets the following requirements:

a controlling natural person who holds the majority of shares in the company, someone who is capable of controlling
the majority of voting rights or has the capability to appoint or remove the majority of directors on the board;

a holding company or subsidiary; or

a joint venture.

In addition to foreign funds, the SCA has assumed oversight responsibilities in relation to the marketing of most types
of foreign securities in the UAE. Specifically, it has regulatory oversight with regard to matters pertaining to plain
vanilla (non-listed foreign) security products, while the Central Bank still retains oversight authority with regard to
sophisticated products such as credit-linked notes. Various new SCA regulations relating to funds have been enacted
between 2016 and 2021:

Chairman of the Authority's Board of Directors' Decision No. 10/RM of 2016 Concerning the Fees of Mutual Funds,
outlining the fees payable to the SCA in respect of application fees and licence renewals for public and private mutual
funds;

Administrative Decision No. 49/RT of 2016 Concerning the Exchange-Traded Fund, regulating the incorporation and
prospectus requirements for exchange-traded funds;

Administrative Decision No. 52/RT of 2016 Concerning the Controls of Cash Investment Fund, regulating the
investments permissible for CIFs;

Administrative Decision No. 1/RT of 2017 Concerning Real Estate Investment Fund Controls; and

Administrative Decision No. 2/RT of 2017 Concerning Private Equity Fund Controls, which has introduced rules
relating to the obligations of both general and limited partners and places restrictions on the investments a private
ownership fund can make. This means that a fund must invest the majority of its monies in purchasing:

shares in limited liability, joint partnership, joint venture or private shareholding companies; or

securities of public shareholding companies that are intending to commence conversion into private shareholding
companies or before the commencement of the liquidation process;

Administrative Decision No. 3/RT of 2017 Concerning The Venture Capital Fund Controls;

Administrative Decision No. 57/RT of 2017 Concerning the Adjustment of Positions Mechanisms for Mutual Funds;

Administrative Decision No. 58/RT of 2017 Concerning the Adjustment of Positions Mechanisms for Promotion and
Introduction Activities;

Administrative Decision No. 123/RT of 2017 Concerning the Regulatory Controls for Financial Activities and Services;

Decision of the Chairman of the SCA Board of Directors No. 32/RM of 2017 Concerning the Regulation of General and
Limited Partnership Funds;

Decision of the Chairman of the SCA Board of Directors No. 5/RM of 2018 Concerning the Imposition of Sanctions;

40
Decision of the Chairman of the SCA Board of Directors No. 12/RM of 2018 Concerning the XBRL;

Chairman of the SCA Board of Directors' Decision No. 19/RM of 2018 Concerning the Regulation of the Central
Depository Activity;

Chairman of the SCA Board of Directors' Decision No. 20/RM of 2018 Concerning the Issuing and Offering of Islamic
Securities;

Chairman of the SCA Board of Directors' Decision No. 8/TM of 2019 on the Mechanism of Investment Funds;

Chairman of the SCA Board of Directors' Decision No. 21/Chairman of 2019 on Procedures of Anti-Money Laundering
and Combating the Financing of Terrorism and Illegal Organisations;

Administrative Decision No. 63/RT of 2019 Concerning Evaluation of In-Kind Shares of Investment Funds;

Administrative Decision No. 59/RT of 2019 Concerning the Capital Adequacy Criteria of Investment Managers and
Management Companies; and

Chairman of the SCA Board of Directors' Decision No. 23/RM of 2020 Concerning Crypto Assets Activities Regulation.

In addition to regulations relating to investment funds, the SCA has been active on a number of other fronts. It issued
a series of regulations governing market making, securities lending and borrowing, short selling and liquidity,4 as well
as central clearing, cross-border securities trading, and efficiency and appropriateness controls for licensed
companies and accredited persons in the securities industry.5

Market making is defined in these regulations as the activity of providing continuous prices for the purchase and sale
of certain securities to increase the liquidity of securities in accordance with market-maker regulations.

The practice of market making requires a licence from the SCA. An applicant for a licence must be a corporate person
with paid capital of at least 30 million dirhams (or the equivalent) meeting any of the following criteria:

a company established in UAE with at least 51 per cent UAE ownership or the nationality of one of the Gulf
Cooperation Council (GCC) states. One of its purposes must be to practise market making;

a company established in the UAE and licensed by the SCA to operate in the field of securities, in which case the
applicant shall be subject to the controls issued by the SCA concerning the prevention of conflicts between activities;
or

a commercial bank or investment company licensed by the UAE Central Bank, or a branch of a foreign bank, provided
that the parent bank is licensed to practise this activity, and subject to obtaining the approval of the UAE Central
Bank in any of these cases.

Any investor is permitted to lend securities owned by that investor, but the borrowing of securities, unless otherwise
approved by the SCA, is permissible only when carried out by a licensed market maker practising market making or
by the clearing department of an exchange in the case of a failure to deliver sold securities on the settlement date.

Licensed market makers are permitted to engage in short selling. Each exchange has the power to determine the
securities eligible for short sales provided that short selling is not permitted until one month after a company's initial
listing. In addition, short selling is not permitted for a subscription in capital increase shares or in covered warrants.
More generally, each exchange has the power to create its own rules governing short selling procedures provided
that these rules are subject to SCA approval.

Duly licensed market makers are also permitted to act as liquidity providers by entering into agreements with issuers
of listed securities provided that the liquidity provider cannot at any time own more than 5 per cent of the listed
securities. All liquidity provision agreements must be disclosed to the SCA, and the exchange on which the securities
are listed and the exchange in turn shall disclose the agreement to the public.

The regulations address separating clearing and settlement functions, transferring securities ownership and
depositories, and further permit the incorporation of companies, independent from securities exchanges, to handle
clearing transactions under a licence from the SCA.
41
The regulations for central clearing houses provide that clearing transactions are no longer executed on securities
exchanges. The regulations also regulate clearing transactions and redistribute the tasks carried out on the
exchanges.

In June 2013, the SCA issued Board Resolution No. 38 of 2013 Concerning the Trading of Rights Issue for Capital
Increases. A rights issue can be listed and traded subject to the provisions of this Resolution. A rights issue is defined
therein as a financial instrument representing rights that are granted to a company's shareholders to have priority to
subscribe for shares in that company's capital increase.

In April 2014, the SCA issued two new sets of regulations: Board of Directors' Decision No. 16 of 2014 Concerning the
Regulation of Sukuk (the Sukuk Regulations) and Board of Directors' Decision No. 17 of 2014 Concerning the
Regulation of Debt Securities (the Debt Securities Regulations).

Sukuk are defined as tradable financial instruments of equal value that represent a share of ownership of an asset or
a group of assets, and that are issued in accordance with shariah law.

Retail sukuk may only be issued in the UAE through public subscription, and approval must be obtained from the SCA
before issuing or listing any sukuk on the market in accordance with the provisions of the Sukuk Regulations.
Excluded from the provisions of these Regulations are government sukuk, and sukuk that will not be offered through
public subscription or listed on the market. A condition for the principal listing of retail sukuk is that the applicant
must be established in the UAE and outside a financial free zone.

Other issues covered under the Sukuk Regulations include the procedures and documents required for approval by
the SCA of primary and joint listings of sukuk, the establishment of an SCA sukuk register, as well as trading, clearance
and settlement of sukuk, and suspension and cancellation of listings.

The Debt Securities Regulations replace SCA Board Resolution No. 94/R of 2005 Concerning the Listing of Debt
Securities. Debt securities are defined as tradable financial instruments of equal value evidencing or creating
indebtedness on the issuer, whether secured or unsecured. The Debt Securities Regulations state that with the
exception of government corporate bonds, no corporate bond shall be issued and offered for public subscription in
the UAE without first obtaining the SCA's approval. The corporate bonds must also be listed on the market. To be
listed, debt securities must satisfy the following conditions:

they must comply with the provisions of the Commercial Companies Law and with the issuer's constitutional
documents;

unless the SCA decides otherwise, the aggregate value of all debt securities to be listed must be at least 10 million
dirhams, or the equivalent thereof in a foreign currency that is acceptable to the SCA and the market; and

where the debt securities sought to be listed are secured debt securities, a trustee must be appointed to represent
the interests of the holders of those debt securities, and that trustee must have the right of access to any information
relating to the assets.

The Debt Securities Regulations provide that the general assembly must approve the issuance of corporate bonds if
the issuer is a joint-stock company, and that a subscription announcement must be prepared and presented
according to the format approved by the SCA.

The Debt Securities Regulations also require non-government issuers to obtain SCA approval before publishing any
document or making any announcement inside the UAE relating to the listing of corporate bonds. The documents or
announcement must clearly indicate that SCA approval was granted for publication. This requirement is also
applicable to sukuk.

Both the Sukuk Regulations and the Debt Securities Regulations provide that neither the SCA nor the markets shall
have any responsibility for any information (lists, financial statements, financial data, information, reports or any
other documents) presented by the applicant or issuer.

42
In July 2014, the SCA also introduced controls for brokerage firms trading for their clients in foreign markets whereby
a brokerage firm may trade for its clients in the foreign markets in the normal way of trading, or using accounts, only
after obtaining the approval of the SCA.6

SCA Board of Directors' Decision No. 10 of 2014 Concerning the Regulation of Listing and Trading of Shares of Private
Joint Stock provides the conditions under which private joint-stock companies would be able to list their shares on
the market, including the requirement that the capital be paid in full, that the audited budget be issued for the
previous two fiscal years and that the company facilitates the trading of its shares through brokerage companies
licensed by the SCA. Private joint-stock companies that are listed on the market shall be exempt from the Corporate
Governance Regulations, Ministerial Resolution No. 370 of 2009 Concerning Private Joint Stock Companies Register
and SCA Board of Directors' Decision No. 3/R of 2000 Concerning the Regulations as to Disclosure and Transparency.

The previous UAE Commercial Companies Law (Federal Law No. 2 of 2015) that was issued on 1 April 2015 and that
came into force on 1 July 2015, significantly enhanced the provisions relating to corporate governance. Some of the
most significant amendments relate to public companies and capital markets. The minimum free float permitted in
an initial public offering (IPO) was reduced from 55 to 30 per cent, with the maximum proportion that can be floated
decreased from 80 to 70 per cent. The share price can now be determined by way of a book-building process, and
shares can be issued at a premium. Pursuant to the previous Commercial Companies Law (and maintained under the
new Commercial Companies Law (see below)), the concerned authorities have introduced subordinated legislation in
a number of areas, including the Corporate Governance Regulations as noted below, and regulations on IPOs and
bookbuilding.7 The concerned authorities have also been authorised to introduce legislation regarding the rules on
the formation and qualification of shariah boards, the creation of different classes of shares and their rights. For
public joint-stock companies, the minimum share capital requirement of 10 million dirhams has been increased to 30
million dirhams. The concept of authorised (but not issued) share capital has been introduced. Public offers of
subscription to shares are expressly prohibited without SCA consent.

A new Commercial Companies Law was enacted as Federal Law No. 32 of 2021 (issued on 20 September 2021 and
came into force on 2 January 2022). This law prohibits any company, other than a public joint-stock company, from
offering any securities in an IPO. In all cases, no company or natural or corporate person, incorporated or registered
anywhere in the world, may publish any advertisements in the UAE that include a call for an IPO in securities prior to
obtaining the approval of the SCA. This prohibition has also been introduced by the SCA.8 The Commercial
Companies Law has also introduced a number of new developments for PJSCs including:

removal of the minimum and maximum percentages of the capital to which the founders of a PJSC may subscribe for
new shares upon a public offering. Previously, the founders were required to subscribe to a minimum of 30 per cent
and a maximum of 70 per cent prior to the invitation to the public subscription. They may now subscribe to new
shares up to the percentage specified in the prospectus and subject to the requirements of the SCA (whereas
previously UAE Council of Ministers approval would be required for an exemption to the minimum 30 per cent
offering size);

removal of the maximum limit on the percentage of shares that can be offered for sale upon conversion from a
private joint stock company to a PJSC (previously the maximum limit on the sale of such shares was set at 70 per
cent). Now the percentage/ratio of sale shares and new shares being offered as part of an IPO on conversion is to be
determined by the SCA;

amendments to the offering subscription period, including:

removal of the statutory minimum period for the public to subscribe for shares in the IPO (previously 10 days), and
instead it refers to the period specified in the prospectus, which may not exceed 30 business days; the subscription
period for the offering may be extended for an additional period on application to the SCA, provided that this does
not exceed the longstop date set out in the prospectus;

the founders of a PJSC may subscribe for any unsubscribed shares in the offering upon the expiry of the subscription
period, subject to any requirements of SCA; previously, the founders were only allowed to subscribe for up to 70 per

43
cent of the shares and in the event that there remained any unsubscribed shares, then the incorporation of the PJSC
would be revoked; and

the Commercial Companies Law removes the restrictions on the founders of a PJSC from trading their shares once
the converted company is listed; and

subject to SCA approval and the passing of a special resolution, a PSJC is may issue shares at a discount in instances
where the market price of the shares falls below the nominal value.

A company may now issue shares to a strategic partner (i.e., an investor from an industry sector related to the
company's own) through a capital increase on terms approved by a special resolution of the shareholders without
needing to comply with preemption rights.

The Commercial Companies Law has largely retained the changes to the foreign ownership restrictions introduced
under Federal Decree Law No. 26 of 2020 (the Decree Law), which reduced the long-standing requirement for 51 per
cent of the shares in a mainland or onshore company to be held by one or more UAE nationals (natural or legal
persons) has been removed. The Commercial Companies Law states that the threshold required for ownership of
UAE limited liability companies (if any) should be determined by the Cabinet upon the recommendation of a
committee, which is required to determine activities considered to have a 'strategic impact' in order for foreign
investors to be entitled to hold up to 100 per cent of the legal interest in these companies. A list of activities
permitted for 100 per cent foreign ownership has recently been published by each of the relevant economic
departments in Abu Dhabi and Dubai. The UAE Cabinet is yet to issue a Resolution regarding the list of activities that
would be considered to have a 'strategic impact'. However, for now certain sectors such as oil and gas, utilities and
companies carrying on activities with a 'strategic impact will continue to be subject to restrictions on foreign
ownership.

In September 2018, the SCA issued SCA Chairman Decision No. 28/Chairman of 2018 Approving the Fintech
Regulatory Framework (the Fintech Regulatory Sandbox Guidelines). A fintech regulatory sandbox is a process-based
framework that allows entities to test innovative products, services, solutions and business models under a relaxed
regulatory environment, but within a defined space and duration. In December 2019, the UAE Central Bank
announced that it would establish a new fintech office to support fintech activities in the banking sector. and
facilitate the establishment of a regulatory framework in cooperation with the DIFC and ADGM, and with the relevant
authorities in the wider Middle East region.

The concept of investment funds incorporated as a separate legal personality in the form of common investment
companies, and the concept that a public shareholding company may buy back a portion of its own shares to resell
them. SCA Board of Directors' Decision No. 40 of 2015 sets out the conditions and procedures for companies to do
so, which include the following:

at least two financial years must have elapsed since the establishment of the listed public shareholding company on
the financial market;

the company must have issued two audited balance sheets approved by its general assembly;

at least one year must have elapsed since the most recent selling transaction of shares previously bought back (if
any);

approval of the general assembly of the company under a special resolution on the buyback for resale transactions;

the buy-back may not exceed 10 per cent of the shares representing the company's paid-up capital; and

the company may not execute the buyback transaction until six months have elapsed since the most recent issuance
of any securities in a public offer.

The SCA issued Chairman of the SCA Board of Directors' Decision No. 3/Chairman of 2020 Concerning Approval of
Joint Stock Companies Governance Guide in April 2016, which sets out new corporate governance rules and
corporate discipline standards for public joint-stock companies (the Guide), which replaced the existing resolutions
44
and regulations. The Guide applies to all listed UAE companies, their board members, managers, chairs and auditors
to whom the provisions of the Commercial Companies Law apply. The provisions stipulated in the Guide shall not
apply to foreign companies listed on the market. Key features of the Guide include:

the obligation to appoint a secretary on the board of directors, and the majority of board members should be
independent and non-executive;

bringing more clarity to the mechanism for disclosure of interests of new board members, by means of the
submission of a declaration of interest form upon assuming position, and more clarity to the process for handling
conflicts of interest;

the introduction of proper and fit criteria for board members;

the development of a new approach to management through the (optional) adoption of the dual governance
structure;

bringing more clarity and detail to risk management procedures through the (optional) formation of a permanent
committee in charge of handling risks;

the introduction of provisions giving the board the authority to create a technical committee for the purpose of
assisting it in discharging its supervisory responsibilities regarding the role of technology in executing the company's
business strategy;

bringing more clarity to governance-related disclosures; and

the introduction of provisions regulating the governance of subsidiary companies and corporate social responsibility.

The Chairman of the SCA Board of Directors' Decision No. 8 /Chairman of 2021 Concerning Amending the Joint Stock
Companies Governance Guide introduced a new requirement that representation of women shall not be less than
one member in the formation of the board of directors. Moreover, the company shall be obligated to disclose this
representation in the annual governance report.

The SCA issued new rules under Chairman of the SCA Board Decision No. 13/RM of 2020 Concerning Procedures of
Dealing with Listed Troubled Joint Stock Companies (the New Rules). One of the main objectives of the New Rules is
to provide additional classification criteria for local or foreign public joint-stock companies listed on either the Dubai
Financial Market or the Abu Dhabi Securities Exchange to highlight to investors public joint-stock companies that are
in financial distress.

On 11 March 2019, the SCA, the Dubai Financial Services Authority (DFSA) of the DIFC and the Financial Services
Regulatory Authority (FSRA) of the ADGM issued a joint press release announcing the enactment of legislation
enabling the implementation of a passporting scheme to facilitate the UAE-wide promotion of domestic funds.
Historically, the existence of three different regulatory regimes in the UAE has been an impediment to the growth of
the market for funds since a fund approved by a particular regulator was only eligible for promotion within the
relevant jurisdiction and not throughout the UAE. The passporting regime aims to change this. The DFSA and ADGM
have published amendments to the relevant rules and regulations implementing the passporting regime. The SCA's
regulations have not yet been published. The passporting regime applies to both private and public domestic funds.
It does not apply to foreign funds promoted in the UAE. Foreign funds and other types of securities promoted in the
UAE remain subject to the applicable rules of the jurisdiction in which they are promoted.

ii Developments affecting derivatives, securitisations and other structured products

Derivative products have been marketed and sold in the UAE for many years. There have been some changes to the
rules and regulations affecting these products to expand the investment options available to customers in the
markets with the issuance of SCA Board of Directors' Decision No. 22/RM of 2018 Concerning the Regulation of
Derivatives Contracts (the Derivatives Contracts Regulations).

Pursuant to the Derivatives Contracts Regulations, derivative contracts are financial contracts of a specific value
determined by the contracting parties. These types of contracts derive their value from that of the underlying
securities (defined to be local securities and foreign securities, or local or foreign index subject matter of a derivatives
45
contract) and are dependent on the change of value of the securities. The Derivatives Contracts Regulations also
classify structured derivatives contracts as 'derivatives contracts structured on the local securities or indicators issued
in accordance with the market's conditions and rules, derivatives contracts structured on foreign securities, issued in
accordance with the market's conditions and rules upon obtaining the SCA's consent, and derivatives contracts
structured on local securities or indicators, issued in accordance with the conditions and rules of the foreign market
upon obtaining the SCA's consent'. Customers who deal in over-the-counter derivatives contracts on local securities
or indicators are required to settle and clear the trading of these contracts through a central clearing party.

The Derivatives Contracts Regulations address the obligations of the markets in the UAE. In addition to other
obligations set out in the law that established the SCA and its regulations, these include the following:

to continuously disclose and update the securities involved in the structured derivatives contracts in the market;

to continuously disclose the types and specifications of the structured derivatives contracts in the market in
accordance with its rules, as well as any updates or amendments thereto, provided that they may not enter into force
in the event there are pending unsettled structured derivatives contracts;

not deregister any security involved, in cases where pending or unsettled structured derivatives contracts, which
include these involving securities, exist in the market;

announce the working days, the hours dedicated to trading in the structured derivatives contracts therein, and the
opening and closing times;

settle all transactions through a central clearing party;

specify the number of structured financial derivatives contracts in the series of contracts. The market should also
specify the securities involved, the month of contract settlement, the month of contracting and the expiry date of the
contract that may be registered with the market. The market may enforce limits for each structured derivatives
contract or for all contracts;

specify the initial margin of the transactions of structured derivatives contracts therewith. The market should also set
the conditions and rules governing the structured derivatives contracts therewith, rules of trading and listing thereof
on the market, and the rules and conditions of licensing practice of the tasks of the derivatives member, and the
rules of licence renewal as well as the obligations of the derivatives member, provided that the rules, as well any
update or change thereto, are approved by the SCA before they enter into force; and

abide by the provisions related to structured derivatives contracts that are compatible with the principles of Islamic
shariah.

Securitisation transactions are extremely rare in the UAE as the existing legal and regulatory environment is not well
suited to structuring such transactions. There have been no significant recent developments.

iii Cases and dispute settlement

As has already been noted, the capital markets in the UAE are young and developing. The UAE has only had emerging
market status since 2012/2013. It is not a common law jurisdiction, and the doctrine of binding judicial precedent is
not followed. To date, there is an absence of significant court cases regarding securities law matters, and there have
been no significant recent developments.

iv Relevant tax and insolvency law

With limited exceptions, the UAE is (as a matter of practice) a tax-free jurisdiction. There is no federal income tax law,
nor are there any federal taxes on income. There is no personal income tax.

Corporate income tax statutes have been enacted in most of the emirates (all of which predate the formation of the
UAE in 1971) but they are not implemented.9 Instead, corporate taxes are collected with respect to branches of
foreign banks (at the emirate level) and courier companies (at the federal level). Furthermore, taxes are imposed at
the emirate level on the holders of petroleum concessions at rates specifically negotiated in the relevant concession

46
agreements. Taxes are imposed by certain emirates on some goods and services (including sales of alcoholic
beverages, hotels, restaurant bills and residential leases).

The UAE Ministry of Finance issued Federal Decree-Law No. 8 of 2017 (the VAT Law) and launched a dedicated
website for the Federal Tax Authority. The VAT Law introduced a new 5 per cent VAT starting in January 2018. The
Law is based on the common principles agreed by all GCC countries in the GCC VAT framework agreement. It sets the
general rules for implementation of the new tax and includes some details on the goods and services that are subject
to VAT and those that will receive special treatment. Full details of the scope of VAT implementation were revealed in
the VAT Law's executive regulations, UAE Cabinet Decision No. 52 of 2017, which outlines supply of goods and
services in all cases, including supply in special cases, supply of more than one component and exemptions related to
legal supply. The regulations also define mandatory tax registration, optional tax registration, registrations that are
liable to exceptions, tax grouping and deregistration.

Separately, the Ministry of Finance has announced that it is still studying reforms to the corporate tax regime, that
the tax rate is under study and that businesses will be given at least one year to prepare for any changes. As there are
still many stages to go through before the laws are enacted, there is still no firm timeline for implementation of the
corporate tax legislation.

The economic slowdown that affected the UAE following the global financial crisis highlighted the inadequacy of the
bankruptcy and insolvency law. The new Bankruptcy Law of the UAE was enacted on 20 September 2016 as Decree-
Law No. 9 of 2016 and came into effect on 31 December 2016. The new Bankruptcy Law replaces and repeals the
previous legislation on the subject: Book 5 of the UAE Federal Law No. 18 of 1993 promulgating the Code of
Commercial Practice. Perhaps the most important new feature of the new Bankruptcy Law is the introduction of a
regime that allows for protection and reorganisation of distressed businesses. It will be interesting to see how the
new Law is implemented in practice and whether debtors make use of its provisions. Nevertheless, the introduction
of an insolvency regime that offers protection and encourages restructuring to enable troubled businesses to survive
what would otherwise have been a bankruptcy situation is welcome and is a milestone development in the UAE's
business law landscape.

In addition to the new Bankruptcy Law, the Commercial Companies Law contains provisions for the dissolution of a
company. The Penal Code of the UAE (contained in Federal Law No. 3 of 1987) also contains criminal sanctions for
bankrupts.

The Commercial Companies Law provides for the dissolution of a company in certain prescribed circumstances,
including where the losses to a company amount to half of its capital. All debts of the company become due and
owing upon the company's dissolution. If the company's assets are not sufficient to meet all the debts, then the
liquidator is required to make proportional payment of those debts, without prejudice to the rights of preferred
creditors. Every debt arising from acts of liquidation must be paid out of the company's assets in priority over other
debts.

Originally, a personal insolvency framework was suggested and drafted at the same time as the new Bankruptcy Law
was formulated, but the draft personal insolvency law was not promulgated in 2016. However, a personal insolvency
law was subsequently adopted as Insolvency Law No. 9 of 2019 (the Personal Insolvency Law) and came into effect
on 29 November 2019.

Similar to the new Bankruptcy Law, the Personal Insolvency Law is seen as introducing a debtor-friendly regime. The
Personal Insolvency Law remains largely untested and it remains to be seen if, and to what extent, this law will be
applied in the coming years.

v Role of exchanges, central counterparties and rating agencies

The SCA is responsible for the regulatory oversight of the ADX and the DFM.10 In addition to the rules and
regulations of the SCA, each exchange has its own rules and regulations.

47
The ADX and the DFM each have a clearing, settlement, depository and registry departments that operate a clearing,
settlement and depositary system (CSD) and are responsible for the clearing and settlement of transactions executed
on the exchange. Each exchange follows a multilateral netting system under which transactions are cleared and
settled on a net basis by brokers. After the clearing of transactions by the exchange, the transfer of securities
ownership is made through the electronic book-entry system operated by that exchange.

To buy or sell securities listed on the ADX or the DFM, an investor must apply for and be granted an identification
number, called an investor number (IN), by the relevant exchange. The issuance of an IN triggers the creation of an
investor account for the custody of shares traded on the exchange (the custody account). The IN identifies the
investor's account in the CSD. In addition to the custody account, every investor must have at least one trading
account with a licensed broker.

All shares traded on the ADX and the DFM are in dematerialised (electronic) form. Ownership of shares is reflected in
a computerised credit entry in the investor account.

All trading is carried out through licensed brokers. An investor must have at least one trading account with a licensed
broker but can have accounts with multiple brokers. To open an account with a broker, an investor has to enter into a
customer agreement with the broker. The investor must also give the broker a power of attorney authorising the
broker to execute any written share transfer form on behalf of the investor in relation to any trades executed on the
applicable exchange by the broker. The broker will process buy or sell orders from the investor upon receipt of
instructions in the manner specified in the customer agreement.

To sell listed securities, investors must transfer the securities from their custody account to their trading account with
a broker. Upon receiving a sell order, the broker will record the order on the electronic trading system. The system
matches buy and sell orders of a particular stock based on the price and quantity requirements. The cash settlement
is done among brokers through the designated settlement bank. Once the trade is executed, the investor will be
notified of confirmation of the deal, and the transfer of share ownership occurs electronically by debits and credits to
the custody accounts of the seller and buyer.

As a legal matter, the transfer of securities occurs by way of contractual assignment. At the time sellers of securities
transfer the securities from their custody account to their trading account with a broker, the obligation to settle
transfers to the broker. However, the seller is still at risk until payment is actually received. Every broker is required to
submit a bank guarantee of at least 10 million dirhams, and the seller may draw upon this guarantee if payment is
not received.

Although the ADX and the DFM each operates a CSD, neither acts as a central counterparty in the sense that neither
legally guarantees the completion of transactions on the exchange. The economic risk of clearing and settlement is
intended to be addressed by the bank guarantees required by each accredited broker and the trading limits imposed
on the brokers.

There are no UAE-based rating agencies. Some UAE issuers have securities rated by international rating agencies such
as Moody's and Standard & Poor's.

In May 2018, the SCA issued Chairman of the SCA Board of Directors' Decision No. 18/RM of 2018 Concerning the
Licensing of Credit Rating Agencies. Pursuant to these regulations, the SCA is now regulating credit rating agencies in
the UAE. A credit rating agency may only be carried out in the UAE subject to obtaining a licence from the SCA.

vi Other strategic considerations

Given the recent enactment of the new Commercial Companies Law further removing the requirement for
companies incorporated in the UAE to have majority UAE ownership, it is anticipated that this will strengthen the
UAE's standing as an international investment destination. As a result of the removal of these restrictions, the
demand from foreign investors for shares in certain publicly traded companies may increase. Many UAE banks hold
shares in publicly traded companies on behalf of clients through custodial arrangements, and some investors use an

48
unregulated individual holding UAE nationality as a proxy to hold shares on the investor's behalf. This may now
change due to the easing of the foreign ownership restrictions.

It is possible to register a security interest over listed securities with the relevant exchange. In practice, however, the
registration fees charged by the ADX and the DFM are often deemed to be prohibitively expensive by investors and
secured parties, who sometimes opt for the cheaper but far riskier alternative (from the perspective of the secured
party) of an unregistered contractual pledge.

Outlook and conclusions

The pace of legislative and regulatory change in the UAE has generally been slow but with investors now eligible for
up to 100 per cent foreign ownership in onshore companies, it is anticipated to boost investment in the UAE. VAT was
introduced in 2018 at a rate of 5 per cent, and some commentators believe this rate may be increased in the coming
years. More generally, taxation is an area that could see changes in the future. The introduction of the Economic
Substance Regulations is another indication of the UAE's willingness to change its tax rules. Furthermore, lower oil
prices and a desire to diversify the economy have changed the landscape. While the UAE has historically been a tax-
free haven, the implementation of corporate income tax in the future is a possibility, although the Ministry of Finance
says the UAE has no plans to do so.

Although still at a nascent stage, the cryptocurrency market is gaining ground in the UAE. According to the website
CoinSchedule, the UAE ranked seventh (tied with Germany) in the world for crypto token sales in 2019 for the period
from 1 January 2019 to 8 September 2019. It is anticipated that the cryptocurrency market in the UAE will continue
to grow. Additionally, the Central Bank has announced it is to issue its own digital currency, as part of its 2023–2026
strategy, which it says 'seeks to position it among the world's top 10 central banks'

The Asset Management Review: United Arab Emirates

Nabil A Issa, James R Stull, Macky O’Sullivan and Sayf Shuqair

King & Spalding LLP

14 September 2022

Print article

Overview of recent activity

The United Arab Emirates (UAE) is arguably the centre of the private equity and asset management industries in the
Middle East. With a recent focus on economic and legal reforms, a low-tax regime and a high quality of life,
numerous international firms have set up their regional hubs in the UAE, and many talented and educated expatriate
and local professionals have put down roots here. Among other factors, the historical strength of the UAE's economy
and stable government as well as the country's expected growth led MSCI to upgrade the UAE to its emerging market
index in mid-2014 (making it and Qatar the first Middle East countries to be included in the index).

Within the UAE, Dubai has become the epicentre of financial services transactions and innovation in the asset
management sector in the Gulf Cooperation Council (GCC) and greater Middle East region, surpassing Beirut,
Bahrain, Kuwait and Riyadh. Abu Dhabi, the country's capital, is known for its more conservative and patient
investment strategy, and is home to some of the world's largest and most prominent sovereign wealth funds.

49
During the last global financial crisis, Dubai, with a focus on financial transactions, was particularly hard hit, resulting
in a near-default on its debt payments and a subsequent bailout from Abu Dhabi. Many predicted the financial crisis
would be the end of Dubai, and would result in a transformative change to Dubai's free-spending and 'casino-like'
culture. However, following certain significant restructurings and policy changes, Dubai entered a period of
sustainable growth, with significant projects in the tourism and real estate sectors. These sectors were hard hit by the
covid-19 pandemic, and 2020 was a difficult year for the Emirate; however, with swift and strong leadership, Dubai
was one of the first countries to emerge and reopen international travel, which was a boon to the economy.

Abu Dhabi weathered the last global financial crisis by implementing a patient economic vision, buoyed by high oil
prices. This approach resulted in four straight years of double-digit fiscal surpluses in the lead-up to 2015, which in
turn led to massive budgets for the government to invest in mega-projects, and to focus on important sectors of the
economy such as healthcare and education. With an economy predominantly based on oil and related hydrocarbon
revenues, the recent slump in oil prices that followed the global financial crisis drastically reduced revenues for Abu
Dhabi, which entered a stage of economic transition toward a more sustainable and diversified economy highlighted
in Abu Dhabi Vision 2030.

The slump in oil prices took a considerable bite out of the total market capitalisation, as many of the companies listed
on the stock exchanges in the UAE (NASDAQ Dubai, the Dubai Financial Market (DFM) and the Abu Dhabi Securities
Exchange (ADX)) derive substantial revenues from oil production and related-energy industries. Stock exchanges in
the UAE have recorded lower net profits.

In 2017, ADX underperformed targets by 3.3 per cent. Although the total traded volume of stocks on ADX dropped 26
per cent in 2018, the performance of First Abu Dhabi Bank (which comprises just below one-third of the index, in
value terms) was strong enough to provide an overall boost to the market. The ADX index finished 2018 10.7 per cent
higher. Dubai's stock market ended 2018 with a 25 per cent annual loss, the worst year since the last global financial
crisis a decade ago, as the real estate and tourism sectors struggled. Dubai was able to rebound in 2019 to post gains
of 9.3 per cent. Despite the announcement of a stimulus package to boost Abu Dhabi's economy in late 2018, its
market witnessed only a slight growth of 3.3 per cent in 2019. The UAE bourses have since struggled to attain
significant growth, although there has been renewed hope since the recent listing of Al Yah Satellite Communications
(Yahsat), a unit of Mubadala Investment Company on the Abu Dhabi Securities Exchange, last year. The listing is the
first major IPO on the Abu Dhabi bourse since Abu Dhabi National Oil Company Distribution listed 10 per cent of its
shares in 2017 with further IPOs expected. Mubadala is reportedly considering an IPO of Emirates Global Aluminum
PJSC while Abu Dhabi National Oil Company seeks the same for its drilling business and fertiliser joint venture.

To create additional income to cover the decrease in oil revenues, the government implemented value-added tax
(VAT) in January 2018. The International Monetary Fund hailed this decision, which it believes will strengthen the
country's fiscal position. Additionally, on 31 January 2022, the Ministry of Finance announced that a new federal
corporate tax system will be implemented in the UAE, effective from the financial year beginning 1 June 2023. The
corporate tax will have a three-tier system with rates ranging from zero to 9 per cent and will be applicable to all
businesses operating within the UAE with certain notable exemptions. Businesses registered in free zones are exempt
from the corporate tax provided they comply with all the regulatory requirements and do not conduct business with
onshore UAE. Most funds and investment managers are domiciled in free zones in the UAE. Accordingly, it is not
expected that the proposed taxes will have a substantial negative impact on the asset management industry in the
UAE.

On 21 January 2017, the President of the UAE, His Highness Sheikh Khalifa bin Zayed Al Nahyan, issued a law creating
the Mubadala Investment Company, a company wholly owned by the government of Abu Dhabi. The new company is
50
the merger of two of Abu Dhabi's sovereign wealth funds, the International Petroleum Investment Company (IPIC)
and Mubadala Development Company (Mubadala), and their respective assets. The law formalised the
announcement made in 29 June 2016 that IPIC and Mubadala would merge, thereby creating an entity with assets
worth an estimated US$130 billion. The merger was viewed as part of a larger government strategy to diversify the
economy and create stronger entities for its growth. While some cost-saving measures have been put in place and
attempts have been made by the government to rein in spending, there has also been investment into other regional
asset managers, with the completion of the acquisition of an aggregate 20 per cent interest by Mubadala in Bahraini
investment manager Investcorp being an example of this. The merger of IPIC and Mubadala was followed by the
announcement in March 2018 by Crown Prince Sheikh Mohammed bin Zayed of the consolidation of Abu Dhabi
Investment Council (ADIC) with Mubadala Investment Company. ADIC became part of the Mubadala group, with a
combined portfolio worth over US$200 billion. This consolidation of state-run companies in Abu Dhabi was another
step towards efforts being made by the government to accelerate the diversification of the UAE's economy. Lower oil
prices have led the UAE to tighten its spending and to consolidate its investment vehicles to generate higher returns.
The rise in mergers has continued through the covid-19 pandemic with Abu Dhabi's National Petroleum Construction
Company merging with the National Marine Dredging Company creating one of the leading integrated oil and gas and
marine services engineering, procurement and construction players in the Middle East and North Africa (MENA)
region with a footprint across the MENA region and South Asia.

Abraaj, the largest private equity firm in the Middle East with assets under management of US$13.6 billion, filed for
provisional liquidation in June 2018. This followed the resignation of its chair and founder, the finding by Deloitte that
Abraaj had commingled about US$95 million after it faced cash shortages and the recent imposition of a US$1.7
million penalty by the Dubai Financial Services Authority on Abraaj's former chief financial officer. This has impacted
the appetite of fund investors to commit, deepened investor perceptions of a lack of transparency and adversely
affected the capabilities of fund managers to raise capital. Despite the burgeoning tech economy, concerns about
governance and due diligence in the region may be blunting investors' enthusiasm for Middle East-focused funds.
Despite some uncertainty, the future of the asset management industry in the UAE, albeit being in a state of
transition, looks strong, and the UAE is generally seen as a bright spot in a turbulent region. To sustain the growth in
the financial services and asset management sectors, the UAE and the emirates of Dubai and Abu Dhabi have
recently published new financial services and funds regulations seeking to provide clarity and confidence to both
managers and investors alike and to encourage further growth of the industry. The UAE also introduced a federal
bankruptcy law in December 2016, which modernised the insolvency regime in the country to be more in line with
international norms, and which should assist asset managers and other businesses when operating in the UAE.

Like other global economies, the UAE has been impacted by the covid-19 pandemic. Efforts have been made by the
UAE government to help minimise the detrimental effect of the pandemic on the economy through the introduction
of stimulus packages. The UAE Central Bank announced a US$27 billion support plan for banks, while Dubai has
announced US$409 million in direct stimulus for the energy, trade, retail and tourism sectors. On 28 March 2020, the
Dubai Free Zones Council and several free zones across the United Arab Emirates, such as the Dubai International
Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), announced financial and other support measures
(including fee reductions, fee waivers and extended time frames for payment) to mitigate the adverse impact of the
covid-19 pandemic on registered entities operating in these free zones. In September 2020, the UAE Cabinet of
Ministers issued Law No. 26 of 2020, which amended certain provisions of the UAE Companies Law No. 2 of 2015.
The amendments include changing the long-held restrictions on foreign ownership, which prevent foreign nationals,
or companies, from owning more than 49 per cent of an onshore business operating in the UAE. The changes are
part of a series of measures introduced to make the UAE a more investment-friendly destination (by making
operating onshore a lot simpler and a lot less costly) and will hopefully help spur more investment in the country. The
clarity over the ability of foreign investors to own 100 per cent of the capital of an onshore UAE entity may stimulate
greater interest from foreign investors seeking to acquire UAE businesses.

51
General introduction to the regulatory framework

Financial services such as investment management are generally provided in the UAE from three hubs, namely
onshore in the UAE (i.e., outside of a designated free zone), the DIFC and the ADGM, each of which has its own rules
and regulations. The DIFC and the ADGM are economic free zones within the UAE that have been created to
encourage foreign investment by offering foreign businesses attractive concessions and a number of investment
incentives, including a zero per cent tax rate and the ability to own a 100 per cent subsidiary (foreign ownership
restrictions apply outside the free zones).

i Onshore UAE

From 2012 to 2014, primary responsibility for overseeing the licensing, regulation and marketing of investment
management was transferred from the Central Bank to the Emirates Securities and Commodities Authority (SCA),
with the SCA confirming the implementation in the UAE of a 'twin peaks' model of financial services regulation and
supervision. Under this model, the Central Bank remains responsible for systemic stability, prudential oversight and
monetary policy, while the SCA is responsible for conduct of business matters (including consumer protection and
financial markets oversight). Any firm (whether based inside or outside of the UAE, including free zones in the UAE)
that intends to conduct investment management activities in the UAE outside of a free zone must obtain a licence
from the SCA prior to conducting such activities. The Investment Management Regulations implemented by the SCA
define 'investment management' as the management of securities portfolios for the account of third parties, or the
management of mutual funds in accordance with the investment objectives and policies defined in the investment
management agreement between the investment manager and its client.

In July 2016, the SCA adopted new investment fund regulations (2016 Fund Regulations), which repealed the prior
investment fund regulations (which were adopted in 2012 and amended in 2013), clarified the formation process for
the establishment of locally domiciled funds and introduced significant changes to the marketing of foreign domiciled
investment funds in the UAE. The 2016 Fund Regulations impose substantial hurdles and costs for managers seeking
to promote foreign funds in the UAE, and have generally been subject to negative feedback. Managers wishing to
market foreign funds onshore in the UAE had far fewer options: they could register the fund with the SCA and enter
into a distribution arrangement with a locally licensed placement agent, engage in reverse solicitation (where the
investor inside the UAE initiates the transaction) or rely on a private placement exemption when offering to sovereign
entities. However, in January 2017, the SCA issued regulations governing promotion and marketing that reintroduced
several private placement exemptions, contemplate the potential listing of certain types of funds and explicitly allow
for foreign funds to rely on reverse solicitation when offering in the UAE. Additionally, in March 2019, a new
passporting regime was introduced to allow locally domiciled funds to be marketed across the UAE, the DIFC and the
FSRA as further discussed in Section V.

After months of speculation, the UAE government confirmed in July 2020 that the Insurance Authority and the UAE
Central Bank will merge as part of a wider simplification of the federal government's structure. In January 2021, the
UAE Central Bank announced the commencement of operational procedures implementing the merger, which is part
of a bigger initiative to transform the UAE Central Bank into one of the top 10 central banks globally. It is expected
that the yet unnamed body will be overseen by the Ministry for the Economy.

ii DIFC

The Dubai Financial Services Authority (DFSA) is the independent regulator of all financial and ancillary services
conducted through the DIFC, including investment management. The rules and regulations governing investment
management in the DIFC are set out in the Collective Investment Law 2010, the Collective Investment Rules module
of the DFSA Rulebook (CIR) and the Regulatory Law. The Regulatory Law provides that financial services may only be

52
carried on in the DIFC by a firm authorised and licensed by the DFSA. Managing a collective investment fund is
defined under the General Module of the DFSA Rulebook as being legally accountable to the unitholders in a fund for
the management of the property held for or within a fund under the fund's constitution; and establishing, managing
or otherwise operating or winding up a collective investment fund. A DFSA fund management licence is required to
manage a collective investment fund in the DIFC. Fund managers from reputable jurisdictions outside the DIFC
(external fund managers) may establish and manage DIFC-based domestic funds without having to obtain a DFSA
licence provided certain conditions are satisfied. For example, the domestic fund must be managed from a place of
business that is in a jurisdiction either included in the DFSA's Recognised Jurisdictions List (as published on the DFSA
website) or assessed by the DFSA as providing an adequate level of regulation.

iii ADGM

In October 2015, the ADGM financial services regulations (the Regulations) were enacted. Under the Regulations,
firms carrying on financial services business such as investment management in the ADGM are subject to licensing by
both the ADGM (in terms of the obligation to hold a commercial licence) and the ADGM Financial Services Regulatory
Authority (in respect of the financial services licensing). The Regulations contain two key prohibitions, namely
providing financial services without a licence or exemption, and making an authorised financial promotion. The
Regulations to some extent mimic the types of funds permitted in the DIFC, and contemplate public funds, exempt
funds and qualified investor funds. The ADGM has also sought to be a hub for real estate asset management in the
region, and has introduced a private real estate investment trust (REIT) regime that has proven to be popular.

Common asset management structures

The most common forms of asset management in the UAE are privately managed accounts and offshore structures.
Privately managed accounts have long been popular in the region as managers have targeted capital from high-net-
worth individuals, family offices and government-related investors in the UAE. For collective investment schemes,
managers have generally looked to the Cayman Islands (and to a lesser extent other offshore jurisdictions) as the
domicile of choice due to comprehensive corporate and funds laws and predictable legal regimes. Additionally, locally
domiciled funds in the DIFC and ADGM have become increasingly utilised in the past couple of years.

Large local banks, such as First Abu Dhabi Bank (created upon the merger of National Bank of Abu Dhabi and First
Gulf Bank in April 2017) and Emirates NBD Bank, have established public mutual funds onshore under the Central
Bank and SCA regulations. However, to manage an onshore fund, a manager requires an SCA fund management
licence, which the SCA only recently began issuing. Similar to other funds jurisdictions in the region, onshore funds
are not legal entities, but rather are contractual entities formed upon execution by the manager and the investors of
the fund's terms.

The DIFC and DFSA have actively promoted the funds industry in the DIFC, with the DIFC publishing its 2024 growth
strategy, which outlines fund management as its long-term strategic focus area. However, the DIFC funds industry has
yet to flourish, and only approximately 103 funds have been established in this jurisdiction. The DIFC has the
qualified investor fund (QIF) regime, which can be established in an expedited time frame and is subject to
significantly less oversight than other UAE-based fund structures. A QIF structure is designed to be offered only
through private placement to experienced investors, with a minimum investment of US$500,000 per investor. To
manage a QIF or any other DIFC-domiciled fund, an entity must be licensed by the DFSA or licensed in a recognised
foreign jurisdiction. As further encouragement to consider establishing in the DIFC, the DFSA has a fast-track licensing
process with reduced fees and share capital for those entities that are seeking to establish in the DIFC for the
purpose of launching a fund.

53
The DIFC has also adopted a prescribed company structure (formerly special purpose companies and intermediate
special purpose vehicles were used) through which many managers effect their private equity, real estate and
alternative investments. Managers have looked to the prescribed company structure owing to the short time frame
to establish a prescribed company (i.e., one week versus potentially months to establish in other local jurisdictions),
low incorporation fee (US$100) and annual renewal fee (US$1,000), as well as the DIFC's legal regime (which is based
on English law) and the general recognition and treatment of DIFC companies as onshore companies for tax and
regulatory purposes in the GCC. The ADGM has a comparable entity, the special purpose vehicle (SPV). The SPV has
garnered substantial interest from managers and investors (and more recently start-ups and venture capital firms)
since its introduction.

Main sources of investment

The UAE is home to several prominent sovereign wealth funds, including the second-largest in the world in terms of
assets under management (Abu Dhabi Investment Authority, with an estimated US$829 billion under management as
of March 2022). These sovereign wealth funds are funded through revenues of the government, which are primarily
generated through the sale of oil and other related hydrocarbons, and income from their existing portfolios.

The UAE is also home to the DIFC, which is arguably the most popular and successful financial centre in the Middle
East. In March 2019, the governor of the DIFC announced that the size of the wealth and asset management sector in
the DIFC is worth US$424 billion and is expected to grow significantly over the coming years.

Local banks dominate the mutual funds industry in the UAE. These mutual funds generally target retail investors in
the UAE and invest into listed equities, primarily in the UAE and the greater GCC region, but also into rated debt and
other fixed income products. Many regional and international asset managers in the UAE (e.g., Fajr Capital, Franklin
Templeton, Jadwa Investment and NBK Capital) have based their operations in the DIFC. These private equity
managers tend to target institutional investors and family office investors.

The ADGM is growing as a fund domicile, and currently approximately 81 funds have been established in the free
zone. Abu Dhabi government investors are increasingly investing in funds established in the ADGM, thereby playing
an integral role in the growth and development of the asset management ecosystem in the ADGM. For example,
following Abu Dhabi Investment Offices' investment in 2020 in Bedaya Fund I LP (an ADGM-domiciled venture capital
fund operated by Shorooq Partners to help develop the startup ecosystem in Abu Dhabi), this year, ADQ's Disrupt AD
invested in the recently launched Bedaya Fund II to back early-stage startups operating in fintech, software, platform
verticals and digital assets in the MENAP region. Abu Dhabi Developmental Holding Company also recently invested
in Alpha Wave Incubation Fund LP, an ADGM domiciled fund that will invest in Asian tech companies and set up
regional headquarters for these companies in Abu Dhabi.

Key trends

In a move widely understood to be aimed at establishing Dubai as a global hub for virtual assets, on 28 February
2022, the Ruler of Dubai issued Law No. 4 of 2022 on the Regulation of Virtual Assets in the Emirate of Dubai (Virtual
Asset Law). The Virtual Assets Law applies to the provision of virtual asset-related services in Dubai (excluding the
DIFC) and established the Dubai Virtual Assets Regulatory Authority (VARA). VARA is responsible for licensing and
supervising virtual asset-related services, including virtual asset platform operation and management services and
offering and trading in virtual tokens. The implementation regulations are due to be released in due course, and the
Virtual Asset Law has been welcomed as a step in the right direction in establishing a framework that defines
standards for virtual asset services in Dubai.

54
On 1 April 2020, the DFSA introduced a new listing regime for small and medium-sized enterprises (SMEs), allowing
SMEs based in any jurisdiction to raise funds through capital markets by issuing shares, listing such shares on the
DFSA's Official List of Securities and admitting them for trading on NASDAQ Dubai. The new listing regime is aimed at
boosting the SME sector in the UAE by allowing SMEs to raise equity funding at a lower cost and within a less
stringent regulatory framework. The regime is not only beneficial to SMEs that want to raise growth capital but also
provides an additional viable exit option for potential private equity, and venture capital, investors that look to
initially help grow, and eventually exit from, an SME. A company seeking to admit its shares on the DFSA Official List
of Securities will qualify as an SME if the aggregate market value of the shares it is applying to list is reasonably
expected to be less than US$250 million. A 24-month prohibition is imposed on repurchases of shares by listed SMEs
to ensure that the capital raised through the IPO is used by the SME to support the SME's growth. Additionally, an
SME is only required to provide at least one year of published or filed audited accounts prepared in accordance with
the national audit and accounting standards of the SME's jurisdiction of incorporation, provided that those standards
are acceptable to the DFSA. Instead of requiring a sponsor, the DFSA will usually require an SME to appoint a
compliance adviser as a condition for admission to the DFSA's Official List and its ongoing listing. The new DFSA SME
listing regime is aimed at enhancing the performance of the SME sector in the UAE by making it easier for SMEs to
obtain equity financing in a prompt and cost-effective manner and is a step in the right direction for a growing
economy.

The announcement last year of the proposed delisting of Emaar Malls less than a decade after the shares were listed
is the latest announcement in what appears to be a developing trend of large corporates withdrawing from certain
equity markets in the region. It follows the delisting of DP World, the global ports operator, from Nasdaq Dubai in an
US$11 billion move by state-backed Port & Free Zone World in 2020. News of DP World's pull-out was preceded by
ENBD REIT's announcement, in late 2019, of its intent to delist from Nasdaq Dubai. In 2018, Union Cement Company,
a leading UAE cement producer based in Ras Al Khaimah, delisted from the Abu Dhabi Securities Exchange. Some of
the driving factors behind this trend include: (1) sluggish markets and a lack of liquidity owing to reduced
international investment in the region, principally because of concerns over oil prices and geopolitical risks; (2) weak
stock prices mean boards of listed companies are coming under increased pressure to find ways to strengthen stock
prices and counteract external market influences; (3) inflexibility of permitted debt levels in a listed company as
shareholders pay close attention to the debt-to-equity ratio;2 and (4) strategic conflicts with companies such as DP
World, which has suggested that the status of being listed is becoming increasingly incompatible with effective, long-
term management strategies. DP World stated that a long-term focus on growth requires the pursuit of different
priorities from those that apply to a short-term focus on share price.

In July 2019, the UAE Cabinet approved 122 qualifying activities across 13 sectors eligible for up to 100 per cent
foreign ownership in the UAE. The list of sectors includes renewable energy, space, agriculture, the manufacturing
industry, information and communications, transport and logistics, healthcare, education, construction and
hospitality. To benefit from this scheme, applicants will need to make an application to the Foreign Direct Investment
(FDI) Authority and satisfy certain obligations including providing evidence of the deposit of the company's capital in
a bank account, appointment of one or more licensed auditors for a renewable period of one year (up to six
consecutive years), implementation of Emiratisation policies in the company and ongoing collaboration with the
foreign direct investment (by notably maintaining regular accounts for the FDI project, notifying the date of
commencement of work or production date, providing information and statistics). The decision aims to support the
growth environment and to reaffirm the UAE's position on the global arena as a hub for investment.

On 11 March 2019, the SCA, the Financial Services Regulatory Authority of the ADGM (FSRA) and the DFSA
announced that a new fund passporting regime will be implemented to facilitate the promotion of funds domiciled in
each of onshore UAE, the ADGM and the DIFC. Under the new regime (which only applies to locally domiciled funds

55
and not to the marketing of foreign funds), a fund manager of a DIFC-domiciled fund, for example, can register with
the DFSA under the passporting regime and the DFSA will notify the other regulators (i.e., the FSRA or SCA) who will
then include the fund on their own respective register of funds allowing the fund to be marketed to investors in the
ADGM and onshore in the UAE. The implementation of the passporting regime is seen as an important step to
encourage the development of the mutual funds' market so as to achieve the goal of having more diversified
investment opportunities and products.

The country's sovereign wealth funds have long invested internationally into diversified portfolios. Because of less
exposure in the region, which has seen a downturn owing to the slide in oil prices, and more investment in stronger
international markets, the value of these funds' portfolios has not dramatically dwindled. However, it can be
expected that the future budgets for UAE sovereign wealth funds will be significantly lower if the country is facing a
budget deficit.

The primary asset classes for investment by local managers have been regional listed equities and real estate. With
the local stock markets hit by the slump in oil revenues, managers have fallen back onto real estate more than ever.
However, as opposed to the 2008 downturn, recently managers have looked to other alternative classes such as debt,
venture capital and private equity. While real estate remains the dominant asset class, the past two years have seen a
rise of credit funds (across the sector, including mezzanine, distressed and real estate financing funds) as well as
blind-pool venture capital and private equity funds.

In an effort to attract new fund managers and provide a cost-effective option to establish and maintain fund
management companies in the DIFC, the DIFC Authority recently introduced significantly reduced fees. Fund
managers looking to establish a presence in the DIFC will find that there is now no application fee payable (previously
US$8,000), and there is a two-year waiver of the annual commercial licence fee of US$12,000. The DIFC has also
introduced incentives for venture capital funds and managers, including flexible office space options. Additionally,
there has been a reduction in the regulatory capital requirement, from US$500,000 to US$70,000 for QIFs and
exempt funds, and US$140,000 for public funds. It is expected that many managers will take advantage of the lower
fees and the streamlined QIF regime (a more flexible structure that is as quick to establish as vehicles in more
traditional offshore funds jurisdictions). Managers setting up investment funds in the DIFC have generally been
focused on private equity and real estate assets.

There has been a surge in interest in the fintech sector in the UAE in the past couple of years, with both the DIFC and
the ADGM recently launching fintech accelerators. The 'FinTech Hive in the DIFC' was launched as a platform to help
identify leading technology entrepreneurs and companies through a competitive process, and then offer them the
opportunity to develop, test and modify their innovations in collaboration with top executives from the DIFC and
regional financial institutions. In the ADGM, the Regulatory Laboratory was launched, authorising fintech participants
for a period of up to two years to develop and test their propositions. The first group of participants was announced
in May 2017, with the second group commencing activities in July 2018. In June 2018, the ADGM launched its
framework to regulate spot cryptoasset activities, including those undertaken by exchanges, custodians and other
intermediaries in the ADGM. The framework also includes guidance from the ADGM Financial Services Regulatory
Authority on the regulation of cryptoasset activities in the ADGM and an application form for interested applicants to
operate a cryptoasset business within the ADGM. This is aimed at instilling proper governance, oversight and
transparency over cryptoasset activities, positioning the ADGM as a destination of choice for cryptoasset players.

There is also an increasing amount of interest in special purpose acquisition companies (SPACs) in the UAE with local
companies seeking fast-track listings abroad.3 Abu Dhabi-based music streaming firm Anghami recently listed on the
Nasdaq stock exchange in New York by merging with a SPAC, making Anghami the first Arab technology company to
56
list on Nasdaq. This follows Abu Dhabi's Brooge Petroleum and Gas Investment Co (BPGIC), an oil storage and service
operation business that listed in 2019 on Nasdaq after a merger with a SPAC to establish a global presence and access
liquid markets. In June last year, Dubai-based FIM Partners, a frontier and emerging markets asset manager backed
by EFG Hermes, raised US$200 million in an IPO of a SPAC on Nasdaq and there are continued announcements of
further SPAC transactions in the UAE, with the Financial Times reporting in July 2021 that Abu Dhabi sovereign wealth
fund Mubadala Investment Company is close to launching two SPACs with a focus on technology and healthcare.

On 9 May 2021, the SCA enacted its new consolidated 'Rulebook', which came into force on 17 May 2021 and made a
major change to the regulation of the promotion of 'financial products' in onshore in the UAE. Arguably the most
notable change to the financial promotions regime introduced by the Rulebook is the introduction of a new, wider
exemption for promotions made to 'professional investors'. The new exemption is available to promotions made to
all types of professional investors. Importantly, professional investors now includes individuals with a net worth of
more than 4 million dirhams, or those with sufficient experience and understanding of the relevant investments.
Previously, the SCA regulations on promotions treated sophisticated individual professional clients as retail clients.
The new exemption permits financial institutions to promote financial products to a much larger segment of UAE
investors in light of the extension of the same to include individuals. On 1 June 2021, changes to the UAE Companies
law removing restrictions on foreign ownership of onshore companies in the UAE came into effect. The previous
restrictions required 51 per cent of the share capital of all UAE onshore companies to be owned by UAE nationals.
This requirement has been removed, and the amendment proposes that all business activities in the UAE are open
for 100 per cent foreign ownership except for a negative list of activities that would be determined by the relevant
UAE authority. Following recent actions from the relevant authorities in the UAE, it appears that the UAE has taken a
slightly different approach for now. The new approach is to permit each Emirate in the UAE to determine the
business activities that it would allow for 100 per cent foreign ownership within its territory. As of 1 June 2021, the
Emirates of Dubai and Abu Dhabi have published their respective permitted activities list. Each list contains over
1,000 activities that have no ownership restrictions. The approach in both Dubai and Abu Dhabi is for 100 per cent
foreign ownership to be permitted only if a company's licensed activities are on their list. There does appear to be a
broad alignment between the two lists, although the fact that each Emirate has the discretion to determine which
business activities are permitted activities has resulted in certain key activities being open for foreign ownership only
in some Emirates. For example, Abu Dhabi has included broader healthcare activities in its list of permitted activities,
such as owning and operating general, ophthalmology, paediatric and gynaecology hospitals. These activities have
not been specifically included on the permitted activities list for Dubai. Dubai has included more general healthcare-
related activities that would require further discussion with the relevant authorities. Moreover, Abu Dhabi has
included 'onshore and offshore oil and gas fields and facilities services' to its list of permitted activities whereas
Dubai has not. It is hoped that the clarity over the ability to own 100 per cent of the capital of an onshore entity will
stimulate greater interest from foreign investors seeking to acquire UAE businesses and help boost the UAE economy.

Sectoral regulation

i Insurance

The UAE government confirmed in January 2021 that operational procedures had commenced to effect the merger
of the Insurance Authority and the UAE Central Bank as part of a wider simplification of the federal government's
structure. The merger is part of sweeping changes announced by the Ruler of Dubai, which will see the closure of 50
per cent of government service centres and their transformation into digital platforms within two years, and the
mergers of around 50 per cent of federal authorities with other authorities or ministries. The merged entity will be
chaired by the Minister of Economy.

ii Pensions

57
In general, pensions in the UAE are regulated by the General Authority for Pensions and Social Security (GAPSS). The
primary objectives of GAPSS have been to expand insurance coverage for UAE nationals and expatriate residents in
the UAE, and the rapid disbursement of insurance, pension and other compensation to its beneficiaries. It is expected
that GAPSS may play a larger role in the future, as the UAE has contemplated pension schemes for expatriates
resident in the UAE, in addition to the existing pensions for UAE nationals.

The Abu Dhabi Retirement Pensions and Benefits Fund (ADRPBF) manages contributions, pensions and employee
benefits for UAE nationals working for government, semi-government and private employers in Abu Dhabi. The
ADRPBF is an active investor in private equity funds and has a large diversified portfolio of investments.

The UAE Ministry of Labour requires employers to pay employees 'end-of-service gratuity' pay upon termination of
their employment. This payment is calculated based on the term of an employee's employment with a company,
provided that the maximum gratuity payable is two years' wages. As an alternative, employers can establish pension
schemes that employees can opt into in lieu of the 'end-of-service gratuity' system. However, such pension schemes
are not common.

iii Real property

Historically, real estate has been the asset of choice for investors in the UAE, despite the precipitous drop in value
during the financial crisis. The years 2013 and 2014 saw a dramatic surge in prices, but the government has taken
steps to regulate the market through limited loans and mortgages, imposing transfer fees on sales and limiting
certain investment structures.

Real estate companies and funds in the UAE continue to seek public listings allowing these companies to raise funds
while enabling investors to gain direct exposure to prime real estate assets. Following the high-profile listing on the
DFM of Dubai Parks and Resorts (a Meraas Holding group company) in 2014, raising approximately US$680 million,
and DAMAC Properties' trading of global depository notes on the London Stock Exchange and the IPO of ENBD REIT
for US$105 million in early 2017, the real estate capital markets have largely dried up.

In the DIFC, the CIR sets out rules and regulations specific to real estate funds, including restrictions on the types of
assets a real estate fund can invest into (e.g., a real estate fund may in certain circumstances only invest up to a
maximum of 40 per cent of cash in government and public securities), the type of legal structure that can be used to
establish a property fund in the DIFC and requirements in relation to the establishment of an advisory committee for
real estate funds.

In late 2018, the DFSA introduced open-ended real estate funds. The first open-ended real estate fund was
established in the DIFC in March 2020.

iv Hedge funds

Hedge funds in the DIFC are regulated by the CIR, similar to other investment funds. The DFSA has implemented the
Hedge Fund Code of Practice, which sets out the principal risks associated with hedge funds and similar structures
and sets out best practice standards. Hedge fund managers are permitted a degree of flexibility to adapt the
standards to suit their particular businesses in light of market conditions and emerging issues. These standards, inter
alia, address back-office systems, valuation procedures, and the skills and resources of managers.

58
v Private equity

In terms of deals, Preqin data shows there were 12 Middle East private equity buyout deals done in 2019, which was
five fewer than in 2018, but the aggregate value rose to US$1.5 billion, compared to US$600 million in 2018. This was
largely due to CVC Capital Partners, a private equity firm leading a consortium in July 2019, acquiring a 30 per cent
stake from existing shareholders in Dubai-based GEMS Education, which is the world's largest provider of private K-12
education by revenue. According to Preqin, there were 17 private equity-backed buyout deals in the MENA region in
2018, which was the same number as in 2017, but considerably lower than completion numbers in 2016, 2015 and
2014, when 32, 31 and 46 deals were completed respectively. Fundraising as a whole for the MENA private equity
industry has slowed down, with the decline of Abraaj believed to be a crucial factor that has made fundraising
difficult with investors having concerns about governance and due diligence in the region.

In the DIFC, the CIR sets out rules specific to private equity funds. For example, a fund manager of a private equity
fund must ensure that, unless the purpose of the private equity fund is to invest in a single venture or undertaking, it
does not invest more than 25 per cent of the fund in one such venture or undertaking. Additionally, the CIR sets out
guidelines that must be followed by the fund manager of a private equity fund prior to entering into related-party
transactions (e.g., prior investor approval by special resolution).

vi Other sectors

Sovereign wealth funds

The UAE is home to some of the most prominent sovereign wealth funds: the Abu Dhabi Investment Authority
(ADIA), the Abu Dhabi Investment Council (ADIC), Mubadala Investment Company (Mubadala), the Emirates
Investment Authority (EIA) and the Investment Corporation of Dubai (ICD). ADIA, ADIC and Mubadala are all resident
in Abu Dhabi, and focus on investments for the benefit primarily of Abu Dhabi but also for the UAE as a whole. EIA is
also based in Abu Dhabi, but is a sovereign wealth fund established for the benefit of the seven emirates of the UAE.
ICD was established in 2006 to hold the assets of the government of Dubai.

ADIA currently has an estimated US$702 billion in assets under management, which it commits to private equity,
venture capital, real estate, debt and other alternatives. ADIA invests the surplus oil revenues generated in Abu Dhabi
and focuses on international investments (with a focus on North America, Europe and emerging markets). ADIA tends
to be a passive investor relying on the managers of the funds and companies in which it invests.

Formed in 2007, ADIC is a spinoff of ADIA and, similar to ADIA, it invests surplus oil revenues. Whereas ADIA primarily
makes international investments, ADIC maintains a stronger focus on UAE and Middle East investments. ADIC is
agnostic as to asset class, and will make both direct and fund investments. It is estimated that ADIC has
approximately US$123 billion in assets under management. ADIC is currently being consolidated with Mubadala
Investment Company.

Mubadala is a sovereign wealth fund established with the purpose of diversifying the Abu Dhabi economy and
providing social benefits to the UAE. It has focused on infrastructure, transportation and energy, including renewable
energy. One of its most prominent investments is Masdar City, located outside Abu Dhabi, which is designed to be a
hub for clean-tech energy companies and is committed to zero carbon. Mubadala recently merged with IPIC, which
held the UAE's overseas oil assets, in an effort to realise synergies and promote growth in the energy, utilities,
technology and aerospace sectors. It is estimated that the merged entity will have over US$200 billion in assets under
management.
59
EIA was established in 2007 by royal decree to represent the seven emirates of the UAE. EIA invests in many
companies that operate across the UAE, such as telecommunications companies and local banks. EIA currently has an
estimated US$34 billion in assets under management.

ICD is a sovereign wealth fund owned by the government of Dubai. ICD's purpose is generally to supervise and
manage the assets of the government while adding value to the portfolio. ICD owns assets in the energy,
transportation, banking, industrial, real estate and other sectors, including stakes in some of Dubai's most prominent
companies, such as Emaar Properties, Emirates NBD Bank and Emirates Airlines. It is estimated that ICD has
approximately US$196 billion in assets under management.

Family offices

Family groups are significant players in the asset management industry in the UAE, both on the manager and investor
side, and are widely expected to be a very active investor group over the next year. While these family offices invest
globally, many have a vested interest in investing in their home economies and the regional markets. There has been
a trend of the larger UAE family offices moving away from blind-pool funds and focusing more on trying to take direct
stakes in their investments.

Tax law

Historically, the UAE has been a zero-tax jurisdiction. However, in October 2016, the UAE federal law establishing the
UAE Federal Tax Authority (FTA) was issued. The FTA has been tasked with overseeing taxation in the UAE and, in
particular, the implementation of the newly introduced VAT, which was implemented in January 2018. The FTA will be
responsible for formulating UAE federal tax rules and regulations, including VAT, and will oversee the UAE's
application of international tax obligations pursuant to tax treaties, tax information exchange treaties and global tax
information exchange programmes. In addition, the FTA will be responsible for implementing all aspects of tax law
including assessments, evaluations of returns, audits and the resolution of disputes. In January 2022, the Ministry of
Finance announced the introduction of corporate tax (effective 1 June 2023) on the net profits of businesses. The
businesses the corporate tax will apply to include, inter alia, all businesses and individuals conducting business
activities under a commercial licence in the UAE; banking operations; and businesses engaged in real estate
management, construction, development, agency and brokerage activities. Free zone businesses that comply with all
regulatory requirements and that do not conduct business set up in the UAE's mainland will not be subject to the
corporate tax.

Notwithstanding the introduction of VAT and corporate tax, the following taxes are not currently applicable in the
UAE: withholding tax, personal income tax and capital gains tax. Oil, gas and petrochemical companies and branch
offices of foreign banks are, however, required to pay taxes.

Entities established in the DIFC and the ADGM and their employees are subject to a zero rate of tax (income tax,
corporate tax, withholding, capital gains, etc.). It is not expected that the new proposed taxes will be assessed on
free-zone entities. Therefore, it is hoped that the tax regulations will have a negligible effect on the asset
management industry in the UAE.

Outlook

60
Throughout the financial downturn and the subsequent slide in oil prices, the UAE has shown its resilience. It has
proved that its economy operates outside of the oil and energy sectors, and that it has the infrastructure to maintain
and grow its asset management industry. Regional and international managers see the UAE as the logical regional
centre for the asset management industry, with Dubai serving as the hub. The DIFC is seeking to capitalise on this
success by introducing simpler funds regulations to encourage more growth of the industry. In Abu Dhabi, the
authorities have sought to emulate this success and make the ADGM a competitor to the DIFC as a regional funds
jurisdiction. Support by government investors in Abu Dhabi have helped support the ADGM and has been an
encouragement for local and international managers to set up shop there. The UAE's economy, like all other global
economies, has been impacted by the covid-19 outbreak. The UAE authorities have taken several measures to help
various business sectors to combat the impact of the pandemic on the economy. It is hoped that these measures will
help ensure business continuity as the economy gradually reopens, accelerate recovery and ultimately help achieve
sustainable economic growth in the UAE.

Types of funds in the UAE

The following article provides a useful guide to the various types of funds within the UAE.

I. FREE ZONE FUNDS

Foreign investors interested in creating an investment fund in the UAE can choose between two free zones the Dubai
International Financial Centre (the “DIFC”) located in the Emirate of Dubai and regulated by the Dubai Financial
Services Authority (the “DFSA”), or the Abu Dhabi Global Market (the “ADGM”) located in the Emirate of Abu Dhabi
and regulated by the Financial Services Regulatory Authority (the “FSRA”).

A. Dubai International Financial Market ("DIFC")

Dubai has established itself on the global investment funds industry through the DIFC which is Dubai’s most
developed zone to set up investment funds.

The Collective Investment Fund Regime as introduced by the DFSA is the main regulation providing for the creation of
a fund in the DIFC (the “Regulation”). The Regulation provides for a business-friendly regulatory framework and is
compliant with the International Organisation of Securities Commission’s (the “IOSCO”) principles governing
collective investments. Therefore, the Regulation meets the international standards in respect of the investors’
protection.

Types of funds in the DIFC

61
The DFSA provides for two types of funds, the domestic funds and the foreign funds.

1. THE DOMESTIC FUNDS are the investment funds established or domiciled in the DIFC. The domestic funds are
divided into three categories: (a) the public funds, (b) the exempt funds and (c) the qualified investor funds. These
three categories of funds can in turn, be subdivided into a series of specialist funds as highlighted below.

a) Public funds (“PF”) are subject to a detailed regulation in line with IOSCO standards. PF shall either have/intend to
have more than 100 unitholders who can be retail clients, or offer all or some of their units to investors through a
public offer. Investors in PF benefit from a high level of protection as a result of a series of requirements including a
detailed disclosure in a prospectus.

b) Exempt funds (“EF”) are subject to lesser regulatory requirements than the PF. Only professional clients are eligible
to invest in EF’s units. EF shall offer their units only through a private placement and shall have 100 or fewer unit
holders. The minimum subscription in respect of EF shall be equivalent to USD 50,000. The fund manager of an EF is
not required to entrust the EF’s property to an eligible custodian. Instead, the fund manager shall appoint an
investment committee to the EF. The fund manager shall further make a series of disclosures in its prospectus
relating to how the EF’s assets are held. EF further benefit from a fast-track notification process: the DFSA aims to
complete the process within a period of five business days as from the receipt of the requested
application/documents.

c) Qualified Investors Funds (“QIF”) are subject to a regime which provides for a regulation significantly less stringent
than the regime applicable to EF and which allows flexibility for QIF’s managers. Indeed, the regulation applicable to
QIF requires self-certification regarding the adequacy of systems and controls. As with EF, only professional clients
are eligible to invest in QIF’s units. QIF shall offer their units only through a private placement and shall have 50 or
fewer unit holders. The minimum subscription in respect of EF shall be equivalent to USD 500,000. QIF benefit from a
fast-track notification process as the DFSA aims to complete the process within a period of two business days as from
the receipt of the requested application/documents.

d) Specialist funds include:

Islamic funds (“IF”) whose manager needs to have either a license authorising it to conduct Islamic financial business,
or an Islamic window, prior to setting up an Islamic fund. The IF shall have a Shari’a supervisory board and Shari’a
compliant systems and controls, financial business policy and a procedures manual. The IF’s constitution and
prospectus shall be approved by the fund’s or firm’s Shari’a supervisory board.

Property funds (“PF”) which mainly invest in real estate properties/real estate related assets. PF may retain up to 40%
of their investments in cash or in specified securities. PF are close-end funds and shall be an investment
company/investment trust listed within six months as from their establishment either on an authorised market, or an
exchange in a recognised jurisdiction. The PF’s properties shall be valued on a yearly basis. An independent valuation
of the PF’s property shall be done prior to any acquisition or disposal of an asset. The PF’s borrowings shall not
exceed 80% of the PF’s total net asset value.

Real estate investment trusts (the “REIT”) which are designed for income generation. The REIT are close-end funds
and shall only use an investment company or an investment trust as the fund vehicle. REIT shall be a public fund
listed and traded on an authorised market, distribute 80% of their audited annual net income to unitholders. REIT’s
62
borrowings shall not exceed 70% of their net asset value and their investments shall not exceed 30% of their total
property assets.

Hedge funds (the “HF”) whose risks shall be adequately managed by the fund manager. For these purposes, the fund
manager shall ensure a segregation of duties between the investment function and the fund valuation process and
observe best practice standards issued by the DFSA including the DFSA hedge fund code of practice.

Vehicles used to create a domestic fund

Three types of vehicles may be used to create a domestic fund in the DIFC. These vehicles are (i) investment
companies, (ii) investment trusts, and (iii) investment partnerships. To date, the investment companies are the most
preferred model. Investment companies shall be incorporated in the DIFC with the fund director appointed as the
corporate director in the investment company. Trust structures are employed for property funds. An investment trust
shall be authorised upon the creation of a trust deed between the fund manager and a trustee who may be a DFSA
licensed company or an authorised individual from an approved jurisdiction. Partnerships are employed for hedge
and private equity funds. An investment partnership is a limited partnership registered with the DIFC and has a
general partner and limited partners. The general partner shall be the individual authorised by the DFSA to be the
fund’s manager.

2. THE FOREIGN FUNDS which are investment funds domiciled or established outside of the DIFC. Foreign funds are
either funds located in jurisdictions outside the UAE, or funds located in the UAE but not in the DIFC. Foreign funds
which in their home jurisdiction cannot be marketed to retail investors cannot be marketed to retail investors in, or
from, The DIFC.

Funds management

Funds are managed by a fund manager (the “FM”) who is responsible for the management of the investment fund
and for providing administrative services. The FM can be either a DFSA licensed FM, or an external FM. To obtain a
DFSA license, the fund manager shall demonstrate to the DFSA that (i) it has adequate systems and controls to
manage the type of fund to be established; and (ii) the individuals performing certain functions within the FM’s
company such as the board members, the senior management and the persons in charge of key control functions
meet the relevant suitability and integrity criteria. DFSA licensed FM are able to establish and manage funds in the
DIFC and in jurisdictions outside the DIFC as well. External FM from an acceptable jurisdiction may establish and
manage a Domestic Fund without the obligation to obtain a DFSA license provided that the external FM:

a) is a corporate body;

b) manages the Domestic Fund from a jurisdiction which is either included in the DFSA’s recognised jurisdiction list,
or assessed by the DFSA as capable of providing an adequate threshold of regulation;

c) willingly subjects itself to the DIFC laws and courts in respect of its activities relating to the Domestic Fund; and

d) appoints a DFSA licensed fund administrator or trustee who will act as the local agent of the external FM to deal
with the DFSA in respect of all regulatory processes and to handle some investor-related functions (e.g. to maintain
the unitholders’ register, to make the fund’s prospectus available to investors and the like).

The FM shall comply with the requirements of DIFC and DFSA. The DFSA also regulates the key players in the fund
management service sector such as fund administrators, custody providers and trustees for the purposes of ensuring
an adequate investor protection by promoting high industry standards which meet international best practice.

63
 Marketing of funds in the DIFC

The marketing of domestic funds is subject to a series of disclosures to be set out in a prospectus. The level of the
disclosures required for public funds i.e. funds which are open to 100 or more investors and/or to retail clients is
significantly higher that the level of disclosures applicable to exempt funds which are open only to professional
investors. A copy of the prospectus shall be filed with the DFSA.

Foreign funds can only be marketed by DFSA licensed firms which hold advisory or arranging authorisations (the
“Authorised Firms”). Additional conditions shall further be met in order for Authorised Firms to advertise foreign
funds’ units. These conditions are as follows:

a) the foreign fund shall be a designated, regulated fund in a jurisdiction included in the DFSA’s recognised
jurisdictions;

b) the Authorised Firm shall have a reasonable basis to recommend the investment in the foreign fund’s units; or

c) the foreign fund shall be open to 100 or fewer investors who meet a professional client test and whose minimum
subscription is USD 50,000 and is not offered to investors by way of a public offering.

Foreign funds which cannot be marketed to retail investors in the foreign fund’s home jurisdiction cannot be
marketed to retail investors in the DIFC.

Documents required for an investment fund in the DIFC

A series of documents are required to set up a domestic fund vehicle including a private placement memorandum
(“PPM”), a subscription agreement for investors and an investment management agreement. The PPM is the key
document and sets out among other things, the terms of the offering, the investment’s objectives, strategies and
methodologies, the structure of the investment, the profile of the fund manager and the service provider and
statutory and commercial disclosures, the risk factors, the calculation methods and the like.

B. Abu Dhabi - Abi Dhabi Global Market (“ADGM”)

The ADGM is an award-winning international financial centre, strategically located in the capital of the UAE. ADGM’s
jurisdiction extends across Al Maryah Island and offers various options for funds setup.

The rules and regulations applicable to the setup of a fund are set out in the Financial Services Regulatory Authority
legislation (the “FSRA”), which is considerably similar to the rules set out in the DIFC Regulation, save for some
differences outlined below.

Types of funds in the ADGM

The ADGM has adopted the same classification of funds as the DIFC. As such, the ADGM differentiates between:

- Domestic Funds, which include Public Funds, Exempt Funds and QIFs. These three types of Domestic Funds can
include various specialist funds, including but not limited to the specialist funds outlined in Section 1 (d) above,
umbrella funds where a single fund may have more than one sub-fund where each has its own investment objective
and policy, feeder funds where all investments are made into one other fund – the master fund; and

- Foreign Funds, i.e., funds domiciled outside the ADGM which wish to market/sell units in/from the ADGM.

64
 Fund vehicles

In addition to investment companies, investment partnerships, and investment trusts, Domestic Funds may be
structured in the ADGM using Protected cell Companies (“PCC”) and Incorporated Cell Companies (“ICC”). PCCs and
ICCs allow fund managers to legally segregate the assets and liabilities of each cell whilst operating under common
management.

Fund management

The provisions applied by the ADGM in relation to the licensing of Fund Managers, whether local or foreign,
correspond, to a large extent, to the provisions/requirements applicable within the DIFC.

Marketing of funds

The rules applicable to the marketing of domestic and foreign funds in the ADGM are consistent with those
applicable in the DIFC.

Similarly to the DIFC and with a view to advertising foreign funds’ units in the ADGM, an authorised fund manager
shall comply with a series of requirements, including:

- disclosing the jurisdiction of the foreign fund and the name of its regulator;

- describing the regulatory status of the foreign fund by its home regulator;

- include a series of warnings in the prospectus; and

- disclosing the investment policy and strategy as well as the associated risks.

II. ON SHORE FUNDS

Since the 28th February, the on shore funds, historically regulated by the UAE Central Bank (the “Central Bank”), are
licensed by the Securities and Commodities Authority (the “SCA”/“ESCA”), a financially and administratively
independent UAE entity whose main purposes are to supervise and monitor the UAE financial markets, including the
Dubai financial market (the “DFM”), the Abu Dhabi securities exchange (the “ADX”) and the Dubai gold and
commodities exchange (the “DGCX”). The Central Bank continues however to have a role in the funds’ industry;
indeed, the Central Bank supervises the financial status of the investment funds established and licensed in
accordance with the provisions of the SCA regulations concerning investment funds and investment management
activity (the “Regulation”) and sends reports to the SCA. The SCA shall take the necessary measures to address any
issue provided for in the Central Bank’s report. The Central Bank and the SCA have therefore complementary roles in
controlling investment funds’ activities.

Prior to the introduction of the Regulation, the local fund management industry was limited and was mainly carried
out in house by banks and investment companies. As from the 28th February 2015, all entities whose activities relate
to investment funds and investment management activities became eligible to carry out the local fund management
activities provided that they are licensed by the SCA. Indeed, the Regulation provides that subject to the provisions
pertaining to the competence of the Central Bank, it is prohibited to establish a local investment fund or promote any
65
foreign investment fund within the UAE before obtaining an establishment license or an approval for the promoting
process from the SCA.

The Regulation applies to all issues in respect of (i) local investment funds, and (ii) the promotion of foreign funds in
the UAE. For the purposes of the Regulation, a local investment fund is an investment fund established in the UAE
and licensed by the SCA. Funds incorporated in the DIFC and the ADGM are considered as foreign funds.

The main effects of the Regulation can be summarised as follows:

• create a more regulated regime for the investment and fund management market in the UAE (the “Market”);

• widen the scope of the Market; instead of being restricted to banks and investment companies, the Regulation
opens the Market to DIFC domiciled and DFSA regulated asset fund managers; and

• provide security for clients and investors over assets; indeed, the Regulation provides that (i) the fund’s monies
guarantee the unit holders’ rights and cannot be pledged or seized to secure/in settlement of, the fund’s founding
party; (ii) the fund’s assets are the fund’s property and cannot be mortgaged, loaned or disposed of in any manners
other than those provided for in the OM; and (iii) the fund’s securities shall be kept with a “keeper of securities” i.e. a
custodian.

In light of the above, the Regulation provides for a series of tools whose purposes are to provide a security to the
fund units’ holders. The Regulation should however be further clarified in order to address a series of relevant issues
including the nature of the “separate fund” where the fund’s assets are to be segregated and the nature of/regime
applicable to, the custodian of the fund’s assets. With respect to the segregation of the fund’s assets, the conditions
of the trust/fiduciary regime are implicitly provided for in the Regulation. However, in the absence of such concepts
in the laws of the UAE, the Regulation should further clarify how the assets are to be segregated. As for the
custodian, additional details/clarification should be provided for in order to fully assess the security provided through
the custody of the fund’s assets referred to in the Regulation as “securities”.

Types of funds

The Regulation provides for two types of funds, the local funds and the foreign funds.

1. LOCAL FUNDS shall meet a series of requirements set out in the Regulation.

The requirements which apply to the company which intends to set up a fund are as follows:

a) the company shall be a joint stock company or a branch of a foreign company licensed by the competent
authorities;

b) the company’s purposes as set out in its bylaws shall be the establishment of investment funds. Banks, financial
investment companies, foreign companies’ branches licensed by the Central Bank are exempted from this
requirement;

c) the capital of the company or the branch of the foreign company shall be equivalent to AED 10 million, at least.
Banks, financial investment companies, foreign companies’ branches and any party licensed by the Central Bank are

66
exempted from this capital requirement provided that they provide an unconditional bank guarantee amounting to
AED 10 million to the benefit of the SCA;

d) the company shall invest in each investment fund it sets up at least 3% of the fund’s capital. The company’s
investment with its affiliated companies shall not exceed 49% of the capital of the fund the company sets up to the
extent that the fund is not a close-end fund and does not allow public placements or the trading of its units; and

e) the company shall be enough solvent to practice its activities in accordance with the SCA’s standards.

SCA license

A company which complies with the above requirements shall apply for an SCA license. For these purposes, the
company shall provide a series of documents and information among which the fund’s offering memorandum to be
prepared in accordance with the SCA’s model (the “OM”). The OM shall include, among other things, the fund’s name
and capital, the fund’s investment policy and applicable method to evaluate the fund’s assets and units, the
conditions governing the subscription to the fund’s units and the units’ redemption, the fund’s policy for the profits
distribution, the names of the fund’s board members, the director of the investments, the auditors and other similar
information with the fee calculation scale of each of these parties’ fees. If the considered fund is an Islamic fund, the
OM shall clearly indicate that the fund complies with the Shari’a and list the names of the fund’s Shari’a board. The
OM shall further determine the specifications of the fund’s available investment instruments, their related risks, their
anticipated returns as well as their expected impact on the achievement of the fund’s objectives, the limitations
applicable to the fund’s investments, the limitations of the fund’s borrowings or lending, the mechanism governing
the amendment of the fund’s policy (if applicable), the obligation to prepare financial reports in accordance with the
Regulation, and the like. The OM shall also provide for the disclosures necessary to make available to the investors all
kind of information allowing them to properly assess their investment in the fund’s units.

Upon the issuing of the SCA’s license granting the fund a license to carry out its activities, the fund shall issue nominal
units with an equal nominal value which ranges between AED 1 and AED 500,000 (or their equivalent in other
currencies). The fund’s units shall grant their holders equal rights to participate to the profits and losses linked to the
fund’s activity pro rata the number of units they hold.

Investments - service providers

A local investment fund which invests in securities shall, unless otherwise approved by the SCA, comply with a series
of ratios provided by the Regulation in order to limit the risks associated with the fund’s investments. This investment
policy aims to optimise the unit holders’ security in the event that an investment fails to achieve the anticipated
returns.

Investment funds’ service providers shall comply with a series of requirements set out in the Regulation, the OM, the
applicable laws and any instructions given to them by the SCA. They shall provide the SCA with all data/documents
the SCA may request and disclose any violations with the suggested remedy to address them.

Termination of the fund

The fund is terminated at the term of its duration as set out in the OM if it is not renewed, or if at the time the fund’s
purposes are achieved. The fund is further terminated in the event of the occurrence of events which prevent it to
exercise its activities, or if the unit holders of a close-end fund decide to liquidate the fund in accordance with the

67
terms and conditions as set out in the OM. The commercial companies’ law provisions governing the liquidation of
joint stock companies apply to the funds’ liquidation unless otherwise provided for in the OM.

2. FOREIGN FUNDS

Foreign investments funds may be promoted in the UAE through a bank licensed by the Central Bank, an investment
company licensed by a local promoter i.e. the Central Bank or a company licensed for this purpose by the SCA,
provided that the foreign investment funds first obtain the SCA’s approval. The Regulation sets out the requirements
for promoting foreign funds’ units in the UAE. The foreign fund shall be registered with the SCA prior to any
marketing to UAE based investors. The SCA’s approval is subject to the foreign fund being (i) established in a foreign
state and subject to the supervision of an authority which is similar to the SCA; and (ii) licensed in its home
jurisdiction for promoting units for a public offering.

The Regulation provides for exceptions where foreign investment funds are exempted from the registration with the
SCA:

a) If the foreign fund is to be marketed exclusively to federal or local government agencies or to their wholly owned
subsidiaries;

b) If the investor initiates the transaction (reverse solicitation) and there is no promotion in the UAE by the fund
manager or any of its agents. An evidence would be required to prove that the investor approached the fund
manager without any promotional activity conducted by the fund manager in the UAE.

The Regulation sets out the obligations of a foreign fund’s local promoter, the promotion methods and the investors
for whom the promotion may be made.

Conclusion: A clear intention to further develop the UAE funds market

On the 11th March 2019, the SCA, the DFSA and the FSRA announced the introduction of rules, based on common
regulatory framework, to facilitate the marketing and sale of units in domestic UAE funds across the UAE (the
“Passporting Arrangement”). The Passporting Arrangement does not apply to the promotion of foreign funds’ units in
the UAE. The Passporting Arrangement allows the UAE licensed firms to promote units in the relevant UAE fund to
certain investors in one or both of the other jurisdictions in the UAE. The Passporting Arrangement should stimulate
the development of the domestic UAE funds market and witnesses the intention of the local authorities to further
develop the financial markets and play a leader role in the funds’ industry.

68