MENA Asset Management Survey 2012 - National Bank of Abu Dhabi

Regulatory Trends
Investor approach. It was also noted that this would enhance investor protection in case
of broker default.
United Arab Emirates
New investment fund regulations by the Securities and Commodities Authority
(SCA) were published in the official gazette on August 26, 2012. A grace period of
one year was provided for existing funds to meet new regulations. SCA had initially
published a draft in early 2011 and invited feedback. SCA revised the draft following
feedback from industry participants, but the crux of the initial text remained intact. Some
pertinent changes in the final version from the initial one were the following:
In article 4, clause 4, a lower percentage co-investment requirement of 3% instead of the
earlier proposal of 10% – “the company must invest in each local mutual fund it
establishes by at least (3%) of the fund’s capital”.
Article 13 sets out various thresholds that local funds should not exceed in their holdings,
but also appears to allow for exceptions subject to fund documents and SCA approval.
This is the same as in the initial proposal. In clause 3, threshold for external assets was
raised to 20% from 10% earlier – “subject to the provisions contained in clauses (1) and
(2) herein, the percentage of the fund's investments in external markets may not exceed
(20%) of the fund's total assets. In case it is desired to increase investments in external
markets beyond this percentage, an application must be submitted to SCA to obtain its
prior approval thereof. The fund that obtained such approval of SCA must submit
monthly reports about the volume and details of its external investments and the financial
position of the fund”.
In article 17, clause 1, minimum unit denomination lowered to AED 1 from AED 10 in the
earlier proposal – “The fund shall, within (15) days from the date of subscription closure,
issue to the subscribers nominal units of equal nominal value not less than (one Dirham)
and not more than (AED 500,000) five hundred thousand Dirhams or the equivalent in
other currencies”.
100