MENA Asset Management Survey 2012 - National Bank of Abu Dhabi

Regulatory Trends
Q/ Article 4, clause 4 states each company must invest in each local fund it
establishes at least 3% of the fund’s capital. Is this required to be maintained after
launch or only applicable at initial launch ? Is this a practice in other jurisdictions
and, if so, which ones ?
A/ For closed-ended mutual fund the percentage refers to the position at launch. For
open-ended fund, the minimum requirement shall be met on an ongoing basis.
The reason behind such requirement is to have a minimum level of alignment of interest
of fund sponsors and fund investors. For example, the minimum requirement level
disincentivise sponsors to profit from placement fees at launch phase without further
ongoing commitment or interest in the fund’s good performance.
Q/ In article 22, clause 2, what are examples of mutual funds of special nature ?
A/ Types of the special nature of some funds have been mentioned in the article (42) of
the investment fund regulation, amongst these types; the real-estate investment funds
and the exchange traded funds ETF.
Q/ Article 24 suggests governance of funds will be similar to corporate entities.
What are the mechanics and voting mechanisms ? What is the intent of this article
given unit owners may not interfere in fund management as specified in article 2 ?
A/ Regarding the mechanics for managing the fund, all the relevant items have been
mentioned in articles (25 and 26) of the investment funds’ regulation.
- Voting mechanisms in the fund board of directors: the minimum percentage and
conditions required in voting decisions will be as per the fund offering prospectus.
- Regarding the interpretation of article (24/2), which indicates non-interference of the
fund units owners in the management of the fund, it is again confirmation and assurance
of the fact that the fund board of directors is the only eligible body assigned for
management according to specific powers and authorities. The fund units owners
interference in the fund management is only limited and restricted to the powers
indicated in the article (24/1).
Q/ Do the service providers to local funds have to be onshore entities ?
A/ At the moment there is no specific regulation to answer this question, however SCA is
currently working on rules to govern fund services providers.
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