Dr. Mariam Al Suwaidi
The system targets achievement of 100% increase of the amount of the money managed by local funds and provides acceptance of the requests of any new types of non-regulated investment funds
Decrease of the requirement of the minimum limit of the capital required for establishing the investment management companies to one million only
The SCA declared - in the media briefing organized by it in the SCA's headquarter in Dubai - that it will soon launch a new system for investment funds that aims at achieving positive effects and contributing to enhancement of this industry locally, within its efforts to develop and update the legislations and rules supporting improvement of the performance of financial markets institutions in the State.
H.E. Dr. Mariam Al Suwaidi, the SCA's CEO, answered to the questions of press and media on the new system that expected to be soon launched, in the media briefing where both of Mr. Abdullah Alsarah – Head of legislations and international standards division – and Mr. Yasser Abdelqader – a financial analyst in the SCA – participated.
Proactive approach for developing the investment funds system
The SCA's CEO said, during the briefing opening speech: "The SCA exerts relentless and continuous efforts for developing and updating the legislations and systems that shall support the improvement of the performance of the financial market institutions. In this context, the SCA today proactively adopts a new approach for developing the investment funds system in accordance with the requirements of the work environments in the State".
She added: "The SCA aims - by this briefing – to inform the public of investors and interested parties inside and outside the State of the aspects and details dealt with by the new investment funds system that targets enhancing the local investment funds industry as one of the investment tools that is appropriate for investors in the securities field and one of the most important institutional investment tools that is relatively stable and that achieves balance in financial markets which the supervisory authorities are concerned with making available to reduce potential risks and price fluctuations in the financial market".
Enhancing competitiveness and attractiveness of the local investment funds
Dr. Al Suwaidi confirmed that: "The SCA develops the investment funds system for the purpose of enhancing competitiveness and attractiveness of the local investment funds and enabling the local investment funds sector to play its effective role of activation of and achieving balance and stability of financial markets in the State, along with supporting the contribution by the assets management sector to the improvement of various economic sectors in the State and achieving the sustainable development".
She continued: "Local funds are supposed to be one of the capital market's effective tools for enhancing the performance of the local markets indicators and achieving stability of securities prices by increasing the institutional investment share in the markets. The SCA is targeting – by the new investment funds system – achievement of positive effects on the assets management sector including the sector of financial services providers (funds managers, administrative services, custodian, in-kind shares assessors, auditors……) due to its importance in finding jobs, bringing experience and moving funds in the State".
Integrated Ecosystem
The new investment funds system – that will be published soon – targets developing a new perception providing an integrated ecosystem that is more appropriate and flexible and that shall focus on encouraging establishment of local investment funds and creation of attractive environment for investment management companies and the professional providers of funds services, along with making tangible leap in the industry of local investment funds".
The system is based on simplifying and facilitating the provisions and rules of the local investment funds system to be matching with the most recent and the best international practices and to provide a regulatory environment that is more appropriate and flexible and that shall encourage the local funds establishment process. This shall be done by facilitating the provisions of establishing and licensing the local private funds raised for qualified investors, avoiding setting restrictions on their investment policies, reducing the study period, issuance of the approvals for private funds within 5 work days and for public funds within 10 work days, along with decreasing the investment restrictions and the investment policies requirements of public local funds in accordance with the best international practices, and simplifying and facilitating the provisions of local real estate funds".
The system will enable adding new types of specialized funds such as (construction real estate funds – direct financing funds – funds of investment in precious ingots - ESG fund – capital protection fund – family funds – charity investment fund – commodities investment fund), along with enabling acceptance of any new types of non-regulated investment funds and studying them and issuance of decision thereon within 20 work days".
Dr. Al Suwaidi indicated that one of the most important aspects that the system is based on is the addition of some processes to organize the investment funds' work such as: the provisions of forming the fund management board, issuance of public fund of bonds and instruments, the book building mechanism rules for raising the real estate public fund units for the public, the provisions on merger of investment funds, the mechanism of the closed fund’s purchasing of its units listed in the market, the mechanism of increasing the fund's capital in sections and payment of the nominal value of the units in installments.
Overcoming obstacles and reduction of procedures
Her Excellency added that one of the main pillars for stimulating the local funds industry is the availability of strong infrastructure of local funds services providers. Therefore, the SCA paid attention to - along with developing the investment funds system – making amendments to brochure of the financial services rules that shall facilitate the procedures of licensing the companies of establishing and managing the investment funds, overcome the obstacles of establishing and licensing new investment management companies, and contribute to support the local funds industry. Thus, the requirement of the minimum limit of the capital of investment management companies was reduced from 50 million dirhams to 1 million dirhams only, along with amending the legal form requirements to include all the companies’ types instead of the form of the joint stock company that was requiring numerous procedures and a long time for being established, and reduction of the charges payable for establishing the investment funds management company.
The new system is based on cancellation of the tests for the employees accredited for the activity of managing the investment funds and reliance only on the requirement of the professional certificates, experience, efficiency and appropriateness. Moreover, the minimum limit of the number of accredited employees required to be appointed for practicing the investment management activity was reduced, along with facilitating the policy of combination of several jobs and the requirements of outsourcing the accredited jobs tasks to the specialized entities. The facilitations also included cancellation of the requirement of the detailed feasibility study as there shall be requirement of provision of a brief work plan only, along with provision of unified forms for operative guides, the investment management services provision contracts and the funds services providers, so this shall save time and costs for the founders of the investment funds management companies and shall regulate new forms of the private management companies such as (family investment offices).
Further, Al Suwaidi said that the new system will be applied soon as it will be officially applied on the day following its publication in the official gazette. She stated that new classifications and investment policies will be introduced for the funds along with organization of the fund establishment process to enable it to use its legal personalities and organization of the self- managed fund in a more clear and detailed way according to global practices.
100 % increase of the managed funds value
In the first year of issuance of the new system and completion of the campaigns of raising awareness and knowledge about the advantages and facilities provided by the new investment funds system, the SCA targets achieving at least 100% increase of the value of the money managed by the local funds. It is expected that this percentage will be increased in the subsequent years.
It is worthy indicating that the number of existing local investment funds is about 26 funds, while the net assets value to the end of the past month amounts to approximately AED 3.44 billion and the number of the registered foreign investment funds during the year is about 64 funds, thus, the total registered foreign and existing investment funds to date are about 675 funds.
Moreover, the promotion approvals issued by the SCA during the present year are 121 promotional approvals, thus, the number of existing promotional approvals to date is about 1965 promotional approvals.
Dr. Mariam stated that the investment funds are the most appropriate means to be used by a new investor when investing in financial markets, as investment funds shall provide him with opportunity to diversify his investment portfolios and reach the largest number of assets categories and various investment tools along with managing those investments by professional and specialized management in such a way that shall decrease potentialities of high risks in the event of making such decisions solely. She also stated that the culture of knowledge and awareness of individual investors about the investment funds was not established yet in the required manner as for the investors in the UAE for several reasons including the limitedness and non-diversification of local funds and the existence of bad experiences as a result of dealing with foreign funds.
Continuous update of the investment funds system
She confirmed that the SCA will continue working for continuous update of the investment funds system in view of measuring the application results and the remarks by the funds' managers, along with establishing and publishing materials and programs for raising awareness of investors of different classes about the local investment funds and their importance to diversify and provide investment tools for professional management. Moreover, there shall be coordination between the SCA and its partners of banks and financial institutions in the State for promoting local funds inside and outside the State, development of electronic platform for distribution of local investment funds and support of the efforts of promotion of the local investment funds directed to Arab and regional investors.
Addition of regulatory provisions for new investment policies
The new system witnessed addition of regulatory provisions for new investment policies. Moreover, other classifications were added to investment funds types such as the fund of investment in material ingots of precious metals as this fund enables the investors to invest in material ingots and precious metals especially gold, and the recovery shall be cash or in-kind recovery by receiving material ingots. There is also the capital protection fund that is a fund for investment in low-risk securities that primarily targets protecting the fund's capital by the means of hedge and insurance of investments.
Moreover, the direct lending fund was added to the new system as it is deemed as investment fund for the purpose of financing projects and companies by investing in the debt instruments issued by it. Furthermore, the real estate investment fund was added along with the income-generating general real estate fund– REIT- as a permission was issued allowing establishment of a new type of real estate development funds as part of their activity shall be real estate development of projects, along with the commodities investment fund.
The new additions also included the green investments funds, that are matching with the environment, society and governance (ESG) requirements, the investment funds that are in accordance with the Islamic Sharia provisions and the family funds that are a special type of investment funds that may be established among the members of a one family for the management of the investments of the family. There is also the charity investment fund as its activities are represented in using the donated money and their revenues in the fields of serving society and charity activities.