The UAE Securities & Commodities Authority amends "Qualified Investor" definition
The UAE Securities & Commodities Authority (SCA) has amended its definition of a "Qualified Investor" in its Promoting and Introducing Regulations. This will impact those promoting securities (including foreign securities) in the UAE and seeking to rely on the Qualified Investor exemption.
The definition of "Qualified Investor" in SCA Chairman Decision No. 3/R.M. of 2017 Concerning Promoting and Introducing (the PIRs) has been amended pursuant to SCA Chairman Decision No. 37/R.M. of 2019. The PIRs are applicable across the United Arab Emirates (other than in the Dubai International Financial Centre and the Abu Dhabi Global Market financial free zones). The new definition came into force on 1 December 2019.
One of the reasons why the Qualified Investor definition is particularly important is that it forms the basis for a private placement exemption to the PIRs. The exemption provides that the PIRs do not apply to the "Promotion" (which includes marketing, distribution and advertisement) of "Financial Products" to certain categories of Qualified Investor. The definition of Financial Products includes "Foreign Securities", which includes "Shares, stocks, bonds, sukuk, units of investment funds, Commodities contracts, Derivatives and any other Securities or financial instruments issued by a Foreign Issuer".
The biggest changes to the definition of Qualified Investor in the PIRs can be summarised as follows:
- The addition of foreign governments, their respective entities, institutions and authorities or companies wholly owned by such entities.
- The addition of entities licensed by the SCA or a "Counterpart Authority" (i.e. a regulatory authority which is an ordinary or associate member of IOSCO).
- A change to the category of corporate entities to introduce certain financial parameters in place of the previous requirements around the entity’s objects.
- The addition of natural persons licensed by the SCA or a "Counterpart Authority" to conduct financial services.
We understand that some further clarificatory amendments to the Qualified Investor definition (most notably the financial parameters for corporate entities) are expected shortly. We are in close communication with the SCA on these and other regulatory developments.
For specific guidance or advice on the implications of these regulatory amendments or any other Middle East financial services related laws or regulations, please contact Muneer Khan.
