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DFSA drafts investment law

DUBAI — The Dubai Financial Services Authority (DFSA), the regulatory body for the Dubai International Financial Centre (DIFC), yesterday released a consultation draft Collective Investment Law for adoption within the tax-free financial district.

The draft law, which seeks to provide a regulatory regime for collective investment funds, is open for public comment till November 16. It has been published along with Consultation Paper No.21 on the DFSA web site at www.dfsa.ae.

"The adoption of a legal framework for the regulation of collective investments will add an important new business dimension to the DIFC," said David Knott, CEO, of DFSA. "The Collective Investment Law will add clarity and certainty and provide the financial and professional services sectors with additional flexibility in client service delivery."

The Collective Investments Law provides a framework for the regulation of collective investments in the DIFC. It has 14 parts dealing with general law, collective investment funds, operators of domestic funds, oversight of domestic funds, auditors of domestic funds, prospectus requirements for domestic funds, registration of domestic funds, exemption of domestic funds, alteration to a domestic fund, transfer schemes and winding up of domestic funds, DFSA powers in relation to a fund, the regulatory appeals committee, the financial markets tribunal and miscellaneous affairs.

DFSA said the draft Collective Investment Law needs to be considered in the context of the core financial services laws – the Regulatory Law 2004, the Markets Law 2004 and the Law Regulating Islamic Financial Business 2004 and the objectives of the DFSA set out therein.

With this law, the DFSA has endeavoured to establish a regime for collective investment vehicles that is appropriate to a market where the persons using them have to be institutional or else of high networth (investors). The DFSA also seeks to allow appropriately authorised operators to establish funds in the DIFC using a variety of internationally recognised vehicles, with a level playing field as among all such vehicles. It also endeavours to permit foreign funds to be offered to qualified members of the public, or to be managed in, or to migrate to, the DIFC under appropriate and nondiscriminatory conditions.

According to DFSA, it would be interested in getting views on whether it is necessary to provide unit trust vehicles along with the corporate and partnership vehicles in light of the fact that, in the UK at least, the majority of unit trust have converted into the sub-funds of open-ended collective investment schemes. It also seeks views on whether the proposed regime facilitates the DIFC becoming the domicile of choice for institutional investor funds and whether a level playing field has been established by this law and the Markets Law 2004 as between domestic, foreign funds.