10 Leaves

This episode is also available as a blog post: https://10leaves.ae/publications/difc/guide-to-the-difc-licensing-process-for-authorised-firms

Firms interested in engaging in financial services from the DIFC are required to submit applications to the independent regulator - Dubai Financial Services Authority, or DFSA.

The DFSA offers a wide range of financial service activities, from investment advisory to asset management, brokerage and wholesale banking. For the purposes of authorisation and supervision,the DFSA categorises applicants based on the activities applied for. There are five main categories of Authorised Firms in the DIFC.

Read more about the DIFC Licensing categories here:

https://10leaves.ae/publications/difc/difc-licensing-categories

This episode is also available as a blog post: https://10leaves.ae/publications/difc/investment-funds-in-the-difc

The DIFC is a leading financial hub in the region. Besides offering a wide range of financial service activities, the centre also provides an integrated environment and world-class standard of living. It is well regarded in the international community as well.

The Dubai Financial Services Authority, or DFSA, acts as the independent regulator of fund managers and investment funds setup in the DIFC, which provides a high degree of comfort to individual and professional investors. The DIFC offers both Domestic Fund Manager and External Fund Manager licenses, both of which allow for the management of DIFC Public Fund, DIFC Exempt Fund and DIFC Qualified Investor Fund. The DIFC Registrar of Companies (ROC) offers multiple fund structures, included open-ended and closed ended investment companies, and GP-LP structures.

With DIFC Funds, Fund Managers can target the GCC market, and the wider MENASA region, taking advantage of the numerous Double Taxation Avoidance Treaties that the UAE has in place. Zero-rate personal and corporate tax also make the DIFC an attractive destination to setup and manage investment funds.

This episode is also available as a blog post: https://10leaves.ae/publications/difc/service-providers-for-investment-funds-in-the-difc

A fund administrator carries out calculations of Net Asset Values (NAV) of the fund units, manages the investor onboarding process, including subscriptions & redemptions, and does all necessary due diligence on the investors. A fund administrator also prepares financials reports for the fund. In case of open-ended funds, a fund administrator also carries out trade and account processing, confirmation of trades & reconciliations, cash management, shareholder register management, investor document retention and overall investor communication on all reporting and corporate actions.

A Qualified Investor Fund in the DIFC does not have to appoint a fund administrator for closed-ended funds this function can be handled in-house. However, in most cases, a fund administrator brings to the table a lot of benefits that can be valuable especially to smaller funds who cannot carry out this function effectively in-house.

Legal Counsel:

It is mandatory to appoint legal counsel for an investment fund. A typical fund setup involves at the very least, three main documents – a detailed private placement memorandum (PPM), an investment management agreement between the fund manager and the fund, and a fund constitution that serves as the Articles of Association of the fund, and helps govern the internal matters of the fund. Other relevant documents include the information memorandum, which is usually a subset of the PPM, and subscription agreements that can be quite detailed in some cases.

Legal counsel help draft this extensive set of documentation, and review fund marketing material. They also play a role in investor dispute resolution & litigation.

This episode is also available as a blog post: https://10leaves.ae/publications/difc/required-documents-for-a-fund-in-the-difc

Starting an investment fund not only requires deep understanding what investment strategies, but also of the various structures available and the documents required for these structures.  Broadly speaking, there are two main categories of hedge fund structures in the DIFC – partnerships and investment companies. Let’s take a closer look at the documents required to setup partnerships and investment company-related structures in the DIFC.

For DIFC-investment companies:

1. Private Placement Memorandum.

2. Subscription Agreement (for investors).

3. Investment Management Agreement.

4. Fund Constitution.

For DIFC Partnerships:

1. Private Placement Memorandum.

2. Limited Partnership Agreeement.

3. Subscription Agreement (for investors).

4. Investment Management Agreement.

This episode is also available as a blog post: https://10leaves.ae/publications/difc/difc-open-ended-and-closed-ended-investment-funds

Funds that are structured as companies, have two main options in the DIFC.

Open-ended Investment Company (OEIC)

Closed-ended Investment Company (CEIC)

There are many considerations that go into choosing a legal structure for a fund. Some of them being – the jurisdiction of choice, the fee structure, tax considerations and the like. The choice between open-ended and closed-ended vehicles for DIFC investment funds however, depends a lot on the investment objective and fund strategy.

The basic difference between an open-ended and a close-ended fund is the option of liquidity, i.e. whether investors (or unit holders) are allowed redemptions. Open-ended funds allow periodic redemptions on certain days, depending on how frequently the Net Asset Value (NAV) of the fund is calculated. For heavily traded funds, this can be daily as well. Most private funds however, have longer NAV periods, ranging from monthly, to quarterly. Closed-ended DIFC funds however, have no such provisions. They are essentially illiquid, due to the nature of the underlying investments. Such funds are usually property or venture capital funds, that require a longer commitment to the underlining investment objectives. These funds have to be closed-ended, since it would not be practical to fulfill periodic redemption requests by selling off the underlying assets. Some closed-ended funds do have an exit option – solely at the discretion of the directors, and at a steep exit fee.

This episode is also available as a blog post: https://10leaves.ae/publications/difc/difc-qualified-investor-funds

Why setup an investment fund in the DIFC?

The DIFC is a leading financial hub in the region. Besides offering a wide range of financial service activities, the centre also provides an integrated environment and world-class standard of living. It is well regarded in the international community as well.

The Dubai Financial Services Authority, or DFSA, acts as the independent regulator of fund managers and investment funds setup in the DIFC, which provides a high degree of comfort to individual and professional investors. The DIFC offers both Domestic Fund Manager and External Fund Manager licenses, both of which allow for the management of Public, Exempt and Qualified Investor Funds. The DIFC Registrar of Companies (ROC) offers multiple fund structures, included open-ended and closed ended investment companies, and GP-LP structures.

With DIFC Funds, Fund Managers can target the GCC market, and the wider MENASA region, taking advantage of the numerous Double Taxation Avoidance Treaties that the UAE has in place. Zero-rate personal and corporate tax also make the DIFC an attractive destination to setup and manage investment funds.

This episode is also available as a blog post: https://10leaves.ae/publications/difc/difc-exempt-funds

The DIFC is a leading financial hub in the region. Besides offering a wide range of financial service activities, the centre also provides an integrated environment and world-class standard of living. It is well regarded in the international community as well.

The Dubai Financial Services Authority, or DFSA, acts as the independent regulator of fund managers and investment funds setup in the DIFC, which provides a high degree of comfort to individual and professional investors. The DIFC offers both Domestic Fund Manager and External Fund Manager licenses, both of which allow for the management of DIFC Public fund, DIFC Exempt fund and DIFC Qualified Investor Fund. The DIFC Registrar of Companies (ROC) offers multiple fund structures, included open-ended and closed ended investment companies, and GP-LP structures.

With DIFC Funds, Fund Managers can target the GCC market, and the wider MENASA region, taking advantage of the numerous Double Taxation Avoidance Treaties that the UAE has in place. Zero-rate personal and corporate tax also make the DIFC an attractive destination to setup and manage investment funds.

This episode is also available as a blog post: https://10leaves.ae/publications/difc/hedge-funds-in-the-difc

Setting up a fund in the DIFC requires either a) setting up a Domestic Fund Manager or b) licensing an existing fund manager in a recognized jurisdiction, to act as the External Fund Manager of the DIFC fund. Read this article to know more about the licensing process and associated costs.

A hedge fund in the DIFC will also need to appoint some service providers to carry out critical functions, such as fund administration and audits. Read this article on the different services associated with maintaining a hedge fund in the DIFC.

Did you know that a Private Placement Memorandum, or PPM, is the key document for DIFC Investment funds? The PPM details material information on the fund and serves as the backbone of the legal documentation involved. Read this article to know more about the documents required for setting up a hedge fund in the DIFC.

This episode is also available as a blog post: https://10leaves.ae/publications/difc/setting-up-a-representative-office-in-the-difc

The financial services industry is growing at a rapid pace in the region. The Dubai International Financial Centre (DIFC), is at the forefront of this change. Ranked among the top 10 onshore financial centres worldwide, the DIFC is arguably THE place to be for financial service companies looking at targeting not just the UAE, but the whole MENA region. Setting up a representative office in DIFC is one of the ways of testing the waters, before deciding on taking on a full-fledged license.

The DIFC offers a low-cost alternative for firms that wish to explore the market. It allows for the marketing of one or more financial services or financial products which are offered in a jurisdiction other than the DIFC. These products are usually of a head office that is based in a different jurisdiction.

This episode is also available as a blog post: https://10leaves.ae/publications/difc/guide-to-the-difc-external-asset-manager-license

DIFC External Asset Manager License:

Individuals who wish to set up as an External Asset Manager, can choose one of two models:

Case 1 is usually a Category 3C Asset Management License. In this case, the EAM has complete control on the relationship with his client, under a discretionary mandate. However, the DFSA requirements are steeper in this case, with a base capital of US$ 500,000 required, among other things. You can read more here:

Requirements for a DIFC Category 3C Asset Manager License:

Alternatively, you can start with an entry-level Category 4 Investment Advisory License, that allows you to set up in an easier manner, get a track record, and then apply for an upgrade. You can read more here:

In both cases, firms will have to apply to the DFSA for a Regulated License.