Middle East Regulatory Update Muneer Khan Partner - Dubai Ahmed Butt Partner - Riyadh Ali Hassan Senior Representative Europe & North America DIFC Authority 7 & 8 October 2015
Agenda Introduction Saudi Arabia UAE Onshore ADGM DIFC Saudi Arabia Kuwait Bahrain Qatar UAE Oman Simmons & Simmons LLP 2015. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. 1 / B_LIVE_EMEA1:2813854v1
Simmons & Simmons Middle East LLP Offices Abu Dhabi, Doha, Dubai, Jeddah*, Riyadh* More than 20 year presence Advising in the region for over 30 years Focus on asset management & investment funds and financial institutions Particular focus on financial regulation in the GCC Middle East Law Firm of the Year Global Investor MENA Awards 2015 Competition & Regulatory Firm of the Year Corporate Counsel Middle East Awards 2015 * In alliance with Hammad & Al-Mehdar Simmons & Simmons LLP 2015. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. 2 / B_LIVE_EMEA1:2813854v1
What has changed in Saudi Arabia? Previously foreign investment was through indirect swaps 1 June 2015: The QFI Rules were implemented to enable certain qualified foreign investors (QFIs) to directly trade on Tadawul (Saudi stock exchange) 15 June 2015: Largest Arab bourse ($530bn) and last of the G20 stock exchanges opened up to foreign investors Primarily aimed at secondary market, but Saudi Arabia is also among the most active initial public offering markets in the region Simmons & Simmons LLP 2015. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. 3 / L_LIVE_EMEA1:28657947v1
Who can be a QFI/QFI Client? Financial institutions Banks Brokerage and securities firms Fund managers Insurance companies Equivalent regulatory authority no list of recognised jurisdictions Size minimum assets under management Investment experience 5 years QFI Clients Simmons & Simmons LLP 2015. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. 4 / L_LIVE_EMEA1:28657947v1
Assessing Authorised Persons Application for QFI or QFI Client Exclusivity of Assessing Authorised Person Assessing Authorised Person also to be the securities broker conflict of interest? QFI Assessment Agreement minimum requirements Approval/rejection decision process Appeal process Simmons & Simmons LLP 2015. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. 5 / L_LIVE_EMEA1:28657947v1
Typical investment structure QFI Client Main investor QFI Investment manager Tadawul QFI Custody Account + QFI Trading Account Local Broker Brokerage Account + Cash Account AAP/Local Custodian QFI Custody Account + QFI Cash Account Simmons & Simmons LLP 2015. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. 6 / L_LIVE_EMEA1:28657947v1
Investment limitations and restrictions 5% maximum ownership/interest per QFI/QFI Client in any listed issuer 49% maximum aggregate for ALL foreign ownership/interest in any listed issuer 20% maximum aggregate for QFIs/QFI clients in any listed issuer 10% maximum QFI/QFI Client ownership/interests on entire stock exchange by market value SAGIA negative list e.g. Mecca, Medina real estate companies Can QFIs participate in IPOs? Simmons & Simmons LLP 2015. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. 7 / L_LIVE_EMEA1:28657947v1
Challenges Existing swaps conversion to QFI shareholdings? Agreements with Assessing Authorised Person/Custodian/Broker you only get one shot! Transferring between Assessing Authorised Persons Impact on share disclosure rules T+0 settlement model v T+2 settlement model need for short-term funding Simmons & Simmons LLP 2015. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. 8 / L_LIVE_EMEA1:28657947v1
UAE Onshore Investment funds regulations to be updated (Q4 2015?) reduced fund registration fees new recognised jurisdictions formalised sophisticated investor exemption Investment management regulations expiry of grace period current status anticipated amendments Simmons & Simmons LLP 2015. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. 9 / B_LIVE_EMEA1:2813854v1
UAE Financial Regulatory Map Dubai International Financial Centre ("DIFC") Abu Dhabi Global Market ("ADGM") The Emirate of Dubai Regulators UAE Securities and Commodities Authority ("SCA") The Emirate of Abu Dhabi UAE Central Bank UAE Insurance Authority UAE Dubai Financial Services Authority ("DFSA") Financial Services Regulatory Authority ("FSRA") Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. 10 / L_LIVE_EMEA1:28669852v1
ADGM Legal framework now in force Draft financial regulations Court to be established and DR rules to be issued soon Simmons & Simmons LLP 2015. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. 11 / B_LIVE_EMEA1:2813854v1
DIFC Regulatory enforcement action Naming policy Focus on arranging Client classification changes Simmons & Simmons LLP 2015. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. 12 / B_LIVE_EMEA1:2813854v1
UPDATE ON DUBAI INTERNATIONAL FINANCIAL CENTRE Simmons & Simmons LLP 2015. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. 13 / B_LIVE_EMEA1:2813854v1
Re-Cap of what is the DIFC
Update on the DIFC What is the DIFC A purpose built Federal Financial Free Zone established in 2004 Common law legal framework, with DIFC Courts, DIFC Laws An independent internationally recognised unitary financial regulator A business friendly environment with 0% tax rate, freedom of ownership, employment and capital Home to companies from Europe, Africa, Middle East, South Asia and the Far East And I worked there for 8 years!
Update on the DIFC
Update on the DIFC H1 2015 Operating Review Highlights 1,327 Active registered companies 18,521 Combined Workforce 178,376 Sq. ft. net commercial office space leased 750 Financial firms 682 Non-financial firms 182 Retailers
Update on the DIFC H1 2015 Operating Review Highlights Total Active Firms Financial Non-Financial Retail Total Active Financial Firms Banks and Capital Markets Wealth Management Insurance 13% 40% 1,327 16% 43% 47% 41%
Update on the DIFC Notable Recent Developments Qualified Investor Fund for sophisticated investors with tailored regulatory requirements and private placement rights into Europe Wills Registry Under the auspices of the DIFC Court a inheritance planning capability for Expats Family Offices over 50 now registered in the DIFC Banking balance sheet and AUM now standing at $80 billion and $20 billion
DIFC 2024 Strategy
MIDDLE EAST, AFRICA & SOUTH ASIA FOCUS ON THE SOUTH-SOUTH CORRIDOR
05 The 10-Year Strategy (2014-2024) Increase Corporate Profile: Domicile Financial Firms and Workforce 1,000 Active domiciled companies by 2024 50,000 Combined Workforce by 2024 1,327 5.5 Sq. ft. of net additional commercial office space by 2024 US$250 bn Assets Under Management of fund managers and financial institutions by 2024 US$400 bn Balance-Sheet by 2024
DFSA Client Classification Regime
DFSA Client Classification Regime Key changes following public comments Implemented in April 2015, save net asset test for professional client which moves from $500,000 to $1,000,000 April 2016 To provide more flexibility To provide greater clarity To better align the DFSA regime with MiFID/UK
DFSA Client Classification Regime Key Points No change to Retail Client but option to opt in as Retail client for clients who meet the test for Professional Client 3 categories of Professional Clients for more flexibility Assessed Deemed Service-based Deemed Professional Client can be treated as a Market Counterparty on Notice and no objection. Look-through arrangements to attribute professional status to a Client by ownership or family relationship Flexibility to use client classifications made elsewhere (with caveats) Flexibility to accommodate group-based provision of financial services (with caveats)
DFSA Client Classification Regime Transitional Arrangements Adequate transitional arrangements to ensure No need to re-classify existing Clients in respect of continuing Financial Services No need to enter into Client Agreements or unwind existing Transactions Firms have until 1 April 2016 to meet the increased asset threshold to US$ 1 million in respect of new Clients or new Financial Services to grandfathered Clients
Simmons & Simmons navigator Complex regulation made easy Our cost effective, cross-jurisdictional online subscription service provides you with up-to-date key financial services, regulatory and tax information Over 300 global organisations subscribe to navigator. Contact us today to find out why elexica.com/navigator navigator@simmons-simmons.com SandSnavigator funds I securities I derivatives and FX I share disclosure I corporate finance I banking I lending I product tax Simmons & Simmons LLP 2015. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. 28 / B_LIVE_EMEA1:2813854v1
Simmons & Simmons LLP 2015. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. 29 / B_LIVE_EMEA1:2813854v1
simmons-simmons.com elexica.com This document is for general guidance only. It does not contain definitive advice. SIMMONS & SIMMONS and S&S are registered trade marks of Simmons & Simmons LLP. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated practices. Accordingly, references to Simmons & Simmons mean Simmons & Simmons LLP and the other partnerships and other entities or practices authorised to use the name Simmons & Simmons or one or more of those practices as the context requires. The word partner refers to a member of Simmons & Simmons LLP or an employee or consultant with equivalent standing and qualifications or to an individual with equivalent status in one of Simmons & Simmons LLP s affiliated practices. For further information on the international entities and practices, refer to simmonssimmons.com/legalresp. Simmons & Simmons LLP is a limited liability partnership registered in England & Wales with number OC352713 and with its registered office at CityPoint, One Ropemaker Street, London EC2Y 9SS. It is authorised and regulated by the Solicitors Regulation Authority. A list of members and other partners together with their professional qualifications is available for inspection at the above address. Simmons & Simmons LLP 2015. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities. 30 / B_LIVE_EMEA1:2813854v1