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Feb
14

Why Start-up Fund Managers Should Consider the DIFC (Qualified Investor Funds)

14 Feb 2017
The Dubai Financial Services Authority (DFSA) first introduced its Collective Investment Funds regime in 2006. The regime was designed to meet international standards for regulation and, where required, to provide adequate investor protection. It therefore provided a facilitative, business-friendly regulatory framework, while remaining compliant with the International Organisation of Securities Commission’s (IOSCO) principles for regulating collective investment schemes.
 
Types of Funds

 

The DFSA Funds regime includes the following types of funds:
 
Type of Fund Public Funds Exempt Funds Qualified Investor Funds
Level of Regulation Detailed regulation in line with IOSCO standards Somewhat less stringent than for Public Funds Less stringent than for Exempt Funds
Investors and Offer
-  Unitholders include Retail Clients; or
-  Has, or intends to have, more than 100 unitholders; or
-  Some or all of its units are offered to investors by way of public offer.
-  Only Professional Clients;
- 100 or fewer unitholders; and
-  Units are offered to persons only by way of a Private Placement.
-  Only Professional Clients;
- 50 or fewer unitholders; and
-  Units are offered to persons only by way of a Private Placement.
Minimum subscription N/A USD 50,000 USD 500,000
Application process time N/A 5 business days 2 business days

 

Regulatory changes
Recent changes have been made to the Funds Regime, with a view to making the DIFC a viable alternative to other established jurisdictions and as a fund domicile of choice for start-up Fund Managers.
 
As a result of this initiative, the DFSA adopted new regulations which came into force on 01 February 2017 and which resulted in a decrease in the Base Capital Requirements (‘BCR’) for Prudential Category 3C Authorised Firms who manage Collective Investment Funds, as follows:
 
DFSA License Category Old BCR Revised BCR
Managing a Collective Investment Fund - Qualified Investor Funds (‘QIF’) and Exempt Funds USD 500,000 USD 70,000
Managing Collective Investment Fund - Public Funds USD 500,000 USD 140,000

 

DFSA Licence Application Process
The DFSA applies a thorough but simplified fast-track application process for Fund Managers seeking a licence only in relation to QIFs. The DFSA aims to process a licence application within a 4-6 week timetable, after which an In-Principle Licence will be issued, setting out specific conditions which need to be met (office space in the DIFC, bank account etc.) before a licence is issued and the Fund Manager can commence business. This is expected to allow Fund Managers to start operations as soon as 3 to 4 months from project initiation.
 
Fund Incorporation and Registration 
The DIFC and DFSA have streamlined procedures in relation to the incorporation and registration of Collective Investment Funds. In relation to a QIF, both the DIFC Registrar of Companies and the DFSA aim to process the incorporation and respectively the Fund registration process within 2 working days.
 
DIFC Authority (‘DIFCA’) Fees
DIFCA has also proposed to reduce its fees for start-up fund managers who are setting up funds in the DIFC as follows:
 
Fee Type Reduction
Registrar of Companies Application Fee 100% reduction (USD 8,000)
Commercial Licence Fee 100% reduction for 2 years (USD 12,000/year)
Leasing of DIFCA owned real estate (e.g. The Gate, Gate Village) 50% reduction for 2 years

 

How HOLT consultancy can assist

 

HOLT consultancy is a company incorporated in the DIFC and has a strong track record and reputation in the market. We have assisted a number of high profile financial groups as well as start-ups from the GCC, US, EU and Asia with obtaining their DFSA licence.
 
Please contact us if you wish to know more about the DFSA Licence application process and how HOLT consultancy can assist you. Please email us at info@holtconsultancy.com or call us on +971 4 386 6360.