Navigating the Process for a Fund Manager License Through the Dubai International Financial Centre (DIFC)

This article highlights how you can obtain a fund management license through the DIFC

Specialist fund management services are becoming more necessary in the Middle East and North Africa, (MENA) region due to the growing pools of wealth. Both institutions and high-net-worth individuals seek experts based in the region to address their investment requirements.

DIFC offers a secure and supportive regulatory regime for local, regional, and global players to domicile, manage and distribute funds, making it the leading fund management jurisdiction in the region. Fund Management is one of the four focus areas within DIFC ’s Wealth and Asset Management, including Asset Management, Private Equity, and Wealth Management.

Types of Fund Manager Licenses in DIFC

The Dubai Financial Services Authority (DFSA), the independent regulator of financial services in the DIFC, offers two distinct types of fund manager licenses for investment manager and hedge fund manager seeking to conduct fund management activities:

Domestic Fund Manager License

This license empowers firms to manage domestic funds, including the mutual fund and collective investment scheme, established within the DIFC and to market and provide advisory services in relation to these qualified investor funds and private funds. It is particularly suitable for firms focusing on the local and regional capital market.

External Fund Manager License

This license permits firms to manage foreign funds (funds established outside the DIFC) and to market and provide advice in relation to these funds within the DIFC. This option caters to firms with a global clientele and a diverse portfolio of international funds, such as hedge funds and private equity funds, targeting institutional investors.

The eligibility criteria and requirements for each license type are tailored to the specific needs and operations of the applicant firm, taking into account factors such as the legal structure, the types of funds to be managed, and the target investor base.

Regulatory Requirements and Compliance

Obtaining a fund manager license in the DIFC is a rigorous process, governed by stringent regulatory requirements aimed at safeguarding the integrity and stability of the financial system. Firms must demonstrate their ability to meet the following key requirements:

Capital Adequacy and Financial Requirements

Fund managers and investment advisors must maintain adequate capital resources and demonstrate their capability to meet ongoing financial obligations, ensuring long-term sustainability and investor protection.

Corporate Governance and Risk Management Frameworks

Robust corporate governance structures, including the appointment of competent financial professionals and portfolio managers, and comprehensive risk management frameworks are essential. These measures ensure proper oversight, accountability, and effective management of risks.

Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) Measures

Fund managers and financial advisors are required to implement effective AML and CTF policies, procedures, and controls to mitigate financial crime risks and maintain the highest standards of integrity and transparency.

Ongoing Supervision and Reporting Obligations

Licensed fund managers and investment advisors are subject to ongoing supervision by the DFSA and the central bank, and are required to comply with regular reporting obligations, ensuring ongoing compliance and accountability.

Benefits of Setting Up a Fund Management Company Within the DIFC

DIFC (Dubai International Financial Centre) stands out as the region’s financial hub thanks to its well-established legal and regulatory framework. Dubai fully integrates with regional and international markets as a global city and center of business, trade, and tourism. It is a safe and stable environment for conducting business.

Some primary reasons to incorporate within the DIFC are:

• DIFC’s Wealth and Asset Management market represents approximately 30% of the GCC’s Gross Domestic Product (GDP) combined.
• The legal system and courts of DIFC adhere to the Common Law framework, overseen by an independent and esteemed regulator, and adjudicated by an equally reputable court system.
• The ability to establish and structure funds in a sophisticated manner.
• Global recognition and acceptance of DIFC funds.
• Companies located in DIFC have no limitations or restrictions on the flow of capital or profit and are not subject to currency exchange controls.
• DIFC guarantees zero taxes on corporate income and profits for 40 years. This benefit is further strengthened by the UAE’s extensive network of double taxation avoidance treaties.

Obtaining a Fund Management License

DIFC takes great pride in making the incorporation as stress and hassle-free as possible.

The general steps for a fund management license are:

• Consult with a Dubai Financial Services Authority (DFSA) and DIFC service advisors to explore fund options.
• Send a letter of intent to the DIFC Authority
• Supply the DFSA with a comprehensive business plan along with an application
• Receive an in-principal approval from the DFSA
• Register and establish the company with the Registrar of Companies
• Obtain the fund manager license from the DFSA.

A firm falling under this category of business licensing may receive a business license to conduct one or multiple financial services , including managing a collective investment fund, managing assets, providing trust services as a trustee of an express trust, providing custody, and managing a profit-sharing investment account.

The base capital requirement for this category is USD 500,000, while a fund manager must maintain USD 140,000 as base capital.

Fees to Get Your DIFC License

To operate within the DIFC , you must have business premises within its jurisdiction. The cost of this can vary based on your business needs.

Initial Costs Recurring Costs Incorporation: $100Confirmation statement: $300Commercial license: $1000Commercial license: $1000Data Protection fee: $500Data Protection renewal fee: $250

Required Appointments for a Fund Management License

An authorized firm in DIFC engaged in fund management must appoint the following positions:

• At least two directors
• Senior Executive Officer who must be an in-house UAE resident and can also serve as a director
• Risk Officer
• Finance Officer, which can be an in-house executive director or senior manager
• Money Laundering Reporting Officer who must be a UAE resident and can also be a Compliance Officer
• Compliance Officer who can also be outsourced but must be a UAE resident and can also be an MLRO.

Challenges and Considerations

While the DIFC offers a well-regulated and internationally recognized financial center, obtaining a fund manager license presents several challenges and considerations that firms must navigate:

Navigating the Regulatory Landscape

Understanding and complying with the DFSA’s regulatory framework and the capital markets authority’s requirements can be complex, requiring extensive knowledge and expertise. Firms must invest in building a robust compliance infrastructure and familiarizing themselves with the intricate requirements.

Meeting Ongoing Compliance Requirements

Maintaining adherence to regulatory requirements, such as risk management, reporting, and anti-money laundering measures, can be resource-intensive and demanding for fund managers, asset managers, and portfolio managers. Continuous monitoring and adaptation to evolving regulations are crucial.

Availability of Skilled Personnel

Attracting and retaining qualified financial professionals, investment advisors, and fund administrators with experience in the investment management industry and familiarity with the DIFC’s regulatory environment can be challenging in a competitive talent market.

Competitive Landscape and Market Dynamics

The DIFC is home to numerous established and reputable fund managers, creating a highly competitive environment where newcomers must differentiate themselves, innovate their offerings, and adapt swiftly to constantly evolving capital market dynamics.

Operational and Infrastructural Considerations

Establishing a physical presence in the DIFC, setting up robust operational processes, and integrating with the local financial ecosystem can pose logistical and technical challenges, especially for firms new to the region.

Get Help in Getting Your DIFC License for Fund Management

You can avoid the hassle of back and forth with the DIFC by processing your application via our consultants. We have an in-depth understanding of what it takes to get a license as swiftly as possible. Timeframes for a fund management license can range from a few weeks to several months. So please contact us to see how we can get your license as quickly as possible!

Note: You might be interested to read about Family Office in Dubai or ADGM & DIFC Foundation / ADGM Foundation