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Directives have been issued to banks by the UAE's Securities & Commodities Authority
As of April 1, individual investors residing in the UAE will no longer have the option to subscribe directly to foreign funds through their local bank accounts, following new regulatory guidelines.
This change has been communicated by banks across the UAE to their clients. Notably, the new rule applies to subscriptions initiated after April 1, while existing investment commitments remain unaffected, as confirmed by banking sources.
Consequently, 'ordinary investors' in the UAE will no longer have access to foreign funds for subscription. However, 'professional investors' can continue their participation in foreign funds, provided they meet the minimum investment threshold of Dh500,000 per foreign fund.
For ordinary investors, only 'local funds' will be directly accessible through their UAE bank accounts.
'Ordinary' and 'Professional' Investors
'Ordinary investors' are those with funds of up to Dh500,000 available for investment. To qualify as 'professional investors,' individuals must possess assets of no less than Dh75 million (after deducting short- and long-term liabilities) and an annual income of no less than Dh150 million.
These directives have been issued to banks by the UAE's Securities & Commodities Authority, emphasising the importance of mitigating risks associated with investing in foreign funds not licensed in the UAE. Funds lacking local licences lack regulatory oversight, exposing investors to increased risk.
Financial industry insiders note a surge in foreign funds attempting to attract UAE-based investors with promises of market-beating returns.
While UAE residents can still invest in these foreign funds, they must now do so through bank accounts in their home countries.
Retail investors have been instrumental in driving spikes in the UAE stock market over the past two years, fuelled by a flurry of IPOs in Dubai and Abu Dhabi.
According to financial sector analysts, the regulatory change bodes well for UAE capital markets, anticipating increased retail inflows.
This change sets the stage for sustained inflows into local stocks, marking an exciting evolution in the UAE's regulatory landscape.
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