Dubai Investors Warned to Check SCA Licensing as Unauthorised Companies Increase Compliance Risks

Dubai’s financial market continues to offer significant opportunities, but investor protection remains a top priority. The Securities and Commodities Authority (SCA), the UAE’s federal financial regulator, oversees securities, commodities and investment activity, issuing licences, regulating entities, monitoring compliance and safeguarding investors against fraud or unlawful financial conduct.

 

The SCA has clear rules governing which companies and individuals are authorised to collect or manage investments from the public. Understanding these regulations is essential to avoid disputes and ensure investments remain legally secure.

Only Licensed Companies Can Collect Investments — but Not All Licences Are Equal

Under UAE law, only companies properly licensed by the SCA may accept client funds for investment or financial services. However, not all SCA licences authorise companies to collect or hold client money. For example:

• First Category licence: Companies may execute trades and hold client funds. They are fully authorised to manage investments.
• Fifth Category licence: Companies may only advise on or promote investments. They are not permitted to collect or hold client funds.
  
  

Many investors encounter companies with Category 5 licences that introduce clients to entities incorporated outside the UAE and beyond SCA jurisdiction. In such cases, funds may end up with foreign companies not regulated by the SCA, exposing investors to considerable financial risk. Understanding the type of licence a company holds is therefore crucial before transferring funds or signing agreements.

Regulatory Requirements for Licensed Entities

Licensed entities must comply with several regulatory obligations, including:

• Receiving funds only for authorised activities, such as service fees, commissions or investments through licensed intermediaries;
• Holding client funds in segregated accounts, separate from company assets;
• Reporting and accounting for client funds in accordance with SCA regulations;
• Maintaining full transparency regarding the intended use of funds.
  
  

Any company that collects funds without the appropriate SCA licence is acting outside the law. Agreements or financial instruments arising from such transactions may be unenforceable, giving investors strong legal grounds to challenge them.

A recent matter we handled illustrates this risk. We advised a client challenging the enforceability of a cheque worth AED 3 million issued to a financial consultancy that was not authorised to accept investment funds. The Cassation Court agreed with our position, ruling that transactions involving unlicensed entities cannot be legally enforced. This underscores the importance of verifying a company’s licence before transferring money or entering into financial agreements.

Recent SCA Notifications: Know Who You’re Dealing With

The SCA has issued several notifications warning the public about unlicensed companies offering financial services. Recent examples include BDS Ltd. (Seychelles), FX Globe Marketing Management, Top Profit Marketing Services L.L.C., Sigma One Capital, MEX Atlantic Corporation and others.

Investors are strongly urged to verify the identity and licensing status of any company before signing agreements or transferring funds. The SCA maintains an updated list of licensed companies on its official website.


Individuals Giving Financial Advice Must Also Be Licensed

The SCA also emphasises that individuals providing financial advice—whether on social media or other platforms—must be registered and licensed. Investors should ensure that any influencer, adviser or educator offering investment recommendations is authorised by the SCA.

Investor Best Practices: Protect Your Funds

• Verify licensing and identity: Confirm that the company receiving funds is properly licensed by the SCA.
• Use official resources: Consult the SCA’s online list of licensed companies.
• Check social media advisers: Ensure individuals offering advice are registered and licensed.
• Understand regulatory limits: Funds should only be handled in line with authorised activities under UAE law.
• Demand transparency: Always insist on clear documentation regarding the handling and use of your money.
  
  

Conclusion: Compliance Is Key to Investor Protection

Investor protection in Dubai hinges on dealing with properly licensed companies and authorised individuals. The SCA’s regulations and warnings reinforce the importance of adhering to licensing requirements to safeguard funds, reduce legal risks and ensure financial agreements remain enforceable. By following these best practices, investors can confidently navigate the UAE’s evolving financial landscape.

 

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