Dubai: Electronic Permits for GCC National Companions

Al Bayan, 22 March 2024: The General Directorate of Residency and Foreign Affairs in Dubai has announced it has activated a service for issuing prior electronic entry permits for companions of GCC nationals.

The aim is to guarantee smooth and easy entry to the UAE.

For the full story, click here.

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Sharjah: Draft Law Regulating Property Leasing Approved

Khaleej Times (United Arab Emirates), 17 March 2024: Sharjah’s Executive Council has approved a draft law regulating property leasing in the Emirate. They approved it with amendments.

They reviewed the Law and made amendments after reviewing a report from the Legislative and Legal Affairs, Appeals, Suggestions and Complaints Committee.

It will regulate the relationship between landlords and tenants in line with the Emirate’s laws. It will repeal and replace the 2007 legislation on this area.

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Dubai Financial Services Authority Launches Consultation on Credit Fund, Public Property Fund and Real Estate Investment Trust Proposals

Dubai’s Financial Services Authority has launched a consultation on credit funds, public property funds and real estate investment trust proposals. It ends on 20 May 2024.

The Authority is proposing to amend the provisions in the Collective Investment Rules of the Authority’s Rulebook in terms of the regulatory regimes for Credit Funds, Public Property Funds and Real Estate Investment Trusts or REITs.

The Authority’s existing rules on External Funds ban a DIFC-based Fund Manager from managing a Credit Fund that is established or domiciled outside the DIFC. As part of the consultation, the Authority is proposing to remove this restriction and allow Fund Managers authorised by the Authority to manage External Funds that are Credit Funds. However, they will only be able to do so where the External Fund is a Qualified Investor Fund as defined in the Collective Investment Law, which means it has its Units offered to Persons only by way of a Private Placement, has its Units offered only to Persons who meet the criteria to be classified as Professional Clients and requires an initial subscription of at least 500,000 US Dollars to be paid by a person to become a Unitholder in the Fund.

The Prospectus of the External Fund should meet general requirements for External Fund Prospectuses and include information specific to Credit Funds equivalent to that currently required under CIR Rule 14.4.13.

The Authority is also proposing to review the entire Credit Fund regime in terms of potential imbalances and will launch a call for evidence soon to gather market feedback on various aspects of the regime.

In terms of Public Property Funds and REITs, the Authority is proposing to amend the 2006 Rules. The latest amendments were made in 2015.

In terms of Public Property Funds, the Authority is proposing to strengthen the diversity of the Fund Manager board of Directors so that at least a third of the members of the Governing Body of a Fund Manager of a Public Property Fund, including a public REIT should be non-executive Directors, who meet the requirements of sufficient skill, knowledge, experience and independence of mind.

Independence criteria for non-executive Directors are specified in Article 42(1)(a) to (f) of the Collective investment Law.

In addition, the Authority is proposing to increase the quality and granularity of the Oversight Committee’s report for the benefit of existing and prospective Unitholders. The report should also include a summary of material findings related to the conduct of the Fund Manager, including any actual or potential breaches or inadequacies.

The Authority is proposing that Investment Committee members, as well as being independent of the Fund Manager, should have suitable knowledge, skill and experience to carry out their functions and be in a position to commit sufficient time to perform their duties properly too.

The Authority is proposing these requirements only apply to Public Property Funds, rather than all Property Funds.

The Authority is proposing the Fund Manager be responsible for ensuring Investment Committee members satisfy these requirements as well.

Elsewhere, the Authority is proposing to bolster the requirements concerning the content of an Investment Committee’s report, which forms part of the Fund’s annual report. It is proposing the report includes information on the investment opportunities reviewed by the Committee members and the outcomes of their assessments. The Committee should be able to decide if any information regarding rejected opportunities remains anonymised too to protect commercially sensitive information.

The Authority is also proposing amendments to the disclosure of Fund Manager remuneration. The Authority is proposing that the Fund Manager should disclose detailed information on how its fees and other charges compare to the fees and charges of similar schemes in comparable jurisdictions in the Prospectus .

If the comparison identifies material differences, the Fund Manager should explain these differences in a clear fashion, the Authority is proposing.

When it comes to the termination of fund management agreements, the Authority is proposing to introduce a rule clarifying the Authority’s expectations related to the termination provisions, specifically for Public Property Funds. The Authority is proposing to require that the fund management agreement must contain balanced termination provisions preventing unfairly prejudicial treatment of the Unitholders.

Examples of these provisions include excessive notice or termination periods for the removal of the Fund Manager or onerous conditions effectively preventing the Unitholders from terminating the agreement in the case of fraud, gross negligence or wilful misconduct.

In terms of the valuation of Fund property the Authority is proposing to supplement the current valuation rules with requirements that the valuation report should be published on the REIT’s website and through the normal disclosure channels applicable to a Listed Fund. It is also proposing the valuation report should be published no later than one month after it has been prepared and published no later than two weeks before the payment of the Fund Manager remuneration. In addition, it is proposing that the validity of the valuation reports be reduced from six to three months and the permitted difference on completion between the valuation and the transaction price be reduced from 5% to a maximum of 3%.

The Authority is proposing to require two independent valuations to be carried out and published and all fund property to be required to be valued semi-annually too.

In terms of improving quality of assets invested by REITs, the Authority is proposing to set the requirement at 75% of the REIT’s total assets.

It is also proposing to reduce to 15% of the NAV the total contract value of property under development which a REIT can invest in.

In terms of the minimum size of REIT distributions, the Authority is proposing to increase the percentage of audited annual net income of a REIT which should be distributed to the Unitholders from 80% to 90% to align with international approaches in this area.

The Authority has added it is going to seek further feedback on the merits of introducing a minimum number of Unitholders in Public Funds requirement.

The Authority is not currently proposing amendments to the leverage limits for REITs. The current leverage limits for Property Funds is set at 65% of the Gross Asset Value of the Fund. However, the Authority will seek industry feedback from the industry on whether the current leverage limit for REITs is still adequate.

The REIT industry has called for a 2.5% reduction to 62.5%.

Finally, the Authority is proposing to allow affected entities to have 12 months to comply.

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Dubai: First Guide for Infrastructure Projects No Objection Certificates Approved

Al Bayan, 15 March 2024: Dubai’s Roads and Transport Authority has announced it has approved the first edition of the guide for submitting non-objection certificate transactions for infrastructure projects.

The guide aims to simplify procedures, increase transparency, make it more efficient to implement infrastructure projects and reduce the time required for services.

This will improve customer satisfaction.

It is also an essential guidance tool for contractors and consultants.

It provides clear guidance to those wanting to obtain the necessary permits for infrastructure projects in the train protection zone.

For the full story, click here.

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Dubai: New Investment Platform Launched

Arabian Business, 13 March 2024: Dubai’s Ruler has issued a Decree establishing a Unified Digital Platform for companies setting up in the Emirate.

Dubai Decree No. 13/2024 has been issued as part of efforts to improve Dubai’s business environment and support economic growth.

It aims to integrate various licensing processes in the Emirate including those managed by the Economy and Tourism Department and the authorities of special development zones and freezones, including the Dubai International Financial Centre (DIFC).

By offering a streamlined channel for accessing information, obtaining licences, and availing other services related to economic activities, the platform seeks to improve ease and convenience for investors.

The Economy and Tourism Department will be responsible for operating, managing and developing the Invest in Dubai platform together with the relevant licensing bodies and in line with the digital transformation guidelines set out by the Dubai Digital Authority.

All requests related to licensing and permits should be processed through the Invest in Dubai platform in line with the procedures, requirements, timelines and fees mentioned in the Guide. The Guide is an electronic document developed by the Economy and Tourism Department, It outlines the requirements for operating a business in Dubai.

The Chairman of the Executive Council will be responsible for issuing the decisions to implement the Decree. It annuls anything which may contradict it.

It applies to all economic activities in Dubai and aims to regulate the issuing of licences, permits and approvals in the Emirate to improve clarity and simplicity.

It also aims to help investors overcome obstacles in setting up or operating businesses in Dubai.

In addition, it aims to improve electronic integration between licensing departments and other key entities to avoid procedures being duplicated.

It aims to support digital transformation efforts in line with the objectives of the Dubai Economic Agenda D33 too.

It will be published in the Official Gazette and come into force on its published date.

Dubai Executive Council Decision No. 5/2024 has also been issued. Under this Decision, key principles to support investors in Dubai are introduced. The principles apply to the processes for all licences, permits and approvals related to business activities in the Emirate.

Under the Decision, all licensing entities and federal and local entities responsible for regulating and supervising business activities in the Emirate are also responsible for facilitating the investor journey in Dubai and implementing the relevant procedures to achieve this.

It also outlines various measures to provide a smooth investor experience. This includes registration on the Invest in Dubai digital platform, unified digital data registration and instant licensing. It also includes instant licence renewal, one-step fee payment, streamlining of licensing requirements and standardisation of procedures, rules and conditions.

It will be published in the Official Gazette and come into force when Dubai Decree No. 13/2024 comes into force.

Also reported in WAM Arabic on 13 March 2024. For the full story, click here.

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Dubai International Financial Centre Publishes New Digital Assets Law

The Dubai International Financial Centre has published a new Digital Assets Law.

Following the publication of DIFC Law No. 2/2024, the DIFC has also published amendments to the Contract Law 2004 (DIFC Law No. 6/2004), the Implied Terms in Contracts and Unfair Terms Law 2005 (DIFC Law No. 6/2005), the Law of Damages and Remedies 2005 (DIFC Law No. 7/2005), the Law of Obligations 2005 (DIFC Law No. 5/2005), the Trust Law 2018 (DIFC Law No. 4/2018), the Foundations Law 2018 (DIFC Law No. 3/2018), the Personal Property Law 2005 (DIFC Law No. 9/2005) and the Insolvency Law (DIFC Law No. 1/2019).

The amendments to those pieces of legislation are contained in the DIFC Amendment Law, DIFC Law No. 3/2024.

The Centre had announced a consultation on a proposed Digital Assets Law in October 2023. It ended on 5 November 2023.

The consultation on the proposed legislation and its enactment followed international common law developments and judgments, which have started to provide some clarity on digital assets. However, they have not provided a comprehensive legal framework mapping out the full extent of the legal characteristics of a digital asset and how users and investors within this asset class may interact with digital assets and each other.

DIFC Law No. 2/2024 defines a digital asset as

something that exists as a notional quantity unit manifested by the combination of the active operation of software by a network of participants and network-instantiated data, independently of any particular person and legal system and something that is not capable of duplication and use or consumption of the thing by one person or specific group of persons necessarily prejudices the use or consumption of that thing by one or more other persons.

It is characterised as intangible property and is neither a thing in possession nor a thing in action.

The Law also contains provisions on who will be considered to control a digital asset and how.

In addition, it includes general rules regarding title, transfer of title and the exercise of rights over digital assets in the event of death, incapacity or insolvency.

It includes provisions on the control of a digital asset where there is impairment and provisions on how control of a digital asset can be recovered as well.

There are also miscellaneous provisions on power to make Regulations.

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Dubai: First 3D Printing Construction Licence Approved

Arabian Business, 19 February 2024: The Planning and Development Department or Trakhees of the Ports, Customs and Free Zone Corporation or PCFC has announced it has approved the first 3D printing construction licence.

It was granted to Nakheel and is the first licence for construction using 3D printing technology for buildings in the Emirate.

It was granted to Nakheel for the Al Furjan Hills project in December 2023.

The printing process for the initial project was concluded 20 days after the start of construction operations.

3D printing is allowed in the construction sector in the Emirate under Dubai Decree No. 24/2021.

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Dubai: International Financial Centre Announces Launch of Sustaining Family Business Success Programme

Arabian Business, 12 February 2024: The Dubai International Financial Centre has announced the launch of a Sustaining Family Business Success Programme.

It has been launched together with the DIFC Academy and MIT Sloan Executive Education.

It will take place from 24 to 26 June and will provide family businesses with training on sustaining success across generations.

It is aimed at equipping family businesses with the knowledge and strategies needed to navigate opportunities and challenges as they expand regionally and globally.

They will earn a certificate from the MIT Sloan School of Management after completing the Programme.

The Programme has been developed around six pillars, including future vision, managing turbulence, governance, talent and succession and multigenerational success.

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Dubai: Dubai Financial Services Authority Issues First ESG Fee Waiver

The Dubai Financial Services Authority has announced it has issued the first ESG fee waiver.

It was issued to Emirates NBD Bank PJSC.

The Authority’s Chief Executive announced in December 2023 that it was going to waive all regulatory fees for issuers looking to list sustainability-related debt securities in the DIFC throughout 2024.

All new and repeat issuers who make a relevant application to the Authority are eligible.

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Dubai: Dubai Financial Services Authority Launches Consultation on Amendments to Crypto Tokens Regulation

The Dubai Financial Services Authority has announced it has launched a consultation on proposed amendments to its Crypto Tokens Regulation. It ends on 4 March 2024.

The Authority is proposing to amend its regime for individuals wanting to provide financial services activities in terms of crypto tokens.

The consultation does not cover the regulation of investment tokens.

The Authority’s Crypto Tokens Regulation came into force in November 2022 and at that time the Authority alluded to subsequent changes being made as the regulatory regime evolved and international regulation in this area developed. In particular the Authority envisaged changes to the decentralised finance, money laundering and terrorist financing and custody provisions.

It was implemented to put a comprehensive regime to address various risks associated with crypto token businesses in place. It included requirements relating to technology, governance, custody, disclosure, market abuse and fraud.

The Authority has also listened to feedback from interested parties.

Those who have provided feedback have expressed concerns about the uncertainty in the length of time it will take for an application to be considered and the high application costs.

The Authority will engage with firms applying for recognition closely so as they are kept fully informed about the progress of their application and if any further information is required.

The Authority is also proposing to reduce the application fee from 10,000 US Dollars to 5,000 US Dollars.

In addition, the Authority are proposing more flexibility when it comes to Fiat Crypto Tokens.

The Authority is proposing to remove specific requirements on the proportion of assets held in reserves and require reserves to be be held in assets that are likely to maintain their value. This has to include during periods of stress. They also have to be highly liquid, appropriately diversified and carry minimal credit risk and require daily valuation.

The amendment will provide the Authority with the flexibility to recognise Fiat Crypto Tokens issued in other jurisdictions and regulated in a comparable way.

The Authority are also proposing changes to the definition of a Fiat Crypto Token. This will involve removing the reference to a combination of fiat currencies so that a Fiat Crypto Token is referenced/pegged to a single fiat currency only.

The Authority is also proposing to allow external funds to invest in Crypto Tokens and offering foreign funds the ability to invest in Crypto Tokens, provided specific requirements are met:

The total investment in Crypto Tokens is limited to Recognised Crypto Tokens and must not exceed 10% of the gross asset value of the Fund and daily valuations on the investment in Crypto Tokens must be conducted.

In addition, the units in the Fund must only be offered to professional clients by way of a private placement, a minimum subscription of 50,000 US Dollars is required and an eligible custodian has been appointed to safeguard and administer the Fund’s investment in Crypto Tokens.

They are also proposing to expand the definition of an eligible custodian for a fund manager of an external fund, or authorised firm offering the units of foreign funds that invest in Crypto Tokens.

Eligible custodians may either be an authorised firm who is licenced to provide custody of Crypto Tokens or a person whom the relevant fund manager or authorised firm has, after performing due diligence, assessed as having adequate custody arrangements.

Firms should consider the regulatory status of the custodian, e.g., whether the person is authorised and supervised by another financial services regulator when providing custody of Crypto Tokens as well as whether the person’s systems and controls ensure safety and segregation of Crypto Tokens.

Firms should also consider the adequacy of the person’s policies and procedures for the storage of private keys, the robustness of the person’s technology governance, the independence and management of conflicts of interest and the appropriate client disclosures and periodic reporting among other things.

The Authority is proposing to require fund managers of external funds that invest in Crypto Tokens to provide unitholders with relevant and up-to-date information about the performance and management of the Fund’s Crypto Token investments (upon request), include relevant disclosures in the prospectus, including information on the rights and obligations conferred by Crypto Tokens, the distributed ledger technology used, cybersecurity risks and other relevant information and maintain records, including daily valuations of the fund’s investments in Crypto Tokens too as well as other information to demonstrate compliance with the additional requirements.

The Authority are also proposing to remind fund managers of external funds that they remain subject to overarching obligations applicable to authorised firms.

These include observing high standards of integrity and fair dealing and apply due skill, care and diligence, in managing an external fund. Similarly, a fund manager must have adequate systems and controls to ensure that the affairs of the fund are effectively managed, having regard to the nature, scale and complexity of the its operations and investment objectives and needs of its investors.

They are also proposing to allow domestic funds to make limited investments in unrecognised Crypto Tokens, provided the total exposure to unrecognised Crypto Token does not exceed 10% of the gross asset value of the fund and the domestic fund is a qualified investor fund, i.e., a fund whose units are offered only to professional clients via private placement with a minimum subscription of 500,000 US Dollars.

Fund managers of these qualified investor funds will also be required to provide unitholders with information on unrecognised Crypto Token investments, including information on the rights and obligations conferred by the Crypto Token, its trading history, technology characteristics and associated cybersecurity risks.

While a fund manager of a qualified investor fund will continue to be exempt from many detailed requirements applicable to public funds and exempt funds, it will continue to be subject to the overarching obligations of a fund manager.

In terms of the custody of Crypto Tokens, the Authority is proposing to align its regime more closely with the International Organisation of Securities Commissions Crypto and Digital Asset Recommendations. authorised firms providing custody will be required to disclose their policies on the chosen storage arrangements for client Crypto Tokens, why they have chosen that storage option, the risks associated with the option, how they will address the risks and the mechanism for transfer between wallets.

Authorised firms will also be allowed to hold a client’s Crypto Tokens in a wallet solely for that client. Alternatively, an authorised firm may choose to pool a client’s Crypto Tokens in a wallet containing Crypto Tokens of more than one client. However, they must disclose the approach taken, why they have taken that approach and any risks involved with the approach.

The Authority is also proposing to allow authorised firms providing custody to segregate a client’s Crypto Tokens or pool them with those of other clients provided they disclose the approach taken, why they have taken it and any risks involved with the approach taken.

Authorised firms that provide custody of Crypto Tokens will be responsible for any unauthorised or incorrectly executed transfers of client Crypto Tokens.

The firm will also have to address the situation promptly and put the client’s account back in the position it would have been in if the transfer had not taken place or had been executed correctly within three business days.

They are also proposing to require an authorised firm providing custody of Crypto Tokens to have appropriate policies and procedures in place to enable it to identify and rectify any unauthorised or incorrectly executed transfers of client Crypto Tokens.

They are also proposing requiring an authorised firm to have appropriate compensation arrangements in place to cover the potential losses in the case of any unauthorised or incorrectly executed transfers of client Crypto Tokens, disclose the compensation arrangements selected to its clients and review the measures and arrangements it has selected to comply with this obligation at least annually.

Authorised firms providing custody will also be required to report to the Authority, on a quarterly basis.

They will have to report on the numbers of unauthorised or incorrectly transferred client Crypto Tokens, the numbers of unauthorised or incorrectly transferred client Crypto Tokens that were reversed and the time it took to reverse the transfer, the total number and value of those unauthorised or incorrectly transferred client Crypto Tokens and the total amount of compensation paid to Clients for any unauthorised or incorrectly executed transfers of client Crypto Tokens.

Where a third party agent is used, an authorised firm should consider whether that agent is authorised and supervised to provide custody of Crypto Tokens and the adequacy of their arrangements. This would involve looking at the suitability of the agent’s systems and controls to ensure proper safeguarding and segregation of Crypto Tokens, the extent of the policies and procedures regarding the storage of client Crypto Tokens including the type of storage chosen, safety of the keys, and the measures in place to protect the keys from a hack, theft or fraud and the robustness of technology governance requirements.

The Authority is proposing publishing guidance on assessing the suitability of an agent.

In terms of records, authorised firms must at the very least maintain records which are accurate, and up to date, establish a separate entry for each client, set out the type of Crypto Token held, the amount, location, transfer history and ownership status of those Crypto Tokens and record the type of storage and if it is commingled with the tokens of other clients or individually segregated.

These records must also be maintained in such a way that they are readily available to the Authority, if requested.

If the proposals are approved, daily reconciliation of client Crypto Tokens will be required.

A safe custody auditor’s report will also have to be produced and it will have to include an audit on the systems and controls in place to store a client’s Crypto Tokens to ensure they are adequate to protect them against hacking, theft or fraud.

In addition, authorised persons will have to have policies and procedures in place to deal with the money laundering risks arising from the transfer of Crypto Tokens. This will include transfers to or from an unhosted wallet. They will have to include how the authorised person will deal with situations where a transfer of a Crypto Token is received without the relevant information.

In terms of Crypto Token transfers totalling 1,000 US Dollars or more, authorised persons will have to conduct due diligence on any counterparty virtual asset service provider and identify the money laundering risks associated with a transfer, applying appropriate risk-based measures and specify additional requirements that would apply to non-fungible token and utility token transfers carried out by a designated non-financial business or profession.

Given the range of providers and the products and services they offer, the Authority is proposing that where an authorised person uses a solution or solutions, they should demonstrate to the Authority at the licensing stage or during a risk assessment the effectiveness of that transaction monitoring and blockchain analysis in relation to the firm’s size, customer base and complexity. In doing so, they should look at the quality and effectiveness of the tracking, screening, and tracing provided.

In terms of financial crime, the Authority is proposing to include requirements relating to Crypto Token transfers in the AML module.

They are also proposing to require authorised persons to develop policies and procedures for how they will comply with the travel rule and require an authorised person to have adequate transaction monitoring procedures to detect the origin, any intermediate transaction, and destination of Crypto Tokens transferred from or to its customer so that it can identify and report any suspicious transactions.

In terms of decentralised finance, and specifically staking, the Authority are proposing to limit staking to be offered only by authorised firms who provide custody of crypto tokens.

The Authority may consider expanding the ability to offer staking to other authorised firms.

The Authority are proposing that a custodian must undertake a full assessment of the validator and satisfy itself on reasonable grounds that they are suitable to provide staking services. A custodian should consider the borrower’s governance and internal controls, their financial status, their compliance with applicable laws, the infrastructure used and the security measures in place and the number of Crypto Tokens staked by the borrower on its nodes.

Risk disclosure should also be made available to clients before they stake their tokens. The disclosure should include details of the staking service and the role of any third parties, due diligence performed risks related to staking, such as risk of loss due to technical errors or bugs in the protocol; hacks or theft of the Crypto Tokens and how losses will be dealt with, potential for losses, bonding and unbonding periods and what this might mean if a client cannot withdraw their staked tokens, fees and charges and how rewards are calculated, and how they are paid out to clients.

In addition, the Authority are proposing that if there are any changes in the information provided to clients, an authorised firm must inform their clients of any of these changes in a reasonable time.

Authorised market institutions will not be able to provide any facility or service in relation to staking.

If approved, amendments will be made to the General (GEN) module, the Conduct of Business (COB) module, the Collective Investment Rules (CIR) module, the Anti-Money Laundering, Counter-Terrorist Financing and Sanctions module (AML), the Fees (FER) module, the Auditor (AUD) module and the Authorised Market Institutions (AMI) module of the Authority’s Rulebook.

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