The United Arab Emirates (UAE) is home to two primary onshore financial centers where companies can obtain financial licenses: Dubai and Abu Dhabi. Each center is regulated by its respective authorities, with the Central Bank overseeing financial companies in Dubai and independent regulators governing activities in other regions. In Abu Dhabi, the Abu Dhabi Global Market (ADGM) stands out as one of the UAE's prominent Financial Free Zones, offering a distinct regulatory environment for financial services.
ADGM Financial Licensing Overview
The ADGM is a well-established international financial center, recognized for its robust regulatory framework and international standards. At its core is the Financial Services Regulatory Authority (FSRA), an independent regulator responsible for licensing and overseeing banking and financial institutions within the ADGM.
The ADGM provides licenses across several categories:
Category 1: Restricted to specific financial activities.
Category 2: Allows for a broader range of financial activities.
Category 3A, 3B, 3C: Covers different scopes of investment services and asset management.
Category 4: Pertains to market infrastructure activities.
Category 5: Encompasses various other financial activities.
Regulatory Authorities in ADGM
ADGM Registration Authority (ADGM RA): This body handles the registration, incorporation, and licensing of legal entities within the ADGM. It also provides essential government-related services.
Financial Services Regulatory Authority (FSRA): The FSRA oversees financial services entities in the ADGM. It operates through two independent bodies—the Regulatory Committee and the Appeals Panel. The FSRA is a signatory to 88 bilateral memorandums of understanding (MoUs) with global regulators and is a member of the International Organisation of Securities Commissions (IOSCO) and the Basel Committee Consultative Group (BCG). Entities must adhere to FSRA regulations and meet specific obligations beyond standard requirements.
ADGM Courts: The judiciary in ADGM is modeled on the English legal system. It applies English common law, including equity principles and established civil statutes, making it a unique jurisdiction in the Middle East. The Application of English Law Regulations 2015 provides the foundation for ADGM's civil and commercial law.
General Rules for ADGM Financial Licensing Categories
Each licensing category within ADGM has specific rules governing the activities of Authorised Firms:
Category-Specific Conduct: Firms are restricted to conducting activities for which they are specifically authorized. For example, a Category 2 entity is not permitted to perform activities designated for Categories 3A, 3B, 3C, or 4 unless explicitly authorized.
FSRA Rulebook Compliance: Authorised Firms must comply with the FSRA Rulebook, which includes client classification requirements and restrictions on dealing with UAE Dirhams or accepting deposits from UAE markets.
Consequences of Non-Compliance: Breaches of FSRA regulations may result in the withdrawal of an entity's authorization. The FSRA can impose sanctions on Authorised Firms and individuals, including suspension or withdrawal of their operational status.
Conclusion
Understanding the ADGM's financial licensing framework is essential for firms operating within this financial hub. By adhering to the specific regulations and guidelines set forth by the ADGM and FSRA, businesses can navigate the regulatory landscape effectively and ensure compliance with both local and international standards.