FUNDS PART 2: FUNDS PART 2: DEFINITIONAL PROVISIONS
In these Rules, a reference to a "Fund" is a reference to a Collective Investment Fund as defined in Section 106 of the FSMR. The definition under Section 106 is very wide. However, Rule 2.1 below sets out certain excluded arrangements which do not fall within the definition of a Fund.
FUNDS 2. FUNDS 2. ARRANGEMENTS NOT CONSTITUTING A FUND
FUNDS 2.1 FUNDS 2.1 Exclusions
The Regulator prescribes that an arrangement which otherwise amounts to a Fund does not constitute a Fund if it falls within one or more of the exclusions specified in this Chapter.
An arrangement does not constitute a Fund if the whole amount of each participant's contribution is a Deposit which is accepted by an Authorised Person authorised under its Financial Services Permission to carry on the Regulated Activity of Accepting Deposits.
An arrangement does not constitute a Fund if:(a) the rights or interests of each participant in the arrangement are rights or interests in money held in a common account; and(b) the money is held in the account on the understanding that an amount representing the contribution of each participant is to be applied in making payments to him or in satisfaction of sums owed by him or in the acquisition of property for him or the provision of services to him.
Commercial activities unrelated to Regulated Activities
An arrangement does not constitute a Fund if each of the participants in the arrangement:(a) carries on a business which does not involve the carrying on of any of the Regulated Activities specified under Schedule 1 of FSMR or an activity which would be such an activity were it not for any applicable exclusion; and(b) enters into the arrangement for commercial purposes related to that business where that participant carries on that business by virtue of being a participant in the arrangement.
An arrangement does not constitute a Fund if each of the participants is a Body Corporate in the same Group as the Person undertaking the fund management function in relation to the arrangement.
An arrangement does not constitute a Fund if the arrangement is a franchise arrangement.
An arrangement does not constitute a Fund if the purpose of the arrangement is the provision of clearing services and the services are operated by a Recognised Body.
Certificates or Options
Time-share and other 'property-enjoyment' related arrangements
An arrangement does not constitute a Fund:(a) if the rights or interests of each of the participants in the arrangement are time share rights; or(b) if:(i) the predominant purpose of the arrangement is to enable the participants to share in the use or enjoyment of property or to make its use or enjoyment available gratuitously to others; and(ii) the property to which the arrangement relates does not consist of or include the currency of any country or territory or Investments, as defined in Part 3 of Schedule 1 of the FSMR or, which would be such Investments if not for any applicable exclusion.
Bodies corporate not undertaking investment management
An arrangement does not constitute a Fund if the arrangement comprises a closed-ended Partnership or Body Corporate, unless on reasonable grounds the purpose or effect of such an arrangement appears to be the investment management, in the exercise of discretion for a collective purpose, of investments, for the benefit of the shareholders or partners.
Debentures and Warrants of a single issuer
FUNDS 2.1.11(a) An arrangement does not constitute a Fund if the rights or interests of the participants in the arrangement are represented by a Debenture or Warrant:(i) where the issuer of the Debenture or Warrant is a single issuer, and if that issuer is:(A) a Body Corporate, it is neither an open-ended investment company nor a closed-ended company the intent or purpose of which is investment management as specified in Rule 2.1.10; or(B) not a Body Corporate, the rights and interests of the Debenture or Warrant holder are guaranteed by the government of any country or territory; and(ii) which, if it is a convertible Security, the underlying Securities to which the Debenture or Warrant holder is entitled are Shares or Debentures issued, or to be issued, by the same issuer as the issuer of the Debenture or Warrant or single other issuer.(b) An arrangement that does not constitute a Fund by virtue of Rule 2.1.11(a) does not become a Fund merely because one of the participants in the arrangement is a person:(i) whose ordinary business involves him engaging in an activity that is a Regulated Activity as defined in Schedule 1 of FSMR or that would fall within an applicable exclusion from a Regulated Activity; and(ii) whose rights or interests in the arrangement are, or include, rights or interests in a swap arrangement under which he facilitates the making of payments to participants whether in a particular amount or currency or at a particular time or rate of interest or all or any combination of those things in settlement of the rights and interests of the other participants in the arrangement.
An arrangement does not constitute a Fund if it is a Contract of Insurance.
Profit Sharing Investment Accounts
An arrangement does not constitute a Fund if it is an account or portfolio which is a Profit Sharing Investment Account.
Discretionary Portfolio Accounts
An arrangement does not constitute a Fund if it is a portfolio or account managed under a Discretionary Portfolio Management Agreement.
Close Relative accounts
An arrangement does not constitute a Fund if every participant in the arrangement is a Close Relative. For the purposes of this Rule, the defined term "Close Relative" includes grandchildren.
An arrangement does not constitute a Fund if the rights or interests of the participants are evidenced by sukuk certificates where the holders of the certificates are entitled to rely on the credit worthiness of:(a) the issuer of the sukuk certificates; or(b) any other Person who has assumed obligations under the sukuk certificates,
for obtaining their rights and benefits arising under the certificates.
Employee reward schemes
An arrangement does not constitute a Fund if the arrangement is for the purposes of enabling or facilitating the operation of an employee compensation or reward scheme where the arrangement:(a) makes Securities available only to:(i) an Employee or former Employee of the Issuer or of another member of the same Group as the Issuer; or(ii) a Close Relative of any such Employee; and(b) is operated by the Issuer or by a member of the same Group as the Issuer or by a trustee who, in pursuance of the arrangements, holds the Securities issued by the Issuer for the benefit of any eligible Persons referred to in Rule 2.1.17(a)(i) or (ii).
Carried interest vehicles
An arrangement does not constitute a Fund if it is a carried interest vehicle which is established solely for the purposes of enabling officers, directors or employees of a Fund Manager, or related persons, to participate in carried interest or similar profit generated by one or more Funds.
Private Financing Platforms
Private Financing Platforms
An arrangement does not constitute a Fund if it is an arrangement made for the purpose of facilitating investment through a Private Financing Platform.
FUNDS 3. FUNDS 3. FUND CRITERIA
FUNDS 3.1 FUNDS 3.1 Domestic and Foreign Funds
FUNDS 3.1.1(1) A Fund is either a Domestic Fund or a Foreign Fund.(2) A Fund is a Domestic Fund if it is established or domiciled in the Abu Dhabi Global Market.(3) A Fund that does not meet the Domestic Fund criteria is a Foreign Fund.
FUNDS 3.2 FUNDS 3.2 Types of Domestic Funds
FUNDS 3.2.1(1) A Domestic Fund shall be one of the following types of Fund:(a) a Public Fund;(b) an Exempt Fund; or(c) a Qualified Investor Fund.(2) The types of Fund set out above are listed in terms of the level of regulation (from most intensively regulated to least intensively regulated).(3) The Regulator may treat any type of Domestic Fund as a specialist class of a Domestic Fund pursuant to Rule 4 hereof.
FUNDS 3.3 FUNDS 3.3 Domestic Fund criteria
FUNDS 3.3.1(1) A Domestic Fund shall be constituted as a Public Fund if:(a) some or all of its Units are offered to investors by way of a public offer; or(b) its Unitholders include Retail Clients.
FUNDS 3.3.3(1) A Domestic Fund is an Exempt Fund, if:(a) its Units are offered to persons only by way of a private placement;(b) all its Unitholders are persons who meet the criteria to be classified as Professional Clients; and(c) the initial subscription to be paid by a person to become a Unitholder is at least US$50,000,and it does not satisfy the conditions in Rule 3.3.4 below to be a Qualified Investor Fund.
FUNDS 3.3.4(1) A Domestic Fund is a Qualified Investor Fund, if:(a) its Units are offered to persons only by way of a private placement;(b) all its Unitholders are persons who meet the criteria to be classified as Professional Clients; and(c) the initial subscription to be paid by a person to become a Unitholder is at least US$500,000.
FUNDS 3.3.5(1) A Domestic Fund does not cease to be an Exempt Fund or a Qualified Investor Fund under Rule 3.3.3 or Rule 3.3.4 above merely because one or more Units in that Fund is registered in the name of a person who does not meet the criteria to be a Unitholder of that particular type of Fund as a result of:(a) inheritance from a registered Unitholder of the Fund; or(b) any legal action brought for or against a registered Unitholder.
FUNDS 3.4 The different types of Domestic Funds
This table illustrates the different Rules applicable to the three categories of Domestic Fund.
The Fund Rules Chapters Public Fund Exempt Fund QIF Chapter 1: Application and Client Classification ✓ ✓ ✓ Chapter 2: Arrangements Not Constituting a Fund ✓ ✓ ✓ Chapter 3: Fund Criteria ✓ ✓ ✓ Chapter 4: Specialist Classes of Funds ✓ ✓ ✓ Chapter 5: Excluded Offers ✓ ✓ ✓ Chapter 6: Domestic Funds ✓
Rule 6.2 does not apply
Rule 6.1 does not apply
Rule 6.1 does not apply
Chapter 7: Foreign Funds and Foreign Fund Managers ✓ ✓ ✓ Chapter 8: Regulator Notification ✓ ✓ ✓ Chapter 9: Marketing of Domestic Funds and Prospectus Disclosure ✓
Rules 9.5.2 and 9.5.4 do not apply
Rules 9.5.1 and 9.5.3 do not apply
Only Rules 9.1.1, 9.2, 9.3, 9.4.1, 9.4.2, 9.5.2, 9.5.4, 9.6.1, 9.7 & 9.8 apply
Chapter 10: Marketing of Foreign Funds and Prospectus Disclosure ✓ ✓ ✓ Chapter 11: Constitution ✓ ✓ ✓
Only Rules 11.1.1, 11.1.2(1)(a), 11.1.2(1)(c), 11.1.2(1)( d), 11.1.2(1)(e), 11.1.3(1)(b), 11.1.3(2) and 11.1.5 apply
Chapter 12: Management and Operation of a Fund ✓ ✓ ✓
Only Rules 12.1, 12.2, 12.3.1, 12.3.2, 12.3.3, 12.3.4, 12.3.5, 12.3.6, 12.3.7(b), 12.3.8, 12.3.9, 12.3.10, 12.3.12(1), 12.4.1 (b) and 12.10.1 and the Guidance to Rule 12.12.2 apply
Chapter 13: Requirements Specific to Public Funds ✓ Chapter 14: Requirements Specific to Exempt Funds ✓ Chapter 15: Requirements Specific to Qualified Investor Funds ✓ Chapter 16: Accounting, Audit and Periodic Reporting of a Fund ✓ ✓
A comparative table as set out in Rule 16.4.8 for the annual report is not required.
Rules 16.3.8 and 16.4.5(a) need not be complied with if a waiver is obtained pursuant to Rule 16.3.9
Rules on interim reports do not apply unless there has been a material change during the interim accounting period. A comparative table for the annual report is not required Rules 16.3.8 and 16.4.5(a) need not be complied with if a waiver is obtained pursuant to Rule 16.3.9
Chapter 17: Fund Administrators ✓ ✓ ✓
Rule 17.1.4 does not apply
Chapter 18: Transfer Schemes Relating to Domestic Funds ✓ ✓ ✓ Chapter 19: Winding Up of Domestic Funds ✓ ✓ ✓ APP 1: Delegation and Outsourcing ✓ ✓ APP 2: Meeting Procedures ✓ APP 3: Approvals and Notifications ✓ APP 4: Guidance on Asset Valuation and Pricing ✓ ✓ APP 5: Constitution of a Domestic Fund ✓ ✓ APP 6: Guidance of Fitness and Propriety for Oversight Functions ✓ APP 7: Public Fund Prospectus Disclosure ✓ APP 8: Recognised Jurisdiction List ✓ ✓ ✓
FUNDS 4. FUNDS 4. SPECIALIST CLASSES OF FUNDS
FUNDS 4.1 FUNDS 4.1 Specialist Funds
FUNDS 4.1.1(1) A Domestic Fund that falls within one or more of the criteria specified in Rules 4.1.2 to 4.1.4 is hereby prescribed to be a Domestic Fund of that specialist class or classes.(2) A Foreign Fund that falls within one or more of the criteria specified in Rules 4.1.2 to 4.1.4 is hereby prescribed to be a Foreign Fund of that specialist class or classes for the purposes of:(a) managing that Fund in the Abu Dhabi Global Market;(b) marketing of the Units of that Fund in or from the Abu Dhabi Global Market; or(c) determining whether a Domestic Fund investing in such a Fund continues to meet any criteria or other requirements applicable to that Domestic Fund.
FUNDS 4.1.2 FUNDS 4.1.2
A Fund is a Feeder Fund if it is dedicated to investing all, or substantially all, of its assets in the Units or Debentures of a single other Fund (Master Fund).
Guidance1. A Domestic Feeder Fund may have a Foreign Fund as its Master Fund.2. A Sub-Fund of an Umbrella Fund is not a Feeder Fund.
FUNDS 4.1.3 FUNDS 4.1.3
A Fund is a Master Fund if it, in whole or in part, issues its Units or Debentures to one or more other Funds which are dedicated to investing in that Master Fund.
A Domestic Master Fund may have one or more Foreign Funds as its Feeder Funds.
FUNDS 4.1.4(1) A Fund is an Umbrella Fund if the contributions of the Unitholders in the Fund and the profits or income out of which payments are to be made to them are pooled separately in a number of Sub-Funds constituting separate parts of the Fund Property.(2) A Fund Manager of an Umbrella Fund must ensure that none of its Sub-Funds invests in another of its Sub-Funds.
Real Estate Investment Trust (REIT)
A Fund is a Real Estate Investment Trust (REIT) only if it meets the criteria in Rule 13.5.
Venture Capital Fund
FUNDS 4.1.6(1) A Fund is a Venture Capital Fund if it:(a) invests only in the Securities of companies which are at an early stage of development and that are not listed or admitted to trading on an exchange, either;(i) directly; or(ii) indirectly as a Feeder Fund holding units of a Master Fund, in accordance with (2);(b) is closed ended;(c) limits total subscriptions to an amount not to exceed $100 million or a higher amount approved by the Regulator; and(d) is either;(i) a Domestic Fund that is either an Exempt Fund or Qualified Investor Fund; or(ii) a Foreign Fund that is not available to Retail Clients.(2) A Venture Capital Fund may consist of a Master Fund and Feeder Fund(s) structure in which:(a) each Feeder Fund meet the requirements in (1)(a)(ii),(b) and (d); and(b) the Master Fund meets the requirement of (1)(a)(i),(b), (c) and (d).
FUNDS 5. FUNDS 5. EXCLUDED OFFERS
FUNDS 5.1 FUNDS 5.1 Excluded transactions and offers
FUNDS 5.1.2 FUNDS 5.1.2
A Person does not make an Offer of a Unit by offering to sell or transfer a Unit that is owned by that Person if the offer to sell or transfer:(a) is capable of acceptance only by the Person to whom that offer is made; and(b) is not made by way of a financial promotion as defined in Schedule 2 of the FSMR.
While a Person who makes personal offers of the kind referred to in Rule 5.1.2 does not attract the Prospectus disclosure obligations in these Rules, if that Person frequently sells Units held by him, he would be likely to be 'Dealing in Investments as Principal'. As a result, such a Person would need to be licensed. Similarly, a Person who obtains Units for the purposes of secondary sales would be likely to be regarded as making those sales "by way of business" and would thus trigger the need to be licensed.
FUNDS 5.1.3(1) A Person does not make an Offer of a Unit if that Person is an Authorised Person and it undertakes a Transaction in relation to a Unit of a Fund if the Transaction is:(a) an Execution-Only Transaction undertaken for or on behalf of a Client;(b) a trade executed for or on behalf of a Client in accordance with a Discretionary Portfolio Management Agreement entered into with that Client; or(c) effected with the Fund Manager of a Fund for the purposes of redeeming a Unit of that Fund for or on behalf of a Client.
A Person does not make an Offer of a Unit if that Person is an Authorised Person and the Offer is made only to, or directed only at, a Market Counterparty.