The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) has revised the capital requirements applicable to managers of collective investment funds (CIF) with immediate effect on 10 April 2017. The revisions are introduced to more keenly address the needs of the market participants, as well as to provide enhanced alignment with capital-adequacy standards practised in established jurisdictions including the EU and the UK.
Capital requirements serve to ensure that an authorised firm maintains adequate financial resources to conduct regulated activities as a going concern and, in the event of its insolvency, to enable the firm to be wound down in an orderly manner.
Under FSRA’s current rules, an authorised firm that manages a collective investment fund is subject to a capital requirement that is either determined on a base capital requirement (BCR) of US$250,000 or an expenditure based capital minimum (EBCM) if higher than the BCR.
The FSRA has adopted an enhanced tier structure for BCR, following a review of existing BCR levels against established jurisdictions. For CIF managers of Public Funds, the BCR will be revised to US$150,000, with a lower BCR of US$50,000 for managers of Exempt Funds and Qualified Investor Funds. This recognises that CIF managers of Public Funds present higher conduct risks, and should have a BCR to support the necessary risk management systems and controls in order to assure compliance with the relevant regulations and rules. The current EBCM requirement will remain unchanged.
The FSRA will regularly review and update its financial services rules and regulations to maintain a robust and highly efficient investment platform, and in response to the developments of the local and global markets.