UAE fund distributor fees to be introduced

Added 28th August 2013

The Emirates Securities and Commodities Authority (ESCA) is to introduce a series of fees for those who wish to register and distribute funds in the United Arab Emirates.

UAE fund distributor fees to be introduced

At the end of June a little publicised notice was published on the SCA’s website by the regulator’s board, stipulating the new fees and announcing that once published in the local Gazette it would become law.

Under the new fee regime, those looking to distribute funds in the UAE will have to pay total costs of between AED15,000 (£2,600, €3,000, $4,000), and AED35,000, with ‘foreign’ companies at the higher end of that pay scale (see below for full fee breakdown).

Nigel Sillitoe, chief executive of research house, Insight Discovery, said the new fees have surprised many working in financial services in the UAE.

“Compared to other jurisdictions the fees are on the high side,” said Silitoe. “As these fees are per fund and in theory should be paid by the bank/distributor marketing the funds I don't believe too many banks will be willing to pay these fees, especially if they currently market, for example, 20 funds to their customers as this would result in a AED700,000 fee being paid to the SCA.”

Sillitoe added that he expects to see asset managers pick up the costs of distributing the funds which is “yet another cost to be borne by asset management companies operating in the retail space”.

“The most likely outcome is that asset management companies will negotiate sales targets with distributors who pass on these SCA fees, another outcome, which is far less palatable, is that it could reduce the number of funds made available to consumers,” added Sillitoe.

In addition to the fees for registering and distributing specific funds, distributors will also need to apply for a licence, at a cost of AED5,000 to be eligible to sell funds in the UAE. If permitted the distributor will be allowed to purchase a licence for AED10,000 which must be renewed every year for a further AED5,000.

Look out on International Adviser over the next few days for reaction to the new fees…

The new fund registration fees are as follows:

The establishment of local mutual funds:
a.    Fee for examining the application for  incorporation - AED5,000
b.    The license fee for a local mutual fund - AED10,000
c.    Fee for examining the application to modify the prospectus of a local mutual fund - AED 5,000

Approval to promote foreign funds within the UAE:
a.    Fee for examining the application - AED5,000
b.    Fee for issuing the approval to promote a foreign fund in a private offering - AED 15,000
c.    Fee for issuing the approval to promote a foreign fund in a public offering - AED 30,000

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