CFCL Investment regulation – Dubai
Reference
Regulatory structure
Please refer to the Market infrastructure – United Arab Emirates (Nasdaq Dubai) for the complete information about the Regulatory structure.
Holding restrictions
Holding Restrictions – CSD Market – Dubai
An institutional investor must set up an account with a member of Nasdaq Dubai.
Foreign investors are permitted to invest on Nasdaq Dubai without holding restrictions. Both segregated accounts and omnibus accounts may be opened with custodians that participate at the Nasdaq Dubai CSD. There are no other market entry requirements for foreign investors.
No ownership restrictions are imposed by Nasdaq Dubai on companies that list on the exchange, however, companies (as issuers) may be subject to specific restrictions in their own country of incorporation. Specific restrictions are communicated to CSD participants and compliance with these regulations is enforced on a case-by-case basis.
Disclosure requirements
Introductory information and categories
This section provides general information about the disclosure requirements for fund securities holdings with which Clearstream Fund Centre must, according to the information available at the time of the present publication, comply with each of the domestic markets and fund markets covered by the Disclosure Requirements. Fund securities that are held remotely are usually not disclosed by CFCL. A disclosure request received by CFCL regarding such a holding will be forwarded to the relevant client without assessing its validity and the CFCL Client shall handle the request on a voluntary basis.
Disclosure Requirements are only available for those countries where CFCL has a link to the respective domestic market or direct access to local domiciled funds that are held in Clearstream’s name on the register.
For fund securities holdings where CFCL has no such link or direct access to the register, clients must be aware that local laws might provide for mandatory disclosure. A disclosure request in this regard will be forwarded to clients without assessing its validity. Clients commit not to unreasonably withhold their consent to such a request and agree to indemnify CFCL for damages resulting directly from non-compliance with mandatory local disclosure requirements.
In most cases, the obligation to disclose is based on the domestic equivalent of a Companies Act, relevant investment funds act or anti-money laundering act and covers all security types.
In some instances, the obligation to disclose is based on stock exchange laws or regulations and only applies to listed domestic and foreign securities.
The Disclosure Requirements do not constitute legal advice and the Clients should seek independent professional advice in relation to fund securities deposited with CFCL, especially as, for those jurisdictions in which no disclosure obligation falls on CFCL, there may be separate disclosure requirements that apply directly to clients of CFCL, shareholders and beneficial owners.
Please note that CFCL is not always given comprehensive information or advised of changes affecting local disclosure requirements.
It remains the sole responsibility of the Client to ensure compliance with local disclosure requirements. If a requirement is not met, it is the Client who will be liable to any related penalty. Clients are therefore advised to seek independent legal advice on the existence and interpretation of local disclosure requirements.
In the case of a discrepancy between the general information contained in this document and the information provided by CFCL for a specific market, as applicable (irrespective of whether this information has been obtained from an agent of Clearstream Fund Centre, or, as the case may be, a foreign regulator of a branch of CFCL), the information provided by CFCL for the specific market as applicable, shall prevail.
N.B.: In all countries, if it is suspected that a disclosure obligation has been breached (for example, that a threshold of holdings under custody has been crossed without being reported), the regulators and the authorities may have the power to investigate. Moreover, in all countries, disclosure obligations might be triggered by enforceable judgements of the competent jurisdiction of the country in question.
Disclosure categories
Clearstream Fund Centre classifies disclosure scenarios according to the following market categories:
Category 1
Markets where disclosure by Clearstream Banking as a custodian of Clearstream Fund Centre to issuers, investment fund managers and/or to regulators or market authorities is mandatory under applicable law;
Category 2
Markets where disclosure by Clearstream Banking as a custodian of Clearstream Fund Centre of account holders to issuers, investment fund managers and/or foreign regulators or market authorities is a legal obligation in respect of securities in specific circumstances;
Category 3
Markets where there is no obligation for Clearstream Banking as custodian of Clearstream Fund Centre to disclose account holders to issuers, investment fund managers and/or regulators, notwithstanding any disclosure requirement falling directly on clients of Clearstream Fund Centre, shareholders and/or beneficial owners or notwithstanding disclosure necessary to obey an enforceable judgement of the country in question.
Disclosure requirements – CSD Market – Dubai
Disclosure Category: 1
Under the terms of Article 42 of the Dubai International Financial Centre (DIFC) Law No.1 of 2012 (“Markets Law 2012") and Chapter 4.3 of the Dubai Financial Services Authority (DFSA) Market Rules (“MKT”), CFCL may fall under the obligation to disclose, to the Nasdaq Dubai CSD and/or to issuers of securities listed on Nasdaq Dubai, the identity and holdings of clients.
The articles of association of particular issuers and the prospectus governing the listing of a specific instrument on Nasdaq Dubai may also specify circumstances under which the issuer may request disclosure.
Consent
In order to comply with the legislation as mentioned above, clients entering into transactions in the Nasdaq Dubai market, consent and are hereby deemed to consent to disclosure and to the appointment of the requestor (for example, the listed company or its agent) as their attorney-in-fact, under power of attorney, to collect from CFCL such information as is required to be disclosed.
Disclosure requirements
Clients are advised that local laws and regulations may require CBL to disclose securities holding information and the identity of the final beneficial owners of certain securities. Generally, CBL will provide its subcustodian with the required information upon receipt of a request to do so.
Background and legal basis
General rules and regulations relating to disclosure requirements are detailed in Article 42 of the Dubai International Financial Centre (DIFC) Law No.1 of 2012 (“Markets Law 2012"), with additional guidance contained in Chapter 4.3 of the Dubai Financial Services Authority (DFSA) Market Rules (“MKT”). Article 42 and Chapter 4.3 also cover the rules regarding disclosure requirements.
All Nasdaq Dubai CSD participants (including CFCL’s appointed local custodian) are governed by the “CSD Terms and Conditions for Custodians”, whose Section 7.6 requires all Nasdaq Dubai CSD participants to provide any information that the CSD may request from time to time, including, without limitation, country specific information with respect to each beneficial owner of deposited securities within a given time frame.
Pursuant to Section 7.7, Nasdaq Dubai CSD participants are required to divulge beneficial owner information contained in a Disclosure Report to the relevant issuer, its registrar and its agents, to the DFSA, to Nasdaq Dubai and to any other governmental or regulatory authority, body or person that has the responsibility for the supervision or regulation of any activity or other financial service or for law enforcement purposes.
Individual prospectuses issued by companies to fulfil listing criteria for the Nasdaq Dubai may also contain specific clauses authorizing the issuer to demand disclosure of beneficial owners in line with requirements stipulated in Rule 9.
Nasdaq Dubai CSD participants are required to submit a report on holdings held through their participant account to the CSD and/or issuers by the deadline initially communicated by the requestor. The contents of the report generally include the name of the final beneficiary, the nationality of the final beneficiary and the number of units held.
Sanctions
Failure to disclose final beneficiary details will result in Nasdaq Dubai contacting the CSD participant in order to obtain the direct contact details of the underlying entity that failed to disclose.
Obligation to report threshold crossings
It is each shareholder’s obligation to monitor their shareholding and to file a report with the Dubai Financial Services Authority (DFSA) and the listed company within five days of acquiring a holding of 5% or more of the voting shares of the listed company. Any further change of 1% increase or decrease triggers a report to the DFSA and the listed company. Shareholders could face regulatory action in the event of failure to comply with the above requirements. Such regulatory action could be in the form of monetary penalties or a public censure and could lead to banning from transacting on the market in the case of repeated non-compliance.