DIFC positioned as the central hub for Hedge
Funds in the region

Hedge funds are showing increasing interest in Dubai as a gateway to the region, looking to establish a presence in DIFC – a rising global hub for alternative investments and hedge funds. DIFC also boasts a unique offering of ecosystem benefits, particularly for hedge funds, in addition to additional regulatory, infrastructure, and environmental advantages at the emirate level. DIFC has more than 60 hedge funds already registered or in the pipeline and 55% of DIFC-based hedge funds originate from US & UK. The migration of hedge funds to DIFC from other global and regional centres reinforces Dubai’s reputation as the region’s leading financial centre and business capital. It also reflects the emirate’s ability to attract top talent and provide access to large concentrations of public and private capital.

The Dubai Financial Services Authority (DFSA), which is globally recognized for its transparency and governance, has always been an accessible and collaborative regulator. While overseeing the DIFC jurisdiction for almost 20 years now, the DFSA frequently consults with the industry, unlike markets where funds have continued to become frustrated by slow and rigid approaches

“DIFC is delighted to welcome our new hedge fund clients to the Centre thereby continuing our remarkable growth as a rising global hub for hedge funds and certainly the region’s largest hedge fund market. Our new clients will manage and grow their business by attracting top global talent and by tapping into deep pools of public and private capital accessible in, and from Dubai.”

Salmaan Jaffery, Chief Business Development Officer, DIFC Authority,

Alongside an environment of ambitious innovation, the DIFC ecosystem also provides the perfect set of partners for funds and their portfolio managers looking to establish in Dubai. Hedge funds can hit the ground running with unparalleled access to high-caliber professional advisors, including law firms, consultancies, and tax specialists within the Centre

DIFC’s world-class ecosystem and infrastructure to support hedge fund capabilities

DIFC is the largest financial services ecosystem in the region and has become a preferred destination for financial institutions from all sectors. It is widely regarded as being on par with the world’s leading financial centres.
Financial institutions, hedge funds included, recognize DIFC’s governmental support, ease of doing business, market-leading operating environment, innovation offering, depth of ecosystem, and forward-thinking legal and regulatory framework. The quality and range of DIFC’s independent regulation, common law framework, supportive infrastructure, and tax-friendly regime make it an ideal base to satisfy the region’s rapidly growing demand for financial and business services.

A regulatory framework that fosters facilitation and aligns seamlessly with international standards.

DIFC’s regulatory model centres on an independent risk-based regulator, the Dubai Financial Services Authority (DFSA), closely modeled on legislation employed in London and New York. In addition to granting licenses, the DFSA regulates all financial institutions, including hedge funds, in DIFC and oversees a legislative system that is consistent with English Common law – the global standard for financial services. The regulator also consults on prospective regulations with industry stakeholders. DIFC has its own set of civil and commercial laws and regulations, in addition to an independent judicial system represented by DIFC Courts, which have exclusive jurisdiction over all civil and commercial disputes arising within DIFC and relating to DIFC-registered entities. The Centre has also made several enhancements for hedge fund clients looking to domicile both their manager and funds at DIFC. It waives DIFC registration costs, reduces regulatory capital, and lowers regulatory fees by as much as 60–80 percent. Hedge funds based in DIFC can be set up as Qualified Investor Funds, Public Funds, or Exempt Funds. The latter are subject to lower regulation in DIFC as they are open to accredited or professional clients only. These funds are also subject to lower base capital requirements – USD 70,000 as opposed to USD 500,000 for public funds – and a fast-track application process which the DFSA aims to complete within five days.

Hedge Funds in DIFC

The Fund Manager of a Hedge Fund is responsible for ensuring that risks associated with the Fund are adequately managed by:

Ensuring that there is adequate segregation of duties between the investment function and the Fund valuation process;

Observing best practice standards and guidance issued by the DFSA, in particular, the DFSA Hedge Fund Code of Practice; and

Observing the requirements that relate to the appointment of prime brokers with authority to combine the assets of the Fund with any other assets, which can only be done in respect of Exempt Funds, and not Public Funds.

DFSA Hedge fund can be a Public Fund or a Professional Fund

Public Funds

Public Funds are open to Retail Clients (as defined by the DIFC), and hence subject to higher levels of regulation. The other features of a Public Fund in the DIFC are:

1. No minimum subscription limit.
2. Units are offered to the general public.
3. Can have any number of unit-holders.
4. Have to comply with IOSCO principles.

Exempt Funds

Exempt Funds are open only to Professional Clients (as defined by the DIFC). The other features of an EF are:

1. Minimum subscription of US$ 50,000.
2. Units are offered to persons only by way of a Private Placement.

Qualified Investor Funds

Qualified Investor Funds are open only to Professional Clients (as defined by the DIFC). The other features of a QIF are:

1. Minimum subscription of US$ 500,000.
2. Units are offered to persons only by way of a Private Placement.

How MS can help you in DIFC?

We offer end-to-end support for Hedge Fund license applications, guiding you through the entire process. From initial consultations to authorization assistance and the preparation of legal documentation, MS Facilitators ensure your application aligns seamlessly with the DFSA Rulebook, guaranteeing comprehensiveness and compliance.

Our comprehensive services encompass:

The business landscape in the United Arab Emirates (UAE) is witnessing a profound transformation with the enactment of the Dubai International Financial Centre (DIFC) Family Arrangements Regulations. This regulatory evolution, effective from January 31, 2023, marks a decisive shift from the Single-Family Office (SFO) regime, aligning seamlessly with the recently introduced UAE Family Business Law. In this blog post, we delve into the intricacies of these regulations and their implications on the landscape of family businesses within the DIFC.

A Strategic Transition:

The journey begins with a graceful transition for Single Family Offices (SFOs) as they evolve into Family Offices under the new regulations. The transition period, extending until January 31, 2024, provides entities with the necessary time to adapt to the regulatory nuances.

Simplified Registration Process:

Noteworthy is the simplification of the registration process. Family Offices are no longer bound to register as Designated Non-Financial Businesses or Professions (DNFBP) with the Dubai Financial Services Authority (DFSA). However, the landscape is nuanced for multi-family offices, necessitating DFSA authorization and licensing for those engaging in financial services for multiple families.

Certification and Accreditation Programs:

Recognizing the unique needs of family businesses, the DIFC introduces certification and accreditation programs. These programs are designed to fortify the support system for family businesses and their advisors, aligning with the overarching goals of the UAE Family Business Law.

Flexibility for Single Families:

The regulations extend flexibility for Single Families, allowing Family Entities or Family Offices to operate beyond the DIFC’s jurisdiction. This flexibility is contingent upon demonstrating a substantial presence in the UAE and appointing a Corporate Service Provider as a registered agent in the DIFC.

Confidentiality at the Forefront:

Confidentiality takes centre stage in the regulatory landscape. The DIFC maintains a special Family Businesses register, offering a private repository for sensitive information, shielding it from public disclosure. This move underscores a commitment to safeguarding the proprietary details of family businesses.

Licensing Requirements and Minimum Net Asset:

To be licensed as a Family Office, entities must meet specific criteria. Submission of relevant documentation and maintaining a minimum net asset requirement of USD 50 million are central to the licensing process. The assessment of net assets can be determined through fair market value or a book value assessment.

Alternative Dispute Resolution (ADR):

The regulations lay a robust foundation for Alternative Dispute Resolution (ADR) within Family Structures. This provision allows for arbitration to resolve disputes, aligning with the UAE Family Business Law’s emphasis on establishing committees in each Emirate to oversee family business disputes.

In conclusion, the DIFC Family Arrangements Regulations emerge not merely as a legal framework but as a strategic commitment by the DIFC to nurture the growth and success of family businesses in the region. As the DIFC launches the Global Family Business and Private Family Wealth Centre, it underscores its dedication to providing unparalleled support for family businesses, ultra-high net worth individuals, and private wealth offices operating within its jurisdiction. These regulations set the stage for a more transparent, flexible, and supportive environment, reflecting the evolving needs of family businesses in the dynamic landscape of the DIFC.

How MS can help?

MS stands as the premier service provider in DIFC, offering a suite of tailored solutions for family offices. Our expertise spans advisory, meticulous family office formation, streamlined re-domicile services, and efficient management/administration. Elevate your experience with our bespoke concierge services, ensuring unparalleled support. With a commitment to excellence, MS is your trusted partner, providing comprehensive, integrated solutions that empower and advance family offices in the dynamic landscape of the Dubai International Financial Centre.

Pioneering Financial Evolution with AI, Big Data, and Cloud

As we enter 2024, the financial landscape is evolving at an unprecedented pace, driven by the transformative forces of Artificial Intelligence (AI), Big Data, and Cloud technology. At the heart of this evolution, DIFC emerges as a thriving hub, empowering financial service providers with unparalleled opportunities.

“The world of finance is undergoing significant transformation as innovation continues to revolutionize the industry. During 2024, we expect AI, Big Data and Cloud to play a significant role in driving the future of finance.” –

Arif Amiri ( Chief Executive Officer of DIFC Authority )

DIFC: A Nexus of Innovation

The journey of digital economies, initiated in the 1990s and accelerated during the dot com boom, saw a resurgence around 2001. Today, technology remains the backbone for facilitating information, goods, and service exchanges in digital economies. Governments and financial centers, like Dubai International Financial Centre (DIFC), create frameworks and regulations to stimulate financial innovation.

Sandboxes, prevalent in the Middle East, provide a safe space for organizations to test new ideas. The pandemic has further fuelled the adoption of digital technology, with Dubai and the wider UAE at the forefront of embracing a digital strategy. DIFC, hosting over 800 companies, prioritizes innovation and identifies three trends shaping the future of finance: Artificial Intelligence (AI), Data, and Cloud.

Deploying AI

AI plays a pivotal role in the finance industry, particularly in combatting financial crime. Collaborations like the Mastercard Global Cyber Forward program with DIFC focus on enhancing readiness against cyber threats, incorporating AI elements. Additionally, DIFC’s Dubai AI and Web3 Campus launched the Artificial Intelligence Transformation Programme, a flexible corporate accelerator aimed at future-proofing regional businesses by boosting their AI capabilities. This initiative not only strengthens Dubai’s global competitiveness but also fosters talent, encourages innovation, and propels economic growth.

Data Mastery

Data’s pivotal role in digitizing financial services is evident, shaping risk assessment, sales modeling, pricing, marketing, relationships, and decision-making. DIFC, envisioning the future of finance, pioneered the first data privacy regulations in the Middle East, Africa, and South Asia, encompassing AI and machine learning. With 20 years of financial prominence, DIFC’s advanced data privacy laws and robust IP protection for innovative solutions set regional benchmarks. Ethical data processing, especially in AI and machine learning, remains a priority, with ongoing efforts for testing use cases through consultation, inspection, and supervision.

Accelerating Cloud Migration in Finance

While cloud technology, offering remote access to storage and data assets, seems ideal for the finance sector, its adoption has been relatively slow due to complexities. Early adopters are typically digital-first new banks or traditional banks undergoing significant digital transformations. Migrating to the cloud necessitates education and cross-team integration, involving product development, marketing, risk, compliance, and IT teams. Despite some still opting for data centers, many financial players embrace cloud technologies for data storage, reaping benefits like organizational restructuring, operational efficiency, informed decision-making, and enhanced product planning. For finance leaders, understanding the potential of AI, data, and cloud is vital for driving strategic innovation in the future of finance.

The DIFC Advantage in 2024

DIFC isn’t just a location; it’s an ecosystem that fosters collaboration and innovation. In 2024, companies within the DIFC community benefit from a collaborative environment where ideas converge, partnerships flourish, and synergies abound. This ecosystem-driven approach propels DIFC to the forefront of global financial innovation.

As we navigate the transformative landscape of 2024, DIFC stands as a testament to the symbiotic relationship between innovation and financial excellence. The integration of AI, Big Data, and Cloud within the DIFC ecosystem propels companies into the future, allowing them to not only adapt to change but to thrive in it. In the heart of Dubai, DIFC remains the epicenter of financial evolution, where cutting-edge technology and a progressive mindset converge to shape the future of finance.

How Can MS Elevate Your Journey in 2024?

At MS, we understand the pulse of innovation and are here to guide you through every step. Our comprehensive suite of services, ranging from strategic advisory, seamless business setup, and compliance services to robust FO & MLRO solutions, as well as top-notch accounting & tax services, is designed to be your compass in navigating this transformative era. Let’s not just adapt to change, but lead the change together. Elevate your financial endeavors with MS, where expertise meets innovation.

Quick overview of the DIFC Innovation license

The Middle East has witnessed a surge in technological advancements and a flourishing tech ecosystem in recent years. Among the driving forces behind this growth is the Dubai International Financial Centre (DIFC), which has positioned itself as a hub for innovation and technology. At the heart of DIFC’s strategy lies the Innovation License, a catalyst for fostering cutting-edge technology firms across various sectors.

With endless opportunities for growth, the DIFC Innovation Hub provides you cost effective licences, cutting-edge co-working spaces, discounted visas and access to the AED 1 billion Dubai Future District Fund.

The DIFC Innovation License: A Launchpad for Tech Pioneers

1. Overview of the Innovation License:

The DIFC Innovation License is a Commercial License with a subsidized fee structure designed to support technology and innovation firms at any stage of their growth. It serves as a launchpad for firms interested in developing or testing new, novel, or innovative products. The license is sector-agnostic, catering to a diverse range of tech startups.

2. Fee Structure and Benefits:

• The license is subsidized for 2 to 5 years at a rate of USD 1,500 per annum.
• Access to world-class co-working spaces at low costs.
• Heavily discounted visa options for team members.

3. Focus on Cutting-Edge Technologies:

The DIFC emphasizes firms leveraging advanced technologies such as Artificial Intelligence, machine learning, blockchain, Web3, and more. The objective is to create a thriving ecosystem of tech innovators.

DIFC’s Evolution: From Fintech to All-Tech

1. Expansion of Startup Benefits:

Originally targeting Fintech players through the DIFC Fintech Hive, the benefits of startup licenses were extended to include a broader spectrum of tech startups—EdTech, RegTech, and all technology-based enterprises.

2. Current Landscape:

• Over 700 innovation licenses are currently operating from the DIFC.
• The focus remains on fostering innovation in products and services.

The Innovation Testing License (ITL): A Regulatory Sandbox

1. Regulatory Support for Testing:

The ITL, offered by the Dubai Financial Services Authority (DFSA), provides a controlled environment for startups to test innovative products and services.

It does not eliminate regulation but serves as a gateway for startups to test their products with live clients.

2. Technology Focus:

Startups deploying technologies falling under regulatory purview, such as money services and robo-advisories, opt for the ITL.

The DIFC Innovation Hub: A Comprehensive Ecosystem

Components of the Innovation Hub:

• Attractive licensing and regulations for FinTech companies.
• Affordable real estate options.
• Accelerator programs provided by the Fintech Hive.
• Access to funding from a diverse range of investors.
• Digital Labs for corporate partnerships and collaborations.
• A vibrant community of like-minded innovators.

Qualifying Requirements for DIFC Innovation License:

1. Exclusions:

• The entity cannot conduct financial services or engage in crypto-related activities, excluding the creation (but not the sale) of NFTs.
• No trading or selling of products is allowed.

2. Requirements for Eligibility:

• The entity must provide a type of technology, such as software solutions, AI, technology R&D, blockchain, etc.
• Physical presence within DIFC, with a flexible desk at co-working spaces.

The DIFC Innovation License stands as a testament to Dubai’s commitment to fostering technological innovation. With a focus on providing comprehensive support, including subsidized fees, co-working spaces, and access to a vibrant community, DIFC continues to play a pivotal role in shaping the future of technology in the Middle East. As the tech ecosystem evolves, the Innovation License remains a key driver for startups seeking to make their mark in the region.

Why Choose MS at DIFC for Your Innovation License?     

Engaging with a reputable service provider like MS within the DIFC can streamline the process of acquiring an innovation license. MS, with its expertise in corporate services, can navigate the regulatory landscape, ensuring compliance with DIFC’s requirements for innovation-driven ventures. Leveraging their knowledge of local regulations and established relationships within the DIFC can expedite the licensing process, allowing businesses to focus on their innovative pursuits. Collaborating with MS as a professional service provider in the DIFC offers a tailored approach, combining their proficiency in regulatory matters with the specific needs of businesses aiming to foster innovation within this globally recognized financial hub.

Contact us: [email protected]

Call us at +971 50 998 7454

Guide to the CAT 3C DIFC License 

The IFC stands among the globe’s top ten onshore financial centres, providing a secure and efficient platform for businesses and financial institutions to engage with the emerging markets of the region. With the high quality and independence of the DIFC’s regulator, a robust common law framework, outstanding infrastructure, and tax advantages, it serves as an ideal hub to capitalize on the escalating demand for financial and business services in the MENASA region.

Wealth & Asset Management

The DIFC stands out as the favored destination for Wealth and Asset Management firms in the MEASA Region.

These firms enjoy the advantages of The Centre’s sophisticated international ecosystem, including:

1. A world-class legal and regulatory framework.
2. A collaborative approach fostering partnerships between clients, regulators, and authorities.
3. A substantial industry size exceeding USD 450 billion in Wealth and Asset Management within the DIFC.
4. A noteworthy USD 165 billion in Assets Under Management (AUM) is managed within the DIFC.
5. A current count of over 330+ companies engaged in Wealth and Asset Management operations.

Wealth Management

The Centre is a prime hub for regional wealth management in the rapidly growing MEASA region, known for accelerated wealth accumulation. Key areas of interest include investment and portfolio management, estate planning, Sharia-compliant wealth management, and real estate and financial advisory. DIFC provides diverse market entry options and regulated licenses. A representative office supports marketing, information provision, and referrals, while a category four license enables asset raising and client relationship management. Additionally, a category three license allows comprehensive portfolio management, making DIFC a strategic base for navigating the dynamic MEASA landscape.

Asset Management

The Centre is an ideal hub for diverse wealth and asset management companies, supporting the development and management of public, private, Sharia-compliant, and qualified funds. DIFC offers regulated licenses, including representative offices for marketing services, information provision, and promotions. A category four license allows asset raising and full client relationship management, while a category three license permits comprehensive portfolio management, making DIFC a strategic choice for varied financial enterprises.

Fund Management
The MEASA region’s expanding wealth demands specialized fund management services. Institutions and high-net-worth individuals seek regional experts for intricate investment needs. DIFC’s legislative framework ensures a secure environment, attracting local, regional, and global players to domicile, manage, and distribute funds. DIFC stands out as the largest fund management jurisdiction in the region, setting the pace with its supportive regulatory regime.

Private Equity

Companies in the MEASA region seek private capital, including international sources, to fuel their growth. Private equity is increasingly attractive to family firms and conglomerates, providing capital and management expertise as they grow in size and complexity. Fragmented industries are ripe for consolidation through private equity. Governments explore private-public partnerships, offering additional opportunities. The growing appetite from institutions and high-net-worth individuals for MEASA-focused private equity creates an investor base for regional funds. DIFC, centrally located for regional deal-making, provides an ideal platform with tailored fund structures and licensing options, establishing a unique regional hub for launching, distributing, managing, and domiciling various private equity funds.   

Hedge Funds

Positioned as a crossroads between the East and West, Dubai serves as a pivotal hub for global trade and investment. The strategic location of DIFC provides hedge funds with an optimal gateway to tap into the high-growth emerging markets of the Middle East, Asia, and Africa. A significant majority of hedge funds established in DIFC, approximately two-thirds, hail from the United States and the United Kingdom, boasting the inclusion of two among the world’s ten largest hedge funds.

Venture Capital Firms
DIFC offers an optimal setting for venture capitalists to establish a foothold in Dubai and invest in innovative technologies and enterprises. Dubai boasts a significant share, one-third, of all MENA investors. Various funding sources, including growth-stage funding, angel investors, and the Dubai Future District Fund, contribute to the vibrant ecosystem. Launched in 2020, the AED 1 billion fund targets attracting leading global and regional capital to expedite the growth of the digital economy.

Establishing a financial entity in DIFC is straightforward, involving a streamlined process of five sequential steps:

1. Submit your interest.
2. Apply for DFSA Authorisation:
   
   
3. Furnish the DFSA with a regulatory business plan.
4. Lodge your application with the DFSA.
5. The DFSA will conduct a thorough final review and provide a recommendation. Upon approval, the DFSA will issue an “in-principle” letter, typically valid for three months.

• Registered Address: Select and officially register the location within DIFC where your entity will operate.
• Register with DIFC: Fulfill the prerequisites for registering the entity in DIFC to acquire both the Certificate and the License.
• Authorization by DFSA: Upon satisfying all DFSA prerequisites, you will be granted DFSA Authorization.

Costs for setting up in DIFC – Dubai International financial centre

The DFSA oversees the assessment and approval of financial services applications, with costs varying based on the specific activities sought, placing the applicant into one of five categories.

DFSA fees typically consist of two elements: 1) an application processing fee and 2) an annual licensing fee.

1) Application fee – starting from $ 5,000.

2) Annual Licensing – starting from $ 5,000.

Registrar of Companies (DIFC ROC)

The DIFC ROC facilitates the establishment of the legal framework for DIFC Regulated Firms. Shareholders may be individuals or corporations, and various options exist, including ‘Private Company Limited by Shares’ and ‘Limited Liability Partnerships.’ Specifically, for the Private Company Limited by Shares structure, the associated setup costs encompass:

Incorporation Application for a Private Company Limited by Shares: $ 8,000
Commercial License Fees: $ 12,000

Data Protection

The data protection notification is an integral component of the new entity registration process in the DIFC, with associated costs outlined below:

Registration: US$ 1,250

Annual renewal: US$ 500

WHAT APPOINTMENTS ARE MANDATORY FOR A CATEGORY 3C-AUTHORIZED FIRM IN DIFC?

Directors (minimum 2, preferably 3-4) – eligible for outsourcing (NEDs).

Senior Executive Officer (SEO) – In-house, must be a UAE resident (can also serve as a director).

Risk Officer (RO) – eligible for outsourcing.

Finance Officer (FO) – eligible for outsourcing (can also be an Executive Director/Senior Manager).

Money Laundering Reporting Officer (MLRO) – eligible for outsourcing, must be a UAE resident (can also be a Compliance Officer).

Compliance Officer (CO) – eligible for outsourcing, must be a UAE resident (can also be an MLRO)

Our Services – WHY MS?

We offer end-to-end solutions for obtaining a Category 3C DIFC License. Whether you need fintech consulting, support during the authorization process, or help preparing legal documentation, MS guides you through the intricacies of the DFSA Rulebook, ensuring your application is thorough, complete, and compliant.

Our range of services includes:

• Evaluating the business model and providing advice on the relevant regulatory framework.

• Crafting the Regulatory Business Plan and creating detailed financial projections.

• Developing all necessary policies, processes, and manuals.

• Offering Outsourced Compliance Officer and Outsourced Finance Officer services.

• Finalizing the legal structure, including setting up a holding company and customizing Memorandums; and

• Completing the leased space arrangements, assisting with bank account opening, and securing Financial Services Permissions.