In a groundbreaking decision this November 2024, the Gulf Cooperation Council (GCC) financial market authorities have approved a unifying fund passporting framework across the GCC.
The framework was approved during the 29th meeting of the GCC Committee of Heads of Financial Market Authorities, alongside draft passporting regulations for GCC member states. The regulations are scheduled to be implemented in early 2025, following adaptation by the GCC member states of their domestic regulations.
The passporting framework aims to streamline the registration and promotion of investment fund units across the GCC. The draft of the regulations sets out fund registration procedures and fees, governs listing and trading procedures and prescribes certain exemptions applicable to registered funds. It also outlines the obligations of fund managers and promoters under the unified framework and grants powers to GCC regulators to deregister non-compliant funds. Investor-side protections include standardised regulatory oversight of the GCC funds in which they invest.
Investment fund units are the first financial products to be regulated under a streamlined framework at the GCC level, which showcases its attractiveness as an investment asset class. In 2019, a passporting regime was implemented in the UAE, pursuant to which authorised investment managers were then able to market and sell their domestic funds to potential investors based anywhere in the UAE, including in one of the financial freezones.
Expanding the passporting regime to a wider GCC level will provide a fully integrated financial environment, enhancing the ease of marketing funds across GCC member states. It remains to be seen how non-GCC funds and managers will (or will not) be treated under the new regulations.
At Trowers & Hamlins, our international funds team advises on establishing funds within various GCC member states (and in other core international fund jurisdictions), each of which is governed by their own regulatory framework. This milestone is a much welcome development as we anticipate it will simplify the regulatory landscape, afford flexibility and consistency to fund managers in their establishment and marketing of funds, and provide certainty to investors given the GCC-wide regulatory position that will be established.
Please get in touch with your usual contacts if you have any queries on this subject.
