ADGM seeks industry feedback on regulatory framework for private financing platformsADGM FSRA 11/03/2018
The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) today published a discussion paper setting out its proposed regulatory framework for operators of financing platforms for non-public companies (Private Financing Platforms or PFPs).
Private enterprises, including start-ups and small and medium-sized enterprises (SMEs), are key engines of economic growth and diversification in the region, but they are an underserved segment in terms of financing needs. The FSRA therefore considers it important to develop alternative financing solutions for them to bridge the commercial funding gap and ease cashflow issues. In this regard, PFPs can play an important role in improving access to financial services and developing financing ecosystems for start-ups and SMEs seeking to launch and grow their businesses, as well as spurring innovation and enhancing competitiveness in these sectors. PFPs can serve a wide, private market landscape from very early stage to pre-IPO stage companies.
FSRA is proposing a calibrated, risk-appropriate regulatory framework (the PFP Framework) for PFPs that would facilitate access by start-ups and SMEs to new, alternative sources of funding primarily from Professional Clients, while applying the necessary regulatory safeguards to ensure that they operate in a safe and sound manner for those clients.
Key features of the proposed PFP Framework
The creation of a new Regulated Activity (Operating a Private Financing Platform) which permits both investment-based and loan-based PFP transactions;
Loans or investments may be held directly by lenders or investors or indirectly through a Special Purpose Vehicle (SPV). The PFP Framework will be supported by the range of SPVs available in ADGM which will offer flexibility in various financing, securitisation and asset transfer options;
Participation in PFP transactions is targeted at Professional Clients given the higher risks associated with these transactions. The FSRA may allow PFP operators to serve Retail Clients, on an exceptional basis, subject to the PFP operator putting in place risk-appropriate retail protections depending on the nature and scale of the PFP operator's business.
The requirement for PFP operators, whilst retaining sufficient flexibility to accommodate innovative business models, to have appropriate systems and controls including, but not limited to: due diligence arrangements for those accessing the PFP; client asset protections; and disclosure obligations.
The proposed PFP Framework serves to promote FSRA's continued objective in developing a stable and sustainable financial services sector in Abu Dhabi and the UAE, while fostering innovation within risk-proportionate regulatory safeguards.
ADGM invites the public and industry participants to submit their comments by 10 April 2018 to:
Discussion Paper No. 1 of 2018
Financial Services Regulatory Authority
Abu Dhabi Global Market Square
Al Maryah Island
PO Box 111999
Abu Dhabi, UAE
Click here for more details of the discussion paper.
About Abu Dhabi Global Market
Abu Dhabi Global Market (ADGM), an international financial centre (IFC) located in the capital city of the United Arab Emirates, opened for business on 21 October 2015. Established by UAE Federal Decree as a broad-based financial centre, ADGM augments Abu Dhabi's position as a global centre for business and finance and serves as a strategic link between the growing economies of the Middle East, Africa and South Asia and the rest of the world.
ADGM's strategy is anchored by Abu Dhabi's key strengths including private banking, wealth management, asset management and financial innovation. Comprising three independent authorities: ADGM Courts, the Financial Services Regulatory Authority and the Registration Authority, ADGM as IFC governs the Al Maryah Island which is a designated financial free zone. It enables registered financial institutions, companies and entities to operate, innovate and success within an international regulatory framework based on Common Law. Since its inception, ADGM has been awarded the "Financial Centre of the Year (MENA)" for two consecutive years for its initiatives and contributions to the financial and capital markets industry in the region.*
For more details of ADGM, please visit www.adgm.com or follow us on Twitter: @adglobalmarket and Linkedin: ADGM
* Source: The Global Investor Middle East and North Africa (MENA) Awards
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 The International Finance Corporation estimated in 2013 that the SME funding gap in MENA at US$260 billion. International Finance Corporation Report: "Closing the Credit Gap for Formal and Informal Micro, Small, and Medium Enterprises" (August 2013,)