ADGM FSRA commences public consultation on proposals to introduce Private Credit Funds

ADGM FSRA 12/12/2022

The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) has published a consultation paper to seek views on the introduction of Private Credit Funds within the FSRA’s current collective investment funds regulatory regime.

Private Credit Funds are collective investment funds that originate loans to borrowers, purchase existing loans from third party lenders, or invest in a combination of the foregoing. The proposals are intended to increase and enhance the range of funds available in ADGM and thereby attract participation by start-ups and SMEs, whilst recognising the risks of such funds and including appropriate safeguards for those. Given the liquidity limitations inherent in such funds, the FSRA proposes that Private Credit Funds are offered only to Professional Clients, as either Qualified Investor Funds (QIF) or Exempt Funds.

In order to permit QIF and Exempt Funds to originate loans, we propose introducing amendments that would allow fund managers, and the Private Credit Funds they manage, to arrange and originate loans where the manager of the fund holds a Financial Services Permission that limits it to undertaking fund management; the fund manager and the fund will not be engaging in Arranging Credit or Providing Credit, respectively. The FSRA also proposes mandating specific investment and operating requirements concerning conflicts of interest, concentration risk, stress testing, gearing, what are permitted and prohibited investments, reporting and disclosure.

This Consultation Paper should be of particular interest to fund managers and potential applicants seeking to operate as fund managers within ADGM, alongside investors, individuals and organisations active in the funds industry and their respective professional advisors.

For more information on the proposed revisions, please visit the dedicated webpage: Consultation Paper No. 8 of 2022 - Proposed Regulatory Framework for Private Credit Funds. The Consultation Paper is open for feedback until 27th January 2023.