UAE tones down marketing rules

Government reforms have made it easier to solicit sovereign wealth fund commitments in the UAE, however the country has taken a firmer view on reverse solicitation.

Private equity firms will no longer need to gain government approval when seeking commitments from institutional investors in the United Arab Emirates (UAE).

On its website the Securities and Commodities Authority (SCA), the UAE’s market regulator, recently posted amendments to marketing rules agreed last summer. The rules raised concerns that regulators would no longer informally allow GPs to solicit investments from UAE investors, including the Abu Dhabi Investment Authority, without prior government approval.

According to law firm SJ Berwin, which translated the rules posted in Arabic, GPs will no longer need a local promoter or gain the prior approval of the SCA before seeking commitments from sovereign wealth funds, financial managers and other certain institutional investors.  

However, in other areas, the reforms increased marketing oversight. The SCA seemed to provide fund managers soliciting commitments from LPs who they’ve dealt with in the past an exemption from its marketing rules, however the regulator has since hardened its stance on reverse solicitation, according to SJ Berwin.

“Even if fund managers obtain a letter from a potential investor stating that the investor has taken the initiative in seeking the marketing materials, and thereby declines any protection afforded to it under the regulations, the SCA will still have the power to determine whether the facts as presented in the documentation accord with the reality in the event of a dispute,” warned the law firm.

Consequently private equity lawyers are advising GPs marketing in the UAE to carefully document their communications and transactions with LPs in the region.