New Proposed Amendments To The FSRA’s Funds Regulatory Framework

Consultation Paper No. 12 of 2025

The Abu Dhabi Global Market’s Financial Services Regulatory Authority (“FSRA”) is carrying out a comprehensive review of its regulatory framework for Funds and Fund Managers to reflect new regulatory developments and reflect practical experience. Accordingly, the FSRA released its Consultation Paper No. 12 of 2025 (the “Consultation Paper”), inviting the public to comment on its proposed enhancements.

Proposed Amendments to the FSRA’s Funds Regulatory Framework

Below is a summary of the main amendments proposed by the FSRA in relation to its Funds regulatory framework for which it is seeking public feedback on their suitability and whether any revisions are needed.

1. Streamlined Regulatory Framework for Sub-Threshold Fund Managers (“STFMs”)

STFM is a new Fund Manager category which the FSRA intends to introduce to achieve proportionality within its regulations, as STFMs are Fund Managers of smaller funds, the FSRA deems it appropriate to reduce their regulatory burden. Accordingly, the FSRA proposes the following amendments:

STFM Eligibility Criteria:

• Committed Capital capped at USD 200 million;
• May only manage closed-ended Qualified Investor Funds (“QIFs”), Exempt Funds or equivalent non-retail Foreign Funds; and
• Not a ‘host’ Fund Manager (i.e., cannot delegate investment management).
• The STFM category would be introduced by adding the restrictions (i.e., the STFM Eligibility Criteria) to an Authorised Firm’s Financial Services Permission.
• STFM-managed Funds must have a leverage limit of 100% of its Net Asset Value (“NAV”).
• Existing Fund Managers can opt-in to the STFM framework. If an STFM no longer meets the eligibility criteria, it must remove the STFM restrictions and become a “full scope” Fund Manager.
• STFMs would have a Base Capital Requirement (“BCR”) of USD 50,000 and no Expenditure Based Capital Minimum (“EBCM”).
• Venture Capital Fund Managers (“VCFMs”) would become a sub-category of STFMs.
• STFMs are not required to appoint a Finance Officer or establish an internal audit function. In such a case, the Senior Executive Officer would be made explicitly responsible for prudential compliance.

2. Simplified Regulatory Framework for Fund Managers of Funds Solely for Institutional Investors (“IFMs”)

IFM is an additional Fund Manager category, which the FSRA proposes to introduce in its commitment to proportional regulation. Since IFMs have lower risk profiles, certain regulatory requirements have been reduced:

IFM Eligibility Criteria:

• Manages only QIFs (or equivalent Foreign Funds) with a minimum of USD 5 million subscription.
• No natural person Unitholders in the Funds.
• IFMs must meet a minimum capital requirement equal to the higher of: a BCR of USD 50,000 or an EBCM of 6/52 of Annual Audited Expenditure.
• IFMs are not required to hold professional indemnity insurance coverage.
• Same “opt-in” transition process as STFMs.

3. Revisions to the Foreign Fund Manager Framework

Currently, Foreign Fund Managers (“FFMs”) are subject to limited governance by the FSRA – an FFM shall operate in the ADGM in accordance with the regulations of a Recognised Jurisdiction, not necessarily those of the FSRA or ADGM (though the right to operate within the ADGM is subject to authorisation by the FSRA). This limits the ADGM’s governance over FFMs, which is unideal should the ADGM suffer reputational impact from an FFM's breach of its laws and regulations. To tighten regulations and controls on FFMs and create greater nexus to ADGM, the FSRA proposes the following amendments:

• FFMs can only manage closed-ended QIFs and its Domestic Funds must have a UAE resident director.
• FFMs must appoint an ADGM-based Fund Administrator and an ADGM-licensed Corporate Service Provider.
• FFMs must subject themselves to ADGM laws and the ADGM Courts’ jurisdiction in relation to their Domestic Fund-related activities.
• FFMs are not allowed to act as a ‘host’ Fund Manager.
• The FSRA shall have discretion to permit an FFM not to appoint an Eligible Custodian in certain cases (e.g., impracticality and disproportionateness).

4. Other Proposed Amendments

In addition to the above proposed amendments, the FSRA also seeks feedback on (i) proposed amendments to the Employee Investment Vehicle-related provisions within its laws and regulations, namely in relation to their exclusion from being deemed as Collective Investments Funds, eligible employees, etc., (ii) the existing framework for its specialist classes of Domestic Funds – whether they remain suitable, and (iii) the miscellaneous changes relating to the requirement to maintain appropriate systems and controls for Multilateral Trading Facilities that trade its underlying Fund’s Units to Professional Clients only.

What This Means

As can be seen above, the FSRA’s proposed amendments to its Funds and Fund Manager regulatory framework ultimately aims to reduce regulatory burdens and complexity, enhance flexibility, streamline requirements and processes, while maintaining strong regulatory oversight and accountability of regulated entities.

Such amendments increase the ADGM’s market competitiveness, making it more attractive to “start-up” Fund Managers of smaller funds and funds solely for institutional investors, as well as aligning the FSRA’s framework with those of other global markets.

For more information on the above, please contact us and we will be happy to assist.

‍