x Abu Dhabi, UAEWednesday 17 January 2018

DIFC issues new rules for wealthy families

The DIFC enacts regulations for wealthy families in the UAE and the region to set up Single Family Offices.

DUBAI // The Dubai International Financial Centre (DIFC) said yesterday it has enacted new regulations allowing wealthy families in the UAE and the region to set up Single Family Offices (SFOs). The DIFC said the new regulations, created in consultation with the Dubai Financial Services Authority (DFSA), would allow family businesses to establish holding companies within Dubai's onshore financial hub. The new rules are also designed to create a platform for wealthy families to manage private family wealth and family structures from anywhere in the world.

Dr Omar bin Sulaiman, the DIFC governor, said family offices had become highly significant on the global economic landscape in recent times. "In the Middle East, where family-run businesses make up over 75 per cent of firms and have total assets in excess of US$1 trillion (Dh3.67tn), the need for a specialised legal and regulatory framework is especially acute." According to Mr Sulaiman, SFOs, in contrast to conventional financial institutions, have no direct public liability and their regulatory requirements differ significantly from conventional institutions.

The regulations are a result of the DIFC Family Office Initiative, which aimed to provide comprehensive infrastructure solutions for families and family businesses operating in the region. Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, on Monday had enacted a new arbitration law for DIFC which will enable the DIFC-LCIA Arbitration Centre - set up as a venture with the London Court of International Arbitration (LCIA) - to provide dispute resolution services to companies around the world. The new arbitration law will be universally applicable and compatible with both civil and common law systems.

In another change that is aimed at aligning the DIFC's regulatory structure with its European counterparts, the DFSA will allow asset management firms operating out of the centre to sell their products directly to retail investors in the region, starting from July. Companies in the DIFC were previously barred from dealing with retail investors and have dealt exclusively with high net worth individuals and institutions since the centre's launch a few years ago.

The DIFC focuses on six main industries within the financial services sector: banking services, capital markets, asset management and fund registration, reinsurance, Islamic finance and back-office operations. To encourage institutions to register, the DIFC offers 100 per cent foreign ownership rights, a zero tax rate and no restrictions on capital and profits repatriation. In just three years, more than 700 firms have registered at the centre.