The UK continues to export best practice in financial services regulation
On 21 October 2015, the Abu Dhabi Global Market (“ADGM”) officially opened for business. The ADGM is the latest international financial free zone to be established in the UAE and throughout the Persian Gulf. In common with similar initiatives in Dubai and Qatar, to encourage diversification of Abu Dhabi’s economy through foreign investment, the ADGM aims to offer foreign companies a business-friendly, low tax regime, and, in particular, a transparent legal and regulatory environment designed to guarantee investor confidence.
As with close relations the Dubai International Financial Centre (DIFC), and the Qatar Financial Centre (QFC), creating a legal and regulatory environment to prove attractive to business has led to the ADGM adopting English substantive and procedural law across a broad range of areas in which it enjoys responsibility, including the regulation of companies, employment rights, real property, and insolvency. In particular, given the ADGM’s ambition to become a leading financial services hub for the region, the ADGM has looked to ape the English regulatory architecture as an example of best practice in financial services regulation.
Following consultation, the ADGM has implemented the Financial Services and Markets Regulations. Closely modelled on the UK Financial Services and Markets Act 2000, the Regulations will be familiar to those practising in financial services regulation the UK, and other common law jurisdictions. There is a broad prohibition against firms and individuals providing financial services, save where they are licenced to do so by the ADGM’s Financial Services Regulatory Authority (the “FSRA”). Licenced firms and approved individuals must comply with the rules and principles contained in the draft Conduct of Business Sourcebook, including in relation to market conduct. Similarly familiar rules apply in relation to Anti-Money Laundering. Decisions made by the FSRA are subject to review by an internal Regulatory Committee, and the superintendence of the ADGM courts (Lord Hope, the former Supreme Court Justice, has recently been appointed Chief Justice).
Firms intending to establish a presence in the ADGM will need to consider carefully whether their systems and controls are properly compliant across a broad range of risk areas including conflicts of interests, market abuse, AML, bribery and corruption, and UN sanctions compliance. Those operating in this new market will also need to maintain their awareness of developments in the UK, Europe and elsewhere: changes imposed by Brussels or London – such as MiFID2, or perhaps even the Senior Persons Regime, may exercise an increasingly multi-jurisdictional reach. At the same time, firms will need to understand where synergies exist between “onshore” and “offshore” legal systems, and where they do not: for example where obligations and responsibilities under financial services regulation (which can be devolved) depart from those under local criminal statutes (which remain applicable).
As financial services regulations becomes increasingly aligned across jurisdictions, and technology continues to drive new advances in connectivity, regulated firms – wherever established – will increasingly look to make use of advisors with experience of assisting clients in navigating through this sophisticated regulatory architecture, as the UK continues not only to export best practice in law systems, but also in legal services.