Entire Section

  • CIR 12A CIR 12A Requirements Specific to Qualified Investor Funds

    • CIR 12A.1 CIR 12A.1 Meeting the conditions to be classified as a Qualified Investor Fund

      • CIR 12A.1 Guidance

        1. Article 16(2) of the Law provides that a Domestic Fund may be constituted as a Qualified Investor Fund only if it satisfies all of the conditions in Article 16(5). Article 16(5) provides that a Qualified Investor Fund must:
        a. have its Units offered to persons only by way of Private Placement;
        b. have only Unitholders each of whom meets the criteria to be classified as a Professional Client; and
        c. have an initial subscription to be paid by a person to become a Unitholder in the Fund of at least US$500,000.
        2. The definition of "Professional Client" is set out in Rule 1.3.1.
        3. Generally a firm will not be able to undertake mass marketing activities relating to Units of Qualified Investor Funds because such marketing would not meet the Private Placement requirement, and would be likely to amount to a public offer, which can only be made in respect of a Unit of a Public Fund.
        [Added] DFSA RM137/2014 (Made 21st August 2014). [VER17/06-14]
        [Amended] DFSA RM218/2018 (Made 22nd February 2018) [VER23/12-18]

      • CIR 12A.1.1

        (1) A Fund may be classified as a Qualified Investor Fund only if it fulfils the conditions in Article 16(5) of the Law at the inception of the Fund and on an on-going basis.
        (2) A Fund Manager must ensure that a Fund which is or is intended to be established and operated as a Qualified Investor Fund meets the conditions in Article 16(5) of the Law both at the inception of the Fund and on an on-going basis.
        (3) For the purposes of (2), where a Fund Manager makes arrangements with other Authorised Firms or Persons in other jurisdictions to Offer to issue or sell the Units of a Qualified Investor Fund, then it must take reasonable steps to ensure that those Authorised Firms or other Persons do not Offer to issue or sell the Units in a manner that would result in a breach of the conditions in Article 16(5) of the Law.
        (4) As soon as a Fund Manager becomes aware that a Qualified Investor Fund it manages no longer meets or is likely not to meet the conditions in Article 16(5) of the Law, it must immediately:
        (a) commence proceedings relating to the winding up of the Fund, or alternatively, take necessary steps to have the Fund reconstituted as an Exempt Fund or registered as a Public Fund; and
        (b) notify the DFSA of that fact and the measures it has taken and proposes to take under (a).
        [Added] DFSA RM137/2014 (Made 21st August 2014). [VER17/06-14]

    • CIR 12A.2 CIR 12A.2 Responsibilities of a Fund Manager of a Qualified Investor Fund

      • CIR 12A.2 Guidance

        1. While a Fund Manager of a Qualified Investor Fund is exempt from many of the detailed requirements applicable to Public Funds and Exempt Funds, it will continue to be subject to most of the main obligations of Fund Managers. Therefore, such a Fund Manager should be mindful that when managing a Qualified Investor Fund, it is subject to some of the overarching obligations applicable to Fund Managers, particularly:
        (a) Article 22 of the Law (Fund Manager's general duties and functions);
        (b) Article 38 of the Law and GEN chapter 5 (Systems and controls requirements); and
        (c) GEN section 4.2 (The Principles for Authorised Firms).
        2. For example, a Fund Manager of a Qualified Investor Fund needs to observe high standards of integrity and fair dealing, and apply due skill, care and diligence, in managing the Fund. Similarly, it must have adequate systems and controls to ensure that the affairs of the Fund are effectively managed, taking into account the nature, scale and complexity of the Fund's operations and the investment objectives and needs of its investors.
        3. A Fund Manager of a Qualified Investor Fund, which is structured as an Open-ended Fund, is required to comply with the requirements relating to adequate systems and controls to manage, among others, the liquidity risk. See CIR Rule 8.6A.1.
        [Added] DFSA RM137/2014 (Made 21st August 2014). [VER17/06-14]
        [Amended] DFSA RM218/2018 (Made 22nd February 2018) [VER23/12-18]

    • CIR 12A.3 CIR 12A.3 Custody of Fund Property

      • CIR 12A.3.1 CIR 12A.3.1

        (1) For the purposes of Article 27(1)(e) of the Law, the Fund Manager of a Qualified Investor Fund that is not an Investment Trust must ensure that the legal title to Fund Property is registered with an Eligible Custodian.
        (2) The requirement in Article 27(1)(e) of the Law does not apply to the Fund Manager of a Qualified Investor Fund if it is:
        (a) a Property Fund;
        (b) a Private Equity Fund;
        (c) a Venture Capital Fund; or
        (d) a Fund in so far as it is investing in an interest in the operation of a Real Property asset (such as investment in an infrastructure project).
        (3) If the Fund Manager of a Qualified Investor Fund referred to in (2) itself holds Fund Property of any kind or if it uses a Fund Platform and the Incorporated Cell Company holds Fund Property of any kind, it must have in place effective arrangements which ensure that the Fund Property is not available to creditors in the event of the insolvency of the Fund Manager or the Incorporated Cell Company (as the case may be).
        [Added] DFSA RM137/2014 (Made 21st August 2014). [VER17/06-14]
        [Amended] DFSA RM218/2018 (Made 22nd February 2018) [VER23/12-18]
        [Amended] DFSA RMI248/2019 (Made 18th December 2019) [VER26/12-19].
        [Amended] DFSA RMI279/2020 (Made 28th October 2020). [VER29/11-20]

        • CIR 12A.3.1 Guidance

          1. Article 27(1)(e) of the Law requires a Domestic Fund that is not an Investment Trust to have legal title to the Fund Property registered with an eligible person (unless the Rules provide otherwise). CIR Rule 12A.3.1(1) specifies that the person must be an Eligible Custodian. CIR Rule 12A.3.1(2) disapplies the requirement in relation to Fund Property of certain kinds of Qualified Investor Funds. Regardless of who holds title to Fund Property, the Fund Manager must always ensure that, in accordance with Article 22(2)(f) of the Law, Fund Property is clearly identified as such and held separately from property of the Fund Manager and any other Funds. Where Fund Property consists of cash or liquid assets, the assets must also be held under arrangements that clearly identify them as belonging to the Fund, and must be properly segregated from similar assets belonging to the Fund Manager and any other Funds.
          2. Where a Fund invests in infrastructure projects (for example, the development of public facilities such as roads, railways or bridges), the Fund Manager may hold self-custody of the Fund Property which consists of the interest in the infrastructure project. However, where it does so, the Fund Manager is not exempt from the overarching obligation under CIR 8.2.2(1) to Unitholders of the QIF to ensure safe custody of the Fund Property. This envisages proper identification and segregation of the interest in the infrastructure project as Fund Property of the QIF.
          [Added] DFSA RM137/2014 (Made 21st August 2014). [VER17/06-14]
          [Amended] DFSA RM218/2018 (Made 22nd February 2018) [VER23/12-18]
          [Amended] DFSA RMI279/2020 (Made 28th October 2020). [VER29/11-20]