The UAE’s Securities and Commodities Authority (SCA) has introduced new regulations for special purpose vehicles (SPVs) to strengthen the country’s securities sector and enhance its global business and investment appeal.
The new regulation includes 14 articles covering various aspects such as the scope of application, SPV classification, incorporation and licensing processes, obligations of the SPV manager, and procedures for dissolution and liquidation.
It also outlines the SCA’s monitoring powers and the penalties for violations.
The new decision, issued by the SCA’s board of directors, aims to improve the effectiveness of securitisation and Sukuk regulations, advance the investment funds industry, and offer alternative financing opportunities for joint stock companies. This move is set to foster the stability and development of the UAE’s financial markets.
SPV founders are required to apply to the SCA for incorporation and licensing approval, with the SCA making a decision within five working days of submission.
Mohamed Ali Al Shorafa, SCA’s Chairman, said that the decision mirrors the SCA’s commitment to promoting financial markets’ legal and regulatory infrastructure and providing innovative and resilient mechanisms that meet market needs. Meanwhile, Dr. Maryam Buti Al Suwaidi, SCA’s CEO, called the decision a positive step to encourage securitisation and Sukuk issuance, promote the investment funds industry, and enable public joint stock companies to transfer assets to SPVs.
An SPV is defined as a company created to maintain the liabilities and assets of a specific financing transaction separately from those of the parent company. These vehicles are used for transactions involving credit, borrowing, securitisation, bonds issuance, and risk transfer related to insurance and derivatives.
The new rules will apply to SPVs incorporated in the UAE, qualified SPVs in UAE free zones, and related entities such as SPV founders, managers, auditors and service providers. However, it excludes SPVs incorporated by federal or local government entities, unless their issues are public, and those in financial free zones or unqualified free zones.