UAE’s Free Zone Regulator Outlines Its Five ‘Guiding Principles’

The Financial Services Regulatory Authority (FSRA), the market supervisor of the United Arab Emirates’ (UAE) Abu Dhabi Global Markets, has outlined five ‘guiding principles’ that will inform its regulatory efforts.

The ADGM is one of the international financial centres and free trade zones in the UAE.

According to the FSRA, the principles are anchored on ensuring that ADGM's regulatory frameworks are internationally recognized, market-orientated, risk-focused, accommodate regional and global cooperation and deliver high standards of quality and service.

The FSRA outlined and explained the rationale behind these principles in an undated post published on the official website of the ADGM.

The First Two Principles

The first principle seeks to bring international recognition to ADGM's regulatory framework.

The FSRA explained that “ADGM will draw on best standards and practices from international financial services centres around the world.”

Under this principle, the free trade zone will conform to international standards in Anti-Money Laundering and Countering the Financing of Terrorism.

At the same time, the free zone will enshrine regulatory confidentiality except in cases where the disclosure of corporate information is required by other regulators, public authorities or the court.

The second principle seeks to make the free trade zone's rules and regulations dynamic and market-orientated.

The FRSA explained that the ADGM’s regulatory framework will be principles-based and outcome-focused, proportional and progressive, responsive and proactive to industry changes and needs, as well as creates space for regular dialogue with the industry.

The “ADGM’s legislative framework will be based on English Common Law, enabling the courts to draw on a well-established set of precedents and responding effectively to changing global market conditions," the FSRA said.

“This will also empower ADGM to offer its member institutions the same level of sophistication, certainty and flexibility in its legal and regulatory regime as practised in other international financial jurisdictions," it added.

The Other Three Principles

Under the third principle, the ADGM is to adopt a 'prudential regulation approach' to see to the Abu Dhabi free trade zone's financial stability and business friendliness.

Furthermore, the FSRA under this principle wants to achieve consolidated supervision of financial institutions in the Abu Dhabi free zone, help reduce the impact of business failure and safeguard the best interest of consumers, among other goals.

Meanwhile, through the fourth principle, the FSRA seeks to achieve cooperation and shared responsibility in its regulation of the ADGM.

The regulatory authority explained that it will achieve this through a partnership with the global regulatory community, collaboration with market participants and recognition of local nuances and laws.

“Further to keep with international standards, ADGM’s legislative framework and regulations will reflect the local characteristics of the UAE and the wider Middle East region," the FSRA explained.

“Specifically, ADGM will also provide the platform for comprehensive offering of Islamic finance services to meet the growing demand and needs of this industry," the market supervisor added.

Additionally, the fifth principle seeks to achieve high standards of quality and service through a dedicated regulatory team with strong industry knowledge as well as upholding the highest standards of integrity.

“The Regulatory Authority [FSRA] is committed to nurturing its regulatory workforce and will dedicate adequate resources to enhance the level of competency, professionalism and ethical standards among its staff,” the FSRA explained.