FSP license in ADGM

Establishing an FSP under FSRA in ADGM in 2022

Abu Dhabi, the capital of the United Arab Emirates (UAE), is being transformed into a fast-growing modern city and a thriving international financial, payment, and investment services centre for the past two decades. This has been noticed by existing financial groups as well as start-up entrepreneurs pursuing a license for the provision of regulated services in and out of the UAE.

Providing these regulated services in the sectors of payment and investment services with a license issued in Abu Dhabi requires establishing a presence in the Abu Dhabi Global Market (ADGM) and submitting the relevant application to the Financial Services Regulatory Authority (FSRA) for a Financial Services Permission (FSP). The ADGM is the financial-free zone of Abu Dhabi and an international financial centre increasingly recognised globally for its open and business-friendly ecosystem. The FSRA is one of ADGM’s three independent authorities, tasked to support and supervise all financial activities. Together ADGM and FSRA operate in line with international best practices, promoting Abu Dhabi’s economic and financial growth.

In this commentary, the SALVUS Investment Firms Licensing team outlines the requirements for submitting an application to the FSRA in ADGM and provides information on obtaining a Category 2, Category 3A or Category 4 license in Abu Dhabi, as follows:

1. Why operate a business in and out of Abu Dhabi?
2. Applying for a Financial Services Firm to the FSRA
3. FSRA Category 2, Category 3A, and Category 4 licenses
4. How can SALVUS support you?

1. Why operate a business in and out of Abu Dhabi?

Experiencing remarkable growth, especially in the past 5 years, Abu Dhabi is a strategic location with favourable geographic distances and time zone differences between international financial markets. The companies established in Abu Dhabi benefit from relatively low requirements for operating expenses, attractive tax benefits, a sophisticated skilled workforce, and direct flight connectivity to the Middle East, Africa, Europe and Asia.

Operating in Abu Dhabi, a business registered with the ADGM enjoys zero corporate income tax, no limits on profits repatriation, no withholding taxes, and the wide range of UAE’s double tax treaties. In this respect, Abu Dhabi presents a great choice for a group or a company that wishes to establish its presence in the Middle East, through a subsidiary or a branch.

Furthermore, accounting for the two-thirds of UAE’s economy, the 60% of UAE’s investible wealth and the 75% of UAE’s total assets under management, as well as owning 9% and 5% of the global oil and gas reserves respectively, Abu Dhabi is recognized as of great importance to the region and globally, offering political and economic stability.

This appealing and business-friendly environment is safeguarded by the applicable civil and commercial laws developed on the grounds of the English Common Law. This is also the case for the regulations and rules governing the financial services enforced by the FSRA for the licensing and supervision of financial, investment, and payment services entities established in ADGM.

2. Applying for a Financial Services Firm to the FSRA

The FSRA is an activities-based regulator. This means a firm wishing to be licensed for the provision of financial services needs to apply for a Financial Services Permission (FSP) license under FSRA covering only the regulated activities it intends to conduct.

Applying to the FSRA for the granting of an FSP license precedes the establishment of the ADGM legal entity to hold the license. This is done as a pre-approval is first needed by the FSRA. In the following list, we present the high-level requirements for submitting such an application to the FSRA.

General Application:

  1. Initial contact: an initial discussion with the FSRA Authorisation team is arranged for a meeting for the assessment of the business requirements and model, as well as to identify the regulated activities involved.
  2. Application proposal: the application proposal plan is submitted to and reviewed by the FSRA Authorisation team and in turn, they advise as to whether the application will be accepted and provides feedback regarding the application’s final submission
  3. Application submission: all the required forms and supporting documentation are submitted along with the payment of the application fees.
  4. Application review: the Authorisation team reviews all the submitted FSRA application, follows up on any outstanding matters and conducts interviews for potential Approved Persons.
  5. Notification: the applicant is provided with an In-principle Approval (IPA) indicating any preconditions before being permitted to act as an FSP.
  6. Permission: the FSRA Authorisation team verifies the completion of the preconditions and the applicant is granted the FSP.

Organisational arrangements:

  1. Senior Executive Officer (SEO)
  2. Licensed Director
  3. Licensed Partner
  4. Finance Officer
  5. Compliance Officer
  6. Money Laundering Reporting Officer
  7. Responsible Officer
  8. Senior Manager

3. FSRA Category 2, Category 3A and Category 4 licenses

Category 2, Category 3A and Category 4 licenses are the different FSRA licenses in ADGM we chose to highlight. They relate to the provision of investment services in and out of Abu Dhabi. Each license authorises a financial services firm for:

  • Category 2:
    • Dealing in Investments as Principal
      • Not as a Matched Principal
    • Providing Credit
  • Category 3A:
    • Dealing in Investments as Principal
      • Only as a Matched Principal
    • Dealing in Investments as an Agent
  • Category 4*:
    • Arranging Credit
    • Arranging Deals in Investments
    • Arranging Custody
    • Advising on Investments of Credit
    • Operating a Multilateral Trading Facility or Organized Trading Facility
    • Operating a Private Financing Platform
    • Operating a Representative Office

*This is a non-exhaustive list of the services a Category 4 license can provide, with the selection presented focused on FSP intending to offer investment services.

Although each license category prescribes specific regulated activities, the FSRA allows the addition of regulated activities prescribed in other license categories subject to additional authorisation and supervision fees.

While we have chosen to focus on investment services FSP licensed under FSRA, it is worth mentioning that Category 1, Category 3B and Category 3C licenses are also popular with our clients, and are FSP licenses provided for money services businesses or investment funds structures.

The following table provides a comparison between the features of the three licenses.

FeaturesCategory 2Category 3ACategory 4
Minimum Regulatory Capital Requirementhigher of:
• 2,000 USD
• RCR*
• EBCM**
higher of:
• 500,000 USD in total for DIFC set-up & 15,000 USD recurring annually
• 2,000,000 USD if dealing as matched principal in OTC Derivatives with retail clients
• RCR*
• EBCM**
higher of:
• 10,000 USD
• 150,000 USD if operating a Private Financing Platform and holding Client Assets
• EBCM**
FSRA Authorisation Fee15,000 USD + 5,000 USD/additional regulated activity15,000 USD +
35,000 USD to deal as matched principal in OTC Derivatives with retail clients +
5,000 USD/additional regulated activity
5,000 USD +
5,000 USD/additional regulated activity
FSRA Annual Supervision Fee15,000 USD +
5,000 USD/additional regulated activity
15,000 USD +
35,000 USD to deal as matched principal in OTC Derivatives with retail clients +
5,000 USD/ additional regulated activity
5,000 USD +
5,000 USD/ additional regulated activity
ADGM Registration Fee15,000 USD15,000 USD15,000 USD
ADGM Annual Renewal/Extension Fees13,300 USD13,300 USD13,300 USD
Ability to hold and/or control client funds or assetsYesYesYes

*RCR: Risk Capital Requirement
**EBCM: Expenditure Based Capital Minimum
OTC: Over the Counter

Licensing Timeframe

The FSRA’s review and in-principle approval for Category 2, Category 3A and Category 4 applications, requires 6 to 10 weeks upon submission of the application and payment of the application fees. Then, the applicant has 3 months to complete any preconditions instructed in the in-principle letter which is valid for that duration.

4. How can SALVUS support you?

The SALVUS Investment Firms Licensing team employs an effective project management approach in successfully delivering licenses in FSRA and other jurisdictions in the region. By applying our specific knowledge and expertise we work closely with you and your team to identify the payment or investment services that are required for your business activities and model.

We then guide you through each and every step of the process.

We will initially introduce you to the regulator and we arrange for the collection and completion of all the required information and documentation, ensuring the submission of a well-supported initial application plan and then a final application. We further assist you in implementing a cost-efficient operations plan through a combination of our experience in human resources and outsourcing providers.

Contact us via email at [email protected] or call us at +357 7000 7898 if you are interested in obtaining an FSP license with FSRA in ADGM or if you would like more information about UAE licensing; our Investment Firms Licensing team is ready to answer your questions.

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The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.

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