Establishing an FSP under FSRA in ADGM in 2024
Abu Dhabi, the capital of the United Arab Emirates (UAE), has rapidly evolved into a dynamic and cutting-edge metropolis, emerging as a leading international centre for financial, payment, and investment services over the past two decades. This remarkable transformation has drawn the interest of both established financial institutions and innovative entrepreneurs looking to secure licenses for providing regulated services both within and beyond the UAE.
To offer regulated services in the payment and investment sectors with a license issued in Abu Dhabi, businesses must establish a presence in the Abu Dhabi Global Market (ADGM) and submit the relevant application to the Financial Services Regulatory Authority (FSRA) for a Financial Services Permission (FSP). The ADGM is the Abu Dhabi’s financial-free zone and an internationally recognized financial center known for its open and business-friendly ecosystem. The FSRA, one of ADGM’s three independent authorities, is responsible for supporting and supervising all financial activities. ADGM and FSRA adhere to the international best practices, promoting Abu Dhabi’s economic and financial growth.
In the below article, 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. Benefits of operating 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. Benefits of operating a business in and out of Abu Dhabi
Abu Dhabi’s strategic location serves as a vital gateway to the Middle East, Africa, and Asia, making it an ideal hub for international financial operations. Its proximity to major global markets allows businesses to efficiently manage and expand their regional and international reach. The emirate’s state-of-the-art transport infrastructure, including one of the world’s leading airports and a modern seaport, ensures seamless connectivity, facilitating the smooth movement of goods and people. This geographical advantage significantly enhances operational efficiency and reduces transit times, providing businesses with a competitive edge in global trade.
The regulatory environment in Abu Dhabi is highly conducive to financial operations. ADGM, offers a business-friendly framework that aligns with international best practices. The FSRA within ADGM ensures a robust yet flexible regulatory regime that supports innovation while maintaining financial stability. Furthermore, the emirate’s favourable tax policies, including the absence of corporate and personal income taxes, create an attractive fiscal environment for businesses. These factors collectively foster a secure and efficient operating environment that encourages both startups and established enterprises to thrive.
Abu Dhabi also offers a high quality of life that attracts a skilled and diverse workforce, essential for the success of any financial business. The emirate provides excellent healthcare, education, and recreational facilities, making it an appealing destination for expatriates and their families. Additionally, the city’s commitment to safety and political stability ensures a secure living and working environment. The combination of these factors helps businesses attract and retain top talent from around the globe, thereby enhancing their operational capabilities and fostering a productive and innovative workplace culture.
2. Applying for a Financial Services Firm to the FSRA
The FSRA is an activities-based regulator, meaning a firm wishing to be licensed for providing financial services must apply for a FSP license under FSRA, covering only the regulated activities it intends to conduct.
Applying to the FSRA for an FSP license precedes the establishment of the ADGM legal entity to hold the license, as a pre-approval from the FSRA is first needed. The high-level requirements for submitting such an application to the FSRA are as follows:
General Application:
- Initial contact: Arrange an initial discussion with the FSRA Authorisation team to assess the business requirements and model, and to identify the regulated activities involved.
- Application proposal: Submit the application proposal plan to the FSRA Authorisation team, who will review it and provide feedback regarding the application’s final submission.
- Application submission: Submit all required forms and supporting documentation along with the payment of application fees.
- Application review: The Authorisation team reviews the submitted FSRA application, follows up on any outstanding matters, and conducts interviews for potential Approved Persons.
- Notification: The applicant is provided with an In-principle Approval (IPA) indicating any preconditions before being permitted to act as an FSP.
- Permission: The FSRA Authorisation team verifies the completion of the preconditions, and the applicant is granted the FSP.
Contact us via email at info@salvusfunds.com 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.
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 a focus on investment services. Although each license category prescribes specific regulated activities, the FSRA allows the addition of regulated activities from other license categories, subject to additional authorisation and supervision fees.
While focusing on investment services FSP licensed under FSRA, it is worth mentioning that Category 1, Category 3B, and Category 3C licenses are also popular with clients, provided for money services businesses or investment fund structures.
The following table provides a comparison between the features of the three licenses.
| Features | Category 2 | Category 3A | Category 4 |
|---|---|---|---|
| Minimum Regulatory Capital Requirement | higher 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 Fee | 15,000 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 |
| Ability to hold and/or control client funds or assets | Yes | Yes | Yes |
*OTC: Over the CounterRCR: Risk Capital Requirement
**RCR: Risk Capital Requirement
***EBCM: Expenditure Based Capital Minimum
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 utilizes a strategic project management approach to efficiently secure licenses from the FSRA and other regional jurisdictions. Leveraging our specialized knowledge and expertise, we collaborate closely with you and your team to determine the necessary payment or investment services tailored to your business activities and model.
We support you throughout the entire process, from the initial introduction to the regulator to the collection and completion of all required information and documentation. This ensures the submission of a robust initial application plan followed by a comprehensive final application. Additionally, we help you implement a cost-effective operations plan by drawing on our extensive experience in human resources and outsourcing providers.
Contact us via email at info@salvusfunds.com 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.