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Abu Dhabi Free Zone Proposes Crowdfunding Regime

by Lorys Charalambous, Lowtax.net, Cyprus
26 July, 2018

Abu Dhabi Global Market (ADGM), the low-tax international financial center in Abu Dhabi, has published a consultation paper setting out its proposed regulatory framework for operators of Private Financing Platforms (PFPs).

PFPs are online platforms that enable private enterprises to seek financing from private and institutional investors to launch and grow their businesses.

ADGM says it is proposing a tailored, risk-proportionate regulatory framework that effectively addresses the risks posed by transactions facilitated through a PFP. The proposed features of the framework include the creation of a new regulated activity (operating a private financing platform), which permits both loan-based and investment-based PFP transactions.

Loans or investments may be held directly by lenders or investors or indirectly through a special purpose vehicle (SPV). ADGM says the PFP Framework will be supported by the range of SPVs available in ADGM, which will offer flexibility across the financing, securitization, and asset transfer options.

Given the higher risks associated with PFPs, PFP transactions will mainly be targeted at professional clients. However, ADGM said it may allow PFP operators to serve retail clients, on an exceptional basis, subject to the operator putting in place appropriate safeguards.

PFP operators will be required to have appropriate systems and controls in the areas of disclosure, safeguarding of client assets, due diligence of enterprises listed on the PFP, anti-money laundering, and countering the financing of terrorism.

ADGM says the PFP Framework is part of ongoing initiatives to support the growth and development of start-ups and small- and medium-sized enterprises in Abu Dhabi, as well as in the Middle East and North Africa region.

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