FSRA Consultation Paper No. 12 of 2025

Introduction

On 24 November 2025, the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) released Consultation Paper No. 12 of 2025, inviting public comments on a suite of proposed enhancements to its regulatory framework for Funds and Fund Managers. The proposals reflect a holistic review, aiming to ensure ADGM’s framework remains internationally competitive, clear, and supportive of sector growth, while maintaining robust risk mitigation.

 

Key Themes and Regulatory Trends

A defining theme of this consultation is the FSRA’s continued commitment to proportional regulation, i.e., reducing regulatory burden where appropriate, especially for smaller and institutional fund managers. This aligns with global trends, notably the EU’s AIFMD sub-threshold regime, and reflects the FSRA’s responsiveness to industry feedback and supervisory experience.

1. Streamlined Regimes for Smaller and Institutional Fund Managers

• Sub-Threshold Fund Manager (STFM) Framework: The FSRA proposes a new category for managers of closed-ended Qualified Investor Funds (QIFs) and Exempt Funds with aggregate committed capital below USD200 million. This regime offers lighter governance (no mandatory Finance Officer/internal audit), a modest base capital requirement (USD50,000), and streamlined authorisation, while maintaining key prudential and disclosure obligations. Importantly, STFMs are prohibited from acting as “host” managers, ensuring accountability remains with the regulated entity.
• Institutional Fund Manager (IFM) Framework: Targeting managers of funds exclusively for institutional investors (with minimum subscription USD5 million and with no natural person unitholders), the IFM regime further reduces regulatory requirements, including exemption from Professional Indemnity Insurance and a lower Expenditure Based Capital Minimum. This reflects the lower conduct and insolvency risk profile of institutional-only funds.
• Integration with Existing Venture Capital Fund Managers (VCFMs) Regime: The FSRA proposes to subsume VCFMs as a sub-category of STFMs, harmonizing requirements and clarifying ambiguities (e.g., aggregate subscription limits, master/feeder structures). This reduces complexity and aligns with the risk-based approach.

2. Facilitating Employee Investment

Recognizing the importance of employee alignment, the FSRA proposes to formally exempt Employee Investment Vehicles (EIVs) from fund status and minimum subscription requirements, provided participation is limited to front-office staff with direct investment responsibilities. This is a pragmatic move, balancing market practice with investor protection.

3. Revisions to the Foreign Fund Manager (FFM) Framework

The FSRA seeks to tighten controls on FFMs managing domestic funds, requiring:

• management of closed-ended QIFs only,
• appointment of UAE-resident directors and ADGM-based fund administrators,
• mandatory ADGM-licensed Corporate Service Providers,
• submission to ADGM laws and courts,
• prohibition on “host” manager models.

These changes enhance jurisdictional nexus and oversight, addressing reputational and conduct risks without unduly restricting market access.

4. Specialist Funds and Private REITs

The FSRA invites feedback on frameworks for Private Credit Funds, Green Funds, Climate Transition Funds, and private REITs, signaling openness to further refinement and industry input. This consultative approach is vital for maintaining relevance and supporting innovation.

5. Miscellaneous Amendments

Proposed changes to COBS, FUNDS, and GEN include enhanced controls for Multilateral Trading Facilities admitting fund units, ensuring only Professional Clients can trade such units. These technical amendments reinforce the integrity of ADGM’s market infrastructure.

 

Conclusion

The FSRA’s proposals represent a thoughtful evolution of ADGM’s funds regulatory landscape, balancing market development with investor protection. By reducing regulatory burden where justified, clarifying ambiguities, and enhancing oversight of foreign managers, the FSRA is positioning ADGM as a progressive, internationally aligned fund management hub.

Stakeholders are encouraged to engage with the consultation, as the final shape of the framework will be informed by industry feedback and further refinement in 2026. If you would like to discuss any aspect of the consultation or seek assistance in submitting feedback to the FSRA, please get in touch with the authors of this article.