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December 2014 – January 2015
The country is a stable and attractive market in which to offer securities due to its steady GDP growth rate of 5% over past years and an estimated USD 29,600 GDP per capita.
As units of investment funds are considered ‘securities’ under Omani law, in this article we take you through the general issues to be aware of when contemplating marketing units of investment funds to potential investors in Oman.
In general, the marketing of units in Oman is governed by:
MARKETING REGULATORY REQUIREMENTS:
The following requirements need to be adhered to before units can be sold to and acquired by Omanis and non-Omani nationals:
Marketing activities carried out from outside Oman, whereby investors based in Oman are targeted, may be considered as conducting business in Oman for the purposes of Omani law.
Omani law requires that:
“MARKETING” OR “OFFER” TO INVESTORS
Under Omani law, the marketing of securities to the public (public offers) is referred to as a ‘public subscription’, and is defined by Capital Market Authority as an invitation to the public generally to subscribe for securities in a joint stock company under incorporation or upon the increase of the capital of an existing company in accordance with the conditions and provisions appearing in the prospectus approved by the Capital Market Authority.
Private subscription, in contrast, is defined by the Capital Market Authority as an invitation directed to a particular class or to particular persons to subscribe for securities in a public joint stock company or upon the increase of the capital of an existing company in accordance with the conditions and requirements which the Capital Market Authority prescribes.
There is no legal definition of what the ‘marketing’ of securities means under Omani law. Practically speaking, however, it is believed to encompass the arranging of conferences, roadshows or one-to-one presentations (i.e. direct contact with a potential investor). These activities therefore require prior approval from the Capital Market Authority.
PRIVATE PLACEMENT PROCESS:
Every fund in the form of a public joint-stock company that is interested in increasing its capital through private placement of units to specific persons is obliged under Omani law to:
Other steps to be taken under Omani law include the following:
Should any of the rules be breached by a party marketing units, under the Omani law governing securities (and without prejudice to any more severe penalty provided for in any other law) the party in breach may be subject to:
Although authorities in Oman are in general open to new financial products being available to its nationals and residents, they have the interests of investors at heart. There is only a limited understanding of such products in Oman and so the Capital Market Authority has taken the view that investors are best protected if the Capital Market Authority acts as a monitoring authority whenever units of funds are offered to investors in Oman.
This does not mean, however, that the legal position under Omani law is unduly burdensome on investment funds or their managers. Provided proper legal advice is taken, both fund managers and investors can have confidence in Oman’s robust securities market.