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Welcome to the latest edition of Law Update titled “Rise of Generative AI.”
In this edition, we dive into the dynamic world of Technology, Media, and Telecommunications (TMT) across the Middle East and North Africa (MENA) region. TMT continues to play a vital role in positioning the region as an international business and social hub, driving significant growth and innovation.
Our focus in this Law Update is on the sector’s ongoing potential to advance and propel the region toward a more digital economy. We explore the benefits of embracing a digital transformation and how local authorities have responded by enhancing regulations to accommodate the evolving TMT landscape.
This edition covers a range of topics, including – the new Telecommunications & Information Technology Law in Saudi Arabia, the intricacies of trademarks in the Metaverse, and the legal challenges faced by the video game industry. Additionally, we take a regional perspective, discussing jurisdictions such as Kuwait, Saudi Arabia, UAE, Oman, and Bahrain to provide a comprehensive understanding of the TMT landscape.
We hope you thoroughly enjoy this packed issue of Law Update, filled with captivating articles that address key legal issues within a vital sector for the region.Read the full edition
Following to the publication of its Consultation Paper No. 8 of 2022 on Private Credit Funds, the Financial Services Regulatory Authority (“FSRA”) has announced the enactment of its regulatory framework enabling collective investment funds based in the Abu Dhabi Global Market (“ADGM”) to invest in credit facilities. The amendments permitting Private Credit Funds to operate in or from ADGM have been introduced to the Financial Services and Markets Regulations, Fund Rules (“FUNDS”), Islamic Finance Rules, and Glossary Rules of the FSRA.
The updated regulatory framework aims to facilitate participation in the global private credit market in and from the ADGM. Private credit has exponentially expanded in recent years – Bloomberg recently reported growth to a total of $1.4 trillion assets managed globally by the end of 2022 in comparison to $500 billion in 2015. To attract global funds, the new rules introduced by the FSRA exempt Private Credit Funds and Private Credit Fund Managers from the requirement to hold a Financial Service Permission, or satisfy a specified Base Capital Requirement, to carry on the regulated activities of ‘Providing Credit’ or ‘Arranging Credit’.
A fund may make investment in ‘Credit Facilities’ (by origination, purchase or participation), investment in equity of the fund’s borrowers (or its group) and the holding of financial instruments for the purpose of cash management or hedging.
The fund must be a close-ended Qualified Investor Fund or Exempt Fund that is managed by an Authorised Fund Manager (within the context of the FUNDS Rules). A Venture Capital Fund will not be permitted to be a Private Credit Fund.
Private Credit Funds must not provide credit to the benefit of natural persons, a person related to its fund, collective investment funds, other lenders or financial institutions and persons intending to use proceeds of the credit facility for speculative investment purposes.
Diversification and risk concentration requirements
The fund will be required to limit the maximum exposure to a single borrower or group of connected borrowers to 25% of its capital.
System and control requirements
The fund is required to maintain systems, controls through suitable documented policies such as fund risk appetite statements, renewal and refinancing of credits policies, the monitoring of granted credits, and the management of collateral, sound assessment and pricing methodology.
The use of leverage by the fund will be limited to 100% of the capital of the fund.
The fund must issue periodic reports containing breakdowns of the allocated loans and their detailed descriptions, a summary of all committed and undrawn credit facilities, information on relevant exposures and report any material changes pertinent to the fund’s credit.
The fund manager must have a periodic report based on a instilled comprehensive stress and scenario analysis programme, conducted by a qualifies third person, that enables the identification and mitigation of possible market risks and exposures.
To view the amendments to the FUNDS that introduces the rules on Private Credit Funds, please click here.
At Al Tamimi & Company, we provide expert guidance to financial institutions at the local, regional, and global levels on matters related to FSRA regulations, ADGM legal advancements, and the licensing of regulated financial service providers.
This alert was prepared by Elyazia Alozaibi.
Senior Associate - Consultanta.email@example.com
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