The new year has witnessed the introduction of significant revisions to the regulatory regime for collective investment schemes operating in or from the Qatar Financial Centre (the QFC). The revised rules, which took effect on 1 January 2011, are principally contained in the revised Collective Investment Schemes Rules 2010 (COLL) and the new Private Placement Schemes Rules 2010 (PRIV). The reforms were published by the QFC Regulatory Authority (the QFCRA) and are part of the QFC’s plan to develop Qatar as a regional hub for the asset management industry. The QFC reforms follow the adoption of similar revisions to the regulatory regime governing collective investment funds in the Dubai International Financial Centre, which came into effect on 11 July 2010 (see our Client Alert 1078 dated 31 August 2010).

The new regime brings the QFCRA regulations closer to established funds jurisdictions and seeks to enhance the attractiveness of the QFC as a domicile of choice for investment funds, fund managers and other service providers. This Client Alert provides an overview of the key revisions relevant for sponsors considering the QFC as a potential fund domicile.

In summary, the key highlights are:

  • No prohibition on the operation of a non-QFC scheme from the QFC
  • A specific regime allowing the marketing of non-QFC retail customer schemes in or from the QFC
  • No limit on the functions that may be carried out by the independent entity
  • The introduction of a separate private placement scheme regime

Operating a non-QFC scheme. COLL does not seek to prohibit a QFC-based fund manager from managing or advising a non-QFC scheme (i.e. a scheme domiciled outside the QFC). Instead, the proposed operation of a non-QFC scheme by a QFC-based manager is regulated through the licensing process for the manager. The QFCRA will likely require details of the non-QFC scheme in order to satisfy itself as to the adequacy of the regulatory regime applicable to the scheme. However, the scheme itself will only be subject to regulation in its jurisdiction of domicile. The ability to manage foreign funds from the QFC is an important step in encouraging the development of the asset management industry in the QFC.

Marketing of non-QFC retail customer schemes. The revised rules provide, subject to certain restrictions and conditions, for a non-QFC retail customer scheme to be marketed to retail investors in or from the QFC. To qualify, a non-QFC scheme must first be declared by the QFCRA to be a “non-QFC retail customer scheme”. The QFCRA will not make such a declaration unless it is satisfied that schemes of the type in question (and the operators of such schemes) are subject to appropriate regulation in their home jurisdiction for the purpose of consumer protection. In addition, COLL contains provisions which require an authorized firm to make and keep available for inspection certain documents and information concerning such a non-QFC retail customer scheme at a facility within the QFC.

Independent entity functions. The revised rules do not limit the administrative services that an independent entity may perform in relation to a QFC scheme. This change will be welcomed by potential independent entities and make this role more attractive financially to such service providers.

Private placement scheme rules. Whereas COLL applies generally to all collective investment schemes falling within the QFCRA’s jurisdiction, PRIV applies only to private placement schemes. A private placement scheme is a scheme in the QFC that is registered as such under PRIV and where the number of unitholders does not at any time exceed 100. Units in a private placement scheme may only be sold to “qualified investors” (i.e., a “Business Customer” (a body corporate with net assets of at least US$5 million) or a “Market Counterparty” (an authorized firm or equivalent)). PRIV distinguishes between open-ended and closed-ended schemes and takes a tailored and lighter touch regulatory approach. PRIV represents a significant development to the existing QFC funds regime and will facilitate the formation and operation of private placement schemes, such as private equity funds.