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A regulated financial activity in the UAE is a particular type of financial activity that requires regulatory approval before offering such an activity to its customers. In most instances, having a general trade license alone does not suffice to carry out activities such as investment management, brokerage, or other types of capital market activities. Application for a UAE CMA financial license depends on the financial activity itself and its corresponding licensing category.
The regulations have since been updated from the old SCA (Securities and Commodities Authority) regulatory system to the new Capital Market Authority (CMA) system, but with all the necessary stringent requirements for protecting investors and ensuring market integrity. It is important to note that the licensing process is the beginning of the process, as firms will need to comply with capital adequacy, risk management, reporting, and renewal requirements during the lifetime of their financial activity license.
Having trouble determining which financial license you should pursue? Enterslice can assist with your regulatory needs.
A Financial Activity License Is Not a General Business license.
A UAE CMA financial license is an authorization from a regulatory body that allows an organisation to engage in particular regulated financial activities under the UAE capital markets regime. This is different from a general business or trade license. While the trade license creates the business, it does not guarantee that the regulated financial services can be provided.
According to the Rulebook under the old SCA (Securities and Commodities Authority), any regulated financial business shall not be conducted unless the necessary license and regulatory approval have been obtained. The necessary approval shall depend on the type of financial business, organisational structure, and compliance capabilities of the firm.
The regulatory framework follows a structured model:
Category → Financial Activity → Approved Personnel
Examples include:
Further classification of activities relating to crowdfunding and virtual assets.
The capital markets regulation system in the UAE has developed from the earlier SCA (Securities and Commodities Authority) regime into the present-day CMA (Capital Market Authority) regime. It is always advisable for any organisation to ascertain the licensing and other relevant requirements for their specific type of financial undertaking before proceeding with the application process.
Financial activities are controlled for the purposes of protecting client and investor funds, ensuring the integrity of the market and instilling confidence in the financial system. Controls also ensure transparency and proper risk management procedures and help ensure the orderliness of capital markets. The use of controls through the imposition of governance, compliance and reporting requirements, among others, helps prevent misconduct, enhances accountability and assists in financial stability in the capital markets in the UAE.
Capital adequacy is an important regulation because it ensures that there is a buffer in terms of finances for any loss or operational difficulties. Capital adequacy enables the organisation to fulfil its responsibilities and deal with the need for liquidity. Capital adequacy is highly associated with financial stability, risk management, client protection and the ability of the firm to handle operational, market and liquidity risks, among others.
Capital-market activities in mainland UAE generally fall under the CMA (Capital Market Authority) regulations, under which licensing, supervision, compliance, and capital market transactions are regulated.
In the regulatory documents, one might find references to the previous securities authority, known as the Securities and Commodities Authority (SCA), such as:
These references are still relevant because there are still quite a number of regulations and guidance that are still being used today.
The regulatory approvals are jurisdiction-based, meaning that an approval granted for operations in the mainland UAE will not necessarily give a company the green light to go ahead for business setup in DIFC or ADGM company formation because they have independent regulatory systems.
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The right license for the UAE financial activity varies based on the nature of the service to be rendered. There are different licenses, and each of these has varying eligibility criteria, approved manpower, and minimum paid-up capital requirements. The figures below are specific to the activity and should be verified against the currently applicable regulatory requirements.
The category involves dealing and brokerage activities that may involve execution of financial instrument transactions. The minimum paid-up capital for category 1 is AED 30 million, subject to any additional activity-specific requirements.
This category encompasses investment fund management, portfolio management and other investment management services. The material in the applicable Rulebook shows that for investment fund management, the minimum amount of paid-up capital is AED 1 million and for portfolio management, it is AED 3 million.
The category encompasses custody of assets and market infrastructural operations. Due to the heightened responsibilities, the requirements under the category are AED 50 million in paid-up capital, depending on the activity involved.
This category involves firms engaged in the provision of credit rating services. The applicable capital table indicates a minimum paid-up capital of AED 5 million.
financial consulting; listing adviser; introduction; and financial promotion constitute the list of financial activities falling under this category. The minimum paid-up capital requirement for this is stated as AED 500,000.
Note: These are category-specific minimum paid-up capital requirements, not CMA capital requirements that applies universally to all licensed entities. Businesses are advised to consult the latest requirements relevant to their specific financial activity prior to application.
Minimum Paid-Up Capital refers to the minimum capital that a company needs to hold in order to be allowed to conduct a certain financial service regulated by the authorities. However, the concept of capital adequacy is not only about the initial capitalisation when applying for a license. It represents a regulation that evaluates whether a licensed company has enough capital in order to conduct business efficiently and properly manage its risks.
The first pillar deals with the capital resources that the company holds and the way in which the resources are allocated against risks. The first pillar is composed of:
The pillar provides tools to ensure that the capital adequacy of the licensed company is sufficient to cover the risks generated from its business.
The second pillar involves creating internal procedures aimed at the evaluation of capital adequacy and management of risks. These include:
The assessment must take into consideration the business model, strategies, risk profile, and the financial standing of the organisation. The aim is to identify and manage risks before they have any impact on the firm’s financial stability.
This third pillar involves issues of transparency and regulatory supervision. A licensed organisation may be obliged to undertake the following:
Together, these three pillars form a framework that ties together capital resources, risk management, and reporting requirements. This would enable regulated companies to sustain their financial stability and ensure that regulatory requirements are met continuously.
Under the capital adequacy framework, capital allocation for credit risk exposure is mandatory. The capital allocation to credit risk shall not be less than 16.5% of the applicable risk-weighted amounts, subject to phased implementation prescribed by the CMA. This will aid the licensed firms in having adequate capital to cushion themselves against any possible loss due to counterparties’ credit risk exposure.
In case of some regulated activities such as investment fund management and portfolio management, market risk capital allocation is mandatory under the capital adequacy framework. In accordance with the methodological framework used, the minimum capital allocation is 0.02% of managed assets based on the approved model and activity requirements.
Operational risk capital may be derived through various approved methodologies, which include:
These methods will allow firms to mitigate operational risk that arises from internal controls and processes, among others.
The issue of capital adequacy also calls for monitoring of exposure and concentration risk. This means analysing substantial counterparty exposure and significant concentrations rather than considering only minimum share capital. This helps in good risk management and financial resilience.
Important: The percentages stated above are examples of the framework and do not constitute a general capital ratio that applies to all CMA-licensed entities.
In order to obtain the UAE CMA financial license, the applicant is required to be organised in the form of a qualified legal entity. In relation to the regulated activity approval in the UAE, the structure may allow the presence of qualifying legal persons, branches of foreign companies and some of the entities in free zones, depending on the requirements for the particular activity.
The applicant is supposed to meet the relevant requirement of minimum paid-up capital and have enough financial resources to carry out its planned activities and obligations.
The regulator will evaluate the following suitability factors:
The license application has to contain a realistic business plan that will describe the business model being considered and will give projections on revenue and expenditure for the first three years of operation.
The applicant needs to have an appropriate infrastructure in place, which includes the following:
Altogether, these criteria help prove that the applicant is able to operate with sufficient financial stability, management capacity, and a governance system for conducting regulated financial activities on a continuous basis.
The document requirements for an SCA financial license in the UAE depend on the type of activities and license category. Furthermore, the Authority may ask for additional information at the time of application review.
Documents to be prepared prior to submitting the regulatory application:
For some types of regulated activities, the applicant needs to submit:
Applicants need to prepare:
As document requirements are activity-specific, businesses are advised to take time to carefully analyse the applicable regulatory requirements and ensure that all relevant documents are complete prior to making their application.
Need help in preparing your licensing package? Enterslice can help you with the preparation of documents, compliance and regulatory filings for your UAE CMA financial license application.
The process of applying for a UAE CMA financial license usually follows the steps below:
Properly define the regulated financial activity that the business wishes to conduct.
Identify the relevant regulatory licensing category that corresponds to the proposed activity.
Evaluate the entity structure, whether there is a foreign branch, minimum paid-up capital requirements, and capital adequacy requirements.
Identify and implement the necessary governance, compliance, risk management, technology structure, business plan, and qualified personnel structure.
File an initial approval application with the necessary documentation. A compliant application will be reviewed within 20 business days.
An initial approval is not a license. Applicants have to fulfil all the licensing requirements within the required period.
Submit the application and provide answers to all queries and requests for additional information.
Once the license is approved, the UAE SCA financial license will be granted. The regulated activities can be carried out under the approved license only. The decision to issue the license generally takes 30 days from a compliant application.
Companies seeking a UAE SCA Financial License should remember that the fees charged for licenses are regulated by the Authority itself. According to the relevant regulation, a fee can be set for each financial activity allowed under the particular license category. All information concerning the fees should be confirmed by the most recent fee schedule of the UAE.
In addition to the regulatory fees, applicants must consider the following costs for:
In light of the fact that costs depend on activities, licensing categories, and business models, enterprises need to consider not only their start-up costs but also compliance-related costs when developing an application for their UAE CMA financial license.
Approval and obtaining the license are done via separate procedures in the UAE SCA license process for financial businesses. The initial approval is not the same as the actual license.
The relevant legal framework requires licenses to have validity for a period of one year and to be renewed annually. It is important for business entities to recognise that these are only periods associated with the review process. The whole process may take longer for various reasons, such as documentation, incorporation, financing, and other requirements by the regulators.
The process does not conclude once an individual acquires a UAE SCA financial license. Licensed organisations should consistently meet the required capital and risk capital requirements throughout the operation of the firm.
Licensed entities could be expected to produce:
Some of the reporting timelines would be 45 days for quarterly reports, as well as three months for the annual audited financial statement.
Approved roles should be assigned to approved persons. In general terms, organisations cannot delegate such duties to other people, unless certain exceptions apply in the UAE CMA framework.
Notifications will be necessary in cases of material changes in the following issues: locations of offices; governance structure; regulatory decisions; investigations; penalties; financial solvency; capital adequacy; or market manipulation.
UAE SCA financial license is to be renewed annually. It will be necessary to ensure that the license category and licensed financial activities remain in effect and valid while meeting the required compliance, reporting, and capital requirements.
By avoiding the below-mentioned problems, one may enhance the chances of a successful application for a financial license with the UAE CMA.
Performing the regulated financial activity without the appropriate approval will mean that the business is liable to face regulatory intervention. Under the relevant regime, the possible enforcement actions that might be taken include license revocation, closure of the business, among others.
In cases where an organisation fails to meet the licensing requirements, the license could be suspended or even withdrawn, depending on the particular situation.
Operating without the required approval can lead to:
These repercussions underscore the significance of having the necessary regulatory approval before embarking on any regulated financial business.
If a business is starting to engage in a financial activity that falls under regulation, it needs to assess whether the activity needs to obtain Regulated Activity Approval before getting the usual business license.
Enterslice can help businesses with:
We guide our clients in fulfilling the requirements for obtaining a UAE CMA financial license.
There is no universal CMA financial license applicable to all regulated financial activities. The required type of license will depend on the nature of your business and the relevant license category in accordance with the existing regulatory framework.
Furthermore, one should not confuse the minimum paid-up capital with the concept of capital adequacy. Even though the former is mostly required during licensing procedures, the latter will be an ongoing process associated with risk exposure, financial stability and compliance with regulatory requirements. Once a company obtains a financial license, it must make sure that it meets all the regulatory requirements, including maintaining sufficient capital, implementing proper risk management, submitting reports and appointing approved persons.
Want to get your UAE CMA Financial License? Get in touch with Enterslice for comprehensive assistance with license categorisation, UAE business setup, capital adequacy assessment, documentation, regulatory approvals and compliance requirements.
A UAE SCA financial license generally refers to regulatory authorisation required to conduct a regulated financial activity under the UAE capital-market framework. While the term “SCA license” is still widely used, the current legislative framework places capital-market regulation under the Capital Market Authority (CMA) and the applicable regulatory requirements.
There is no single capital requirement for all financial activities. The required amount depends on the license category and specific activity. For example, applicable Rulebook materials indicate AED 1 million for certain investment-fund management activities, AED 3 million for portfolio management, and AED 500,000 for certain arranging and advisory activities.
No. Minimum paid-up capital is an entry requirement for obtaining a license. Capital adequacy is an ongoing regulatory framework that considers capital levels, risk exposure, risk assessment, financial strength, and reporting obligations throughout the life of the licensed business.
The applicable framework provides for an initial approval decision within up to 20 business days and a licensing decision within up to 30 working days following a compliant application. These periods relate to specific regulatory review stages and do not represent the entire business setup and licensing timeline.
No. A trade license alone does not authorise regulated financial activities. The relevant activity must be approved by the applicable capital-market regulator, and the business may only operate within the scope of its granted regulatory authorisation.
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