A number of significant changes to the securities and capital markets regime in the Dubai International Financial Centre (DIFC) came into force on 5 July 2012. The changes represent the policy of the DIFC’s regulator, the Dubai Financial Services Authority (DFSA) to more closely align the DIFC with leading benchmark jurisdictions and the requirements of the EU Prospectus Directive (the PD).
The changes include a new DIFC Markets Law (DIFC Law No. 1 of 2012) and an all-new Markets Rules (MKT) module of the DFSA Rulebook, which replaces the now obsolete Offered Securities Rules (OSRs). MKT incorporates the new DFSA Listing Rules, which reflect the recent transfer of listing authority functions from NASDAQ Dubai to the DFSA. NASDAQ Dubai has retained authority for setting admission and disclosure standards for entities seeking to have their securities admitted to trading on its exchange.
Triggers for a Prospectus. The previous Markets Law regime employed a three-way classification of all offers of securities in or from the DIFC into “public offers”, “exempt offers” or “unregulated offers”. MKT adopts a structure that is more closely aligned with the PD regime and focuses on two types of activities, each of which triggers the requirement to publish a prospectus in the DIFC (a Prospectus). These are (i) an “Offer of Securities to the Public” made in or from the DIFC; and (ii) an application is made to have securities admitted to trading on an “Authorised Market Institution” (AMI) situated in the DIFC. Note that this is an either/or test – even where an offer is not an “Offer to the Public” for the purposes of MKT (i.e. it is an “Exempt Offer”), a Prospectus will still be required where the securities are being admitted to trading on an AMI situated in the DIFC.
Abolition of the requirement for a “DIFC Exempt Offer Statement”. The OSRs required a Prospectus relating to an “Exempt Offer” in the DIFC to include a “DIFC Exempt Offer Statement”. The wording for this statement was stipulated in the rules and had to be followed verbatim and included on the front page of a Prospectus. Interestingly, there is no such requirement under the new rules. Going forward, an appropriate legend should still be included in an offering document to make clear that the prospectus relates to an “Exempt Offer” in the DIFC. However, there is no longer any prescribed wording. Practice is likely to closely follow the previous wording but without using the now defunct term “DIFC Exempt Offer Statement”.
Approval and validity of a Prospectus. Another notable feature of the previous regime was that, although the DFSA reviewed the contents of a Prospectus, it did not formally approve its publication. This differed from the position in many comparable jurisdictions. In line with the PD, the new Markets Law now requires the DFSA’s formal approval for a Prospectus. In addition, whereas the OSRs were silent on the validity period for a Prospectus, MKT, again in line with the PD, provides that a Prospectus will have a validity period of 12 months from the date of approval.