ADGM issues Consultation Paper No. 2 of 2023 to enhance client assets and conduct requirements

On 30 March 2023, the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM) issued Consultation Paper No. 2 of 2023 to invite public feedback and comments on its proposed amendments to the core rules regulating investment activities in ADGM.

The proposed amendments are accompanied by concurring changes concerning client classification, marketing materials, the disclosure of fees and charges to retail clients, treatment of client assets, and the regulated activity of providing custody.

The proposed amendments aim to:

  • Align the current framework with benchmarked jurisdictions, proposing additional client protection measures in relation to the investment business, specifically relating to client classification, marketing materials, the disclosure of fees and charges to retail clients, and the safekeeping of client assets;
  • Structurally enhance the rules governing client classification, while also being consistent with the FSRA’s stance that certain assessment standards for professional clients should be further aligned with comparable jurisdictions;
  • Redefine a narrower scope of the Regulated Activity of Providing Custody, to align the perimeter of regulated custody activities with the current practice in leading benchmarked regimes;
  • Clarify the current responsibilities of firms that hold, control, or engage in providing custody in relation to virtual assets, anticipating possible additional changes by the FSRA to its regulatory regime applicable to virtual assets.

The main areas of the proposed amendments concern:

  • Conduct of Business Rules relating to client classification and amending the net asset requirement;
  • Client Money Rules — streamlining the Client Money Rules set out in Chapter 14 of the Conduct of Business Rulebook (COBS) to provide a clearer and easier-to-apply set of obligations;
  • Financial Services and Markets Regulations relating to the Regulated Activity of Providing Custody description;
  • Miscellaneous amendments to the General Rulebook and Glossary.

The deadline for providing comments on this proposal is 25 May 2023. The Board of ADGM and the FSRA will then proceed to enact the proposed amendments.

As a market participant, ACM Limited welcomes the initiative of the FSRA and ADGM and its team. We are currently working on comments, and will share them in due course.

The Consultation Paper is available here.

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