The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) has enhanced its regulatory framework to facilitate higher participation by investors and private enterprises seeking funding and thus to support the development of “private capital markets”.
Investments in private markets have been limited to professional investors, a fact compounded by the absence of an organized market for such investments which has resulted in illiquidity.
With the advent of innovative financial technology like digital assets and tokenized securities, private capital markets became highly accessible to investors of all types and more efficient for private enterprises that aim to raise capital, while permitting such investments to be traded and therefore become more liquid.
The development of innovative financial technologies has enhanced the opportunities for appropriately knowledgeable and experienced non-professional clients to invest in high-growth startups and existing ventures, in accordance with their investment strategy.
“The private capital markets framework supports the FSRA’s objective to continue to enhance and develop ADGM’s comprehensive, vibrant financing ecosystem. It will help support and bolster the growth of enterprises while providing greater investor choices, and ultimately contributing to the growth and diversification of the economy of Abu Dhabi, the UAE, and the broader region. It complements our existing regulatory regime for private financing platform operators that enables early-stage startups to seek funding from angel and venture capital investors. Collectively, our regulatory framework caters to the funding needs of a wide range of companies at different stages of their growth cycle.”
The private capital markets framework (PCM Framework) introduced by the FSRA, promotes broader participation, thereby leading to greater liquidity, through technology platforms that enable:
- Private enterprises to raise capital from professional clients alongside a limited number of non-professional clients, the latter group is required to have relevant investment knowledge and experience, without the need to ‘go public’ and issue a prospectus.
- Securities issued through the framework to trade on technology platforms amongst professional clients and qualifying non-professional clients.
The PCM Framework is enabled to serve larger private startup companies that are seeking to expand their operations but do not intend to tap the public equity capital markets through an initial public offering.