By CRYPTOVERSE Legal Consultancy
An ADGM fund setup licensing guide for managers receives encouraging news: investors want to increase their commitments to its next fund.
The opportunity creates a regulatory question. The manager holds an FSRA Financial Services Permission (FSP) as a Sub-Threshold Fund Manager (STFM). If it accepts the new commitments, its aggregate managed commitments will exceed the limit attached to that route.
Can it close the fundraising round and update its licence afterward?
No. The manager needs to address the FSP restriction before accepting commitments that would take it over the STFM threshold. The FSRA’s September 2026 guidance expressly requires an STFM in that position to apply to vary its FSP in advance. The same principle of reviewing the permission before expanding applies when a manager proposes a new fund type, investor audience or regulated service outside its authorised scope. Supplementary Guidance – Regulatory Framework for Specialised Fund Manager Categories, paragraph 11.
Growth is welcome. It must be planned against the licence the firm actually holds.
Your FSP defines the business you may conduct
An FSRA fund manager licence is not a general authorisation to run any investment business. The firm’s FSP identifies its regulated activities and may contain restrictions or conditions that narrow how those activities can be conducted.
The September 2026 specialised frameworks make this particularly important. A manager authorised as an STFM, Venture Capital Fund Manager (VCFM) or Institutional Fund Manager (IFM) receives an FSP restricted to that status. Its business must continue to fit the relevant framework. Existing authorised managers may also apply to vary their FSPs to move into an eligible specialised category. (www.adgm.com)
The manager should therefore read the exact wording of its own FSP alongside the applicable rules and guidance. A description of its original application, or what a similar manager is permitted to do, cannot substitute for that review.
What changes commonly trigger an FSP variation?
| Proposed change | Why the existing permission may no longer fit |
| STFM commitments exceed USD 200 million | The ceiling applies to aggregate Committed Capital across all funds managed. The manager must apply to vary its FSP before accepting commitments that would cross it. |
| An STFM plans an open-ended fund | The STFM framework requires its managed funds to be closed-ended. |
| An STFM plans a fund available to Retail Clients | STFMs are limited to Exempt Funds, QIFs or equivalent Foreign Funds unavailable to Retail Clients. |
| A VCFM plans a non-VC fund | A VCFM may manage only qualifying Venture Capital Funds and must also satisfy the STFM conditions. |
| An IFM plans an Exempt Fund or lowers its fund’s minimum subscription below USD 5 million | The IFM route is limited to QIFs or equivalent Foreign Funds meeting the USD 5 million minimum subscription condition. |
| An IFM proposes natural-person unitholders | The IFM framework prohibits natural-person unitholders, subject to the specific Employee Investment Vehicle rules. |
| The manager adds advice or arranging services | Managing a Collective Investment Fund does not automatically authorise every separate regulated activity the firm may wish to perform. |
These examples follow the FSRA’s specialised manager guidance, particularly paragraphs 10–15 and 21–23. Whether a particular proposal requires a variation depends on the firm’s existing FSP and the facts of the proposed activity.
The STFM threshold: measure the whole platform
The USD 200 million STFM limit is an aggregate Committed Capital test. It is not a per-fund allowance.
Imagine a manager with:
- Fund I: USD 90 million of committed capital; and
- Fund II: USD 80 million of committed capital.
Its total is USD 170 million. It is now considering a further USD 50 million of commitments to Fund II. Accepting all of them would take the aggregate to USD 220 million.
The manager should not treat the first USD 30 million as a reason to leave the licensing issue until the final subscriptions arrive. It needs a fundraising timetable that identifies when the restriction may be reached and allows for an FSRA variation before commitments are accepted above the permitted ceiling. Supplementary Guidance, paragraphs 10(a) and 11.
A good control tracks commitments across every managed fund, including commitments being negotiated. It should give the responsible team enough warning to pause or sequence closings while the variation is assessed.
What if the next fund changes the business model?
Size is only one trigger.
An STFM might remain well below USD 200 million but propose an open-ended investment fund. A VCFM might identify an attractive private credit strategy for its next vehicle. An IFM might want to raise a fund from a broader group of Professional Clients through an Exempt Fund.
Each proposal may be commercially sensible. Each also needs to be tested against the existing FSP before the manager begins the new activity. The STFM guidance expressly calls for a variation where a manager wishes to run funds outside its eligibility criteria, and the IFM guidance does the same for non-qualifying funds. A VCFM’s restriction to VC Funds must likewise be addressed if the proposed platform expands beyond venture capital. Supplementary Guidance, paragraphs 11–13 and 21–22.
The answer is not necessarily to create an entirely new manager. An FSP variation can be the regulatory route for an existing authorised firm to seek a wider or different scope, subject to FSRA assessment and approval.
Adding co-investment services: a separate permission question
Suppose a VCFM manages a fund investing in an early-stage company. An investor asks the manager to recommend and arrange a direct co-investment alongside the fund.
The fund’s investment and the investor’s direct investment are different relationships. The FSRA guidance explains that a VCFM may apply for permissions to Advise on Investments or Credit and/or Arrange Deals in Investments where those activities are restricted to qualifying co-investments. It also states that the VCFM may seek an FSP variation to add those activities after authorisation, if needed. Supplementary Guidance, paragraphs 14–15.
The manager should map what it will actually say and do for the investor. Recommending an investment, structuring it and arranging participation can raise different regulated-activity issues. A fund management permission alone should not be assumed to cover the entire co-investment service.
What does the FSRA expect in a variation application?
The ADGM General Rulebook, section 8.3, addresses applications to change the scope of an FSP or to vary or withdraw an existing condition or restriction. It requires the firm to give the FSRA written details of the proposed change. The relevant standards concerning fitness and propriety, resources, compliance arrangements and effective supervision also apply to such an application.
The FSRA’s Guidance & Policies Manual (GPM), paragraph 2.10.1, explains the information a firm should provide when changing the scope of its permission. Depending on the proposal, that includes:
- A revised business plan explaining the rationale for the change;
- Changes to policies, procedures, systems and controls;
- Updated senior management responsibilities and reporting lines;
- Any relevant transitional arrangements;
- Financial information where the change affects prudential obligations;
- The effect on Approved Persons and controlled functions; and
- Revised pro forma financial statements.
The practical message is clear: a variation is not simply a request to delete a sentence from the FSP. The application must show that the manager has the people, financial resources and controls to operate under its proposed scope.
The FSRA may require conditions to be met before granting a variation and may refuse a request where it considers that appropriate under its statutory objectives.
A practical FSP variation process
1. Identify the proposed activity precisely
Describe what is changing in operational terms. Is the firm taking larger aggregate commitments, managing a new fund type, admitting a different investor group, or providing an additional service?
Avoid a vague request to “broaden the licence”. The FSRA needs to assess a defined business model.
2. Compare it with the current FSP
Review the regulated activities, client limitations, fund manager category, conditions and restrictions in the issued permission. Then compare each proposed step with the applicable FUNDS, GEN and prudential requirements.
3. Determine the new regulatory position
If the manager leaves the STFM or VCFM framework, its capital, governance, internal audit, Finance Officer and insurance requirements may change. For example, STFMs benefit from specified dispensations, including no Expenditure Based Capital Minimum, while a full-scope manager is subject to a different prudential assessment. The financial plan must reflect the framework the manager is seeking to enter. FSRA Specialised Fund Manager Guidance, key features and Annex 1.
4. Prepare the supporting pack
Update the business plan, financial projections, organisation chart, key personnel analysis, compliance arrangements, fund strategy and investor-facing disclosures as appropriate. Explain how the firm will manage both its existing funds and the proposed expansion.
5. Engage the FSRA and submit the application
The FSRA directs regulated firms to keep it informed of changes to their business and provides channels for discussing changes in the scope of an FSP with their supervisor. The applicable forms and submission requirements should be confirmed for the specific variation.
6. Sequence the commercial launch around the decision
An application is not an amended permission. The manager should plan subscription closings, fund launches and new service offerings around the point at which the required variation has been granted and any applicable conditions have been met. The FSRA’s general application process similarly distinguishes applying for permission from receiving permission to commence regulated activity.
What if the manager notices the problem late?
The first step is to establish the facts: what activity has occurred, what the FSP allowed at the time, and whether any restriction has been or may imminently be breached.
A prospective change can be managed through a properly timed application. A possible past breach raises an additional supervisory and legal question. The manager should not assume that a later variation retrospectively authorises earlier conduct. It should assess any applicable notification obligations, preserve accurate records and engage the FSRA appropriately.
The FSRA’s GPM explains that it has powers concerning FSPs and may take account of regulatory compliance advisory contraventions and inadequate resources when considering supervisory action.
The best time to plan a variation
An FSP variation should appear in the manager’s growth plan before it appears as an obstacle to a fund closing.
For an STFM, that means forecasting aggregate commitments. For a VCFM, it means testing future strategies and co-investment services. For an IFM, it means checking proposed fund types, subscription minimums and the legal identity of investors. For every manager, it means treating the wording of the FSP as an operating limit that must be monitored.
The question is not whether your ADGM fund manager business is allowed to grow. It is whether your permission is updated before your activities grow beyond it.
CRYPTOVERSE Legal Consultancy advises ADGM fund managers on FSRA licence scope reviews, regulatory perimeter assessments, FSP variations, fund structuring and the documentation needed to support business expansion.
Disclaimer: This article provides general information based on the ADGM regulatory framework and FSRA guidance available in September 2026. It is not legal advice on a specific FSP, proposed activity or potential breach. The firm’s issued permission and current rules must be reviewed in each case.
FAQs
1. Can an ADGM fund manager accept commitments first and update its licence afterward?
No. If accepting new commitments would take an STFM over its aggregate threshold, the FSP must be varied before those commitments are accepted — not retroactively adjusted after the fact.
2. Is the USD 200 million STFM threshold measured per fund or across all funds?
Across all funds the manager manages. A manager should track aggregate commitments across its entire platform, including funds still being negotiated, not just the fund currently raising capital.
3. Does a VCFM automatically need an FSP variation to offer co-investment opportunities to investors?
Not automatically, but it needs the right permission. A VCFM can apply for restricted Advising or Arranging permissions for qualifying co-investments, either at initial authorisation or through a later variation.
4. What must an FSP variation application typically include?
A revised business plan explaining the rationale, updated policies and controls, revised management responsibilities, financial information if prudential obligations change, and the effect on Approved Persons — not just a request to remove a restriction.
5. What happens if a manager realises it has already exceeded its licence restrictions?
This raises a separate supervisory issue beyond a routine variation. The manager should establish the facts, preserve records, and engage the FSRA appropriately — a later variation does not retrospectively authorise earlier conduct.