SCA

SCA

The Securities and Commodities Authority (SCA) of the UAE is the regulatory body responsible for supervising and regulating the securities and commodities markets in the UAE. The SCA was established in 2000, with the aim of promoting investor confidence and protecting the interests of investors, issuers, and other stakeholders in the securities and commodities markets.

The SCA operates under the supervision of the UAE Ministry of Economy and has the authority to issue regulations, licensing and supervising the activities of all entities operating in the UAE’s securities and commodities markets. This includes companies, brokers, dealers, investment advisers, and other market participants.

The Securities and Commodities Authority (SCA) of the UAE is responsible for regulating and supervising the securities and commodities markets in the UAE. To operate in these markets, entities and individuals are required to obtain licenses from the SCA.

SCA has now divided all licensed financial activities into five categories, which are provided as:

  • Category 1: Dealing in securities.
  • Category 2: Dealing in investments.
  • Category 3: Custody, clearing and registration.
  • Category 4: Credit rating.
  • Category 5: Arrangement and advice.

To obtain any of these licenses, entities and individuals must meet certain requirements and comply with regulations set by the SCA. The licensing process typically involves applying, providing relevant documentation, and meeting certain criteria, such as having the required capital, infrastructure, and qualified personnel.

Furthermore, SCA regulates all securities-related activity within the UAE excluding activity within the Dubai International Financial Centre (“DIFC”) and the Abu Dhabi Global Market (“ADGM”).

SCA AND VIRTUAL ASSETS

SCA now accept license applications from companies intending to provide virtual asset services following the approval of the decision regulating virtual asset service providers.

The Cabinet issued Resolution No. 111 of 2022 Regulating Virtual Assets and Virtual Asset Service Providers at the end of 2022, mandating that the SCA has the authority to issue decisions regulating virtual asset transactions and licensing virtual asset service providers to implement its provisions.

Based on the SCA board’s decisions, all UAE-based companies that provide virtual asset services (except for those licensed to operate in financial free zones like DIFC and ADGM) must comply with the provisions of these decisions and submit their license application to the SCA.

In contrast, companies operating in the emirate of Dubai must submit their license application to the Virtual Assets Regulatory Authority in addition to pursuing the SCA’s approval in accordance with uniform procedures designed to facilitate and expedite the licensing procedure.

The decision regulating virtual asset platform operators contains nine articles, including Article 3, which prohibits the trading of virtual assets in the United Arab Emirates unless they are admitted to the official list of virtual assets of licensed virtual asset platform operators by the SCA and/or the competent authority.

Article 4 of the decision outlines the responsibilities of the operator of a platform for virtual assets, while Article 5 specifies the obligations of the operator in seven areas, including operational efficiency and resilience, as well as the creation and maintenance of operational rules that must comply with a set of standards outlined in the decision. Article 4 also addresses matters pertaining to integrity, transparency, and professional conduct; virtual asset protection system and measures; compliance and discipline measures, systems, and procedures; rules and procedures for fair, orderly, and effective operation to regulate trading; and the regulation of access to services through the establishment of procedures that ensure only authorized individuals have access.

As per Article (5) of the Resolution, the following activities require a license and are subject to oversight by the Authority, in accordance with the provision of this resolution:

  1. Provision of Virtual Asset transfer services,
  2. Provision of Virtual Asset custody, management, and control services,
  3. Provision of brokerage services in trading operations in Virtual Assets.
  4. Provision of Virtual Asset Platform operation and management services,
  5. Provision of exchange services between one or more forms of virtual assets, and
  6. Provision of financial services related to offering and/or selling by the issuer to the Virtual assets or participating in providing those services.

The Cabinet, based on the Authority’s proposal and after coordinating with the local licensing authorities and the Central Bank, may amend the activities described in this Article, whether by addition or deletion.

Under Article 6 of the decision, the SCA may request any documents or data from the operator of the virtual asset platform, which must be provided within the specified time frame. In addition, the article stipulates that the SCA shall perform supervisory, investigative, supervision, and inspection duties in relation to the virtual asset platform, its operator, and all other relevant aspects. In accordance with Article 7, complaints may be submitted against decisions issued by the SCA to implement the terms of this decision in accordance with the controls established for this purpose.