Investment Funds Conference “Collective Investment Funds in the Qatar Financial Centre – Confidence and Opportunity” November 26-27, 2007

Michael Webb Managing Director, Financial Sector Development and Policy Qatar Financial Centre Regulatory Authority

The Qatar Financial Centre

• The Qatar Financial Centre (QFC) is the onshore financial market in Qatar established in 2005 to support the ambitious investment programme of the government of the State of Qatar, and to bring added depth and breadth to Qatar’s financial sector and the region as a whole.

• The

QFC Regulatory Authority

(QFCRA) regulates financial services carried on in or from the QFC, including asset management.

QFC - the legal and regulatory template

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Clear constitutional arrangements

: The QFC and its key entities were established by primary Qatari statute. QFC authorised entities can operate in the State of Qatar, and do business with Qatari corporations and individuals.

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Modern laws

: A full suite of civil and commercial laws have been implemented with drafting based on the laws of leading common law jurisdictions. More laws are being developed to meet industry needs.

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A separate and independent QFC Civil and Commercial Court

: The Court has been established to adjudicate between parties relying on those new QFC laws. Alternative forms of dispute resolution are encouraged.

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Full access to markets

: The law establishing the QFC imposes no restrictions on the type of financial services business that can be done by QFC authorised entities.

Qatar Financial Centre Regulatory Authority

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QFC - the legal and regulatory template

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An Integrated Regulator

: The QFC Regulatory Authority was established as an integrated regulator, providing supervision of all forms of financial services activity. Much of the operation of the Authority is based on the approach of the UK’s Financial Services Authority.

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Regulatory Independence

: The Regulatory Authority was designed to be fully independent, with its own international Board drawn from leading regulatory bodies, and the Board in turn reports directly to Qatar’s Council of Ministers. •

International Cooperation

: The Authority has been given powers to cooperate fully with its international counterparts and enter into information sharing arrangements for the purposes of supervision and enforcement.

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Adopting International Standards

: Entry into the QFC regime is open to any institution that can demonstrate that it can meet the standards for admission and will be able to maintain those standards.

Qatar Financial Centre Regulatory Authority

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The QFCRA Collective Investment Funds regime

• The QFCRA collective investment funds regime came into force in July 2007 – – The detailed rules are set out in the Collective Investment Funds Rulebook (COLL); – This followed an extensive public consultation process.

Qatar Financial Centre Regulatory Authority

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Why regulate funds?

• Investors are not directly in control of their investments or investment decisions and consequently need assurances that their funds are being managed appropriately and they are being treated fairly.

• Unregulated funds may also be exposed to: – – – – – increased money laundering risk; complex structures ownership/control; lack of control over money inflows and bank account arrangements; no investment restrictions; and lack of requirements regarding protections (custody/trustee oversight).

Types of funds allowed under COLL

• Qualified Investor Funds – Business Customers & Market Counterparties only • Private Placement Funds – Less than 100 investors – Exempt from a number of COLL provisions, e.g.: • requirement to appoint an independent entity/custodian • investment and borrowing restrictions • Retail Funds – Currently not permitted • Foreign Funds – Freely marketable (subject to financial promotion rules).

Qatar Financial Centre Regulatory Authority

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COLL - overview

• QFCRA regulates QFC funds (Registered Funds) through the operator: – – – – – QFCRA Authorised Firm Responsible for registering fund Regular, clear and concise reporting to investors Appoints Independent Entity, Administrator, etc.

Compliance with COLL Rules • Regulation of operator is supported by oversight functions undertaken by independent entity: – – Safekeeping & Oversight Can be based outside Qatar • QFCRA regulates the sale/marketing of foreign funds through regulation and authorisation of the Authorised Firm doing the selling/marketing.

Qatar Financial Centre Regulatory Authority

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The main functionaries

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Operator

: the QFC Authorised Firm responsible for establishing (incl. registering) and operating the fund. Commonly referred to as the fund manager.

– Operator can outsource functions but not to the Independent Entity •

Independent Entity

: the firm responsible for the custody/safe keeping of the fund property and for overseeing the operations of the Operator. If the IE is in the QFC it must be an Authorised Firm.

– Independent Entity can outsource functions but not to the Operator •

Administrator

: the firm responsible (if appointed by the Operator) for the administration of the fund on behalf of the Operator. If the firm is in the QFC it must be an Authorised Firm.

The next step – a fully integrated regulator for Qatar’s financial services

A fully integrated regulator for Qatar’s financial services

• On 16 July 2007, the Government of Qatar announced that Qatar was to create a fully integrated, best practice regulatory and legal environment for financial services.

• A single integrated financial regulatory body is to be established that will oversee all banking, insurance, securities, asset management and other financial services.

• Qatar is following an international trend towards an integrated approach, on the basis of the significant benefits that accrue from such an approach; including – Greater transparency and predictability given a simplified institutional landscape; – Greater efficiency through a pooling of scarce regulatory staff; – Ability to take a comprehensive view of financial institutions active across different lines of financial activity.

An integrated Regulator

• The new regulatory body will be fully independent, with management accountable to a board constituted of international and Qatari financial services regulatory experts.

• The new regulator is expected to be in place in 2008.

• A common set of high standard rules applying to all financial service providers in Qatar will be rolled out over a more extended period to allow institutions that need to adapt to new regulatory standards sufficient time to put in place the resources.