Due to the enhanced interest of citizens from CIS countries in obtaining residency in the country, as well as opening bank accounts as a decent alternative to accommodate their funds, investors are actively evaluating the local financial system. 

It is worthy to note, that the financial system of the UAE differs from American or European systems, therefore, the entire approach to working with local financial institutions would be different. Generally, there are several major categories of banks in the UAE - the local banks, banks of American and European financial groups, and the banks of GCC, in total there are 52 banks in the country, 22 of which are national banks. The UAE Central Bank regulates new business, the use of new technologies, and all banking activity within the nation.

Securities account and its custody

In general, the custody fees of the national banks for securities comprise 1% per year of their value, however, it is the average rate. For instance, the standard rate of securities custody in some of the UAE’s banks comprises 2%. The fees for transactions in stocks and bonds can be 1-2% of the transaction amount. At such costs, investors would have to make very successful investments to make a profit on their assets or at least keep their real value, taking into account the current inflation rate of 5-7%. 

In addition to classic investments, investment life insurance policies and bank deposits at fairly modest rates are also actively offered to bank clients. The rates might slightly vary from one bank to another, however, the important note is that most of the banks may take only limited types of securities under their custody, however, some of the banks offer broader types of securities, than others. If, for instance, the majority of banks can accommodate only a certain range of funds on a reversed inquiry basis, such as JPMorgan Funds; Amundi Funds - Pioneer Us Equity Research; Parvest Equity USA Growth; Schroders Isf Japanese Equity; Franklin Biotechnology; Franklin Mutual European; Amundi Funds - Top European Players. There are several banks, which might take more types under their custody.

For those, who wish to accommodate their savings in a form of securities, there are other options available, which are broker companies, which are mainly concentrated in financial centers of Dubai or other Emirates. There are two leading financial centers in the country: Dubai International Financial Center (DIFC) and Abu Dhabi Global Markets (ADGM). The DIFC is currently the largest in the Middle East. Both financial zones are separate jurisdictions within the UAE with their own legislation, courts, and financial regulators. Both of them comply with the principles of international law and take steps to maintain their reputation as safe places to store and grow assets. As in many other countries and jurisdictions, the legislation of these financial centers provides for mandatory storage of all clients’ assets of brokerage companies in segregated accounts. This means that investors' funds are not commingled with the broker's own funds, but are kept separately in accounts at major depositories.

There is a range of subsidiary structures, registered under these jurisdictions, which are mainly established by European companies, or representatives of other countries, willing to relocate their business to the UAE due to the beneficial taxation policy. The clients of these companies have access to most of the world's trading platforms, as well as the opportunity to trade on the over-the-counter market.

Thus, one of the key advantages of custodying securities on broker accounts does not require an investor to be a resident of the UAE. Moreover, compared to bank brokerage accounts, the broker accounts can be opened remotely, which would take several working days. It is still worthy to note that the length of the procedure varies from case to case, and might last for a longer period. Additionally, the relatively fast process does not mean a compromise on the compliance procedures while onboarding a client. Generally, the UAE’s financial ecosystem is evolving rapidly, being in line with the global giants on the market.

If you would like advice or assistance concerning custodying the securities in the UAE, kindly contact us. 

Marsel Shadmanov

Head of Corporate Services at Garant Business Consultancy DMCC

Phone +971 4 421 4335

Email info@garant.ae