There is no passport in the Gulf, and a fund authorised in one centre has been authorised nowhere else.

A manager that has registered a fund in a financial centre has a fund it may market from that centre to the investors the centre's rules permit, and nothing else. The centre's registration is not recognised by the capital markets authority of any Gulf state as a permission to offer the fund to that state's residents. Each state has its own rules on who may offer a foreign fund to its residents, to which residents, by what process and with what disclosures, and each is entered separately: through a person the state licenses, under an approval or a notification the state's authority grants, within the investor categories the state defines, on a timetable the state's authority sets. The passport, the single authorisation that opens a region, exists in other regions and not in this one, and a manager that plans a raise across the Gulf on the assumption of one has planned a raise that begins again at each border.

This note sets out what the centre's registration permits and where it stops, the states and their routes, the licensed person, the investor categories, the approval and the notification, the reverse solicitation exception and its narrowness, the private placement routes, the timetable per state, the disclosure per state, the marketing materials and the memorandum, the record of each approach, the regulators' communication, the lender's reading, a comparison, a worked raise as a type, cases, what each party holds, the sequence, questions, terms and what to read.

What the centre's registration permits

The centre's regulator registers or authorises the fund by tier and licenses the manager to market it. The permission is to market from the centre, under the centre's rules, to persons the tier permits, wherever they are, subject to the rules of wherever they are. The last clause is the boundary. The centre's rules do not purport to override any state's rules on offers to its residents, and the centre's regulator expects the manager to comply with those rules as a matter of the manager's conduct. A manager that markets into a state without the state's permission has breached the state's rules and, through its conduct obligations, the centre's.

The states and their routes

Each Gulf state has a capital markets authority or equivalent with rules on the offering of foreign funds. The routes differ: one state requires a foreign fund to be registered with its authority and offered through a locally licensed distributor to a defined investor class; another permits a private placement to a defined class through a licensed person with a notification; another permits offers to institutional investors through a licensed person without registration of the fund but with the licensed person's own approval; another restricts foreign funds to a narrow class of investors and requires the authority's approval per offer. The routes are the states' and they change, and the structure paper's column per state is dated.

The licensed person

In every state the offer is made by a person the state licenses for the activity: a local bank, a licensed distributor, a licensed adviser, or the manager's own affiliate licensed there. The manager's own licence in the centre is not the state's, and the manager's staff travelling into the state to meet investors are the manager acting in the state without a licence unless the meetings are under the licensed person's arrangements. The licensed person's engagement, its own approval where the state requires it, its conduct obligations in the state and its engagement terms are the route's first step, and the manager that has not engaged one has no route.

Why managers assume a passport

Managers from regions with passports assume one; managers in the centres hear the centres described as gateways to the region and read gateway as passport. The centres are gateways in the sense that a manager licensed there has a regulated home from which to run a Gulf strategy, and in no other sense. The centres' own marketing rules say so in their territorial scope, and each state's rules say so in their own. The assumption survives because the first raise is often from investors the manager already knows, who approach it, and the question of the route does not arise until the second raise reaches investors it does not know. By then the manager has a record of meetings in states it had no route into, and the record is read at the second raise's diligence.

The centre's rules in the state

The centre's conduct rules follow the manager into the state: the manager's communications must be clear and fair under the centre's rules wherever they are received, the manager's classification of investors under the centre's tiers applies to its own conduct, and the manager's record-keeping obligations reach its activity in the state. The state's rules bind on the offer's arrival. A manager in a state is under both sets at once, and a communication lawful under the state's rules and misleading under the centre's is a breach in the centre. The licensed person's approval of the materials is the state's check; the manager's own compliance is the centre's.

The onshore affiliate as the licensed person

A manager with an affiliate licensed in a state has its own licensed person there, and the affiliate's licence carries its own conditions: the activities it may conduct, the investors it may approach, the products it may offer, the capital and the staff it must hold, and the state's authority's supervision. The affiliate's licence is the state's permission for the affiliate and not for the manager, and the manager's staff who are not the affiliate's staff are in the same position as at any other licensed person. The affiliate's approval of the fund for offering, its classification of investors and its record are the route, and its own compliance is the state's reading of the group.

The investor categories

Each state defines who may be offered a foreign fund: institutional investors by a list, professional or qualified investors by a test of assets or experience, high-net-worth individuals by a threshold, or the public with a registered fund. The definitions differ from the centre's tiers, and a holder that is professional in the centre's rules may be retail in the state's. The licensed person classifies each investor under the state's definition before the offer, and the classification is the record the state's authority reads.

The states beyond the Gulf

A raise that reaches holders outside the region, in jurisdictions with passports of their own, finds that the passports run among their members and not to the centres: a centre's fund is a third-country fund under them, offered by national private placement where the member state permits it, with the member state's notification and conditions, and the manager's own status under those rules. The method is the same as in the Gulf, a column per jurisdiction and a route per column, and the structure paper's pages extend to each jurisdiction the raise will touch. The absence of a passport in the Gulf is the absence of a passport for a Gulf fund everywhere, and the raise is national everywhere.

The distribution agreement

The licensed person's engagement is a distribution or placement agreement: its appointment, its territory, the investors it may approach, the materials it may use, the approvals it must obtain, the classification it must perform, the records it must keep, its conduct obligations, its engagement terms, the manager's obligations to it, the liability each bears, and the termination. The agreement is drafted by counsel in the state to the state's rules on distribution and by the manager's counsel to the centre's rules on delegation and outsourcing, because the licensed person's activity is the manager's marketing delegated. The centre's regulator reads the agreement as the manager's outsourcing, and the manager's oversight of the licensed person is a conduct obligation in the centre.

The approval and the notification

Some states approve the fund for offering, on an application with the memorandum, the constitution, the manager's standing and the licensed person's particulars, in a period the authority sets; others receive a notification before or after the offer; others approve the licensed person's activity and leave the fund unregistered. An approval is a permission and its conditions bind; a notification is a record and the authority may object. The state's rule says which, and the timetable of the raise carries each state's period.

The reverse solicitation exception

Each state's rules except, in some form, an investor that approaches the manager on its own initiative without solicitation. The exception is narrow, it is read narrowly by the authorities, and it is the one managers rely on most. A meeting the manager requested, a presentation the manager gave at a conference in the state, a document the manager sent first, is solicitation; an investor that found the fund's name in the centre's register and wrote is not. The exception is a defence to be proved with a record, and a manager that markets into a state and calls it reverse solicitation has a record that shows the opposite.

The private placement routes

Most states have a route for private offers to a limited number of defined investors, through a licensed person, with a notification or a light approval, and the route is the usual one for a closed-ended fund. The route's conditions are the state's: the number of offerees, the minimum subscription, the investor class, the licensed person's role, the disclosures, the prohibition on public advertising, and the record. A private placement that exceeds the number, falls below the minimum or reaches outside the class is a public offer without registration.

The subscription's validity

A subscription obtained by an offer the state's rules did not permit is a subscription the state's authority may treat as void or voidable, and the holder's own regulator may treat as an investment its regulated entity should not hold. The constitution's subscription provisions carry the holder's representation that it was offered the fund lawfully under its own jurisdiction's rules and that it is within the class its jurisdiction permits, and the representation is the manager's protection against the holder and not against the state. The administrator's checks at admission record the route, the licensed person and the classification for each holder, and the register is the evidence that every subscription was lawful where it was made.

The timetable per state

The raise's timetable is the states' periods in parallel: the licensed person's engagement and its own approval, the fund's approval or notification, the investor classification, the offer, the subscription. A state whose approval takes a quarter is a state whose investors subscribe at the second close, and the first close's equalisation applies to them. The manager plans the closes on the states' clocks, and a final close date fixed before the slowest state's clock is read is a date the slowest state misses.

The disclosure per state

Each state requires disclosures to its investors: a statement that the fund is not registered with the state's authority where it is not, the licensed person's identity, the risk warnings in the state's form, the investor's classification, and in some states a translation of the memorandum or a summary in the state's language. The disclosures are a wrapper on the centre's memorandum, per state, and the wrapper is drafted by counsel in the state and approved by the licensed person.

The conference and the press

A conference in a state at which the manager presents, a press interview in which the manager describes the fund, a website the state's residents can read, are each a communication the state's rules may read as an offer to its residents, and the licensed person's approval of the manager's public statements in the state is the route's protection. The usual practice is that the manager speaks about its strategy and not its fund, that the fund's materials are available only through the licensed person, and that the website carries the state-by-state restrictions the states' rules require. A manager that presented the fund at a conference in a state it had no route into has a record the reverse solicitation exception cannot survive.

The marketing materials and the memorandum

The memorandum is the centre's document under the centre's rules, and it is used in each state with the state's wrapper. Presentations, teasers, summaries and letters are marketing materials in each state's rules, and each is a document the licensed person approves before use in the state and the state's authority may read. A presentation used in three states has three approvals, and a teaser sent to a state's resident before the licensed person approved it is an unapproved offer.

The record of each approach

Every contact with a prospective investor in a state is recorded: who, when, by whom, under which licensed person, on which classification, with which documents. The record is the manager's evidence that the offer was lawful under the state's rules and the centre's, and the state's authority and the centre's regulator each read it on inspection. A manager without the record relies on memory, and memory is what the reverse solicitation exception is disproved by.

The regulators' communication

The centre's regulator and the states' authorities have memoranda of understanding for information sharing on marketing, and a breach found in a state is reported to the centre. The centre's regulator reads the report as a conduct matter, and a manager with breaches in two states has a conduct record in the centre. The communication runs one way in practice: the states report to the centre, and the centre's registration is not reported to the states as a permission.

The lender's reading

A capital-call lender reads the fund's register for holders admitted under each state's route, because a holder admitted in breach of the state's rules is a holder whose subscription the state may unwind or whose commitment the state's authority may restrain. The facility requires the manager's representation that each holder was admitted lawfully under the rules of its jurisdiction, and the manager's record per state is the representation's evidence.

By state route · by element	The licensed person	The fund's status	The investor class	The record
Registration and licensed distribution	Licensed distributor	Registered with the authority	The defined class	The distributor's and the authority's
Private placement with notification	Licensed person	Notified	The defined class, limited in number	The licensed person's
Institutional offer through a licensed person	Licensed person with its own approval	Unregistered	Institutions by list	The licensed person's
Approval per offer	Licensed person	Approved per offer	The narrow class	The authority's
Reverse solicitation	None	Unregistered	The investor that approached	The manager's, proving the approach

A raise, as a type

A manager registers a fund in a centre for professional investors and plans a raise from holders in four Gulf states. The structure paper carries a column per state: the route, the licensed person, the investor class, the approval or notification and its period, the disclosures and the wrapper, the marketing materials' approval, and the record's form. Licensed persons are engaged in each state in month one. The fund is notified in two states and approved in two, with the slowest approval in month five. Each investor is classified by the licensed person under the state's definition before the first meeting. The memorandum carries a wrapper per state. Every meeting is under the licensed person's arrangements and recorded. The first close in month four admits holders from the two notified states; the second close in month seven admits holders from the approved states with equalisation. The lender takes the manager's representation on the record. The centre's regulator's inspection in year two reads the record per state and asks nothing; no state's authority has reason to report.

The structure paper's page

The structure paper carries the column per state: the route, the licensed person and its engagement, the investor class and its test, the approval or notification and its period, the disclosures and the wrapper, the materials' approval, the record's form, and the date the column was last checked. The page is written before the first meeting in any state, and it is the page the licensed persons and the lender's counsel each read.

The public fund's different route

A fund registered as a public fund in a centre may use a route some states provide for recognised public funds, on registration with the state's authority, with a licensed distributor and the state's disclosures, to the state's public. The route is a registration and not a passport: the state's authority registers on its own conditions, the distributor is the state's licensed person, and the fund's public status in the centre is one of the conditions and not the permission. A private fund has no such route and uses the private placement or the institutional route, and a manager that registers a public fund to reach a state's retail investors has chosen a tier for a route and pays the tier's cost in every other respect.

The second raise's reading

A manager's second raise is diligenced on the first raise's record per state, and prospective holders' counsel read it for the route each holder was admitted under. A first raise whose record shows licensed persons, classifications, wrappers and approvals is a raise the second raise's holders read as a manager that knows the region; one whose record shows meetings in states with no route is a raise whose holders' counsel ask about the subscriptions' validity. The record per state is the manager's regional competence made visible, and the second raise's licensed persons read it before they agree to act.

Four cases, as types

A manager registers a fund in a centre and markets it across four states from the centre on the registration. Two states' authorities find the offers, penalise the manager, and report to the centre, whose regulator opens a conduct matter on a manager with two breaches in its first raise.

A manager engages licensed persons in two states and relies on reverse solicitation in two others. The record in the other two shows the manager's presentation at a conference in each, and the exception fails on the manager's own record.

A manager engages licensed persons in four states and fixes the final close before the slowest state's approval period. The slowest state's investors miss the close, the manager extends it, the first-close holders' equalisation runs for longer than the memorandum implied, and the anchor asks why the clock was not read.

A manager writes the column per state, engages the licensed persons, classifies the investors, wraps the memorandum, approves the materials, records every approach and plans the closes on the states' clocks. The raise crosses four borders by beginning again at each, as planned.

What each party holds

The manager holds the column per state, the licensed persons' engagements and the record.

Counsel in each state holds the route, the investor class, the disclosures and the wrapper.

The licensed person in each state holds the offer, the classification, the materials' approval and its own record.

The centre's regulator holds the manager's conduct, including conduct in the states.

Each state's authority holds the approval or the notification and the power to find a breach.

The lender holds the representation and the record.

Where it surfaces

It surfaces at the first meeting in a state, when the investor's counsel asks which licensed person the manager is there under. It surfaces at the subscription, when the administrator's checks ask for the investor's classification under its state's rules. It surfaces at the state's authority, when a complaint or a routine review finds an offer with no route. It surfaces at the centre's regulator, when the state's report arrives. It surfaces at the lender's representation. It surfaces at the final close, when the slowest state's approval has not issued. And it surfaces at the second raise, when the diligence reads the first raise's record per state.

The cost of getting it wrong

An offer without a route costs the state's penalty, the centre's conduct finding, the subscription's vulnerability, and the manager's standing in both. The cost of the route is a licensed person's engagement per state, a wrapper per state, an approval's period and a record, which is the cost of a raise that was always going to begin again at each border.

The investor's own reading

An institutional investor in a state reads the manager's route before it subscribes, because a subscription under an unlawful offer is a subscription the investor's own regulator may question. Its counsel asks for the licensed person's engagement, the approval or notification, the wrapper and the classification, and an investor that receives them subscribes; one that does not reads the manager as a manager that does not know the rules of the investor's own state. The route is the manager's credibility with the investors it most wants.

A timeline, as a type

Month one: the column per state is written and dated; the licensed persons are engaged. Month two: the fund is notified in two states and the approval applications are filed in two; the wrappers are drafted; the materials are submitted for approval. Month three: the licensed persons classify the first investors and the meetings begin under their arrangements, recorded. Month four: the first close admits holders from the notified states. Month five: the slowest approval issues. Month seven: the second close admits holders from the approved states with equalisation. Year two: the centre's regulator inspects the record per state. Year four: the second raise's diligence reads the same record. The passport did not exist, and the raise did not need it.

The sequence

1. The states are listed and counsel in each writes the route's column, dated.
2. A licensed person is engaged in each state, with its own approval where the state requires it.
3. The fund is approved or notified in each state on the state's clock, and the closes are planned on the clocks.
4. Each investor is classified under the state's definition by the licensed person before the offer.
5. The memorandum is wrapped per state and the materials are approved per state.
6. Every approach is recorded, and the record is the manager's evidence in the centre and the states.

Questions a manager asks

Is there any recognition between the centres and the states. Specific recognitions for specific routes exist and change; none is a passport, and the column per state says what the current recognition permits.

Can the manager's staff meet investors in a state. Under the licensed person's arrangements, as the licensed person's guests, on the licensed person's classification; not on their own.

What about a sovereign or a state institution. Often in the institutional class with the lightest route, and still through a licensed person unless the state's rule excepts offers to its own public bodies.

Does the reverse solicitation exception ever apply. When the investor approached first, unsolicited, and the record shows it; the manager treats it as a defence and not a route.

On what terms are the licensed persons engaged. Under written engagements the manager bears from its own resources, disclosed where the state's rules require; not borne by the fund unless the constitution permits.

What if a state changes its route mid-raise. The column is redated, the licensed person advises, and the offers in that state pause until the route is clear.

Terms used

Passport: a single authorisation recognised across a region, which the Gulf does not have.

Licensed person: the person a state licenses to offer a foreign fund to its residents.

Investor class: the state's definition of who may be offered a foreign fund by each route.

Approval and notification: the state's permission for the fund's offering, or its record of it.

Reverse solicitation: an investor's unsolicited approach, excepted narrowly from the marketing rules.

Wrapper: the per-state disclosures attached to the centre's memorandum.

What to read

The centre's marketing rules and the manager's licence; each state's rules on foreign fund offers, its investor classes and its routes; the licensed persons' engagements; the wrappers; the record. On this site, the marketing room under Jurisdictions, the onshore room and the interfaces room.