Every fund manager setting up in Abu Dhabi Global Market needs a Category 3C licence from the Financial Services Regulatory Authority. That is the baseline. The FSRA has recognised that applying the same requirements to a first-time manager raising $30 million and a global firm managing $2 billion makes no sense. In late 2025, they proposed a Sub-Threshold Fund Manager framework that would give emerging managers a much lighter path into the jurisdiction. I have been advising managers on ADGM licensing for several years now, and this is the biggest structural change since the jurisdiction launched its funds regime.
Here is what the current rules require, what is changing, and how to decide which path fits your fund.
How Category 3C licensing works today
Category 3C is the FSRA's licence category for managers of collective investment funds [1]. It sits within a broader tiered system under the Financial Services and Markets Regulations 2015 [2], with categories scaled by activity type and risk profile. If you want to manage a fund domiciled in ADGM, or manage an ADGM fund from outside the jurisdiction as a Foreign Fund Manager, Category 3C is where you start.
The application goes through the FSRA's general authorisation process [2]. You submit a regulatory business plan, demonstrate your governance structure, and satisfy the FSRA that your team has the expertise to run the fund. The FSRA evaluates applications on a case-by-case basis, and timelines vary, but a well-prepared application typically takes three to four months from submission to approval.
Capital requirements: the current maths
Under the existing rules, a Category 3C fund manager must hold base capital equal to the higher of two figures [1][3]:
- $50,000 fixed minimum, the floor.
- Expenditure-Based Capital Requirement (EBCR), calculated as 13/52 of your annual audited expenditure. In plain terms, roughly thirteen weeks of operating costs.
For a lean startup manager spending $400,000 per year on operations, the EBCR works out to $100,000, double the fixed minimum. That is capital you need to lock up before you can start managing the fund. It is not an unreasonable figure by global standards, but for a first-time GP whose personal capital is going into the fund itself, every dollar of regulatory capital is a dollar not working for LPs.
Approved persons and governance
The FSRA requires the appointment of several Approved Persons before you can begin operations [3][4]. These are individuals who must be pre-approved by the regulator to perform Controlled Functions as defined under GEN Rules 5.3 through 5.6 [5]. The mandatory roles include:
- Licensed Director or Partner (must be UAE-resident).
- Senior Executive Officer (the day-to-day operational lead, also UAE-resident).
- Finance Officer (responsible for financial reporting and controls).
- Compliance Officer (oversees regulatory compliance).
- Money Laundering Reporting Officer (MLRO) (handles AML/KYC obligations) [6].
Some of these roles can be combined. The SEO and Compliance Officer may be the same person in a small firm, for instance. But the UAE residency requirement for key roles is non-negotiable and shapes hiring decisions from day one. If your founding team is based in London or Singapore, you need at least one senior person on the ground in Abu Dhabi.
The Sub-Threshold Fund Manager proposal
In November 2025, the FSRA published Consultation Paper No. 12 of 2025, proposing a new Sub-Threshold Fund Manager designation for managers with up to $200 million in committed capital across all closed-ended funds [3][7]. The consultation closed on January 30, 2026, and implementation is expected during 2026.
Here is what would change:
- Capital requirement: the EBCR is eliminated entirely. STFM managers would only need the $50,000 fixed base capital [3][7]. For the manager spending $400,000 per year, that is a $50,000 saving in locked-up capital.
- Governance simplification: the mandatory Finance Officer role and internal audit function would no longer be required [3][7]. You still need financial controls, but you would no longer need a dedicated person in that seat from day one.
- Expedited authorisation: the FSRA has signalled faster processing for STFM applications, though specific timelines are not yet published.
The $200 million threshold is not arbitrary. The FSRA drew on the EU's AIFMD, which uses EUR 100 million for leveraged funds and EUR 500 million for unleveraged funds with five-year lockups as its own sub-threshold boundaries [3][7]. The $200 million figure sits comfortably within those ranges and covers the vast majority of first and second funds in the VC and PE space.
What happens to the existing VCFM regime
ADGM currently has a separate Venture Capital Fund Manager regime with a zero base capital requirement [8]. The consultation proposes folding VCFM into the STFM category [3][9]. Existing VCFMs would transition to STFM status with the $50,000 base capital requirement replacing the current zero-capital framework.
For managers who launched under VCFM specifically because of the zero capital threshold, this is a real change. $50,000 is still modest, but it is not zero. If you are currently operating as a VCFM, start planning for this transition now rather than being caught off guard when the final rules take effect.
Choosing between full 3C and STFM
The decision depends on three factors:
Fund size. If your committed capital will stay under $200 million across all vehicles (and for a first or second fund, it almost certainly will), STFM is the obvious choice. If you expect to cross $200 million within two to three years, consider whether you want to start with full 3C licensing to avoid a mid-life regulatory upgrade.
Investor expectations. Some institutional LPs may want to see a full-scope licence as a signal of regulatory seriousness. In my experience, this matters less than people think; most sophisticated investors care about operational substance, not licence categories, but it is worth testing with your anchor LP.
Leverage. The consultation floats a potential leverage cap of 100% of NAV for STFM-managed funds [7]. If your strategy involves serious fund-level borrowing, full 3C licensing may give you more flexibility.
Practical steps for an ADGM fund manager application
Whether you go full 3C or wait for the STFM framework, the preparation work is largely the same:
- Regulatory business plan. The FSRA wants a clear description of your strategy, target investor base, fund structure, and operational setup. This is not a formality; reviewers read it carefully.
- Approved Persons applications. Start these early. Each individual goes through a fit-and-proper assessment, and the FSRA will verify professional history, qualifications, and any regulatory track record. Expect this to take four to six weeks per person.
- Substance in ADGM. The regulator expects genuine presence, not just a registered address [10]: you need physical office space (even if shared or co-working), UAE-resident key personnel, and operational activities actually conducted from ADGM.
- AML/KYC framework. You need documented policies, procedures, and systems for anti-money laundering compliance before your licence is granted [6]. This includes customer due diligence procedures, transaction monitoring, and suspicious activity reporting.
How Infra One supports ADGM fund launches
We work with emerging managers launching their first and second funds in ADGM, handling the operational side so the GP team can focus on fundraising and deal flow. Our fund administration platform covers formation, investor onboarding with automated KYC/AML, capital calls, NAV calculations, and regulatory reporting. We also coordinate with local legal counsel on the licensing application itself.
The ADGM licensing process is well-structured but detail-intensive. Having a fund administrator who knows the FSRA's expectations, and who can prepare the operational documentation the regulator wants to see, makes a real difference to approval timelines. If you are considering an ADGM fund launch and want to discuss the licensing pathway, get in touch.
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