Written by Parastu Aghai, Director · Last reviewed 5 October 2026
Working with investment funds, I regularly come across questions that sound straightforward at first, but often become much more complicated once you look at the regulatory structure.
So I am starting a short Fund Problems – Q&A Series, covering some of the practical issues that arise when establishing and operating funds in the UAE.
Q1: Who actually qualifies as a Professional Client?
“Professional Clients only” appears in many fund documents. But simply calling an investor sophisticated or high-net-worth does not make them a Professional Client.
The applicable regulatory criteria have to be considered for the particular investor, and the classification needs to be properly supported and documented.
This matters particularly for private fund structures. For example, in the DIFC, both Exempt Funds and Qualified Investor Funds are restricted to Professional Clients and private placement. A QIF also currently requires an initial subscription of at least USD 500,000.
The DFSA has previously highlighted inadequate documentation and “tick-box” approaches to Professional Client classification as areas of concern.
Takeaway: “Professional Client” is a regulatory classification, not simply a description of a wealthy or experienced investor.
Q2: Can we accept the subscription now and complete the investor classification afterwards?
This is where commercial timelines and compliance requirements sometimes collide.
The investment team may have an investor ready to subscribe and want compliance to complete the classification afterwards.
But where the fund may only be offered to Professional Clients, the investor’s eligibility is part of determining whether that person can participate in the fund in the first place.
For example, a DIFC QIF must have Unitholders who meet the Professional Client criteria and must be offered by private placement.
So Professional Client classification should not simply become a retrospective KYC exercise after the investment has been accepted.
Takeaway: Investor classification belongs at the beginning of the subscription process — not at the end.
Q3: Can different investors in the same fund receive different economic terms?
Potentially — and this is where fund structuring becomes interesting.
Investors may negotiate different management fees, performance fees, subscription terms or other economic rights. Funds may also have different classes of Units, and side arrangements can arise with significant or strategic investors.
But the question is not simply: “Can we give Investor A a better deal?”
You need to consider how those differences are structured and documented, what the constitutional and offering documents permit, whether disclosure is required, whether the arrangement creates conflicts, and whether investors’ rights are being treated consistently with the applicable fund rules.
The more preferential the arrangement becomes, the more important the documentation and governance around it become.
Takeaway: Different economics may be possible. Undocumented preferential treatment is where the regulatory and governance problems begin.
Investor onboarding is not simply:
KYC → Subscription Agreement → Money received.
There is another question running through the entire process:
Is this investor actually eligible to invest in this particular fund, on these particular terms?
More questions from practice in Series 3.
