ADGM’s Restricted Securities Regime

The Riffle

The Abu Dhabi Global Market (ADGM) Financial Services Regulatory Authority (FSRA), in its capacity as the Listing Authority, has introduced a comprehensive Restricted Securities Regime aimed at safeguarding market integrity and ensuring fair treatment of investors — particularly in the case of start-ups and early-stage companies listing under the Assets Eligibility Test.

This regime applies a temporary transfer prohibition, known as a Restriction Period, on securities held by insiders and early investors, enabling a fair price discovery phase post-listing and minimizing volatility from early sell-offs.

Purpose and Scope

The Restricted Securities framework ensures that companies with limited profitability or tangible asset history — often admitted under the Assets Eligibility Test (MKT 2.3.16) — operate within a structured environment that balances opportunity and investor protection.

Its objectives are threefold:

• Promote fair price discovery: Allowing markets to value the issuer’s securities based on fundamentals rather than insider activity.

• Enhance market integrity: Preventing founders or related parties from realizing early profits at the expense of public investors.

• Align interests: Ensuring early investors and the public share aligned incentives for at least one to two years post-listing.

Issuers admitted under the Profits Eligibility Test (MKT 2.3.15) are typically exempt from these requirements due to their established track records.

Key Features

1. Classification into 11 Categories

The regime divides potentially restricted securities into 11 categories, based on:

• The holder’s relationship to the issuer (e.g., founder, vendor, employee, service provider)

• The form of consideration (cash, debt, or assets)

• The timing of acquisition (pre- or post-listing)

Restriction periods are either one or two years, with some categories subject to a Restriction Formula that determines which portion of securities remains locked.

For example:

• Categories 1 & 9: Founders and employees – 2-year restriction with formula relief.

• Category 2: Early non-related investors – 1-year restriction if shares acquired below 80% of offer price.

• Categories 3–6: Vendors of unproven assets – 1- or 2-year restriction depending on relatedness.

• Categories 7–8: Service providers compensated in shares – 2-year restriction.

• Categories 10–11: Transferred or reorganised securities – restriction continues for the remaining period.

2. The Restriction Formula

To acknowledge early-stage risk takers, ADGM provides a formula to determine the portion of securities exempt from restriction:

(A / B) × C, where A is the price paid, B is the offer price, and C is total securities held.

The formula proportionally frees those securities bought closer to market value.

3. Procedural Obligations

Issuers under the regime must comply with several formalities:

• Restriction Agreements: Signed between issuer and each restricted holder using MKT Form 9-1 before listing.

• Holding Locks: Applied to prevent transfer during the Restriction Period, administered by the issuer or a third party.

• Free Float Exclusion: Restricted securities are excluded from “shares in public hands.”

• Disclosure Requirements: Lock-up details must be disclosed in the prospectus, at admission, and ten business days before any restriction expiry.

4. Transfers and Exceptions

Transfers during the Restriction Period are strictly prohibited, except in limited cases:

• Takeovers: If the offer is made for all securities and majority unrestricted holders have accepted.

• Waivers: Granted only in exceptional cases, such as court orders or public interest situations.

In the case of takeovers, new securities received remain restricted for the balance of the original period.

Conclusion

The Restricted Securities Regime reinforces ADGM’s commitment to transparent, stable, and investor-friendly capital markets.

By ensuring insiders and early investors remain aligned with the public through structured lock-ups, the FSRA fosters long-term confidence and fair value discovery — vital components for sustaining Abu Dhabi’s position as a trusted international financial centre.

Read the full briefing document presented by 10 Leaves here -