Part 3 Part 3 Fund Functionaries
CIR 5 CIR 5 Fund Administrators
CIR 5.1 CIR 5.1 General
CIR 5.1.1(1) Subject to (2), this chapter applies to an
Authorised Firmwhich is appointed as a Fund Administratorto either a Domestic or a Foreign Fund.(2) This chapter does not apply to a Fund Manageror Trusteeto the extent that it carries on an activity of Providing Fund Administrationwithin the Financial Servicesof Managing a Fundor of Acting as the Trustee of a Fund.
Compliance with the AML Rules
Client Money and Assets
Fund Administrator, in Providing Fund Administrationfor a Domestic Fundor Foreign Fund, must not hold or control monies or assets belonging to third parties in connection with such administration except in the following circumstances:(a) holding cheques to the order of a Fund'sbank account, provided such cheques are securely held for a maximum of three business days prior to being deposited into the relevant Fund'sbank account or returned to the drawer of the cheque; or(b) where a mandate over a Fund'sor other third party's bank account is granted to a Fund Administratorand the mandate has been agreed in writing with the bank concerned, and transfers out of the relevant bank account may be made only in circumstances where the mandate restricts instructions to make such payments to being made solely in accordance with the payment of invoiced fees and expenses, made in accordance with the relevant Fund's Constitutionand Prospectusand are not remitted to the account of the Fund Administratorexcept by express instructions of the Fund Manager.
Delegation and Service Level Agreements
CIR 5.1.4 CIR 5.1.4(1) A
Fund Administratorof a Domestic Fundfor which it is Providing Fund Administrationmust have a Delegation Agreementthat meets the requirements in CIR App1 with the Fund Manageror Trusteeof the Fund.(2) Paragraph (1) does not apply to a Fund Administratorof a Qualified Investor Fund.
CIR 5.1.4 Guidance
CIR Section 8.12of this module governs the delegation of activities by a Fund Manageror where appointed the Trustee.
CIR 5.1.5 CIR 5.1.5(1) A
Fund Administratorof a Foreign Fundfor which it is Providing Fund Administrationmust have a service level agreement with the fund manager of that Foreign Fundsetting out the functions and service standards that will be applied to the provision of such administration.(2) The agreement in (1) must ensure that the Fund Administratorcannot in turn delegate the activities and functions delegated to it by the fund manager of the Foreign Fundunless the sub-delegate has been approved by that fund manager.(3) The agreement in (1) must also require the Fund Administratorto retain any relevant work or records relating to the delegated activities and functions where the contract is terminated either by the fund manager or the Fund Administrator.
CIR 5.1.5 Guidance
DFSAwould expect any agreement required under CIR Rule 5.1.5 to include as a minimum the following provisions:a. unambiguous descriptions and definitions of the activities and functions to be provided by the Fund Administratorand the duties to be performed by both parties;b. an agreed standard in respect of resources and services supported as necessary by performance measures in accordance with the applicable legislation;c. the requirement for regular detailed reporting to a specified frequency from the Fund Administratorin respect of its duties and activities;d. provisions relating to the reporting of relevant events such as technological changes or error reporting and, in particular, any event which undermines the ability of the Fund Administratorto fulfil its duties;e. the requirement for an annual review (at a minimum) of the performance of the functions by the Fund Administrator; andf. provisions relating to records and adequate access by the fund manager, the Fund'sauditor or any other Personsproviding control or risk management functions for the Fund, as required by the fund manager or applicable laws to that Fund.
Fund Administratormust maintain records which are sufficient to show and explain transactions in relation to each of the specific activities and functions which are being provided to each Fund, in respect of Unitholdersor potential Unitholdersof the Fundas appropriate.
The records required under CIR Rule 5.1.6 must be:(a) capable of demonstrating to the
Governing Bodyof the relevant Fundthat any accounts prepared comply with the applicable requirements in this module or any other applicable legislation;(b) retained by the Fund Administratorfor at least 6 years from the date to which they relate;(c) at all reasonable times, open to inspection by the DFSA, the Fund's Auditorand any Personproviding oversight functions for the relevant Fund; and(d) if requested by the DFSA, capable of reproduction within a reasonable period not exceeding 3 days, in hard copy and in English.
CIR 6 CIR 6 External Fund Managers and External Funds
CIR 6 Guidance
This chapter sets out the detailed requirements that apply to
External Fund Managersand External Funds. Article 20(5) of the Law contains the criteria to be classified as an External Fund Managerand Article 14(1) of the Law contains the criteria for an External Fund.
CIR 6.1 CIR 6.1 Requirements for External Fund Managers
This section applies to an
External Fund Manager.
Subjecting to the DIFC Jurisdiction
External Fund Managermust:(a) be subject to regulation by a Financial Services Regulatorin a Recognised Jurisdictionor a jurisdiction otherwise acceptable to the DFSAwith respect to its activity of managing Fund; and(b) subject itself to the DIFClaws and the jurisdiction of the DIFC Courtsso far as they apply to its activities relating to the Domestic Fund, and, for that purpose, sign the appropriate declaration contained in AFN.
Appointment of Fund Administrator/Trustee
CIR 6.1.3 CIR 6.1.3(1) An
External Fund Managermust:(a) appoint to the Funda Fund Administratoror a Trusteelicensed by the DFSA(hereafter referred to as the "Appointed Fund Administrator" or "Appointed Trustee") before any Unitsin that Fundare Offeredto any Person;(b) nominate, and require, the Appointed Fund Administrator or Appointed Trustee, as the case may be, to be its agent in relation to its dealings with the DFSAand Unitholdersand prospective Unitholdersof the Fund; and(c) require the Appointed Fund Administrator or Appointed Trustee to, and for this purpose grant to that Personsuch powers as are necessary to, facilitate:(i) if it is an Open-ended Fund, the issue, resale and redemption of the Unitsof the Fundand the publication of the price at which such issue, resale or redemption will occur as provided under the Law and the Rules;(ii) the sending to Unitholdersof the Fundall the reports required under the Law and the Rules;(iii) access to the Constitutionand most recent Prospectusof the Fundto Unitholdersand prospective Unitholders;(iv) access to the Unitholderregister; and(v) access to the books and records relating to the Fundas required by the DFSAand any person providing the oversight functions of the Fund,in or from a place of business in the DIFC.(2) If the Fundis structured as an Investment Trust, the Fund Managermay appoint the Trusteeas its Appointed Trustee for the purposes of (1).(3) An External Fund Managermust continue to meet the criteria in Article 20(5) of the Law.
CIR 6.1.3 Guidance
In addition to the requirements in this chapter which apply to the Appointed Fund Administrator or Appointed Trustee,
Personswho are appointed to Fundsas Fund Administratorsor Trusteeshave other obligations (see for example CIR chapter 5.1).
Use of a Fund Platform not permitted
An External Fund Manager must not use a Fund Platform.
CIR 6.2 CIR 6.2 Requirements for External Funds
CIR 6.2 Guidance
Article 14(1) of the Law provides that a
Fundis an External Fundif that Fund:a. is established in a jurisdiction other than the DIFC; andb. is managed by a Fund Managerwhich is an Authorised Firm.
This section applies to the
Fund Managerof an External Fund.
CIR 6.2.2 CIR 6.2.2
Fund Managerof an External Fundmust:(a) have systems and controls which are adequate to ensure compliance with the requirements that apply to the External Fundin the jurisdiction in which it is established or domiciled; and(b) inform the DFSAof the jurisdiction in which the Fundis or is to be established or domiciled and the nature of regulatory requirements applicable to the Fundin the host jurisdiction.
CIR 6.2.2 Guidance1. A
Fund Managerof an External Fundis generally not subject to the requirements that otherwise apply to other Domestic Funds(see Article 14(2) of the Law). However, some limited requirements apply to External Funds. See for example the disclosure required under Rules CIR 14.2.4–CIR 14.2.7. Should such a requirement conflict with any requirements that apply to an External Fundin the jurisdiction in which the Fundis domiciled, the Fund Managermay apply to the DFSAfor appropriate waivers or modifications of the DFSArequirements.2. The DFSAmay, upon receipt of the information referred to in CIR Rule 6.2.2(b), assess the desirability of establishing an External Fundin the particular jurisdiction chosen by the Fund Manager. Relevant considerations include:a. the Fund Manager'sneed to establish the Fundin the particular jurisdiction for reasons such as the physical location of the Fundassets or investor preference;b. any regulatory risks arising from establishing the External Fundin the relevant jurisdiction, particularly if the Fundis to be open to retail investors; andc. whether the relevant jurisdiction complies with the FATFor other relevant international standards or requirements.
CIR 6A CIR 6A Using a Fund Platform
CIR 6A Guidance
Overview1. The DIFC Incorporated Cell Company (ICC) Regulations (‘the ICC Regulations’) provide for the establishment of an Incorporated Cell Company and its Incorporated Cells. The Incorporated Cells are stand-alone companies distinct from each other and from the ICC itself, of which they are cells. The ICC Regulations permit such companies to be used to conduct Fund business or Insurance Business.2. The ICC contains the infrastructure (e.g. systems and controls) for the exclusive use by the Fund Manager to manage Funds established as Incorporated Cells of the ICC. The ICC is the ‘core’ and each Incorporated Cell of the ICC is a Fund on the ICC. Under the ICC Regulations, an ICC cannot itself be constituted as a Fund or act as a Fund Manager.3. A Fund Manager with an endorsement to use a Fund Platform (see GEN 2.2.7A) can incorporate an Incorporated Cell Company to assist it to manage any type or specialist classes of Fund, in accordance with the applicable requirements in the Law and these Rules and in the DIFC Companies Law and ICC Regulations. However, a Fund Manager cannot use the Fund Platform to create, or provide services to, a type of Fund if it is contrary to its authorisation. For example, a Fund Manager permitted under its Licence to manage only QIFs cannot use the Fund Platform to establish or manage Exempt or Public Funds.4. A Fund Manager may use the infrastructure available in the ICC (the core) to provide a range of services relating to the Funds on the ICC. These services include implementing the Fund’s investment mandate (e.g. investment selection), carrying out administrative functions such as issuing, transferring and redeeming Fund Units, valuing Fund assets, account keeping, financial reporting and carrying out compliance and oversight functions, in relation to each Fund constituted as an Incorporated Cell.5. The activities which the Incorporated Cell Company carries out for the Funds are not those of a third party service provider appointed by the Fund Manager, however the Fund Manager remains legally responsible to Unitholders in the Funds for acts or omissions of the Incorporated Cell Company (see Rule 6A.1.3).
Incorporated Cell Companies and Protected Cell Companies6. While both Incorporated Cell Companies (ICCs) and Protected Cell Companies (PCCs) have a similar structure as both have a ‘core’ containing the infrastructure to manage their ‘cells’, there is a significant difference between an ICC and a PCC. Unlike a cell of a PCC, each Incorporated Cell of an ICC is a separate legal entity operating under its own name and with its own directors and Articles of Association. Under the ICC Regulations, an Incorporated Cell is not a subsidiary of the ICC. By contrast, a PCC and its cells form a single Fund, with each cell being a Sub-Fund of the PCC.7. A Fund Manager wishing to offer different investment strategies within a Single Fund (e.g. an Umbrella Fund) and different asset classes within its Sub-Funds to investors who can freely switch their investment strategies, can use the PCC structure. A Fund Manager wishing to manage different types or specialist classes of Funds, which are separate legal entities, using the infrastructure available in the core, can only do so by establishing an ICC.
Funds constituted as Incorporated Cells8. Each Incorporated Cell of an ICC that is established as a Fund will need to be registered with, or notified to, the DFSA as a separate Fund (as it is a separate legal entity). Unless specified otherwise, the requirements in the Law and these Rules apply to an Incorporated Cell that is a Fund in the same way that the requirements apply to other Funds that use a company structure. This includes, for example, general requirements for the management or operation of Funds and requirements that apply according to whether the Fund is a Public Fund, Exempt Fund or QIF and relevant requirements for specialist classes of Funds.9. An ICC is incorporated under the DIFC Companies Law, and so each Incorporated Cell of that ICC that is used to conduct Fund business is a Domestic Fund as defined in the Law (see Article 26(2) of the Law).10. An External Fund Manager is not permitted to use a Fund Platform (see Rule 6.1.4).11. A Fund Manager that uses the ICC structure to establish and manage Funds is not prevented from also managing other Funds outside that structure. However, the Fund Manager cannot use the infrastructure available in the Incorporated Cell Company to provide services to Funds that are not Incorporated Cells of the ICC (see Rule 6A.1.4(c)).12. This chapter sets out various requirements that apply to a Fund Manager that uses a Fund Platform to manage Funds constituted as Incorporate Cells of that ICC. These requirements should be read in conjunction with the other obligations, particularly under the ICC Regulations.
Application of chapter
This chapter applies to a Fund Manager that uses a Fund Platform.
General application of CIR to Incorporated Cell Companies
CIR 6A.1.2 CIR 6A.1.2
Except as otherwise provided in these Rules, the requirements in CIR that apply:(a) to a Fund Manager, apply to a Fund Manager when it uses an Incorporated Cell Company (ICC) to provide infrastructure to a Fund; and(b) in relation to a Fund that is a Company, apply in relation to a Fund that is an Incorporated Cell of an ICC.
CIR 6A.1.2 Guidance
Because each Fund (i.e. an Incorporated Cell) is a stand-alone Fund, the Fund Manager using a Fund Platform needs to comply with all the applicable requirements in respect of each such Fund, although it is a Fund on a Fund Platform.
Fund Manager responsible for acts of Fund Platform
A Fund Manager using a Fund Platform remains responsible for any acts or omissions of the ICC as if they were the acts or omissions of the Fund Manager.
The Fund Manager’s obligations when using a Fund Platform
CIR 6A.1.4 CIR 6A.1.4
Without limiting any other obligations of the Fund Manager under the Law or these Rules, a Fund Manager using a Fund Platform must ensure that the ICC:(a) maintains adequate infrastructure to provide services to Funds on the Fund Platform, taking into account the type or specialist class of each particular Fund;(b) does not carry on any activity in relation to a Fund on the Fund Platform, other than the activities which the Fund Manager is authorised and permitted to undertake in respect of the relevant Fund;(c) does not provide any service to a Fund that is not an Incorporated Cell of the ICC; and(d) maintains procedures and up-to-date records to demonstrate to the DFSA:(i) the activities that the ICC undertakes in relation to each Fund on the Fund Platform; and(ii) that all applicable requirements have been met in respect of each Fund on the Fund Platform, taking into account the type or specialist class of the relevant Fund.
CIR 6A.1.4 Guidance
Guidance1. Under Rule 6A.1.4(b), a Fund Manager using a Fund Platform cannot establish on its Fund Platform any Funds other than a QIF if its authorisation is limited to managing QIFs. What type of Funds a Fund Manager can manage is reflected in the fees applicable to Fund Managers under FER.2. Rule 6A.1.4(c) does not prevent a Fund Manager from being able to share resources available to it (such as its IT systems and staff) between a Fund Platform and other Funds the Fund Manager manages on a stand-alone basis. However, a Fund Manager allocating its resources between the Fund Platform and such a Fund should be able to demonstrate (for example, through its written records) effective functional separation.
Directors of the Fund Platform and its Funds
A Fund Manager using a Fund Platform must ensure that if the ICC or an Incorporated Cell of the ICC has any Directors other than the Directors of the Fund Manager, that the Fund Manager exercises control over the board of the ICC or Incorporated Cell, as the case may be, either by having:(a) a majority of its Directors on the board of the ICC or the Incorporated Cell; or(b) the power to veto decisions of that board, if the Fund Manager reasonably believes that the decision will have an adverse impact on the ICC or the Incorporated Cell.
A Fund Manager using a Fund Platform must not allow a Fund that is an Incorporated Cell of the Incorporated Cell Company to have a Corporate Director.