Back Custom print Link Text Only Rich Text Print

Entire Section

  • CIR 8.12 CIR 8.12 Delegation and Outsourcing

    • CIR 8.12 Guidance

      1. This section sets out the general requirements that apply to a Fund Manager, or where appointed the Trustee, of a Domestic Fund where it delegates or outsources any Financial Service activity or function to another Person. Such a Person is defined as a "Service Provider" for the purposes of this module.
      2. Under Article 24 of the Law and Article 24 of the Investment Trust Law 2006, a Fund Manager or where appointed the Trustee of a Fund respectively may, subject to any restriction in the Constitution of the Domestic Fund and any provisions of the Rules, delegate any of its Financial Service activities or outsource any of its functions to a Service Provider, which may be located in or outside the DIFC.
      3. Fund Managers of Domestic Funds structured as an Investment Company or Investment Partnership are required under CIR Rule 8.2.2(2) to delegate the activity of Providing Custody to an Eligible Custodian. This obligation does not apply where there are adequate alternative arrangements. This chapter sets out the circumstances in which the obligation under CIR Rule 8.2.2(2) does not apply.
      4. A Fund Manager or Trustee 'outsources' a function relating to the operation of the Fund where the function, whether or not relating to a Financial Service activity, is contracted to be performed by a Service Provider. Where the extent of any such function or functions is such that they effectively constitute the carrying on of a Financial Service activity, the DFSA will consider this to comprise a 'delegation' of the Financial Service.
      5. If the Fund Manager or the Trustee delegates any activities or outsources any functions, the Fund Manager or the Trustee remains liable to the Unitholders for any acts or omissions of the Service Provider as if they were the acts or omissions of the Fund Manager or Trustee.
      6. The Rules permitting the use of a Service Provider do not relieve the Fund Manager or the Trustee from their obligations, including any restrictions on delegation or outsourcing arising from the Fund's Constitution or Prospectus.
      7. Rules GEN 5.3.21 and GEN 5.3.22 also govern outsourcing of functions and activities by an Authorised Firm. Those Rules are not disapplied by this section.
      Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Fund Manager

      • CIR 8.12.1 CIR 8.12.1

        In accordance with the Delegation Agreement, the Fund Manager:

        (a) must register the legal title of the Fund Property with the Eligible Custodian; and
        (b) may give instructions to the Eligible Custodian to deal with the Fund Property.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

        • CIR 8.12.1 Guidance

          See CIR Rule 8.2.4 for the definition of an Eligible Custodian

          Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

      • CIR 8.12.2 CIR 8.12.2

        (1) Subject to the requirements in CIR Rule 8.12.4, a Fund Manager may delegate one or both of the Financial Service activities of Providing Fund Administration and Managing Assets to a Service Provider.
        (2) For the purposes of (1), and in relation to Providing Fund Administration for a Public Fund, the Service Provider must be:
        (a) a Person authorised by the DFSA to carry on the activity of Providing Fund Administration; or
        (b) a Person who is lawfully entitled in a Zone 1 jurisdiction or Recognised Jurisdiction to carry on in that jurisdiction the activities of:
        (i) asset pricing and Fund valuation;
        (ii) issuing and redemption of Units; and
        (iii) record keeping and maintaining the Unitholders register.
        (3) For the purposes of (1), and in relation to Managing Assets, the Service Provider must be:
        (a) a Person authorised by the DFSA to carry on the activity of Managing Assets; or
        (b) a Person who is authorised by a Financial Services Regulator in a Zone 1 jurisdiction or Recognised Jurisdiction to carry on an equivalent activity in that jurisdiction.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

        • CIR 8.12.2 Guidance

          As CIR Rule 8.12.2(2) only applies in relation to a Public Fund, a Fund Manager of an Exempt Fund may make other appropriate arrangements in respect of the provision of Fund Administration.

          Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
          [Amended] RM158/2015 (Made 9th December 2015). [VER19/02-16]

    • Trustee

      • CIR 8.12.3

        (1) Subject to CIR Rules 8.12.4, a Trustee may, with the prior written consent of the Fund Manager, delegate one or both of the Financial Service activities of Providing Fund Administration and Providing Custody to a Service Provider.
        (2) For the purposes of (1), and in relation to Providing Fund Administration for a Public Fund, the Service Provider must be:
        (a) a Person authorised by the DFSA to carry on the activity of Providing Fund Administration; or
        (b) a Person who is lawfully entitled in a Zone 1 jurisdiction or Recognised Jurisdiction to carry on in that jurisdiction the activities of:
        (i) asset pricing and Fund valuation;
        (ii) issuing and redemption of Units; and
        (iii) record keeping and maintaining the Unitholders register.
        (3) For the purposes of (1), and in relation to Providing Custody, the Service Provider must be an Eligible Custodian.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Delegation and Outsourcing Process and Requirements

      • CIR 8.12.4 CIR 8.12.4

        (1) When delegating, a Fund Manager or Trustee must:
        (a) carry out due diligence on a proposed Service Provider to ensure eligibility prior to effecting a delegation of a Financial Services activity; and
        (b) comply with the requirements in GEN chapter 5 of GEN and CIR App1 and ensure that any delegation is made in a written Delegation Agreement as prescribed in CIR App1.
        (2) Delegation to a Service Provider does not relieve the Fund Manager or Trustee from accountability for the proper conduct of a delegated activity.
        (3) The DFSA may, as a condition on a Fund Manager's or Trustee's Licence, require the delegation of one or more specified Financial Service activities to a Service Provider.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

        • CIR 8.12.4 Guidance

          The DFSA may impose a condition under CIR Rule 8.12.4(3) when, for example, it considers that a Fund Manager is unable to conduct the activity under its own Licence.

          Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

      • CIR 8.12.5

        (1) When a Fund Manager or Trustee outsources any function to a Service Provider, it must:
        (a) comply with any relevant requirements in GEN chapter 5 of GEN;
        (b) enter into an Outsourcing Agreement which complies with the requirements in CIR App1; and
        (c) before entering into such agreement, carry out due diligence on the proposed Service Provider to conclude on reasonable grounds that the Person is suitable to perform the relevant functions.
        (2) Outsourcing to a Service Provider does not relieve the Fund Manager or Trustee from accountability for the proper conduct of the outsourced activity.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Systems and Controls

      • CIR 8.12.6 CIR 8.12.6

        If a Fund Manager or Trustee delegates any activity or outsources any function under this section, it must take reasonable steps to ensure that it implements and maintains systems and controls to monitor the Service Provider.

        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

        • CIR 8.12.6 Guidance

          This Rule supplements the requirements under GEN section 5.3.

          Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Review

      • CIR 8.12.7

        (1) A Fund Manager or the Trustee of a Public Fund, which has delegated any Financial Service activities or outsourced any functions, must conduct a review of the carrying out of the relevant activities or functions by the Service Provider and present the findings of the review to either:
        (a) the Fund's Governing Body every 6 months at the Fund's board meeting; or
        (b) in the case of a Fund structured as an Investment Trust, to the Trustee.
        (2) Notwithstanding the requirement in (1), if a Fund Manager or the Trustee discovers non-compliance in regard to a term of the Delegation Agreement or Outsourcing Agreement, the Fund Manager or the Trustee, as the case may be, must take immediate action to remedy the matter and also notify the DFSA and, as applicable, its Governing Body or the Trustee forthwith.
        (3) For the purposes of (2), the Fund Manager or the Trustee must notify the DFSA only where the non-compliance is material.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]