GEN 11 GEN 11 Supervision
Guidance1. This chapter outlines
DFSA'ssupervisory requirements for an Authorised Person.2. This chapter should be read in conjunction with the RPP Sourcebook which sets out DFSA'sgeneral regulatory policy and processes.
GEN 11.1 GEN 11.1 Information gathering and DFSA access to information
This section applies to an
Authorised Personother than a Representative Officewith respect to the carrying on of all of its activities.
Authorised Personmust where reasonable:(a) give or procure the giving of specified information, documents, files, tapes, computer data or other material in the Authorised Person'spossession or control to the DFSA;(b) make its Employeesreadily available for meetings with the DFSA;(c) give the DFSAaccess to any information, documents, records, files, tapes, computer data or systems, which are within the Authorised Person'spossession or control and provide any facilities to the DFSA;(d) permit the DFSAto copy documents or other material on the premises of the Authorised Personat the Authorised Person'sexpense;(e) provide any copies as requested by the DFSA; and(f) answer truthfully, fully and promptly, all questions which are put to it by the DFSA.
Authorised Personmust take reasonable steps to ensure that its Employeesact in the manner set out in this chapter.
Authorised Personmust take reasonable steps to ascertain if there is any secrecy or data protection legislation that would restrict access by the Authorised Personor the DFSAto any data required to be recorded under the DFSA's Rules. Where such legislation exists, the Authorised Personmust keep copies of relevant documents or material in a jurisdiction which does allow access in accordance with legislation applicable in the DIFC.
GEN 11.1.5(1) If requested by the
DFSA, an Authorised Personmust provide the DFSAwith information that the Authorised Personor its auditor has provided to a Financial Services Regulator.(2) If requested by the DFSA, an Authorised Personmust take reasonable steps to provide the DFSAwith information that other members of the Authorised Person's Grouphave provided to a Financial Services Regulator.
GEN 11.2 GEN 11.2 Waivers
This section applies to every
Rulebookreference to the written notice under Article 25 will be referred to as a 'waiver'.
GEN 11.2.3 GEN 11.2.3
Authorised Personwishes to apply for a waiver, it must apply in writing to the DFSAusing the appropriate form in AFN.
GEN 11.2.3 Guidance
Waiver application forms are contained in AFN and the RPP Sourcebook sets out the
DFSA'sapproach to considering a waiver.
The application must contain:(a) the name and
Licencenumber of the Authorised Person;(b) the Ruleto which the application relates;(c) a clear explanation of the waiver that is being applied for and the reason why the Authorised Personis requesting the waiver;(d) details of any other requirements; for example, if there is a specific period for which the waiver is required;(e) the reason, if any, why the waiver should not be published or why it should be published without disclosing the identity of the Authorised Person; and(f) all relevant facts to support the application.
Authorised Personmust immediately notify the DFSAif it becomes aware of any material change in circumstances which may affect the application for a waiver.
Continuing relevance of waivers
Authorised Personmust immediately notify the DFSAif it becomes aware of any material change in circumstances which could affect the continuing relevance of a waiver.
GEN 11.3 GEN 11.3 Application to change the scope of a Licence
This section applies to an
Authorised Firmapplying to change the scope of its Licenceor, where a condition or restriction has previously been imposed, to have the condition or restriction varied or withdrawn.
The provisions relating to permitted legal forms, fitness and propriety, adequate resources, compliance arrangements, enquiries and the provision of additional information set out in section 7.2 also apply to an
Authorised Firmmaking an application under this chapter, and are to be construed accordingly.
Authorised Firmapplying to change the scope of its Licence, or to have a condition or restriction varied or withdrawn, must provide the DFSA, with written details of the proposed changes.
GEN 11.4 GEN 11.4 Withdrawal of a Licence at an Authorised Firm's request
GEN 11.4.1 GEN 11.4.1
Authorised Firmother than a Representative Officeseeking to have its Licencewithdrawn must submit a request in writing stating:(a) the reasons for the request;(b) that it has ceased or will cease to carry on Financial Servicesin or from the DIFC;(c) the date on which it ceased or will cease to carry on Financial Servicesin or from the DIFC;(d) that it has discharged, or will discharge, all obligations owed to its customers in respect of whom the Authorised Firmhas carried on, or will cease to carry on, Financial Servicesin or from the DIFC; and(e) if it is providing Trust Services, that it has made appropriate arrangements for the transfer of business to a new Trust Service Providerand the appointment, where necessary, of new trustees.
GEN 11.4.1 Guidance
When considering a withdrawal of a
Licence, the DFSAtakes into account a number of matters including those outlined in the RPP Sourcebook.
GEN 11.5 GEN 11.5 Changes to an authorised individual status
GEN 11.5 Guidance
This section addresses applications or requests regarding
Authorised Individualswith respect to Article 53(3), 56(3), 58(2) and 58(3).
An application to extend the scope of an
Authorised Individualstatus to other Licensed Functionsmay be made by the Authorised Individualand Authorised Firmby the completion and submission of the appropriate form in AFN.
Authorised Firmor Authorised Individualrequesting:(a) the imposition, variation or withdrawal of a condition or restriction;(b) withdrawal of Authorised Individualstatus; or(c) withdrawal of authorisation in relation to one or more Licensed Functions;must, subject to Rule 11.5.3, for (a) submit such request in writing to the DFSA, and for (b) and (c) submit a request by completing the appropriate form in AFN.
GEN 11.5.3 GEN 11.5.3
A request for the variation or withdrawal of a condition or restriction may only be made after the expiry of any period within which a reference to the
FMTrelating to the relevant condition or restriction may commence under Article 29.
GEN 11.5.3 Guidance
In considering the suitability of such an application or request the
DFSAmay take into account any matter referred to in RPP with respect to fitness and propriety for Authorised Individuals.[Amended] DFSA RM131/2014 (Made 21st August 2014). [VER34/06-14]
GEN 11.6 GEN 11.6 Temporary cover
GEN 11.6.1(1) An
Authorised Firmmay, subject to (2), appoint an individual, who is not an Authorised Individual, to carry out the functions of an Authorised Individualwhere the following conditions are met:(a) the absence of the Authorised Individualis temporary or reasonably unforeseen;(b) the functions are carried out for 12 weeks maximum in any consecutive 12 months; and(c) the Authorised Firmhas assessed that the individual has the relevant skills and experience to carry out these functions.(2) An Authorised Firmmay not appoint under (1) an individual to carry out the Licensed Functionsof a Licensed Directoror Licensed Partner.(3) The Authorised Firmmust take reasonable steps to ensure that the individual complies with all the Rulesapplicable to Authorised Individuals.(4) Where an individual is appointed under this Rule, the Authorised Firmmust notify the DFSAin writing of the name and contact details of the individual appointed.
Where an individual is appointed under this section, the
DFSAmay exercise any powers it would otherwise be entitled to exercise as if the individual held Authorised Individualstatus.
GEN 11.7 GEN 11.7 Dismissal or resignation of an Authorised Individual
Authorised Firmmust request the withdrawal of an Authorised Individualstatus within seven days of the Authorised Individualceasing to be employed by the Authorised Firmto perform a Licensed Function.
In requesting the withdrawal of an
Authorised Individualstatus, the Authorised Firmmust submit the appropriate form in AFN, including details of any circumstances where the Authorised Firmmay consider that the individual is no longer fit and proper.
Authorised Individualis dismissed or requested to resign, a statement of the reason, or reasons, for the dismissal or resignation must be given to the DFSAby the Authorised Firm.
Authorised Individualwas acting as a trustee, the Trust Service Providermust confirm to the DFSAin writing that a new trustee has been appointed in place of the trustee in question.
GEN 11.8 GEN 11.8 Changes relating to control
GEN 11.8.1 GEN 11.8.1(1) This section applies, subject to (2) and (3), to:(a) an
Authorised Firm; or(b) a Personwho is, or is proposing to become, a Controllerspecified in GEN Rule 11.8.3.(2) This chapter does not apply to a Representative Officeor a Personwho is a Controllerof such a firm.(3) A Credit Rating Agencymust comply with the requirements in this section as if it were a non-DIFC established company.
GEN 11.8.1 Guidance
The requirements in respect of notification of changes relating to control of
Branches(i.e. Non-DIFC established companies) are set out in GEN Rule 11.8.10. Although some Credit Rating Agenciesmay be companies established in the DIFC, such companies will only be subject to the notification requirements relating to their Controllers. Accordingly, regardless of whether a Credit Rating Agencyis a company established in the DIFC or a Branchoperation, it is subject to the notification requirements only and not to the requirement for prior approval by the DFSA of changes relating to its Controllers.[Added] DFSA RM96/2012 (Made 24th July 2012) [VER30/07-12]
Definition of a Controller
GEN 11.8.2 GEN 11.8.2(1) A
Controlleris a Personwho, either alone or with any Associate:(a) holds 10% or more of the shares in either the Authorised Firmor a Holding Companyof that firm;(b) is entitled to exercise, or controls the exercise of, 10% or more of the voting rights in either the Authorised Firmor a Holding Companyof that firm; or(c) is able to exercise significant influence over the management of the Authorised Firm as a result of holding shares or being able to exercise voting rights in the Authorised Firmor a Holding Companyof that firm or having a current exercisable right to acquire such shares or voting rights.(2) A reference in this chapter to the term:(a) "share" means:(i) in the case of an Authorised Firm, or a Holding Companyof an Authorised Firm, which has a share capital, its allotted shares;(ii) in the case of an Authorised Firm, or a Holding Companyof an Authorised Firm, with capital but no share capital, rights to a share in its capital; and(iii) in the case of an Authorised Firm, or a Holding Companyof an Authorised Firm, without capital, any interest conferring a right to share in its profits or losses or any obligation to contribute to a share of its debt or expenses in the event of its winding up; and(b) "a holding" means, in respect of a Person, shares, voting rights or a right to acquire shares or voting rights in an Authorised Firmor a Holding Companyof that firm held by that Person either alone or with any Associate.
GEN 11.8.2 Guidance1. For the purposes of these Rules, the relevant definition of a
Holding Companyis found in the DIFC Companies Law. That definition describes when one body corporate is considered to be a holding company or a subsidiary of another body corporate and extends that concept to the ultimate holding company of the body corporate.2. Pursuant to Rule 11.8.2(1)(c), a Personbecomes a Controllerif that Person can exert significant management influence over an Authorised Firm. The ability to exert significant management influence can arise even where a Person, alone or with his Associates, controls less than 10% of the shares or voting rights of the Authorised Firmor a Holding Companyof that firm. Similarly, a Personmay be able to exert significant management influence where such Persondoes not hold shares or voting rights but has current exercisable rights to acquire shares or voting rights, such as under Options.
For the purposes of determining whether a
Personis a Controller, any shares, voting rights or rights to acquire shares or voting rights that a Person holds, either alone or with any Associate, in an Authorised Firmor a Holding Companyof that firm are disregarded if:(a) they are shares held for the sole purpose of clearing and settling within a short settlement cycle;(b) they are shares held in a custodial or nominee capacity and the voting rights attached to the shares are exercised only in accordance with written instructions given to that Person by another Person; or(c) the Personis an Authorised Firmor a Regulated Financial Institutionand it:(i) acquires the shares as a result of an underwriting of a share issue or a placement of shares on a firm commitment basis;(ii) does not exercise the voting rights attaching to the shares or otherwise intervene in the management of the issuer; and(iii) retains the shares for a period less than one year.
Requirement for prior approval of Controllers of Domestic Firms
GEN 11.8.4 GEN 11.8.4(1) In the case of an
Authorised Firmwhich is a Domestic Firm, a Personmust not:(a) become a Controller; or(b) increase the level of control which that Personhas in the firm beyond a threshold specified in (2),unless that Personhas obtained the prior written approval of the DFSA to do so.(2) For the purposes of (1)(b), the thresholds at which the prior written approval of the DFSA is required are when the relevant holding is increased:(a) from below 30% to 30% or more; or(b) from below 50% to 50% or more.
GEN 11.8.5 GEN 11.8.5(1) A
Personwho is required to obtain the prior written approval of the DFSA pursuant to Rule 11.8.4(1) must make an application to the DFSA using the appropriate form in AFN.(2) Where the DFSA receives an application under (1), it may:(a) approve the proposed acquisition or increase in the level of control;(b) approve the proposed acquisition or increase in the level of control subject to such conditions as it considers appropriate; or(c) object to the proposed acquisition or increase in the level of control.
GEN 11.8.5 Guidance1. A
Personintending to acquire or increase control in an Authorised Firmshould submit an application for approval in the appropriate form in AFN sufficiently in advance of the proposed acquisition to be able to obtain the DFSA approval in time for the proposed acquisition. Sections 3-2-34 – 3-2-37 of the RPP Sourcebook set out the matters which the DFSA will take into consideration when exercising its powers under Rule 11.8.5 to approve, object to or impose conditions of approval relating to a proposed Controlleror a proposed increase in the level of control of an existing Controller.2. The DFSA will exercise its powers relating to Controllers in a manner proportionate to the nature, scale and complexity of an Authorised Firm's business, and the impact a proposed change in control would have on that firm and its Clients. For example, the DFSA would generally be less likely to impose conditions requiring a proposed acquirer of control of an Authorised Firm whose financial failure would have a limited systemic impact or impact on its Clientsto provide prudential support to the firm by contributing more capital. Most advisory and arranging firms will fall into this class.
GEN 11.8.6 GEN 11.8.6(1) Where the DFSA proposes to approve a proposed acquisition or an increase in the level of control in an
Authorised Firmpursuant to Rule 11.8.5(2)(a), it must:(a) do so as soon as practicable and in any event within 90 days of the receipt of a duly completed application, unless a different period is considered appropriate by the DFSA and notified to the applicant in writing; and(b) issue to the applicant, and where appropriate to the Authorised Firm, an approval notice as soon as practicable after making that decision.(2) An approval, including a conditional approval granted by the DFSA pursuant to Rule 11.8.5(2)(a) or (b), is valid for a period of one year from the date of the approval, unless an extension is granted by the DFSA in writing.
GEN 11.8.6 Guidance1. If the application for approval lodged with the DFSA does not contain all the required information, then the 90 day period runs from the date on which all the relevant information has been provided to the DFSA.2. If a
Personwho has obtained the prior DFSA approval for an acquisition or an increase in the control of an Authorised Firmis unable to effect the acquisition before the end of the period referred to in Rule 11.8.6(2), it will need to obtain fresh approval from the DFSA.
Objection or conditional approval process
GEN 11.8.7 GEN 11.8.7(1) Where the
DFSAproposes to exercise its objection or conditional approval power pursuant to Rule 11.8.5(2)(b) or (c) in respect of a proposed acquisition of, or an increase in the level of control in, an Authorised Firm, it must, as soon as practicable and in any event within 90 days of the receipt of the duly completed application form, provide to the applicant:(a) a written notice stating:(i) the DFSA'sreasons for objecting to that Personas a Controlleror to the Person'sproposed increase in control; and(ii) any proposed conditions subject to which that Personmay be approved by the DFSA; and(b) an opportunity to make representations within 14 days of the receipt of such notice or such other longer period as agreed to by the DFSA.(2) The DFSAmust, as soon as practicable after receiving representations or, if no representations are received, after the expiry of the period for making representations referred to in (1)(b), issue a final notice stating that:(a) the proposed objections and any conditions are withdrawn and the Personis an approved Controller;(b) the Personis approved as a Controllersubject to conditions specified in the notice; or(c) the Personis not approved and therefore is an unacceptable Controllerwith respect to that Personbecoming a Controllerof, or increasing the level of control in, the Authorised Firm.(3) If the DFSAdecides to exercise its power under this Rule not to approve a Personas a Controlleror to impose conditions on an approval, the Personmay refer the matter to the FMTfor review.
GEN 11.8.7 Guidance [Deleted]
GEN 11.8.8 GEN 11.8.8(1) A
Personwho has been approved by the DFSA as a Controllerof an Authorised Firmsubject to any conditions must comply with the relevant conditions of approval.(2) A Personwho has been notified by the DFSA pursuant to Rule 11.8.7(2)(c) as an unacceptable Controllermust not proceed with the proposed acquisition of control of the Authorised Firm.[Amended] DFSA RM105/2012 (Made 23rd December 2012). [VER32/12-12]
GEN 11.8.8 Guidance
Personwho acquires control of or increases the level of control in an Authorised Firmwithout the prior DFSA approval or breaches a condition of approval is in breach of the Rules. See Rule 11.8.13 for the actions that the DFSA may take in such circumstances.
Notification for decrease in the level of control of Domestic Firms
Controllerof an Authorised Firmwhich is a Domestic Firmmust submit, using the appropriate form in AFN, a written notification to the DFSA where that Person:(a) proposes to cease being a Controller; or(b) proposes to decrease that Person's holding from more than 50% to 50% or less.
Requirement for notification of changes relating to control of Branches
GEN 11.8.10 GEN 11.8.10(1) In the case of an
Authorised Firmwhich is a Branch, a written notification to the DFSA must be submitted by a Controlleror a Personproposing to become a Controllerof that Authorised Firmin accordance with (3) in respect of any one of the events specified in (2).(2) For the purposes of (1), a notification to the DFSA is required when:(a) a Personbecomes a Controller;(b) an existing Controllerproposes to cease being a Controller; or(c) an existing Controller's holding is:(i) increased from below 30% to 30% or more;(ii) increased from below 50% to 50% or more; or(iii) decreased from more than 50% to 50% or less.(3) The notification required under (1) must be made by a Controlleror Personproposing to become a Controllerof a Branch using the appropriate form in AFN as soon as possible, and in any event, before making the relevant acquisition or disposal.
[Deleted][Deleted] DFSA RM105/2012 (Made 23rd December 2012). [VER32/12-12]
Obligations of Authorised Firms relating to its Controllers
GEN 11.8.11 GEN 11.8.11(1) An
Authorised Firmmust have adequate systems and controls to monitor:(a) any change or proposed change of its Controllers; and(b) any significant changes in the conduct or circumstances of existing Controllers which might reasonably be considered to impact on the fitness and propriety of the Authorised Firmor its ability to conduct business soundly and prudently.(2) An Authorised Firmmust, subject to (3), notify the DFSA in writing of any event specified in (1) as soon as possible after becoming aware of that event.(3) An Authorised Firmneed not comply with the requirement in (2) if it is satisfied on reasonable grounds that a proposed or existing Controllerhas either al obtained the prior approval of the DFSA or notified the event to the DFSA as applicable.
GEN 11.8.11 Guidance
Steps which an
Authorised Firmmay take in order to monitor changes relating to Controllers include the monitoring of any relevant regulatory disclosures, press reports, public announcements, share registers and entitlements to vote, or the control of voting rights, at general meetings.
GEN 11.8.12 GEN 11.8.12(1) An
Authorised Firmmust submit to the DFSA an annual report on its Controllers within four months of its financial year end.(2) The Authorised Firm's annual report on its Controllers must include:(a) the name of each Controller; and(b) the current holding of each Controller, expressed as a percentage.
GEN 11.8.12 Guidance1. An
Authorised Firmmay satisfy the requirements of Rule 11.8.12 by submitting a corporate structure diagram containing the relevant information.2. An Authorised Firmmust take account of the holdings which the Controller, either alone or with any Associate, has in the Authorised Firmor any Holding Companyof the firm (see the definition of a Controllerin Rule 11.8.2).
Other Powers relating to Controllers
GEN 11.8.13 GEN 11.8.13(1) Without limiting the generality of its other powers, the
DFSAmay, subject only to (2), object to a Personas a Controllerof an Authorised Firmwhere such a Person:(a) has acquired or increased the level of control that Personhas in an Authorised Firmwithout the prior written approval of the DFSAas required under Rule 11.8.4;(b) has breached the requirement in Rule 11.8.8 to comply with the conditions of approval applicable to that Person; or(c) is no longer acceptable to the DFSAas a Controller.(2) Where the DFSAproposes to object to a Personas a Controllerof an Authorised Firmunder (1), the DFSAmust provide such a Personwith:(a) a written notice stating:(i) the DFSA'sreasons for objecting to that Personas a Controller; and(ii) any proposed conditions subject to which that Personmay be approved by the DFSA; and(b) an opportunity to make representations within 14 days of the receipt of such objections notice or such other longer period as agreed to by the DFSA.(3) The DFSAmust, as soon as practicable after receiving representations, or if no representations are made, after the expiry of the period for making representations referred to in (2)(b), issue a final notice stating that:(a) the proposed objections and any conditions are withdrawn and the Personis an approved Controller;(b) the Personis approved as a Controllersubject to conditions specified in the notice; or(c) the Person is an unacceptable Controllerand accordingly, must dispose of that Person's holdings.(4) Where the DFSAhas issued a final notice imposing any conditions subject to which a Personis approved as a Controller, that Person must comply with those conditions.(5) Where the DFSAhas issued a final notice declaring a Personto be an unacceptable Controller, that Personmust dispose of the relevant holdings within such period as specified in the final notice.(6) The DFSAmust also notify the Authorised Firmof any decision it has made pursuant to (3).(7) If the DFSAdecides to exercise its power under this Rule to object to a Personas a Controller, to impose conditions on an approval or to require a Personto dispose of their holdings, the Personmay refer the matter to the FMTfor review.
GEN 11.9.5 [Deleted]
GEN 11.9.6 [Deleted]
GEN 11.9.7 [Deleted]
GEN 11.10 GEN 11.10 Notifications
GEN 11.10.1 GEN 11.10.1(1) This section applies to every
Authorised Person, unless otherwise provided, with respect to the carrying on of Financial Servicesand any other activities whether or not financial.(2) This section does not apply to a Representative Office.
GEN 11.10.1 Guidance1. This chapter sets out
Ruleson specific events, changes or circumstances that require notification to the DFSAand outlines the process and requirements for notifications.2. The list of notifications outlined in this chapter is not exhaustive. Other areas of the Rulebookmay also detail additional notification requirements.3. An Authorised Personand its auditor are also required under Article 67 to disclose to the DFSAany matter which may indicate a breach or likely breach of, or a failure or likely failure to comply with, laws or Rules. An Authorised Personis also required to establish and implement systems and procedures to enable its compliance and compliance by its auditor with notification requirements.
Authorised Personmust provide the DFSAwith reasonable advance notice of a change in:(a) the Authorised Person'sname;(b) any business or trading name under which the Authorised Personcarries on a Financial Servicein or from the DIFC;(c) the address of the Authorised Person'sprincipal place of business in the DIFC;(d) in the case of a Branch, its registered office or head office address;(e) its legal structure; or(f) an Authorised Individual'sname or any material matters relating to his fitness and propriety.
Domestic Firmmust provide the DFSAwith reasonable advance notice of the establishment or closure of a branch office anywhere in the world from which it carries on financial services.
When giving notice under Rule 11.10.3 in relation to the establishment of a branch, a
Domestic Firmmust at the same time submit to the DFSAa detailed business plan in relation to the activities of the proposed branch.
GEN 11.10.5(1) The
DFSAmay object to the establishment by a Domestic Firmof a branch office elsewhere in the world.(2) If the DFSAobjects to the firm establishing a branch anywhere in the world the firm may not proceed with establishment of such a branch.(3) The procedures in Schedule 3 to the Regulatory Lawapply to a decision of the DFSAunder (1).(4) If the DFSAdecides to exercise its power under (1), the Domestic Firmmay refer the matter to the FMTfor review.
GEN 11.10.6 [Deleted]
Authorised Personmust advise the DFSAimmediately if it becomes aware, or has reasonable grounds to believe, that any of the following matters may have occurred or may be about to occur:(a) the Authorised Person'sfailure to satisfy the fit and proper requirements;(b) any matter which could have a significant adverse effect on the Authorised Person'sreputation;(c) any matter in relation to the Authorised Personwhich could result in serious adverse financial consequences to the financial system or to other firms;(d) a significant breach of a Ruleby the Authorised Personor any of its Employees;(e) a breach by the Authorised Personor any of its Employeesof any requirement imposed by any applicable law in respect of the Authorised Personor any of its Employees;(f) subject to Rule 11.10.8, any proposed restructuring, merger, acquisition, reorganisation or business expansion which could have a significant impact on the Authorised Person'srisk profile or resources;(g) any significant failure in the Authorised Person'ssystems or controls, including a failure reported to the Authorised Personby the firm's auditor;(h) any action that would result in a material change in the capital adequacy or solvency of the Authorised Firm; or(i) non-compliance with Rulesdue to an emergency outside the Authorised Person'scontrol and the steps being taken by the Authorised Person.
GEN 11.10.8 GEN 11.10.8(1) Subject to (2), an
Authorised Firmwhich makes or proposes to make a Major Acquisitionas defined in (3) must:(a) if it is a Domestic Firm, comply with the requirements in Rule 11.10.9; and(b) if it is not a Domestic Firm, comply with the requirements in Rule 11.10.10.(2) The requirement in (1) does not apply to an Authorised Firmwhich is a Credit Rating Agencyor a firm in Category 3 (as defined in PIB Rules 1.3.3 to 1.3.5) or Category 4 (as defined in PIB Rule 1.3.6).(3) Subject to (4), an Authorised Firmmakes a Major Acquisitionif it makes or proposes to directly or indirectly acquire a shareholding in a Body Corporatewhere that acquisition:(a) is of a value (whether by one acquisition or a series of acquisitions) of 10% or more of:(i) the Authorised Firm's Capital Resources, if it is a Domestic Firmwhich is a Category 1 Authorised Firm(as defined in PIB Rule 1.3.1), Category 2 Authorised Firm(as defined in PIB Rule 1.3.2) or Category 5 Authorised Firm(as defined in PIB Rule 1.3.7); or(ii) the Authorised Firm's Adjusted Capital Resources, if it is a Domestic Firmconducting Insurance Business; or(iii) the capital resources of the Authorised Firmcalculated in accordance with the requirements of the Financial Services Regulatorin its home jurisdiction, if it is not a Domestic Firm; or(b) even if it does not exceed the 10% threshold referred to in (a), it is reasonably likely to have a significant regulatory impact on the Authorised Firm'sactivities.(4) An acquisition is not a Major Acquisitionfor the purposes of (3) if it is an investment made by an Authorised Firm:(a) in accordance with the terms of a contract entered into by the Authorised Firmas an incidental part of its ordinary business; or(b) as a routine transaction for managing the Authorised Firm'sown investment portfolio and therefore can reasonably be regarded as made for a purpose other than acquiring management or control of a Body Corporateeither directly or indirectly.
GEN 11.10.8 Guidance1. Examples of the kind of investments referred to in Rule 11.10.8(3)(b) include an acquisition of a stake in a small specialised trading firm that engages in high risk trades or other activities that could pose a reputational risk to the
Authorised Firm.2. The onus is on an Authorised Firmproposing to make an acquisition to consider whether it qualifies as a Major Acquisitionunder Rule 11.10.8(3)(b). Generally, in the case of an Authorised Firmthat is not a Domestic Firm(i.e. a Branchoperation in the DIFC), the significant regulatory impact referred to in Rule 11.10.8 (3)(b) should be prudential risk to the Authorised Firmas a whole. If an Authorised Firmis uncertain about whether or not a proposed acquisition qualifies as a Major Acquisitionunder Rule 11.10.8 (3)(b), the Authorised Firmmay seek guidance from the DFSA.3. Examples of contractual arrangements of the kind referred to in Rule 11.10.8(4)(a) include enforcement of a security interest in the securities of the investee Body Corporateor a loan workout pursuant to a loan agreement entered into between a bank and its client.4. Examples of the kind of investments referred to in Rule 11.10.8(4)(b) include temporary investments, such as investments included in the Authorised Firm'strading book or which are intended to be disposed of within a short term (e.g. within 12 months).
GEN 11.10.9 GEN 11.10.9(1) An
Authorised Firmwhich is a Domestic Firmmust:(a) before making a Major Acquisition:(i) notify the DFSAin writing of the proposed Major Acquisitionat least 45 days prior to the proposed date for effecting the Major Acquisition; and(ii) give to the DFSAall the relevant information relating to that Major Acquisitionto enable the DFSAto assess the impact of the proposed Major Acquisitionon the Authorised Firm; and(b) not effect the proposed Major Acquisitionunless:(i) the Authorised Firmhas either received written advice from the DFSAthat it has no objection to that Major Acquisitionor has not received any written objection or request for additional information from the DFSAwithin 45 days after the date of the notification; and(ii) if the DFSAhas imposed any conditions relating to the proposed Major Acquisition, it has complied with, and has the on-going ability to comply with, the relevant conditions.(2) The DFSAmay only object to a proposed Major Acquisitionif it is of the view that the proposed Major Acquisitionis reasonably likely to have a material adverse impact on the Authorised Firm'sability to comply with its applicable regulatory requirements or on the financial services industry in the DIFCas a whole. The DFSAmay also impose any conditions it considers appropriate to address any concerns it may have in relation to the proposed Major Acquisition.(3) Without limiting the generality of its powers, the factors that the DFSAmay take into account for the purposes of (2) include:(a) the financial and other resources available to the Authorised Firmto carry out the proposed Major Acquisition;(b) the possible impact of the proposed Major Acquisitionupon the Authorised Firm'sresources, including its capital, both at the time of the acquisition and on an on-going basis;(c) the managerial capacity of the Authorised Firmto ensure that the activities of the investee Body Corporateare conducted in a prudent and reputable manner;(d) the place of incorporation or domicile of the investee Body Corporateand whether or not the laws applicable to that entity are consistent with the laws applicable to the Authorised Firm. In particular, whether there are any secrecy constraints that are likely to create difficulties in relation to the DFSArequirements including those relating to consolidated supervision by the DFSAwhere applicable; and(e) any other undue risks to the Authorised Firmor the financial services industry in the DIFCas a whole arising from the proposed Major Acquisition.
GEN 11.10.9 Guidance
Factors which the
DFSAmay take into account in assessing whether there are any undue risks arising from the proposed Major Acquisitioninclude the size and nature of the business of the investee Body Corporate, its reputation and standing, its present and proposed management structure and the quality of management, the reporting lines and other monitoring and control mechanisms available to the Authorised Firmand the past records of the Authorised Firmrelating to acquisitions of a similar nature.
GEN 11.10.10(1) An
Authorised Firmwhich is not a Domestic Firmmust:(a) notify the DFSAin writing of any Major Acquisitionin accordance with the notification requirement applying to the Authorised Firmunder the requirements of the Financial Services Regulatorin its home jurisdiction (the home regulator); and(2) An Authorised Firmwhich gives to the DFSAa notification under (1)(a) must:(a) notify the DFSAof the Major Acquisitionat the same time as it notifies the home regulator;(b) provide to the DFSAthe same information as it is required to provide to the home regulator; and(c) provide to the DFSAcopies of any communications it receives from the home regulator relating to the notification it has provided to the home regulator as soon as practicable upon receipt.
GEN 11.10.11 GEN 11.10.11(1) The
DFSAmay, for the purposes of the requirements in this section, require from an Authorised Firmany additional information relating to the Major Acquisitionas it may consider appropriate. An Authorised Firmmust provide any such additional information to the DFSApromptly.(2) The DFSAmay, where it considers appropriate, withdraw its no objection position or modify or vary any condition it has imposed or any remedial action it has required under the Rulesin this section.
GEN 11.10.11 Guidance
DFSAwill generally not withdraw a no objection position it has conveyed to an Authorised Firm, except in very limited circumstances. An example of such a situation is where the Authorised Firmis found to have provided to the DFSAinaccurate or incomplete information and that commission or omission has a material impact on the DFSA'sno objection decision.
GEN 11.10.12(1) The procedures in Schedule 3 to the
Regulatory Lawapply to a decision of the DFSAunder Rules 11.10.9, 11.10.10 and 11.10.11 to object to an acquisition or to impose or vary conditions.(2) If the DFSAdecides to exercise its power under Rule 11.10.9, 11.10.10 and 11.10.11 to object to an acquisition or to impose or vary conditions, the Authorised Firmmay refer the matter to the FMTfor review.
Suspected Market Abuse
GEN 11.10.12A(1) An
Authorised Firmmust notify the DFSA immediately if it:(a) receives an order from a Client, or arranges or executes a transaction with or for a Client; and(b) has reasonable grounds to suspect that the order or transaction may constitute Market Abuse.(2) The notification under (1) must specify:(a) sufficient details of the order or transaction; and(b) the reasons for the Authorised Firmsuspecting that the order or transaction may constitute Market Abuse.(3) An Authorised Firmmust not inform the Client, or any other Personinvolved in the order or transaction, of a notification under this Rule.Derived DFSA RM184/2016 (Made 7th December 2016). [VER38/02-17]
GEN 11.10.12A Guidance1. Under GEN Rule 5.3.20, an
Authorised Firmmust establish and maintain systems and controls that ensure that it and its employees do not engage in market abuse or facilitate others to engage in market abuse, whether in the DIFCor elsewhere. GEN Rule 11.10.12A requires the firm to notify the DFSA if it reasonably suspects that a client's order or transaction may constitute Market Abuseunder Part 6 of the Markets Law.2. In some cases, a suspicion of Market Abusemay arise when an order is received. In other cases, it may not be apparent until a transaction is executed or when viewed in the context of later information, behaviour or transactions. When a firm submits a notification, it should be able to explain to the DFSA its reasons for suspecting that the order or transaction may constitute Market Abuse.3. The details of the order or transaction provided with the notification should include the date and time of the order or transaction, the relevant Investment, the client and other parties involved, the nature of the order (e.g. limit order or market order), the nature of the transaction (e.g. on-exchange or OTC) and if the client was acting on its own account or for a third party.4. If a firm reasonably suspects that a client's order or transaction may constitute market abuse under the laws in another jurisdiction, it will also need to consider if it needs to notify the regulator in that other jurisdiction (under any corresponding obligation to notify).5. If an Authorised Firmbecomes aware that the firm itself, or an employee of the firm, (rather than a client) has engaged in conduct that may constitute market abuse in the DIFCor elsewhere, it has a separate obligation to notify the DFSA under Article 67 of the Regulatory Law and GEN Rule 11.10.7.Derived DFSA RM184/2016 (Made 7th December 2016). [VER38/02-17]
Fraud and errors
Authorised Personmust notify the DFSAimmediately if one of the following events arises in relation to its activities in or from the DIFC:(a) it becomes aware that an Employeemay have committed a fraud against one of its customers;(b) a serious fraud has been committed against it;(c) it has reason to believe that a Personis acting with intent to commit a serious fraud against it;(d) it identifies significant irregularities in its accounting or other records, whether or not there is evidence of fraud; or(e) it suspects that one of its Employeeswho is connected with the Authorised Person's Financial Servicesmay be guilty of serious misconduct concerning his honesty or integrity.
GEN 11.10.14 GEN 11.10.14
Authorised Personmust advise the DFSAimmediately of:(a) the granting or refusal of any application for or revocation of authorisation to carry on financial services in any jurisdiction outside the DIFC;(b) the granting, withdrawal or refusal of an application for, or revocation of, membership of the Authorised Personof any regulated exchange or clearing house;(c) the Authorised Personbecoming aware that a Financial Services Regulatorhas started an investigation into the affairs of the Authorised Person;(d) the appointment of inspectors, howsoever named, by a Financial Services Regulatorto investigate the affairs of the Authorised Person; or(e) the imposition of disciplinary measures or disciplinary sanctions on the Authorised Personin relation to its financial services by any Financial Services Regulatoror any regulated exchange or clearing house.
GEN 11.10.14 Guidance
The notification requirement in Rule 11.10.14(c) extends to investigations relating to any employee or agent of an
Authorised Personor a member of its Group, provided the conduct investigated relates to or impacts on the affairs of the Authorised Person.
Action against an Authorised Person
Authorised Personmust notify the DFSAimmediately if:(a) civil proceedings are brought against the Authorised Personand the amount of the claim is significant in relation to the Authorised Person'sfinancial resources or its reputation; or(b) the Authorised Personis prosecuted for, or convicted of, any offence involving fraud or dishonesty, or any penalties are imposed on it for tax evasion.
Winding up, bankruptcy and insolvency
Authorised Personmust notify the DFSAimmediately on:(a) the calling of a meeting to consider a resolution for winding up the Authorised Person;(b) an application to dissolve the Authorised Personor to strike it from the register maintained by the DIFC Registrar of Companies, or a comparable register in another jurisdiction;(c) the presentation of a petition for the winding up of the Authorised Person;(d) the making of, or any proposals for the making of, a composition or arrangement with creditors of the Authorised Person; or(e) the application of any person against the Authorised Personfor the commencement of any insolvency proceedings, appointment of any receiver, administrator or provisional liquidator under the law of any country.
Accuracy of information
Authorised Personmust take reasonable steps to ensure that all information that it provides to the DFSAin accordance with any legislation applicable in the DIFCis:(a) factually accurate or, in the case of estimates and judgements, fairly and properly based; and(b) complete, in that it should include anything of which the DFSAwould reasonably expect to be notified.
GEN 11.10.18(1) An
Authorised Personmust notify the DFSAimmediately it becomes aware, or has information that reasonably suggests, that it:(a) has or may have provided the DFSAwith information which was or may have been false, misleading, incomplete or inaccurate; or(b) has or may have changed in a material particular.(2) Subject to (3), the notification in (1) must include details of the information which is or may be false or misleading, incomplete or inaccurate, or has or may have changed and an explanation why such information was or may have been provided and the correct information.(3) If the correct information in (2) cannot be submitted with the notification it must be submitted as soon as reasonably possible.
In the case of an
Insurerwhich is a Protected Cell Companyor an Incorporated Cell Company, an Insurermust advise the DFSAimmediately if it becomes aware of any actual or prospective significant change in the type or scale of the business conducted through a Cell, or in the ownership of the Cellshares of the Protected Cell Company or of an Incorporated Cell of the ICC.
Information relating to corporate governance and remuneration
GEN 11.10.20 GEN 11.10.20(1) Subject to (2), an
Authorised Firmmust provide to the DFSA notice of any significant changes to its corporate governance framework or the remuneration structure or strategy as soon as practicable.(2) An Authorised Firmwhich is a Branchmust provide notice of any significant changes to its corporate governance framework or the remuneration structure or strategy only if the changes are relevant to the activities and operations of the Branch.[Added] DFSA RM95/2012 (Made 14th June 2012). [VER29/06-12]
GEN 11.10.20 Guidance1. The purpose of these notifications is to ensure that the
DFSAis informed of any significant changes to the Authorised Firm'scorporate governance framework and remuneration structure and strategies.2. Significant changes that the DFSAexpects Authorised Firmsto notify the DFSApursuant to Rule 11.10.20 generally include:a. any major changes to the composition of the Governing Body;b. any changes relating to Persons Undertaking Key Control Functions, such as their removal or new appointments or changes in their reporting lines; andc. significant changes to the remuneration structure that apply to the members of the Governing Body, senior management, Persons Undertaking Key Control Functionsand major risk taking Employees.3. The DFSAexpects Branchesto provide to the DFSAnotification of significant changes that are relevant to the Branchoperations.[Added] DFSA RM95/2012 (Made 14th June 2012). [VER29/06-12]
GEN 11.11 GEN 11.11 [Deleted][Deleted]
DFSARM176/2016 (Made 19th June 2016) [VER37/08-16]
GEN 11.11.1 [Deleted][Deleted] DFSA RM176/2016 (Made 19th June 2016) [VER37/08-16]
GEN 11.12 GEN 11.12 Requirement to provide a report
GEN 11.12.1 GEN 11.12.1
This section applies to every
GEN 11.12.1 Guidance1. Under Article 74, the
DFSAmay require an Authorised Personto provide it with a report on any matter. The Personappointed to make a report must be a Personnominated or approved by the DFSA. This Personwill be referred to throughout the Rulebookas an independent expert.2. When requesting a report under Article 74, the DFSAmay take into consideration the matters set out in the RPP Sourcebook.
GEN 11.12.2 GEN 11.12.2(1) The
DFSAmay, by sending a notice in writing, require an Authorised Personto provide a report by an independent expert. The DFSAmay require the report to be in whatever form it specifies in the notice.(2) The DFSAwill give written notification to the Authorised Personof the purpose of its report, its scope, the timetable for completion and any other relevant matters.(3) The independent expert must be appointed by the Authorised Personand be nominated or approved by the DFSA.(4) The Authorised Personmust pay for the services of the independent expert.
GEN 11.12.2 Guidance1. If the
DFSAdecides to nominate the independent expert, it will notify the Authorised Personaccordingly. Alternatively, if the DFSAis content to approve the independent expert selected by the Authorised Personit will notify it of that fact.2. The DFSAwill only approve an independent expert that in the DFSA'sopinion has the necessary skills to make a report on the matter concerned.
Authorised Personappoints an independent expert, the Authorised Personmust ensure that:(a) the independent expert co-operates with the DFSA; and(b) the Authorised Personprovides all assistance that the independent expert may reasonably require.
Authorised Personappoints an independent expert, the Authorised Personmust, in the contract with the independent expert:(a) require and permit the independent expert to co-operate with the DFSAin relation to the Authorised Personand to communicate to the DFSAinformation on, or his opinion on, matters of which he has, or had, become aware in his capacity as an independent expert reporting on the Authorised Personin the following circumstances:(i) the independent expert reasonably believes that, as regards the Authorised Personconcerned:(A) there is or has been, or may be or may have been, a contravention of any relevant requirement that applies to the Authorised Personconcerned; and(B) that the contravention may be of material significance to the DFSAin determining whether to exercise, in relation to the Authorised Personconcerned, any powers conferred on the DFSAunder any provision of the Regulatory Law2004;(ii) the independent expert reasonably believes that the information on, or his opinion on, those matters may be of material significance to the DFSAin determining whether the Authorised Personconcerned satisfies and will continue to satisfy the fit and proper requirements; or(iii) the independent expert reasonably believes that the Authorised Firmis not, may not be, or may cease to be, a going concern;(b) require the independent expert to prepare a report within the time specified by the DFSA; and(c) waive any duty of confidentiality owed by the independent expert to the Authorised Personwhich might limit the provision of information or opinion by that independent expert to the DFSAin accordance with (a) or (b).
Authorised Personmust ensure that the contract required under Rule 11.12.4:(a) is governed by the laws of the DIFC;(b) expressly provides that the DFSAhas a right to enforce the provisions included in the contract under Rule 11.12.4;(c) expressly provides that, in proceedings brought by the DFSAfor the enforcement of those provisions, the independent expert is not to have available by way of defence, set-off or counter claim any matter that is not relevant to those provisions;(d) if the contract includes an arbitration agreement, expressly provides that the DFSAis not, in exercising the right in (b) to be treated as a party to, or bound by, the arbitration agreement; and(e) provides that the provisions included in the contract under Rule 11.12.4 are irrevocable and may not be varied or rescinded without the DFSA'sconsent.
GEN 11.13 GEN 11.13 Imposing Restrictions on an Authorised Person's business or on an Authorised Person dealing with property
DFSAhas the power to impose a prohibition or requirement on an Authorised Personin relation to the Authorised Person'sbusiness or in relation to the Authorised Person'sdealing with property under Article 75 or Article 76 in circumstances where:(a) there is a reasonable likelihood that the Authorised Personwill contravene a requirement of any legislation applicable in the DIFC;(b) the Authorised Personhas contravened a relevant requirement and there is a reasonable likelihood that the contravention will continue or be repeated;(c) there is loss, risk of loss, or other adverse effect on the Authorised Person'scustomers;(d) an investigation is being carried out in relation to an act or omission by the Authorised Personthat constitutes or may constitute a contravention of any applicable law or Rule;(e) an enforcement action has commenced against the Authorised Personfor a contravention of any applicable law or Rule;(f) civil proceedings have commenced against the Authorised Person;(g) the Authorised Personor any Employeeof the Authorised Personmay be or has been engaged in market abuse;(h) the Authorised Personis subject to a merger;(i) a meeting has been called to consider a resolution for the winding up of the Authorised Person;(j) an application has been made for the commencement of any insolvency proceedings or the appointment of any receiver, administrator or provisional liquidator under the law of any country for the Authorised Person;(k) there is a notification to dissolve the Authorised Personor strike it from the DIFCregister of Companies or the comparable register in another jurisdiction;(l) there is information to suggest that the Authorised Personis involved in financial crime;(m) the DFSA considers there are reasonable grounds to require the suspension or removal from trading of an Investment traded on any facility operated by the Authorised Person; or(n) the DFSAconsiders that this prohibition or requirement is necessary to ensure customers, Authorised Personsor the financial system are not adversely affected.