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][Deleted] DFSA RM131/2014 (Made 21st August 2014). [VER34/06-14]
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]