Entire Section

  • Major acquisitions

    • GEN 11.10.8 GEN 11.10.8

      (1) Subject to (2), an Authorised Firm which makes or proposes to make a Major Acquisition as 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 Firm which is a Credit Rating Agency or 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 Firm makes a Major Acquisition if it makes or proposes to directly or indirectly acquire a shareholding in a Body Corporate where 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 Firm which 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 Firm conducting Insurance Business; or
      (iii) the capital resources of the Authorised Firm calculated in accordance with the requirements of the Financial Services Regulator in 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's activities.
      (4) An acquisition is not a Major Acquisition for 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 Firm as an incidental part of its ordinary business; or
      (b) as a routine transaction for managing the Authorised Firm's own investment portfolio and therefore can reasonably be regarded as made for a purpose other than acquiring management or control of a Body Corporate either directly or indirectly.
      Derived from Notice of Amendments to Legislation April 2011 [VER27/02-11]
      [Amended] DFSA RM96/2012 (Made 24th July 2012) [VER30/07-12]
      [Amended] DFSA RM166/2016 (Made 10th February 2016). [VER36/04-16]

      • GEN 11.10.8 Guidance

        1. 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 Firm proposing to make an acquisition to consider whether it qualifies as a Major Acquisition under Rule 11.10.8(3)(b). Generally, in the case of an Authorised Firm that is not a Domestic Firm (i.e. a Branch operation in the DIFC), the significant regulatory impact referred to in Rule 11.10.8 (3)(b) should be prudential risk to the Authorised Firm as a whole. If an Authorised Firm is uncertain about whether or not a proposed acquisition qualifies as a Major Acquisition under Rule 11.10.8 (3)(b), the Authorised Firm may 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 Corporate or 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's trading 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 Firm which is a Domestic Firm must:
      (a) before making a Major Acquisition:
      (i) notify the DFSA in writing of the proposed Major Acquisition at least 45 days prior to the proposed date for effecting the Major Acquisition; and
      (ii) give to the DFSA all the relevant information relating to that Major Acquisition to enable the DFSA to assess the impact of the proposed Major Acquisition on the Authorised Firm; and
      (b) not effect the proposed Major Acquisition unless:
      (i) the Authorised Firm has either received written advice from the DFSA that it has no objection to that Major Acquisition or has not received any written objection or request for additional information from the DFSA within 45 days after the date of the notification; and
      (ii) if the DFSA has 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 DFSA may only object to a proposed Major Acquisition if it is of the view that the proposed Major Acquisition is reasonably likely to have a material adverse impact on the Authorised Firm's ability to comply with its applicable regulatory requirements or on the financial services industry in the DIFC as a whole. The DFSA may 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 DFSA may take into account for the purposes of (2) include:
      (a) the financial and other resources available to the Authorised Firm to carry out the proposed Major Acquisition;
      (b) the possible impact of the proposed Major Acquisition upon the Authorised Firm's resources, including its capital, both at the time of the acquisition and on an on-going basis;
      (c) the managerial capacity of the Authorised Firm to ensure that the activities of the investee Body Corporate are conducted in a prudent and reputable manner;
      (d) the place of incorporation or domicile of the investee Body Corporate and 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 DFSA requirements including those relating to consolidated supervision by the DFSA where applicable; and
      (e) any other undue risks to the Authorised Firm or the financial services industry in the DIFC as a whole arising from the proposed Major Acquisition.

      • GEN 11.10.9 Guidance

        Factors which the DFSA may take into account in assessing whether there are any undue risks arising from the proposed Major Acquisition include 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 Firm and the past records of the Authorised Firm relating to acquisitions of a similar nature.

    • GEN 11.10.10

      (1) An Authorised Firm which is not a Domestic Firm must:
      (a) notify the DFSA in writing of any Major Acquisition in accordance with the notification requirement applying to the Authorised Firm under the requirements of the Financial Services Regulator in its home jurisdiction (the home regulator); and
      (b) if there is no notification requirement applying to the Authorised Firm under (a), comply with the requirements in Rule 11.10.9 as if it were a Domestic Firm. The DFSA must follow the same procedures, and shall have the same powers, as set out in Rule 11.10.9 in relation to such a notification.
      (2) An Authorised Firm which gives to the DFSA a notification under (1)(a) must:
      (a) notify the DFSA of the Major Acquisition at the same time as it notifies the home regulator;
      (b) provide to the DFSA the same information as it is required to provide to the home regulator; and
      (c) provide to the DFSA copies 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 DFSA may, for the purposes of the requirements in this section, require from an Authorised Firm any additional information relating to the Major Acquisition as it may consider appropriate. An Authorised Firm must provide any such additional information to the DFSA promptly.
      (2) The DFSA may, 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 Rules in this section.
      Derived from Notice of Amendments to Legislation April 2011 [VER27/02-11]
      [Amended] DFSA RM131/2014 (Made 21st August 2014). [VER34/06-14]

      • GEN 11.10.11 Guidance

        The DFSA will 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 Firm is found to have provided to the DFSA inaccurate or incomplete information and that commission or omission has a material impact on the DFSA's no objection decision.

    • GEN 11.10.12

      (1) The procedures in Schedule 3 to the Regulatory Law apply to a decision of the DFSA under 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 DFSA decides 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 Firm may refer the matter to the FMT for review.
      Derived from Notice of Amendments to Legislation April 2011 [VER27/02-11]
      [Amended] DFSA RM131/2014 (Made 21st August 2014). [VER34/06-14]