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.