RPP 2 RPP 2 Authorisation — Becoming Regulated
RPP 2-1 RPP 2-1 DFSA's Approach to Authorisation
This chapter outlines the
DFSA'sapproach to assessing an applicant to become:(a) an Authorised Person, that is, an Authorised Market Institutionor an Authorised Firm(an Authorised Firmincludes a Representative Office);(b) an Authorised Individual;(c) a Principal Representative;(d) an Ancillary Service Provider; or(e) an Auditor.
Prior to submitting an application to the
DFSA, the relevant applicant should contact the DFSAEnquiries Team on +971 (0)4 362 1500 or via e-mail email@example.com. In preparing an application, this chapter should be read in conjunction with the forms and notes in the AFN Sourcebook, and relevant Laws and Rules.
In assessing whether a relevant applicant is and remains fit and proper, the
DFSAmay also consider the degree to which an applicant is , willing and able to conduct the relevant activities in accordance with the Laws and Rules and other legislation applicable in the DIFC.
An applicant must not provide information to the
DFSAwhich is false, misleading or deceptive, or conceal information where the concealment of such information is likely to mislead or deceive the DFSA(see Article 66 of the Regulatory Law2004).
If an applicant becomes aware of a material change in circumstances that is reasonably likely to be relevant to an application which is under consideration by the
DFSA, then it must inform the DFSAof the change, in writing, without delay (see Article 46 of the Regulatory Law2004).
RPP 2-2 RPP 2-2 Assessing the Fitness and Propriety of Authorised Persons
This section sets out matters which the
DFSAtakes into consideration when assessing the fitness and propriety of an Authorised Person(including applicants). There are some matters in this section which apply to all Authorised Personsand some which are specific to either an Authorised Firmor an Authorised Market Institution. Such matters should be read in conjunction with those requirements relating to Authorised Firms(see chapter 7 of the GEN module) and Authorised Market Institutions(see chapters 2 and 7 of the AMI module).
DFSAmay have regard to all relevant matters, whether arising in the DIFCor elsewhere. The DFSAmay determine the materiality of any information for the purposes of considering whether an Authorised Personhas demonstrated, or continues to demonstrate, that it is fit and proper.
DFSAmay request or require any information which it considers relevant to its consideration of an application by an Authorised Person.
In considering any specific matters, the
DFSAmay request reviews by an appropriately skilled third party on any aspect of the Authorised Person'sproposed or actual activities or the environment in which the applicant predominantly operates. The DFSAwill normally agree to the scope of any reviews performed. Such reviews will ordinarily be at the applicant's sole expense.
Background and History
In respect of the background and history of an
Authorised Person, the DFSAmay have regard to any matters including, but not limited to, the following:(a) any matter affecting the propriety of the Authorised Person'sconduct, whether or not such conduct may have resulted in the commission of a criminal offence or the contravention of the law or the institution of legal or disciplinary proceedings of whatever nature;(b) whether an Authorised Personhas ever been the subject of disciplinary procedures by a government body or agency or any self regulating organisation or other professional body;(c) a contravention of any provision of financial services legislation or of rules, regulations, statements of principle or codes of practice made under it or made by a recognised self regulatory organisation, Financial Services Regulatoror regulated exchange or clearing house;(d) whether an Authorised Personhas been refused, or had a restriction placed on, the right to carry on a trade, business or profession requiring a licence, registration or other permission;(e) an adverse finding or an agreed settlement in a civil action by any court or tribunal of competent jurisdiction resulting in an award against or payment by an Authorised Person in excess of $10,000 or awards that total more than $10,000;(f) whether an Authorised Personhas been censured, disciplined, publicly criticised or the subject of a court order at the instigation of any regulatory authority, or any officially appointed inquiry, or any other Financial Services Regulator; and(g) whether an Authorised Personhas been open and truthful in all its dealings with the DFSA.
Locations of Offices
Authorised Personshould be able to satisfy the DFSAthat it is in compliance with chapter 6 of the GEN module. In particular, section 6.5 of GEN module requires that if an Authorised Personis a Body Corporateconstituted under the laws of the DIFCit should maintain its head office and registered office within the boundaries of the DIFC. In considering the location of an Authorised Person'shead office, the DFSAmay have regard to the location of its directors, partners, and senior management with respect to its strategic, operational and administrative arrangements. Where an Authorised Firmis a Partnershipwith its head office in the DIFC, it must carry on business in the DIFC.
GEN section 6.6 concerns
Close Links. The DFSAshould be satisfied that the existence of Close Linksdo not prevent the effective supervision of the Authorised Personby the DFSA.
Legal Status of Authorised Firms
DFSAwill only consider an application for authorisation where the legal status of the proposed entity meets the requirements set out in section 7.2 of the GEN module or chapter 7 of the AMI module. In the case of non-DIFC firms other than companies limited by shares, the DFSA will consider whether the legal form is appropriate for the activities proposed.
In respect of
Effecting Contracts of Insurance, Carrying Out Contracts of Insurance, Acting as the Trustee of a Fund, or Operating a Collective Investment Fund, an Authorised Firmhas to be a Body Corporatein accordance with GEN Rules 7.2.2(2) and 7.2.2(4) respectively.
In respect of
Accepting Depositsor seeking to Accept Deposits, an Authorised Firmhas to be a Body Corporateor Partnershipin accordance with GEN Rule 7.2.2(3).
Ownership and Group
In respect of the ownership and
Groupstructure of an Authorised Person, the DFSAmay have regard to:(a) the Authorised Person'sposition within its Group, including any other relationships that may exist between the Authorised Person'saffiliates, Controllers, Associatesor other Personsthat may be considered a Close Link(see paragraph 2-2-12 for considerations relating to Controllers and paragraph 2-2-7 for considerations relating to Close Links);(b) the financial strength of a Controllerand other members of the Groupand its implications for the Authorised Person; and(c) whether the Grouphas a structure which makes it possible to:(i) exercise effective supervision;(ii) exchange information among regulators who supervise Groupmembers; and(iii) determine the allocation of responsibility among the relevant regulators;(d) any information provided by other regulators or third parties in relation to the Authorised Personor any entity within its Group;(e) whether the Authorised Personor its Groupis subject to any adverse effect or considerations arising from a country or countries of incorporation , establishment and operations of any member of its Group. In considering such matters, the DFSAmay also have regard to the type and level of regulatory oversight in the relevant country or countries of the Groupmembers, the regulatory infrastructure and adherence to internationally held conventions and standards that the DFSAmay have adopted in its Rules.
In respect of the
Controllersof an Authorised Person, the DFSA may, taking into account the nature, scale and complexity of the firm's business and organisation, have regard to:(a) the background, history and principal activities of the Authorised Person's Controllers, including that of the Controller's Directors, Partnersor other officers associated with the Authorised Person, and the degree of influence that they are, or may be, able to exert over the Authorised Personand/or its activities;(b) where the Controllerwill exert significant management influence over the Authorised Person, the reputation and experience of the Controlleror any individual within the Controller;(c) the financial strength of a Controllerand its implications for the Authorised Person'sability to ensure the sound and prudent management of its affairs, in particular where such a Controlleragrees to contribute any funds or other financial support such as a guarantee or a debt subordination agreement in favour of the Authorised Firm; and(d) whether the Authorised Personis subject to any adverse effect or considerations arising from the country or countries of incorporation, establishment or operations of a Controller. In considering such matters, the DFSA may have regard to, among other things, the type and level of regulatory oversight which the Controlleris subject to in the relevant country or countries and the regulatory infrastructure and adherence to internationally held conventions and standards that the DFSA may have adopted in its Rules.Added by Notice of Updates (Made 20th December 2012). December 2012 Edition
Where the DFSA has any concerns relating to the fitness and propriety of an applicant for a licence stemming from a Controller of such a person, the DFSA may consider imposing licence conditions designed to address such concerns. For example, the DFSA may impose, in the case of a start-up, a licence condition that there should be shareholder agreement to resort to an effective shareholder dispute resolution mechanism.Added by Notice of Updates (Made 20th December 2012). December 2012 Edition
Resources, Systems and Controls
DFSAmay have regard to whether the Authorised Personhas sufficient resources, including the appropriate systems and controls (including those set out in chapter 5 of the GEN module), such as:(a) the Authorised Person'sfinancial resources and whether it complies, or will comply, with any applicable financial Rules, and whether the Authorised Personappears in a position to be able to continue to comply with such Rules;(b) the extent to which the Authorised Personis or may be able to secure additional capital in a form acceptable to the DFSAwhere this appears likely to be necessary at any stage in the future;(c) the availability of sufficient competent human resources to conduct and manage the Authorised Person'saffairs, in addition to the availability of sufficient Authorised Individualsto conduct and manage the Authorised Person's Financial Services;(d) whether the Authorised Personhas sufficient and appropriate systems and procedures in order to support, monitor and manage its affairs, resources and regulatory obligations in a sound and prudent manner;(e) whether the Authorised Personhas appropriate anti money laundering procedures and systems designed to ensure full compliance with applicable money laundering and counter terrorism legislation, and relevant UN Security Council sanctions and resolutions, including arrangements to ensure that all relevant staff are aware of their obligations;(f) the impact of other members of the Authorised Person's Groupon the adequacy of the Authorised Person'sresources and in particular, though not exclusively, the extent to which the Authorised Personis or may be subject to consolidated prudential supervision by the DFSAor another Financial Services Regulator;(g) whether the Authorised Firmis able to provide sufficient evidence about the source of funds available to it, to the satisfaction of the DFSA. This is particularly relevant in the case of a start-up entity; and(h) the matters specified in paragraph 2-2-12(c).
Authorised Firms — Collective suitability of Individuals or Other Persons Connected to the Authorised Firm
Notwithstanding that individuals performing
Licensed Functionsare required to be Authorised Individualsand that an Authorised Firmis required to appoint certain Authorised Individualsto certain functions as stated in chapter 7 of the GEN module, the DFSAwill also consider:(a) the collective suitability of all of the Authorised Firm'sstaff taken together, and whether there is a sufficient range of individuals with appropriate knowledge, skills and experience to understand, operate and manage the Authorised Firm'saffairs in a sound and prudent manner;(b) the composition of the Governing Bodyof the Authorised Firm. The factors that would be taken into account by the DFSAin this context include, depending on the nature, scale and complexity of the firm's business and its organisational structure, whether:(i) the Governing Bodyhas a sufficient number of members with relevant knowledge, skills and expertise among them to provide effective leadership, direction and oversight of the Authorised Firm'sbusiness. For this purpose, the members of the Governing Bodyshould be able to demonstrate that they have, and would continue to maintain, including through training, necessary skills, knowledge and understanding of the firm's business to be able to fulfil their roles;(ii) the individual members of the Governing Bodyhave the commitment necessary to fulfil their roles, demonstrated, for example, by a sufficient allocation of time to the affairs of the firm and reasonable limits on the number of memberships held by them in other Boards of Directorsor similar positions. In particular, the DFSAwill consider whether the membership in other Boards of Directorsor similar positions held by individual members of the Governing Bodyhas the potential to conflict with the interests of the Authorised Firmand its customers and stakeholders; and(iii) there is a sufficient number of independent members on the Governing Body. The DFSAwill consider a member of the Governing Bodyto be "Independent" if he is found, on reasonable grounds by the Governing Body, to be independent in character and judgement and able to make decisions in a manner that is consistent with the best interests of the Authorised Firm;(c) the position of the Authorised Firmin any Groupto which it belongs;(d) the individual or collective suitability of any Personor Personsconnected with the Authorised Firm;(e) the extent to which the Authorised Firmhas robust human resources policies designed to ensure high standards of conduct and integrity in the conduct of its activities;(f) whether the Authorised Firmhas appointed auditors, actuaries and advisers with sufficient experience and understanding in relation to the nature of the Authorised Firm'sactivities; and(g) whether the remuneration structure and strategy adopted by the Authorised Firmis consistent with the requirements in GEN Rule 5.3.31(1).
Authorised Market Institutions — Other Considerations
In determining whether an
Authorised Market Institutionhas satisfied its Licensing Requirementsset out in AMI Rule 7.2.2, the DFSAwill, in addition to the matters raised in this chapter, consider:(a) its arrangements, policies and resources for fulfilling its obligations under the Licensing Requirements;(b) its arrangements for managing conflicts and potential conflicts between its commercial interest and applicable regulatory requirements;(c) the extent to which its constitution and organisation provide for effective governance;(d) the arrangements made to ensure that the Governing Bodyhas effective oversight of its Regulatory Functions;(e) the access the Key Individualshave to the Governing Body;(f) the size and composition of the Governing Bodyincluding:(i) the number of independent members on the Governing Body;(ii) the number of members of the Governing Bodywho represent Membersof the Authorised Market Institutionor other persons and the types of persons whom they represent; and(iii) the number and responsibilities of any members of the Governing Bodywith executive roles within the Authorised Market Institution.(g) the structure and organisation of its Governing Body, including any distribution of responsibilities among its members and committees;(h) the integrity, relevant knowledge, skills and expertise of the members of the Governing Bodyto provide effective leadership, direction and oversight of the Authorised Market Institution'sbusiness. For this purpose, such individuals should be able to demonstrate that they have, and would continue to maintain, including through training, necessary skills, knowledge and understanding of the Authorised Market Institution'sbusiness to be able to fulfil their roles;(i) the commitment necessary by the members of the Governing Bodyto fulfil their roles effectively, demonstrated, for example, by a sufficient allocation of time to the affairs of the Authorised Market Institutionand reasonable limits on the number of memberships held by them in other Boards of Directorsor similar positions. In particular, the DFSAwill consider whether the membership in other Boards of Directorsor similar positions held by individual members of the Governing Bodyhas the potential to conflict with the interests of the Authorised Market Institutionand its stakeholders;(j) the integrity, qualifications and competence of its Key Individuals;(k) its arrangements for ensuring that it employs individuals who are honest and demonstrate integrity;(l) the independence of its regulatory and listings departments from its commercial departments; and(m) whether the remuneration structure and strategy adopted by the Authorised Market Institutionis consistent with the requirements in GEN Rule 5.3.31(1).
DFSAwill consider a Directorto be "independent" if the Directoris found, on the reasonable determination by the Governing Body, to:(a) be independent in character and judgement; and(b) have no relationships or circumstances which are likely to affect or could appear to affect the Director'sjudgement in a manner other than in the best interests of the Authorised Market Institution.
In forming a determination the
Governing Bodyshould consider the length of time the Directorhas served as a member of the Governing Bodyand whether the relevant Director:(a) has been an employee of the Authorised Market Institutionor group within the last five years;(b) has or has had, within the last three years, a material business relationship with the Authorised Market Institution, either directly or as a Partner, shareholder, Directoror senior employee of a body that has such a relationship with the Authorised Market Institution;(c) receives or has received, in the last three years, additional remuneration or payments from the Authorised Market Institutionapart from a Director'sfee, participates in the Authorised Market Institution'sshare option, or a performance-related pay scheme, or is a member of the Authorised Market Institution'spension scheme;(d) is or has been a Director, Partneror Employeeof a firm which is the Authorised Market Institution'sauditor;(e) has close family ties with any of the Authorised Market Institution'sadvisors, Directorsor senior employees;(f) holds cross directorships or has significant links with other Directorsthrough involvement in other bodies; or(g) represents a significant shareholder.
RPP 2-3 RPP 2-3 Assessing the Fitness and Propriety of Authorised Individuals and Principal Representatives
This section sets out the matters which the
DFSAtakes into consideration when assessing the fitness and propriety of an Authorised Individualor Principal Representativeunder section 7.6 of the GEN module and section 4.2 of the REP module, respectively.
In order to assess the fitness and propriety of a proposed
Authorised Individualor Principal Representative, the DFSAmay request an interview with the proposed individual.
In respect of
Authorised Individuals, Article 53(2) of the Regulatory Law2004 provides that applications for Authorised Individualstatus in respect of Licensed Functionroles must be made by both the individual seeking to be authorised and the Authorised Firmfor which that individual is to perform services.
In determining whether an individual has satisfied the
DFSAas to his integrity, the DFSAmay have regard to matters including, but not limited to, the following:(a) the propriety of an individual's conduct whether or not such conduct may have resulted in the commission of a criminal offence, the contravention of a law or the institution of legal or disciplinary proceedings of whatever nature;(b) a conviction or finding of guilt in respect of any offence, other than a minor road traffic offence, by any court of competent jurisdiction;(c) whether the individual has ever been the subject of disciplinary proceedings by a government body or agency or any recognised self regulatory organisation or other professional body;(d) a contravention of any provision of financial services legislation or of rules, regulations, statements of principle or codes of practice made under or by a recognised self regulatory organisation, Authorised Market Institution, regulated exchange or regulated clearing house or Financial Services Regulator;(e) a refusal or restriction of the right to carry on a trade, business or profession requiring a licence, registration or other authority;(f) a dismissal or a request to resign from any office or employment;(g) whether an individual has been or is currently the subject of or has been concerned with the management of a Body Corporatewhich has been or is currently the subject of an investigation into an allegation of misconduct or malpractice;(h) an adverse finding in a civil proceeding by any court of competent jurisdiction of fraud, misfeasance or other misconduct, whether in connection with the formation or management of a corporation or otherwise;(i) an adverse finding or an agreed settlement in a civil action by any court or tribunal of competent jurisdiction resulting in an award against the individual in excess of $10,000 or awards that total more than $10,000;(j) an order of disqualification as a director or to act in the management or conduct of the affairs of a corporation by a court of competent jurisdiction or regulator;(k) whether the individual has been a director, or concerned in the management of, a body corporate which has gone into liquidation or administration whilst that person was connected with that body corporate or within one year of such a connection;(l) whether the individual has been a partner or concerned in the management of a partnership where one or more partners have been made bankrupt whilst that person was connected with that partnership or within a year of such a connection;(m) whether the individual has been the subject of a complaint in connection with a financial service, which relates to his integrity, competence or financial soundness;(n) whether the individual has been censured, disciplined, publicly criticised by, or has been the subject of a court order at the instigation of, the DFSA, or any officially appointed inquiry, or Financial Services Regulator; and(o) whether the individual has been candid and truthful in all his dealings with the DFSA.
Competence and Capability
In determining the competence and capability of an individual, the
DFSAmay have regard to any factors, whether in the U.A.E.or elsewhere including, whether an individual is capable of performing functions which his Authorised Firmemploys or intends to employ him to perform. A relevant factor may also include evidence of appropriate qualifications, including for example, the bespoke examination offered by the Chartered Institute for Securities and Investment in respect of DIFC Laws and Rules.
In determining the financial soundness of an individual, the
DFSAmay have regard to any factors including, but not limited to, the following:(a) whether an individual is able to meet his debts as they fall due; and(b) whether an individual has been adjudged bankrupt, had a receiver or an administrator appointed, had a bankruptcy petition served on him, had his estate sequestrated, entered into a deed of arrangement (or any contract in relation to a failure to pay due debts) in favour of his creditors or, within the last 10 years, has failed to satisfy a judgement debt under a court order, whether in the U.A.E.or elsewhere.
RPP 2-4 RPP 2-4 Waivers During Authorisation
An applicant for authorisation may request a waiver whilst its application for authorisation is being processed. In some circumstances, the applicant may need to work with the
DFSAin developing the waiver and may not be required to use the formal application process. However, the written consent to the waiver by the Authorised Personwill then be required once the applicant is authorised.
RPP 2-5 RPP 2-5 Start-Up Entities in the DIFC
This section replaces DFSA Policy Statement 2/2005 on Start Up Entities in the DIFC — as amended on 16 February 2006.
What are "Start up Entities"?
Start up entities are, either:(a) new financial services businesses; or(b) existing financial services businesses which have never been subject to financial services regulation, for whatever reason.
This section is designed to serve as a guide to assist start up entities which are interested in applying for authorisation by the
DFSAto conduct Financial Servicesin or from the DIFC. This section sets out the information required to support an application and indicates the criteria that the DFSAmay apply in the authorisation process. Start ups, as with any other applicants, will be required to satisfy all relevant aspects of the DFSA'srules and authorisation process prior to being granted a licence.
Considering the restriction in Article 4(1) (a) of the Federal Law No 8 of 2004, the
DFSAmay not authorise a new entity proposing to form in the DIFCto carry out banking activities, unless it is a branch or a wholly owned subsidiary of an existing bank or a joint venture between parties, in which each party must be an existing bank. In formulating this policy the DFSArecognises that it is not practical to provide information on the application of the policy to every possible scenario. Therefore, interested parties are invited to contact the DFSAif they have questions about the application of the policy to their particular circumstances.
The DFSA's Risk Based Approach to Start Up Entities: Broad Risk Categories
Any consideration of an application for authorisation received by the
DFSAis likely to involve an assessment of the risks posed to the objectives of the DFSAby the proposed activities of the applicant. Whilst the broad categories of risks for all applicants will be the same, the nature of those risks within start up entities will be unique, as start ups do not have a regulatory track record upon which the DFSAmay place reliance. In the case of a new business, even where senior management has substantial experience and relevant competence in the business sector, this does not necessarily imply an ability to create and sustain an adequate management control environment and compliance culture, particularly when faced with all the other issues of establishing a new business.
In the case of an existing, but previously unregulated business, any existing control environment and compliance culture may not have been subject to external independent regulatory scrutiny and the additional regulatory reporting requirements which apply to an authorised firm.
The broad categories of risk and some of the unique elements of those risk categories that apply to start up entities include financial risk, governance risk, business/operational risk and compliance risk.
All applicants are required to demonstrate a sound initial capital base and funding and to meet the relevant prudential requirements of the
DFSArulebook, on an ongoing basis. This may include holding sufficient capital to cover expenses on a zero revenue basis. Inevitably, start up entities face greater financial risks as they seek to establish and grow a new business.
In addition to the risks associated with the financial viability of the start up entity, particular attention may be focussed on the clarity and the verifiable source of the initial capital funding. Start up entities may be required to disclose the source of their funds and the history of those funds for at least the previous 12 months.
All applicants are required to demonstrate robust governance arrangements together with the fitness and integrity of all controllers, directors and senior management. The
DFSAis aware that management control, in smaller start ups especially, may lie with one or two dominant individuals who may also be amongst the owners of the firm. In such circumstances, the DFSAwould expect the key business and control functions (i.e. risk management, compliance and internal audit) to be subject to appropriate oversight arrangements which reflect the size and complexity of the business. Applicants can assist the DFSAby describing in detail the ownership structure, high level controls and clear reporting lines which demonstrate an adequate segregation of duties.
DFSAmay request details of the background, history and ownership of the start up entity and, where applicable, its Group. Similar details relating to the background, history and other interests of the directors of the start up entity may also be required. Where it considers it necessary to do so, the DFSAmay undertake independent background checks on such material. A higher degree of due diligence will apply to individuals involved in start up entities and there would be an expectation that the entity itself will have conducted detailed background checks, which may then be verified by the DFSA.
All applicants are required to establish appropriate systems and control environment to demonstrate that the affairs of the firm are managed and controlled effectively. The nature of the systems and controls may depend on the nature, size and complexity of the business. Start up entities may wish to consider which additional systems and controls may be appropriate in the initial period of operation following launch, such as increased risk or compliance monitoring. Due to the unproven track record of start up entities, the
DFSAmay impose restrictions on the business activities of the entity or a greater degree and intensity of supervision until such a track record is established.
Senior Executive Officerwithin all Authorised Firmsis expected to take full responsibility for ensuring compliance with the DFSArules by establishing a strong compliance culture which is fully embedded within the organisation. To this end, a start up entity will be required to appoint a UAEresident Compliance Officerand Money Laundering Reporting Officer (MLRO)with the requisite skills and relevant experience in compliance and anti money laundering duties. The individuals fulfilling these roles within start up entities may be expected to demonstrate to the DFSAtheir competence to perform the proposed role and adequate knowledge of the relevant sections of the DFSArulebook and, in the case of the MLRO, the wider anti-money laundering legislation and related provisions.
Main Information Requirements
The main information requirements are the same for all applicants, including start ups, and each application will be assessed on its own merits. It may help if start up applicants consider the risk categories set out above and how they will address the particular risks raised by their start up proposition.
A key document will be the regulatory business plan submitted in support of the application. It will facilitate the application process if applicants cover the following areas within this submission:(a) An Introduction and background;(b) Strategy and rationale for establishing in the
DIFC;(c) Organisational structure;(d) Management structure;(e) Proposed resources;(f) High level controls;(g) Risk management;(h) Operational controls;(i) Systems overview; and(j) Financial projections.
Start up applicants may find it useful to include diagrams illustrating corporate structures, and, where applicable, group relationships, governance arrangements, organisational design, clear reporting lines, business process flows and systems environments.
Comprehensively addressing these areas and detailing how the key risks will be identified, monitored and controlled may significantly assist the
DFSAin determining applications from start up entities.
RPP 2-6 RPP 2-6 Application for a Retail Endorsement
Section 7.3 of the GEN module provides that an applicant intending to carry on a
Financial Servicewith a Retail Clientrequires an endorsement on its Licence.
When assessing an application for a Retail Endorsement, the
DFSAmay consider, among other things, the following:(a) the adequacy of an applicant's systems and controls for carrying on Financial Serviceswith a Retail Client;(b) whether the applicant is able to demonstrate that its systems and controls (including policies and procedures) adequately provide for, among other things, compliance with the requirements specifically dealing with Retail Clientsin the COB module, in particular:(i) marketing materials intended for Retail Clients;(ii) the content requirements for Client Agreementsfor Retail Clients;(iii) the suitability assessment for recommending a financial product for a Retail Client;(iv) the disclosure of fees and commissions, and any inducements, to a Retail Client; and(v) the segregation of Client Moneyand/or Client Investments, where relevant;(c) whether the applicant has adequate systems and controls to ensure, on an ongoing basis, that its Employeesremain competent and capable to perform the functions which are assigned to them, including any additional factors that may be relevant if their functions involve interfacing with Retail Clients; and(d) the adequacy of the applicant's Complaintshandling policies and procedures. An applicant's policies and procedures must provide for fair, consistent and prompt handling of complaints. In addition to the matters set out in Chapter 9 of the GEN module, the policies and procedures should explicitly deal with how the applicant ensures that:(i) Employeesdealing with Complaintshave adequate training and competencies to handle Complaints, as well as impartiality and sufficient authority (see GEN Rules 5.3.19, 9.2.7 and 9.2.8);(ii) a Retail Clientis made aware of the firm's Complaints handling policies and procedures before obtaining its services (see COB Rule A2.1.2(1)(h)); and(iii) the applicant's Complaintshandling policies and procedures are freely available to any Retail Clientupon request (see COB Rule 9.2.11).
RPP 2-7 RPP 2-7 Application for an Islamic Endorsement
Pursuant to Article 9 of the Law Regulating Islamic Financial Business 2004, in order to conduct Islamic Financial Business, an
Authorised Personmust have an endorsed Licenceauthorising it to conduct business either as an Islamic Financial Institutionor as an Islamic Window. Conducting Islamic Financial Businessmeans carrying on one or more Financial Servicesin accordance with Shari'a.
Authorised Personwho is granted an endorsement to operate an Islamic Windowmay conduct some of its Financial Serviceactivities in a conventional manner while conducting its Islamic Financial Businessthrough the Islamic Window.
DFSAmay grant an Islamic Endorsement only if it is satisfied that the applicant has demonstrated that it has the systems and controls in place to undertake Islamic Financial Business. In deliberating over the granting of an Islamic Endorsement, the DFSAmay consider, among other things, those matters set out in the IFRModule of DFSA'sRulebook.
RPP 2-8 RPP 2-8 Application to be a Representative Office
An applicant seeking to become a
Representative Officewill need to comply with requirements including those set out in the REP module and take note of any applicable matters set out in section 2.2 of the RPP.
In assessing an application for a
Representative Office, the DFSAis likely to assess matters including whether:(a) the proposed activities to be undertaken by the applicant are consistent with the Financial Serviceactivity of Operating a Representative Officeas described in section 2.26 of the GEN module; and(b) the applicant is incorporated and regulated by a Financial Services Regulatorin a jurisdiction other than the DIFC.
Further general information in relation to the
DFSA's Representative Officeregime can be located in a Question and Answer document accessible on:
RPP 2-9 RPP 2-9 Application to be an Ancillary Service Provider
An applicant seeking to become an
Ancillary Service Providerwill need to comply with requirements including those set out set out in the ASPmodule.
In respect of
Ancillary Service Providers, Article 44(1) of the Regulatory Law2004 prohibits a Personfrom carrying on an Ancillary Servicein or from the DIFCunless the Personis registered as an Ancillary Service Provider.
Chapter 4 of the ASP module outlines some of the matters required to be addressed when making an application to carry on
Ancillary Services. The activities which constitute Ancillary Servicesare defined in the ASPmodule as Providing Legal Servicesand Providing Accountancy Services.
ASP Rule 4.2.2 provides that applications for registration as an
Ancillary Service Providermay be submitted only by a Body Corporateor Partnership.
DFSAwill have particular regard to whether the firm, or anyone in a position of influence in or over it, has criminal convictions or been the subject of adverse findings by courts or regulatory authorities in the UAEor elsewhere, or is known to have engaged in dishonest or improper business practices.
RPP 2-10 RPP 2-10 Application to be an Auditor
Authorised Firmsand Authorised Market Institutionsthat are Domestic Firmsand Operators of Domestic Fundsare required to appoint and retain Auditorswho are registered for the duration of the audit. A Personintending to audit Authorised Firmsor Authorised Market Institutions(that are Domestic Firms), or Domestic Funds, must apply to the DFSAfor registration in accordance with the GENmodule.
An applicant for registration should be able to demonstrate to the
DFSA'ssatisfaction that:(a) it has professional indemnity insurance as required in section 8.17 of the GEN module;(b) it has adequate systems, procedures and controls to ensure due compliance with:(i) the International Standards on Auditing;(ii) the International Standards on Quality Control; and(ii) the Code of Ethics for Professional Accountants;(c) where applicable, it has adequate systems, procedures and controls to ensure due compliance with:(i) the Islamic Accounting and Auditing Standards; and(ii) the Code of Ethics for Accountants and Audit Firms of Islamic Financial Institutions;(d) it is controlled by Personseach of whom holds a Recognised Professional Qualificationfrom a Recognised Professional Body; and(e) it has complied with any other requirement as specified by the DFSA.