Entire Section

  • RPP 2-2 RPP 2-2 Assessing the Fitness and Propriety of Authorised Persons

    • Introduction

      • RPP 2-2-1

        This section sets out matters which the DFSA takes 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 Persons and some which are specific to either an Authorised Firm or 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).

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]

      • RPP 2-2-2

        The DFSA may have regard to all relevant matters, whether arising in the DIFC or elsewhere. The DFSA may determine the materiality of any information for the purposes of considering whether an Authorised Person has demonstrated, or continues to demonstrate, that it is fit and proper.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]

      • RPP 2-2-3

        The DFSA may request or require any information which it considers relevant to its consideration of an application by an Authorised Person.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]

      • RPP 2-2-4

        In considering any specific matters, the DFSA may request reviews by an appropriately skilled third party on any aspect of the Authorised Person's proposed or actual activities or the environment in which the applicant predominantly operates. The DFSA will normally agree to the scope of any reviews performed. Such reviews will ordinarily be at the applicant's sole expense.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]

    • Background and History

      • RPP 2-2-5

        In respect of the background and history of an Authorised Person, the DFSA may have regard to any matters including, but not limited to, the following:

        (a) any matter affecting the propriety of the Authorised Person's conduct, 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 Person has 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 Regulator or regulated exchange or clearing house;
        (d) whether an Authorised Person has 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 Person has 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 Person has been open and truthful in all its dealings with the DFSA.
        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]

    • Locations of Offices

      • RPP 2-2-6

        An Authorised Person should be able to satisfy the DFSA that it is in compliance with chapter 6 of the GEN module. In particular, section 6.5 of GEN module requires that if an Authorised Person is a Body Corporate constituted under the laws of the DIFC it should maintain its head office and registered office within the boundaries of the DIFC. In considering the location of an Authorised Person's head office, the DFSA may have regard to the location of its directors, partners, and senior management with respect to its strategic, operational and administrative arrangements. Where an Authorised Firm is a Partnership with its head office in the DIFC, it must carry on business in the DIFC.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]

    • Close Links

      • RPP 2-2-7

        GEN section 6.6 concerns Close Links. The DFSA should be satisfied that the existence of Close Links do not prevent the effective supervision of the Authorised Person by the DFSA.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]

    • Legal Status of Authorised Firms

      • RPP 2-2-8

        The DFSA will 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.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 20th December 2012). December 2012 Edition

      • RPP 2-2-9

        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 Firm has to be a Body Corporate in accordance with GEN Rules 7.2.2(2) and 7.2.2(4) respectively.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]

      • RPP 2-2-10

        In respect of Accepting Deposits or seeking to Accept Deposits, an Authorised Firm has to be a Body Corporate or Partnership in accordance with GEN Rule 7.2.2(3).

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]

    • Ownership and Group

      • RPP 2-2-11

        In respect of the ownership and Group structure of an Authorised Person, the DFSA may have regard to:

        (a) the Authorised Person's position within its Group, including any other relationships that may exist between the Authorised Person's affiliates, Controllers, Associates or other Persons that 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 Controller and other members of the Group and its implications for the Authorised Person; and
        (c) whether the Group has a structure which makes it possible to:
        (i) exercise effective supervision;
        (ii) exchange information among regulators who supervise Group members; 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 Person or any entity within its Group;
        (e) whether the Authorised Person or its Group is 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 DFSA may also have regard to the type and level of regulatory oversight in the relevant country or countries of the Group members, the regulatory infrastructure and adherence to internationally held conventions and standards that the DFSA may have adopted in its Rules.
        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 20th December 2012). December 2012 Edition

    • Controllers

      • RPP 2-2-12

        In respect of the Controllers of 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, Partners or other officers associated with the Authorised Person, and the degree of influence that they are, or may be, able to exert over the Authorised Person and/or its activities;
        (b) where the Controller will exert significant management influence over the Authorised Person, the reputation and experience of the Controller or any individual within the Controller;
        (c) the financial strength of a Controller and its implications for the Authorised Person's ability to ensure the sound and prudent management of its affairs, in particular where such a Controller agrees 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 Person is 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 Controller is 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

      • RPP 2-2-13

        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

      • RPP 2-2-14

        The DFSA may have regard to whether the Authorised Person has 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's financial resources and whether it complies, or will comply, with any applicable financial Rules, and whether the Authorised Person appears in a position to be able to continue to comply with such Rules;
        (b) the extent to which the Authorised Person is or may be able to secure additional capital in a form acceptable to the DFSA where 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's affairs, in addition to the availability of sufficient Authorised Individuals to conduct and manage the Authorised Person's Financial Services;
        (d) whether the Authorised Person has 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 Person has 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 Group on the adequacy of the Authorised Person's resources and in particular, though not exclusively, the extent to which the Authorised Person is or may be subject to consolidated prudential supervision by the DFSA or another Financial Services Regulator;
        (g) whether the Authorised Firm is 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).
        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 20th December 2012). December 2012 Edition

    • Authorised Firms — Collective suitability of Individuals or Other Persons Connected to the Authorised Firm

      • RPP 2-2-13

        Notwithstanding that individuals performing Licensed Functions are required to be Authorised Individuals and that an Authorised Firm is required to appoint certain Authorised Individuals to certain functions as stated in chapter 7 of the GEN module, the DFSA will also consider:

        (a) the collective suitability of all of the Authorised Firm's staff 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's affairs in a sound and prudent manner;
        (b) the composition of the Governing Body of the Authorised Firm. The factors that would be taken into account by the DFSA in this context include, depending on the nature, scale and complexity of the firm's business and its organisational structure, whether:
        (i) the Governing Body has a sufficient number of members with relevant knowledge, skills and expertise among them to provide effective leadership, direction and oversight of the Authorised Firm's business. For this purpose, the members of the Governing Body should 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 Body have 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 Directors or similar positions. In particular, the DFSA will consider whether the membership in other Boards of Directors or similar positions held by individual members of the Governing Body has the potential to conflict with the interests of the Authorised Firm and its customers and stakeholders; and
        (iii) there is a sufficient number of independent members on the Governing Body. The DFSA will consider a member of the Governing Body to 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 Firm in any Group to which it belongs;
        (d) the individual or collective suitability of any Person or Persons connected with the Authorised Firm;
        (e) the extent to which the Authorised Firm has robust human resources policies designed to ensure high standards of conduct and integrity in the conduct of its activities;
        (f) whether the Authorised Firm has appointed auditors, actuaries and advisers with sufficient experience and understanding in relation to the nature of the Authorised Firm's activities; and
        (g) whether the remuneration structure and strategy adopted by the Authorised Firm is consistent with the requirements in GEN Rule 5.3.31(1).
        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 5th July 2012). July 2012 Edition

    • Authorised Market Institutions — Other Considerations

      • RPP 2-2-14

        In determining whether an Authorised Market Institution has satisfied its Licensing Requirements set out in AMI Rule 7.2.2, the DFSA will, 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 Body has effective oversight of its Regulatory Functions;
        (e) the access the Key Individuals have to the Governing Body;
        (f) the size and composition of the Governing Body including:
        (i) the number of independent members on the Governing Body;
        (ii) the number of members of the Governing Body who represent Members of the Authorised Market Institution or other persons and the types of persons whom they represent; and
        (iii) the number and responsibilities of any members of the Governing Body with 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 Body to provide effective leadership, direction and oversight of the Authorised Market Institution's business. 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's business to be able to fulfil their roles;
        (i) the commitment necessary by the members of the Governing Body to fulfil their roles effectively, demonstrated, for example, by a sufficient allocation of time to the affairs of the Authorised Market Institution and reasonable limits on the number of memberships held by them in other Boards of Directors or similar positions. In particular, the DFSA will consider whether the membership in other Boards of Directors or similar positions held by individual members of the Governing Body has the potential to conflict with the interests of the Authorised Market Institution and 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 Institution is consistent with the requirements in GEN Rule 5.3.31(1).
        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 5th July 2012). July 2012 Edition

      • RPP 2-2-15

        The DFSA will consider a Director to be "independent" if the Director is 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's judgement in a manner other than in the best interests of the Authorised Market Institution.
        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]

      • RPP 2-2-16

        In forming a determination the Governing Body should consider the length of time the Director has served as a member of the Governing Body and whether the relevant Director:

        (a) has been an employee of the Authorised Market Institution or 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, Director or 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 Institution apart from a Director's fee, participates in the Authorised Market Institution's share option, or a performance-related pay scheme, or is a member of the Authorised Market Institution's pension scheme;
        (d) is or has been a Director, Partner or Employee of a firm which is the Authorised Market Institution's auditor;
        (e) has close family ties with any of the Authorised Market Institution's advisors, Directors or senior employees;
        (f) holds cross directorships or has significant links with other Directors through involvement in other bodies; or
        (g) represents a significant shareholder.
        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]