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  • GEN 5.3.30 GEN 5.3.30

    (1) An Authorised Person must have a Governing Body and senior management that meet the requirements in (2) and (3) respectively.
    (2) The Governing Body of the Authorised Person must:
    (a) be clearly responsible for setting or approving (or both) the business objectives of the firm and the strategies for achieving those objectives and for providing effective oversight of the management of the firm;
    (b) comprise an adequate number and mix of individuals who have, among them, the relevant knowledge, skills, expertise and time commitment necessary to effectively carry out the duties and functions of the Governing Body; and
    (c) have adequate powers and resources, including its own governance practices and procedures, to enable it to discharge those duties and functions effectively.
    (3) The senior management of the Authorised Person must be clearly responsible for the day-to-day management of the firm's business in accordance with the business objectives and strategies approved or set by the Governing Body.
    [Added] DFSA RM95/2012 (Made 14th June 2012). [VER29/06-12]

    • GEN 5.3.30 Guidance

      Scope of corporate governance

      1. Corporate governance is a framework of systems, policies, procedures and controls through which an entity:
      a. promotes the sound and prudent management of its business;
      b. protects the interests of its customers and stakeholders; and
      c. places clear responsibility for achieving (a) and (b) on the Governing Body and its members and the senior management of the Authorised Person.
      2. Many requirements designed to ensure sound corporate governance of companies, such as those relating to shareholder and minority protection and responsibilities of the Board of Directors of companies, are found in the company laws and apply to Authorised Persons. Additional disclosure requirements also apply if they are listed companies. The requirements in this Module are tailored to Authorised Persons and are designed to augment and not to exclude the application of those requirements.
      3. Whilst Rule 5.3.30 deals with two aspects of corporate governance, the requirements included in other provisions under sections 5.2 and 5.3 also go to the heart of sound corporate governance by promoting prudent and sound management of the Authorised Person's business in the interest of its customers and stakeholders. These requirements together are designed to promote sound corporate governance practices in Authorised Persons whilst also providing a greater degree of flexibility for Authorised Persons in establishing and implementing a corporate governance framework that are both appropriate and practicable to suit their operations.
      4. Stakeholder groups of an Authorised Person, who would benefit from the sound and prudent management of firms, can be varied but generally encompass its owners (shareholders), customers (in the case of an AMI, its members and investors), creditors, counterparties and employees, whose interests may not necessarily be mutually coextensive. A key objective in enhancing corporate governance standards applicable to Authorised Persons is to ensure that firms are soundly and prudently managed, with the primary regard being had to its customers.

      Proportionate application to firms depending on the nature of their business

      5. One of the key considerations that underpins how the corporate governance requirements set out in Rule 5.3.30 apply to an Authorised Person is the nature, scale and complexity of the Authorised Person's business, and its organisational structure.
      6. While requiring banks, insurers and dealers to have more detailed and complex corporate governance systems and controls, simpler systems and procedures could be required for other firms, depending on the nature and scale of their Financial Services. For example, in the case of certain types of Category 4 Financial Service providers such as arranging or advising only firms, less extensive and simpler corporate governance systems and procedures may be sufficient to meet their corporate governance obligations.
      7. For example, an Authorised Person which is a small scale operation with a tightly held ownership structure may not have a Governing Body which comprises members who are fully independent of the firm's business and from each other, nor be sufficiently large to be able to form numerous committees of the Governing Body to undertake various functions such as nomination and remuneration. In such cases, whilst strict adherence to such aspects of best practice would not be required, overall measures as appropriate to achieve the sound and prudent management of the business would be needed. For example, a firm with no regulatory track record would be expected to have additional corporate governance controls in place to ensure the sound and prudent management of its business, such as the appointment of an independent director (who has relevant regulatory experience) to its Governing Body.

      Application to Branches and Groups

      8. As part of the flexible and proportionate application of corporate governance standards to firms, whether a firm is a Branch or a subsidiary within a Group is also taken into account. An Authorised Person which is a member of a Group may, instead of developing its own corporate governance policies, adopt group-wide corporate governance standards. However, the Governing Body of the Authorised Person should consider whether those standards are appropriate for the firm, and to the extent possible, make any changes as necessary.
      9. In the case of a Branch, corporate governance practices adopted at the head office would generally apply to the Branch and are expected to be adequate. The DFSA considers, as part of its authorisation of a Branch and on-going supervision, the adequacy of regulatory and supervisory arrangements applicable in the home jurisdiction, including a corporate governance framework adopted and implemented by the head office (see section 3.2.15 of the RPP Sourcebook).

      Best practice relating to corporate governance

      10. In addition to the considerations noted above, best practice that an Authorised Person may adopt to achieve compliance with the applicable corporate governance standards is set out in Guidance at Appendix 3.1. An Authorised Person may, where the best practice set out in App3.1 is not suited to its particular business or structure, deviate from such best practice or any aspects thereof. The DFSA will expect the Authorised Person to demonstrate to the DFSA, upon request, what the deviations are and why such deviations are considered by the Authorised Person to be appropriate.
      [Added] DFSA RM95/2012 (Made 14th June 2012). [VER29/06-12]