Entire Section

RPP 2-1-1

This chapter outlines the DFSA's approach to assessing an applicant or registrant to become:

RPP 2-1-2

Prior to submitting an application to the DFSA, the relevant applicant should contact the DFSA Enquiries Team on +971 (0)4 362 1500 or using the General Enquiries form on our website. 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.

RPP 2-1-3

In assessing whether a relevant applicant is and remains fit and proper, the DFSA may 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.

RPP 2-1-4

An applicant must not provide information to the DFSA which 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 Law).

RPP 2-1-5

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 DFSA of the change, in writing, without delay (see Article 46 of the Regulatory Law).

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, so this chapter 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 9 of the AMI module).

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.

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.

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.

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:

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 requires that if an Authorised Person is a Body Corporate, or a Partnership, constituted under the laws of the DIFC it should maintain its head office and registered office within the boundaries of the DIFC. The 'head office' of an Authorised Person is defined as the principal place where it carries on both the day-to-day management and control of its business and also the activities for which it is authorised by the DFSA. An Authorised Person operating in the DIFC through a branch must have a place of business in the DIFC that is the principal place where it carries on the activities for which it is authorised by the DFSA and the address in the DIFC to which communications and notices may be sent.

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.

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 5 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.

RPP 2-2-9

In respect of Effecting Contracts of Insurance or Carrying Out Contracts of Insurance, an Authorised Firm has to be a Body Corporate in accordance with GEN Rule 7.2.2(2).

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).

RPP 2-2-11

In respect of Acting as the Trustee of a Fund or Managing a Collective Investment Fund, an Authorised Firm has to be a Body Corporate in accordance with GEN Rule 7.2.2(4).

RPP 2-2-12

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

RPP 2-2-13

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:

RPP 2-2-14

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.

RPP 2-2-15

The DFSA will 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 and AMI Rules 5.5.4 and 5.5.5), such as:

RPP 2-2-16

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:

RPP 2-2-17

In determining whether an Authorised Market Institution has satisfied its Licensing Requirements set out in chapter 5 of the AMI module and chapter 5 of the GEN module, the DFSA will consider:

RPP 2-2-18

The DFSA will consider a Director to be "independent" if the Director is found, on the reasonable determination by the Governing Body, to:

RPP 2-2-19

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:

RPP 2-3-1

This section sets out the matters which the DFSA takes into consideration when assessing the fitness and propriety of:

RPP 2-3-2

In order to assess the fitness and propriety of a proposed Authorised Individual or Principal Representative, the DFSA may request an interview with the proposed individual.

RPP 2-3-3

In respect of Authorised Individuals, Article 53(2) of the Regulatory Law provides that applications for Authorised Individual status in respect of Licensed Function roles must be made by both the individual seeking to be authorised and the Authorised Firm for which that individual is to perform services. Under Article 56 of the Regulatory Law, the DFSA may reject an application for Authorised Individual status or extension to such status or grant Authorised Individual status or extension to such status with or without conditions and restrictions.

RPP 2-3-4

AMI Rule 3.3.1(1) requires applications for Key Individual to be made by both the individual seeking to be authorised and the Authorised Market Institution for which that individual is to perform a Key Individual function. In assessing whether an individual meets the fitness and propriety criteria to be able to perform the role of a Key Individual, the DFSA takes into account the considerations noted in paragraphs 2-3-5 to 2-3-7 below.

RPP 2-3-5

In determining whether an individual has satisfied the DFSA as to his integrity, the DFSA may have regard to matters including, but not limited to, the following:

RPP 2-3-6

In determining the competence and capability of an individual to perform the role of an Authorised Individual, Principal Representative or Key Individual, the DFSA may have regard to any factors, whether in the U.A.E. or elsewhere including, whether an individual is capable of performing functions which he has to perform within the Authorised Firm or Authorised Market Institution which employs or intends to employ him. 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.

RPP 2-3-7

In determining the financial soundness of an individual, the DFSA may have regard to any factors including, but not limited to, the following:

RPP 2-5-1 [Deleted]

RPP 2-5-1

Start up entities are, either:

RPP 2-5-2

This section is designed to serve as a guide to assist start up entities that are interested in applying for authorisation by the DFSA to conduct Financial Services in or from the DIFC. This section sets out the information required to support an application and indicates the criteria that the DFSA may apply in the authorisation process. Start ups, as with any other applicants, will be required to satisfy all relevant aspects of the DFSA's rules and authorisation process prior to being granted a licence.

RPP 2-5-3

An entity seeking authorisation to be a Bank, and to carry on its activities in or from the DIFC, will be either:

RPP 2-5-4

Where the applicant falls into categories (a) and (b) above, the DFSA will pay particular attention to the soundness of the existing bank of which the proposed DIFC entity is a part. It is our expectation that the existing bank will be a source of strength¹ for the DIFC entity. The DFSA will also pay particular attention to the supervisory relationships it has, or will need to establish, with the supervisor(s) of the existing bank, whichever jurisdiction(s) that is based in. Being able to exchange supervisory information with other relevant supervisors is a cornerstone of the DFSA's regulatory approach.

¹ The 'source of strength' doctrine is a well-established and understood concept in banking regulation. It is an expectation that the parent company of a regulated bank will be a source of financial strength and support to that regulated bank should it experience distress

RPP 2-5-5

Where the applicant falls into category (c) above, and so is a start-up entity, the DFSA will, clearly, not be able to place reliance on existing banking entities or the strength of a larger group. The credibility and financial soundness of the proposed shareholders of the start-up Bank will, therefore, be a key consideration for the DFSA, as it is these proposed shareholders that the DFSA would need to look to, to provide support to the Bank, should it encounter difficulties.

RPP 2-5-6

The DFSA will have a greater degree of comfort with proposed shareholders who are themselves regulated financial institutions or who have a track record of investing in financial institutions and of providing support to those institutions, if and when such support has been needed. Similarly, if proposed shareholders demonstrably have the financial means to provide further support to the start-up Bank, then this will allow the DFSA to take greater comfort.

RPP 2-5-7

Applicants who wish to establish a start-up Bank in the DIFC should consider carefully the implications of the absence of a central bank in the DIFC. For example, the DFSA would expect applicants to address how this fact would affect their:

RPP 2-5-8

In formulating this policy the DFSA recognises 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 DFSA if they have questions about the application of the policy to their particular circumstances.

RPP 2-5-9

Any consideration of an application for authorisation received by the DFSA is likely to involve an assessment of the risks posed to the objectives of the DFSA by 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 DFSA may 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.

RPP 2-5-10

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.

RPP 2-5-11

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.

RPP 2-5-12

The DFSA will consider each application for a start-up separately and determine accordingly if further tailored regulatory requirements, in addition to the DFSA's existing requirements, may be necessary. Tailored requirements could include — but not be limited to — capital, liquidity, credit or investment limits.

RPP 2-5-13

All applicants are required to demonstrate a sound initial capital base and funding and to meet the relevant prudential requirements of the DFSA rulebook, 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.

RPP 2-5-14

In addition to the risks associated with the financial viability of the start up entity, particular attention may be given to 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.

RPP 2-5-15

All applicants are required to demonstrate robust governance arrangements together with the fitness and integrity of all controllers, directors and senior management. The DFSA is 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 DFSA would 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 DFSA by describing in detail the ownership structure, high level controls and clear reporting lines which demonstrate an adequate segregation of duties.

RPP 2-5-16

The DFSA may 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 DFSA may 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.

RPP 2-5-17

All applicants are required to establish appropriate systems and controls 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 DFSA may, for example, impose restrictions on the business activities of the entity or a greater degree and intensity of supervision until such a track record is established.

RPP 2-5-18

The Senior Executive Officer within all Authorised Firms is expected to take full responsibility for ensuring compliance with the DFSA rules by establishing a strong compliance culture which is fully embedded within the organisation. A start up entity will be required to appoint a UAE resident Compliance Officer and 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 DFSA their competence to perform the proposed role and adequate knowledge of the relevant sections of the DFSA rulebook and, in the case of the MLRO, the wider anti-money laundering legislation and related provisions.

RPP 2-5-19

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.

RPP 2-5-20

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:

RPP 2-5-21

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.

RPP 2-5-22

Comprehensively addressing these areas and detailing how the key risks will be identified, monitored and controlled may significantly assist the DFSA in determining applications from start up entities.

RPP 3-1-1

Chapter 3 focuses on the DFSA's risk-based approach to supervision and the ongoing relationship between the DFSA and an Authorised Person, DNFBP or Registered Auditor (collectively referred to as firms in this Chapter unless otherwise stated).

RPP 3-1-2

Section 3-1 outlines the DFSA's general approach to risk based supervision; the remaining sections (3-2 to 3-6) provide additional information in relation to the DFSA's approach to the supervision of particular types of firms.

RPP 3-1-3

The appropriate use of the DFSA's supervisory powers plays an important part in ensuring that the DFSA achieves its statutory objectives and has regard to its guiding principles which are set out in chapter 1.

RPP 3-1-4

The DFSA has adopted a risk-based approach to the regulation and supervision of all regulated firms in order to concentrate its resources on the mitigation of risks to its objectives. The DFSA will work with a regulated entity to identify, assess, mitigate and control these risks where appropriate.

RPP 3-1-5

The DFSA's supervisory risk-based approach involves:

where applicable, considering any lead or consolidated supervision which a firm or its Group may be subject to in other jurisdictions, taking into account the DFSA's relationship with other regulators, set out in paragraphs 3-1-34 and 3-1-35;

RPP 3-1-6

The DFSA's risk-based approach to the supervision of a firm may vary depending upon the size, scale, nature and circumstances of each individual firm and the specific risks it poses to the DFSA's objectives.

RPP 3-1-7

The DFSA is concerned with a firm's behaviour that affects both its overall financial condition and its interaction with individual customers and market counterparties. We do not aim to prevent all failures. A 'zero failure' regime would place an excessive regulatory burden on firms. Instead, we aim to reduce the probability of excessive risk taking or inappropriate conduct through increased intensity of supervision where it is both appropriate and likely to be effective.

RPP 3-1-8

The DFSA has adopted a continuous risk management cycle. This comprises the identification, assessment, prioritisation, monitoring and mitigation of risks.

RPP 3-1-9

Our risk management cycle starts with a macro-prudential view of the DIFC as a whole. We produce a comprehensive set of quarterly data which highlight demographics of all types of regulated entities. This data set provides an overview of the risk profile of regulated entities, including the aggregate financial position.

RPP 3-1-10

Based on the analysis of this data set, we might increase assessment activity with respect to certain entities, or use thematic reviews to target certain products, services or practices across a set of firms.

RPP 3-1-11

Our Board of Directors use these data, amongst other factors, to set organisational risk tolerances which are used to prioritise risks.

RPP 3-1-12

The impact rating is an assessment of the potential adverse consequences that could follow from the failure of, or significant misconduct by, a firm. The potential adverse consequences include not only the direct financial impact on such firm's customers and stakeholders, but also the potential for damage to the reputation and objectives of the DFSA.

RPP 3-1-13

We do not have a single proxy for the impact rating. We consider a variety of factors such as:

RPP 3-1-14

The probability rating covers four broad risk groups:

RPP 3-1-15

Within these risk groups are risk elements which the DFSA may review, according to the type of firm, to identify risks that could inhibit the achievement of our objectives.

RPP 3-1-16

A risk matrix is then used to identify, assess and further prioritise risks using these impact and probability ratings, resulting in a risk based classification of a firm.

RPP 3-1-17

Risk assessments allow the DFSA to allocate its resources in such a way that its supervisory tools are targeted towards those firms and activities which pose a higher risk to the DFSA's objectives.

RPP 3-1-18

The DFSA has in place intra-departmental challenges and measures to check that our supervisory activities are proportionate to a firm's risk-based classification.

RPP 3-1-19

We will generally only allocate a Relationship Manager to a firm with a higher level of resultant risk from the combined assessment of impact and probability risk ratings. This means that a significant number of firms will not have a dedicated Relationship Manager, but will be supervised by a team — the Thematic Supervision Team (TST).

RPP 3-1-20

Firms supervised by the TST will be subject to onsite and thematic surveillance reviews, however, the review cycle will differ from those firms supervised by dedicated relationship managers. In addition to risk assessments, the TST will use high-level management meetings and self-certifications as considered necessary.

RPP 3-1-21

Thematic reviews will cover a sample of all relevant firms. Such reviews may be conducted at any time.

RPP 3-1-22

Whilst the DFSA may discuss certain information with a firm, in particular the specific risks that lead it to assign an overall risk classification to the firm and any necessary remedial actions, it will not usually disclose the final risk classification.

RPP 3-1-23

Whenever appropriate, the DFSA may inform the firm of the steps it needs to take in relation to specific risks. The DFSA then expects the firm to demonstrate that it has taken appropriate steps to mitigate the risks it poses to the DFSA's objectives.

RPP 3-1-24

Where necessary, risk mitigation programmes may be developed with a firm in order to mitigate or remove identified areas of risk.

RPP 3-1-25

In order to meet its objectives, the DFSA requires an open, transparent and co-operative relationship between itself and each firm. The DFSA expects to establish and maintain an on-going dialogue with the firm's senior management in order to develop and sustain a thorough understanding of the firm's business, systems and controls and, through this relationship, to be aware of all areas of risk to the DFSA's objectives.

RPP 3-1-26

The DFSA seeks to maintain an up-to-date knowledge of a firm's business. However, a firm is also required to keep the DFSA informed of significant events, or anything related to the firm of which the DFSA would reasonably expect to be notified, including as set out in paragraphs 3-1-32 and 3-1-33.

RPP 3-1-27

The nature and intensity of the DFSA's relationship with a firm will depend first on the extent of risk a firm poses, but after that will also depend on a number of factors. The DFSA's level of supervision will be proportionate to the risks which the firm poses to the DFSA's objectives and will emphasise the responsibilities of the firm's senior management in identifying, assessing, mitigating and controlling its risks. The greater the impact and probability of the firm's perceived risks, the more intensive the supervisory relationship may be.

RPP 3-1-28

For those Firms who have a dedicated Relationship Manager, their Relationship Managers will be the Firms' main point of contact with the DFSA. This includes any notifications, changes or queries.

RPP 3-1-29

For those Firms without a dedicated Relationship Manager, who will be supervised by the TST, a "Supervised Firm Contact Form" (Contact Form), is available only to Firms on the DFSA website and provides a mechanism to securely and efficiently communicate with us.

http://www.dfsa.ae/Pages/ContactUs/SupervisedFirmContactForm.aspx

RPP 3-1-30

This Contact Form can be used for any questions or queries you have of us and for the lodgement of any required forms (except EPRS returns). The Contact Form also allows for the attachment of any related supporting documents. Once received, all enquiries will be acknowledged and an appropriate DFSA staff member will be allocated to each enquiry. The DFSA has put in place service standards to ensure that all enquiries are responded to in a timely manner.

RPP 3-1-31

In addition, we have also published, on our website, a set of Frequently Asked Questions (FAQs). These FAQs include the most commonly asked questions from our regulated entities ranging from general "Where can I find … ?" queries to more specific supervisory processes or reporting requirement queries. We will update the FAQs on a regular basis and we encourage all regulated entities to visit and revisit this resource frequently.

RPP 3-1-32

Section 11.10 of the GEN module sets out Rules on specified events, changes or circumstances that require notification to the DFSA by an Authorised Person (other than a Representative Office). The list of notifications outlined in section 11.10 is not exhaustive and other areas of the Rulebook may also specify additional notification requirements.

RPP 3-1-33

An Authorised Firm and Authorised Market Institution are required to comply with the high level principles in GEN Rule 4.2.10 and AMI Rule 9.2.1 respectively. These Rules require an Authorised Person to deal with the DFSA in an open and co-operative manner and keep the DFSA promptly informed of significant events or anything else relating to such person of which the DFSA would reasonably expect to be notified.

RPP 3-1-34

The DFSA views co-operation with other regulators as an important component of its supervisory activities. Effective co-operation arrangements with other regulators will provide for prompt exchange of information in relation to supervision, investigation and enforcement matters. Usually, co-operation arrangements will be in the form of memoranda of understanding or other arrangements. The information exchange may enhance, for example, the DFSA's understanding of the operations of an Authorised Firm's Group and the effect on the firm.

RPP 3-1-35

The DFSA may exercise its powers for the purposes of assisting other regulators or agencies (see Article 39 of the Regulatory Law). The DFSA may also delegate functions and powers to representatives of other regulators or agencies (see Article 40 of the Regulatory Law).

RPP 3-1-12 [Deleted]

RPP 3-1-13 [Deleted]

RPP 3-1-14 [Deleted]

RPP 3-1-15 [Deleted]

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RPP 3-1-18 [Deleted]

RPP 3-1-19 [Deleted]

RPP 3-1-20 [Deleted]

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RPP 3-1-22 [Deleted]

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RPP 3-1-22 [Deleted]

RPP 3-1-23 [Deleted]

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RPP 3-1-26 [Deleted]

RPP 3-1-27 [Deleted]

RPP 3-1-28 [Deleted]

RPP 3-1-29 [Deleted]

RPP 3-1-30 [Deleted]

RPP 3-1-31 [Deleted]

RPP 3-1-32 [Deleted]

RPP 3-1-33 [Deleted]

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RPP 3-1-35 [Deleted]

RPP 3-1-36 [Deleted]

RPP 3-1-37 [Deleted]

RPP 3-1-38 [Deleted]

RPP 3-1-39 [Deleted]

RPP 3-1-40 [Deleted]

RPP 3-2-1

Section 3.2 provides additional information in relation to DFSA's approach to the supervision of an Authorised Firm. Where relevant, some of these requirements may apply to a Representative Office.

RPP 3-2-2

In supervising an Authorised Firm, the DFSA expects an Authorised Firm to comply with a number of high level principles in relation to its activities.

RPP 3-2-3

An Authorised Firm, other than a Representative Office, must comply with the twelve principles set out in section 4.2 of the GEN module. In brief, these are:

RPP 3-2-4

A Representative Office must comply with the four principles set out in section 3.2 of the REP module. In brief, these are:

RPP 3-2-5

When the DFSA licenses an Authorised Firm, it takes into consideration the relationship with any wider Group to which the firm may belong or with other Persons closely linked to it. The DFSA may also take into account lead or consolidated supervision to which an Authorised Firm or its Group may be subject in another jurisdiction.

RPP 3-2-6

An Authorised Firm is expected to provide information as required or reasonably requested under legislation applicable in the DIFC relating to the Authorised Firm and, where applicable, its consolidated or lead regulatory arrangements. This information may include prudential information, reports on systems and controls relating to an Authorised Firm's Group, internal and external audit reports, details of disciplinary proceedings or any matters which may have financial consequences, reputational impact or pose any significant risk to the DIFC or to the Authorised Firm and the group-wide corporate governance practices and policies and the remuneration structure and strategies adopted. This information may initially be taken into account as part of DFSA's fit and proper test as set out in section 2.2 and may subsequently be utilised in the supervision of the Authorised Firm. Further Rules and Guidance with regard to obtaining information from an Authorised Firm's lead regulator are set out in GEN Rule 11.1.5.

RPP 3-2-7

The DFSA has an interest in the relationship of an Authorised Firm with other regulators, particularly in order to determine the level of reliance the DFSA may place on a regulator in another jurisdiction concerning any lead supervision arrangements. Depending on the legal structure of an Authorised Firm and the relationship of the DFSA with the regulator in question, the DFSA may place appropriate reliance on the supervision undertaken by this regulator.

RPP 3-2-8

The DFSA will usually be the lead and consolidated regulator of any Group headed by a Domestic Firm. Members of the Group, that is any of the Authorised Firm's Subsidiaries or branches, will be either subject to DFSA's exclusive supervision or, where members of the Group are located in a jurisdiction outside the DIFC, generally subject to lead or consolidated supervision by the DFSA in co-operation with another regulator.

RPP 3-2-9

The DFSA will routinely be the lead regulator for the purpose of prudential supervision of an Authorised Firm which is a DIFC incorporated Subsidiary of a non-DIFC firm.

RPP 3-2-10

Where the Authorised Firm is a Subsidiary of a regulated non-DIFC parent company, the DFSA may have regard to any consolidated prudential supervision arrangements to which the Subsidiary is subject and will liaise with other regulators as necessary to ensure that these are adequately carried out, taking into account the Subsidiary's activities. The DFSA may place appropriate reliance on the Subsidiary's consolidated regulator in another jurisdiction if it is satisfied that it meets appropriate regulatory criteria and standards.

RPP 3-2-11

An Authorised Firm carrying on Financial Services as a Subsidiary of an unregulated non-DIFC parent company may be subject to the DFSA's consolidated prudential supervision, taking into account the parent's activities.

RPP 3-2-12

An Authorised Firm carrying on Financial Services through a branch will be subject to supervision by both the DFSA and the regulator in its head office jurisdiction.

RPP 3-2-13

The DFSA will have regard to any lead or consolidated prudential supervision arrangements to which a branch is subject. The DFSA may place appropriate reliance on a Branch's lead regulator in another jurisdiction and, where appropriate, its consolidated prudential regulator if it is satisfied that it meets appropriate regulatory criteria and standards. Where an Authorised Firm is subject to lead regulation arrangements with a foreign regulator, the DFSA will usually not seek to impose consolidated prudential supervision on the Authorised Firm's Group.

RPP 3-2-14

During the authorisation process the DFSA will take into account the nature and scope of the regulation and supervision to which the applicant is subject in its head office jurisdiction. Notwithstanding that an Authorised Firm may be subject to lead or consolidated regulatory arrangements, the DFSA requires it to remain fit and proper in respect of its Group and Controllers. Certain changes or events will require notification to, or prior approval from, the DFSA.

RPP 3-2-15

The DFSA will determine the level of regulatory and supervisory oversight which is subsequently required for a specific Branch. As part of DFSA's risk assessment process, during the authorisation process the DFSA undertakes a two-tier approach to the risks to its objectives posed by the Branch, thereby taking into account the characteristics of the applicant and its head office. The first part of this assessment includes a judgement on the degree of home country supervision and considers the strength of support, both financial and managerial, which the head office is capable of providing to the Branch, taking into account the Branch's activities and the adequacy of, among other things, the corporate governance framework and practices and remuneration structure and strategies adopted at the head office. The second part of the assessment considers the risk and control mechanisms within the Branch itself.

RPP 3-2-16

As a result of the assessment, the DFSA may consider granting a waiver or modification notice in respect of specific prudential or other regulatory requirements relating to a Branch.

RPP 3-2-17

An Authorised Firm is required to submit periodic returns. In addition, an Authorised Firm may be required to submit copies of its Group's annual interim and audited accounts. The DFSA may also require an Authorised Firm to provide copies of Group returns which are sent to any other regulator.

RPP 3-2-18

Collecting this data in a timely and accurate manner is imperative to our risk management cycle, which is the primary reason we have automatic fees for late financial reports.

RPP 3-2-19

The DFSA conducts an ongoing analysis of risks relating to each Authorised Firm, although the information required may vary from firm to firm. Authorised Firms with a higher risk classification may be subject to closer regulatory attention and would typically be subject to supervisory reviews specifically designed to address particular causes of risk.

RPP 3-2-20

All Authorised Firms will be subject to an individual on-site risk assessment, except where more than one Authorised Firm belongs to the same Group, in which case the DFSA may decide to carry out a Group risk assessment.

RPP 3-2-21

The risk assessment process is ongoing. The DFSA will, on a continuous basis, review notifications and reporting of information, maintain an ongoing dialogue with senior management and make appropriate visits to the Authorised Firm, so that the DFSA has current information on key risk areas of the Authorised Firm.

RPP 3-2-22

There are also a number of trigger events which may affect the frequency of a risk assessment and the Authorised Firm's overall risk classification. Examples include:

RPP 3-2-23

Under GEN Rule 5.3.4, an Authorised Firm must ensure that its risk management systems provide the Authorised Firm with the means to identify, assess, mitigate and control its risks. In addition to undertaking its own assessment of the Authorised Firm, the DFSA may review the results of the Authorised Firm's internal risk assessment and determine the extent to which each of the Authorised Firm's risks impacts on DFSA's objectives, the likelihood of the risk occurring and then will consider the controls and mitigation programmes the firm has in place.

RPP 3-2-24

The DFSA may undertake desk based reviews in order to review compliance with legislation applicable in the DIFC. They assist the DFSA's understanding of an Authorised Firm's operations. For example, monitoring its financial position and detecting emerging problems or concerns to be explored in greater detail through prudential meetings, examinations, or otherwise. A desk based review may involve analysing information provided by the firm through periodic returns, internal management information, published financial information or specially requested information.

RPP 3-2-24 [Deleted]

RPP 3-2-25

On-site visits provide the DFSA with an overview of the Authorised Firm's operations and enable it to form a first-hand view of the personnel, systems and controls and compliance culture within the Authorised Firm as well as identifying and evaluating the risks to the DFSA's objectives, taking into account any mitigation by the Authorised Firm. They enable the DFSA to test the soundness of the Authorised Firm's systems and controls and the extent to which the DFSA can continue to rely on them and the Authorised Firm's senior management to prevent or mitigate risks to the DFSA's objectives. On-site visits will also assist the DFSA to assess the extent of supervision and the use of other supervisory tools required to address certain key risk areas.

RPP 3-2-26

There are various types of on-site visits by the DFSA to an Authorised Firm which differ in their objective and frequency:

RPP 3-2-27

The DFSA is committed to open and transparent communication with Authorised Firms. From time to time, the DFSA may issue letters to Senior Executive Officers or equivalent persons across the DIFC (commonly referred to as 'Dear SEO Letters'). Frequently, these letters will be issued as a means of communicating findings arising from completed thematic visits. However, they may also be issued in response to other major events or changes. For example, such a letter may include an update from relevant United Nations Security Council Sanctions or Resolutions or the Financial Action Task Force, in relation to the prevention of money laundering and combating the financing of terrorism.

RPP 3-2-28

In addition to the Senior Executive Officer letters, the DFSA may issue s and warnings in response to particular matters of concern. An example of this could be in relation to matters concerning fraudulent activity that the DFSA has become aware of.

RPP 3-2-29

The DFSA holds outreach sessions from time to time, to interact with firms operating in the DIFC. These sessions are held to discuss regulatory matters in an open manner.

RPP 3-2-30

From time to time, the DFSA may consider a particular item of communication to an Authorised Firm to be of key regulatory importance. For this reason, the DFSA may consider it necessary to issue such communications directly to a senior member of staff at the Board level of the DIFC entity copied (where appropriate) to the group's home state regulator. For entities established as a Branch in the DIFC, these communications will likely be delivered to the Chairman of the Board at the DIFC Branch entity's head or Parent office. For DIFC incorporated entities, communications will likely be delivered directly to the Chairman of the firm's Board or head office. These communications may include, for example, the results of DFSA's risk assessment visits where a risk mitigation plan has been sent that contains significant matters of concern to DFSA's objectives.

RPP 3-2-31

The DFSA requires an Authorised Firm's registered external auditor to co-operate with the DFSA in a number of ways, including the submission of specific audit reports and statements. As part of an audit, the DFSA would expect an auditor to review any relevant correspondence between the DFSA and the Authorised Firm. Further, tripartite meetings between the Authorised Firm's senior management, the auditor, and the DFSA may be requested at the DFSA's initiative. Finally, an auditor is required to disclose to the DFSA those matters outlined in Article 104(3) of the Regulatory Law.

RPP 3-2-32

Apart from reports such as regular prudential returns, the DFSA may from time to time also request from an Authorised Firm additional supplementary information and documents, including non-financial information such as an Authorised Firm's internal policies on particular areas of risk and compliance.

RPP 3-2-33

Article 64 of the Regulatory Law and section 11.8 of the GEN Module set out the DFSA's requirements governing Controllers of Authorised Firms.

RPP 3-2-34 [Deleted]

RPP 3-2-35 [Deleted]

RPP 3-2-36 [Deleted]

RPP 3-2-34

A Person who proposes to become a Controller of a Domestic Firm or an existing Controller who proposes to increase the level of control which that Person has in a Domestic Firm beyond the threshold of 30% or 50% is required to obtain the DFSA's prior approval before doing so. The DFSA's assessment of a proposed acquisition or increase in control of a Domestic Firm is a review of such a firm's continued fitness and propriety and ability to conduct business soundly and prudently. Accordingly, the DFSA takes into account the considerations specified in paragraph 2-2-13 relating to Controllers when making such an assessment.

RPP 3-2-35

Under GEN Rule 11.8.5(1), a Person who proposes either to acquire or increase the level of control in a Domestic Firm must lodge with the DFSA an application for approval in the appropriate form in AFN. The DFSA may approve of, object to or impose conditions relating to the proposed acquisition or the proposed increase in the level of control of the Authorised Firm. If the information in the application form lodged with the DFSA is incomplete or unclear, the DFSA may in writing request further clarification or information. The DFSA may do so at any time during the processing of such an application. The period of 90 days within which the DFSA will make a decision will not commence until such clarification or additional information is provided to the satisfaction of the DFSA. The DFSA may, in its absolute discretion, agree to a shorter period for processing an application where an applicant requests for such a period, provided all the information required is available to the DFSA.

RPP 3-2-36

Where the DFSA proposes to object to or impose conditions relating to a proposed acquisition of or increase in the level of control in a Domestic Firm, the DFSA will first notify the applicant in writing of its proposal to do so and its reasons. The DFSA will take into account any representations made by an applicant before making its final decision.

RPP 3-2-37

The DFSA may consider whether a Person has become an unacceptable Controller as a result of any notification given by an Authorised Firm under Rule 11.8.11(2) or as a result of its own supervisory work. The considerations which the DFSA will take into account in assessing whether a Person is an acceptable Controller are those set out in paragraph 3-2-34 above.

RPP 3-2-38

Where an Authorised Firm applies to change the scope of its Licence, it should provide the following information:

RPP 3-2-39

An Insurer which wishes to vary its Licence to remove the Financial Service of Effecting Contracts of Insurance or to reduce the classes of insurance should refer to the run-off provisions in PIN chapter 9.

RPP 3-2-40

In considering whether an Authorised Firm is fit and proper with respect to a change in the scope of its Licence, the DFSA may take into account those matters in Chapter 2 of the RPP Sourcebook, which provides Guidance on fitness and propriety for Authorised Firms.

RPP 3-2-41

When considering a change to the scope of a Licence, the DFSA may also consider one or more of the matters outlined in paragraphs 3-2-51 to 3-2-56 below relating to the withdrawal of a Licence.

RPP 3-2-42

GEN Rule 11.10.8 provides that an Authorised Firm which makes or proposes to make a Major Acquisition as defined must comply with either GEN Rule 11.10.9 or 11.10.10, depending on whether it is a Domestic Firm.

RPP 3-2-43

An Authorised Firm should provide to the DFSA information that would enable the DFSA to consider factors noted in GEN Rule 11.10.9(3). Although the DFSA does not prescribe the form in which such information is to be provided to the DFSA, Authorised Firms should consider any relevant industry and international practices when providing information to the DFSA for similar purposes.

RPP 3-2-44

The 45 day notice period referred to in GEN Rule 11.10.9(1) commences to run from the first business day after the date on which the DFSA receives the notification. However, if any critical information that the DFSA requires in order to assess the notification has not been provided to the DFSA at the time of the notification, the relevant notice period for considering that notification will only commence to run after the Authorised Firm has provided to the DFSA that information upon a request made by the DFSA under its powers in GEN Rule 11.10.11(1).

RPP 3-2-45

Upon the request of an Authorised Firm, the DFSA may, at its sole discretion, agree to consider a notification within a shorter period than the 45 days referred to above. The onus is on an Authorised Firm which wishes to obtain a DFSA decision under this Rule within a shorter period to make a request to that effect to the DFSA and provide all the information that the DFSA requires to enable the DFSA to process the notification within a shorter timeframe.

RPP 3-2-46

The DFSA may exercise its powers under this provision to object to a proposed Major Acquisition or impose any conditions relating to a Major Acquisition. In these cases a Person affected by such a decision may refer the decision to the Financial Markets Tribunal for review. Provisions on the referral to the Financial Markets Tribunal are in GEN Rule 11.10.12.

RPP 3-2-47

Where the DFSA receives a notification under GEN Rule 11.10.10(1)(b), it will to the extent necessary, liaise with the home regulator in taking any appropriate action relating to the proposed Major Acquisition.

RPP 3-2-48

An Authorised Person must comply with those requirements in GEN Rules 5.3.21 and 5.3.22 when outsourcing functions or activities. In relation to Funds, there are additional outsourcing and delegation requirements applicable for Fund Managers and Trustees in section 8.12 of the CIR module.

RPP 3-2-49

The DFSA requires an Authorised Person to notify it of any material outsourcing arrangements. In the case of an Authorised Market Institution, any material outsourcing arrangements require the DFSA's prior approval under AMI Rule 5.5.3(1). An outsourcing arrangement would be considered to be material if it is a service of such importance that weakness or failure of the service would cast serious doubt on the Authorised Firm's continuing ability to remain fit and proper or comply with applicable Laws and Rules.

RPP 3-2-50

The outsourcing of functions or activities does not absolve management or Governing Body of responsibility and accountability for ensuring proper administration and execution of these functions or activities.

RPP 3-2-51

In considering requests under GEN Rule 11.4.1, an Authorised Firm will need to satisfy the DFSA that it has made appropriate arrangements with respect to its existing customers, including the receipt of any customers' consent where required and, in particular:

RPP 3-2-52

In determining a request for the withdrawal of a Licence, the DFSA may require additional procedures or information as appropriate including evidence that the Authorised Firm has ceased to carry on Financial Services.

RPP 3-2-53

An Authorised Firm should submit detailed plans where there may be an extensive period of wind-down. It may not be appropriate for an Authorised Firm to immediately request a withdrawal of its Licence in all circumstances, although it may wish to consider reducing the scope of its Licence during this period. Authorised Firms should discuss these arrangements with the DFSA.

RPP 3-2-54

The DFSA may refuse a request for the withdrawal of a Licence where it appears that customers may be exposed to adverse effect.

RPP 3-2-55

The DFSA may also refuse a request for the withdrawal of a Licence where:

RPP 3-2-47

Some other matters which an Authorised Firm should be mindful of in relation to the withdrawal of its Licence include:

RPP 3-2-48 [Deleted]

RPP 3-2-49 [Deleted]

RPP 3-2-50 [Deleted]

RPP 3-2-51 [Deleted]

RPP 3-2-52 [Deleted]

RPP 3-2-53 [Deleted]

RPP 3-2-54 [Deleted]

RPP 3-2-55 [Deleted]

RPP 3-2-56 [Deleted]

RPP 3-6-1

The Regulatory Law establishes a principles-based framework for the licensing and supervision of Authorised Market Institutions and for taking regulatory action against those licensed institutions. This framework is supplemented by supervisory powers and other requirements in the Markets Law 2012.

RPP 3-6-2

The Markets Law 2012 establishes a framework in relation to how an Authorised Market Institution may administer and operate an Official List of Securities and stipulates some specific Rule requirements in respect of this.

RPP 3-6-3

Where an Exchange administers and operates an Official List of Securities, the risk-based approach to supervision also applies to the carrying on of this activity.

RPP 3-6-4

When the DFSA licenses an Authorised Market Institution, it takes into consideration the relationship with any wider Group to which the Authorised Market Institution may belong or with other Persons closely linked to it. The DFSA will also take into account lead or consolidated supervision to which an Authorised Market Institution or its Group may be subject in another jurisdiction. This may lead to the DFSA placing some reliance on the supervisory arrangements in another jurisdiction or creating and participating in special arrangements for the supervision of the Authorised Market Institution and its Group. The Authorised Market Institution is expected to provide information required or reasonably requested in relation to these consolidated or lead supervisory arrangements before final supervisory arrangements are established.

RPP 3-6-5

Each relationship will be considered on a case by case basis and according to the risks posed by the Authorised Market Institution's activities identified during supervisory arrangements. Such supervisory arrangements may include a process to be agreed by the DFSA, the Authorised Market Institution itself and other relevant regulators.

RPP 3-6-6

Effective co-operation with regulators will provide for prompt exchange of information and co-operation in relation to supervision and enforcement between jurisdictions. This may include exchanges of information and co-operation in respect of activity conducted by an Authorised Market Institution. Usually co-operation arrangements will be in the form of memoranda of understanding. The information exchange will enhance the DFSA's understanding of the operations of the Group and the effect on the Authorised Market Institution.

RPP 3-6-7

Chapter 8 of the AMI module sets out the requirements relating to a change in control. These requirements are similar to those for an Authorised Firm which are set out at paragraphs 3-2-33 to 3-2-37.

RPP 3-6-8

Article 26 of the Markets Law 2012 empowers the DFSA to give an Authorised Market Institution certain directions in relation to the Authorised Market Institution's duties under DFSA-administered laws. It also gives the DFSA a power to direct an Authorised Market Institution to do specified things including closing the market, suspending transactions and prohibiting trading in Investments. Article 26 also empowers the DFSA to exercise the powers contained in the Authorised Market Institution's Rules for participants as though it was the Authorised Market Institution where it considers that the Authorised Market Institution has not exercised the powers under those Rules.

RPP 3-6-9

In considering whether to exercise such powers, the DFSA may take into account factors including:

RPP 3-6-10

The written notice given by the DFSA will specify what an Authorised Market Institution is required to do under the exercise of such powers. Though the DFSA is not required to do so under the Markets Law 2012, in most cases the DFSA will contact the Authorised Market Institution prior to issuing such a direction.

RPP 3-6-11

Article 35 of the Markets Law 2012 allows the DFSA to direct an Authorised Market Institution to suspend or delist Securities from its Official List of Securities. Such directions may take effect immediately or from a date and time as may be specified in the direction. Chapter 9 of the MKT contains details in this regard.

RPP 3-7-1

This section sets out information relating to a financial services business transfer scheme, i.e., a scheme by an Authorised Firm to transfer all or a part of a financial service business to another body. A reference in this section to "the Law" is to the Regulatory Law, to an "Article" is to an Article of the Law and to a "transfer scheme" is to a financial services business transfer scheme.

RPP 3-7-2

Part 9 of the Law sets out requirements applying to financial services business transfer schemes. In particular, Article 106 provides that no transfer scheme is to have effect unless a Court order has been made in relation to the scheme.

RPP 3-7-3

Article 107 defines a "transfer scheme" as a scheme where:

RPP 3-7-4

The need for a Court order sanctioning a transfer scheme arises because a transfer of business may interfere with agreements between an Authorised Firm and its clients (without the consent of each client), and may also affect the rights of other persons, such as creditors. The Court is best placed to hear and consider representations from persons who may be adversely affected by the scheme. It is then able, if appropriate, to make various orders binding all persons concerned that are necessary to give legal effect to the transfer.

RPP 3-7-5

Under Article 108 the Authorised Firm concerned, the transferee or both may apply to the Court for an order sanctioning a transfer scheme.

RPP 3-7-6

If an Authorised Firm or transferee is considering a transfer scheme, it should discuss the scheme with the DFSA as soon as practicable, to enable the DFSA to consider whether any particular issues are likely to arise, and to establish a practical timetable for the scheme.

RPP 3-7-7

It is important for an applicant to plan a timetable as there are various steps it must take under Article 111 (some of which involve the DFSA) before the Court may determine an application. For example, an applicant to the Court must:

RPP 3-7-8

The scheme report is a key document in the process that will assist and be relied upon by the Court in deciding whether or not to approve the proposed scheme and will also inform and be relied upon by the DFSA and persons potentially affected by the scheme. The DFSA will, therefore, only nominate or approve a person to make the report if the person has appropriate expertise and is independent of both the proposed transferor and transferee. That is, the person should be neutral and not have any potential conflicts of interest, so that the report is objective. The scheme report, as well as being objective, must set out clearly and in sufficient detail, the independent expert's opinion as to the likely effects and impact of the scheme on clients and third parties and each opinion must be supported by appropriate analysis and rationale.

RPP 3-7-9

In limited circumstances the DFSA may direct that a scheme report or notice is not required. However, the DFSA may only do so if it appears to the DFSA that, by reason of urgency, it is in the interests of the DIFC that the scheme report or notice is not provided (see Article 111).

RPP 3-7-10

Article 109 provides that when an application is made to the Court, the following persons may be heard by the Court:

RPP 3-7-11

Under Article 108 the Court may grant an order sanctioning the transfer scheme if it considers that, in all the circumstances of the case, it is appropriate to do so. Under Article 112 the Court must also be satisfied that:

RPP 3-7-12

Article 110 sets out the various types of orders that the Court can make relating to a transfer scheme.

RPP 3-7-13

Under Article 113 the DFSA may, by Rules, modify the provisions in Part 9 in specified cases. The DFSA has made such Rules in Chapter 12 of GEN and in Chapter 16 of CIR.

RPP 3-7-14

The effect of GEN Chapter 12 is that a business transfer scheme is not required to be sanctioned by a Court order to be effective if certain other alternative arrangements have been made. These alternative arrangements apply only to transfer schemes that do not involve a transfer of:

RPP 3-7-15

The first type of arrangement is if the Authorised Firm or transferee has been able to obtain the consent of each client who will be affected by the scheme. This option recognises that sometimes, if there are only a small number of clients, it may be practicable to obtain the agreement of all clients whose interests may be affected. Any communication sent to the client should set out clearly what the client is being asked to consent to. Also, it should then be clear that the client has provided its consent.

RPP 3-7-16

The second type of arrangement is if the transfer of business is expressly permitted under agreements between clients and the Authorised Firm or transferee concerned and the procedures in those agreements have been complied with. For example, in some cases agreements expressly provide for the transfer of accounts or novation of contracts to another person in accordance with a specified procedure.

RPP 3-7-17

Finally, in limited cases, a person may apply to the DFSA for its written consent to the transfer scheme. The DFSA does not expect Authorised Firms to regard this as their first option. The DFSA expects to receive applications seeking its consent to a transfer scheme only in very limited circumstances if the scheme is not complex or contentious. Under GEN 12.1.5, the DFSA may give its consent only if it is reasonably satisfied of a number of matters including that:

RPP 3-7-18

The onus is on the Authorised Firm and the transferee to ensure that a transfer of business under an alternative arrangement is legally effective. For example, obtaining the consent of the DFSA may mean that it is not necessary to apply for a Court order, but it does not of itself give legal effect to the transfer.

RPP 3-7-19

Further, just because an alternative mechanism in GEN 12 may be available does not prevent the Authorised Firm or transferee from applying for a Court order sanctioning a transfer scheme under Part 9 of the Law if they consider it appropriate to do so. For example, an application for a Court order is likely to be more appropriate if the scheme is complex (e.g. there are complex property interests involved), is likely to be contentious, is likely to affect a large number of persons or if additional legal certainty is sought.

RPP 3-7-20

The following flowchart sets out in simplified form some of the options available to an Authorised Firm or transferee. The flowchart and the information in this Chapter is only intended to be a summary of the procedures for a transfer of business. For full information a person reading this Chapter should also read Part 9 of the Law, Chapter 12 of GEN and Chapter 16 of CIR.

BUSINESS TRANSFER SCHEMES

RPP 4-12-1

The DFSA has the power to:

on an endorsement to conduct Islamic Finance Business.

⁹ Article 12 of the Law Regulating Islamic FInancial Business 2004.

¹⁰ Article 12 of the Law Regulating Islamic FInancial Business 2004.

RPP 4-12-2

In respect of an endorsement on a Licence to conduct business with Retail Clients, the DFSA has the power to impose conditions and restrictions, or withdraw or vary conditions and restrictions under Article 49 (see section 4-6 of this chapter).

RPP 4-12-3

In determining whether to exercise such powers, the DFSA will have regard to all relevant matters including, but not limited to, one or more of those circumstances specified in 4-6-2 in respect of imposing, varying or withdrawing conditions and restrictions.

RPP 4-12-4

The DFSA has the power to withdraw the registration of a Public Fund in one or more of the circumstances set out in Article 32 of the Collective Investment Law.¹¹ In determining whether to exercise this power, the DFSA can withdraw the registration of a Public Fund only if it considers that:

¹¹ Article 32 of the Collective Investment Law 2010.

RPP 4-12-5

Under Article 75A, the DFSA may for, prudential purposes, direct a particular Authorised Firm, or Authorised Firms within a specified class, to:

RPP 4-12-6

Where the DFSA issues a direction under Article 75A to Authorised Firms within a specified class, the direction will remain in force for a period of no more than 12 months in the first instance, unless the DFSA specifies a shorter period of time in the notice. The DFSA considers that such a direction should remain in force for a limited period as it has a Rule making power under the Regulatory Law at its disposal, which the DFSA would ordinarily use where it was proposing to change its Rules relating to Authorised Firms within a specified class.

RPP 4-12-7

The DFSA may also direct an Affiliate of an Authorised Person to take specified steps or not to carry out specified activities.¹² The DFSA may give such a direction to an Affiliate if the DFSA is the consolidated supervisor of the Group to which the Authorised Person belongs and is satisfied that the direction is necessary or desirable for the effective prudential supervision of the Group.¹³ A direction may, for example, include a requirement that the Affiliate limit any activities reasonably likely to expose the Authorised Person or its Group to excessive risks or risks that are not properly managed.

¹² Article 75A(2).

¹³ Article 75A(2).

RPP 4-13-1 [Deleted]

RPP 4-13-2 [Deleted]

RPP 4-13-3 [Deleted]

RPP 4-13-4 [Deleted]

RPP 4-13-5 [Deleted]

RPP 4-13-6 [Deleted]

RPP 4-13-7 [Deleted]

RPP 4-13-8 [Deleted]

RPP 5-1-1

This chapter sets out the DFSA's approach to enforcement and how it commences and conducts investigations, and exercises its powers to address any misconduct or contravention of the Law, Rules or other legislation administered by the DFSA. The DFSA's approach to imposing a penalty can be found in chapter 6 of this sourcebook.

RPP 5-1-2

A reference to:

RPP 5-1-3

The DFSA's enforcement philosophy is guided by the following principles, which govern the DFSA's approach to fulfilling its objectives as set out in Article 8:

RPP 5-2-1

The DFSA will take an enforcement action in line with its objectives and enforcement philosophy and may conduct investigations where there is a suspected contravention of the Law.

RPP 5-2-2

A Person contravenes the Law when that Person:

¹⁴Article 85.

RPP 5-2-3

If a Person is knowingly concerned in a contravention by another Person of the Law then, under Article 86, both Persons may be held liable for committing a contravention.

RPP 5-2-4

A Person is "knowingly concerned" in a contravention¹⁵ if the Person:

¹⁵Article 86(7).

RPP 5-2-5

When taking enforcement action, the DFSA will generally adopt the enforcement process described in this chapter. The DFSA's enforcement process is comprised of the following elements:

See Appendix 1 for a diagram of the enforcement process.

RPP 5-3-2

The DFSA may become aware of suspected misconduct or suspected contraventions of Laws from a variety of sources including:

RPP 5-3-3

The DFSA receives and assesses two types of complaints:

RPP 5-3-4

A Person wishing to lodge a complaint with the DFSA should do so in writing. A complaint can be lodged:

RPP 5-3-5

When a complaint is received, the DFSA will send an acknowledgement letter to the complainant which will include the contact details of the DFSA complaints management function.

RPP 5-3-6

Complaints received by the DFSA from members of the public which relate to:

are classified as regulatory complaints and are assessed through the DFSA's complaints management function.

RPP 5-3-7

If, during the assessment of a regulatory complaint, the DFSA identifies suspected misconduct or a suspected contravention of a Law, it will refer the complaint to the relevant DFSA division for further consideration. Thereafter, the relevant division assumes responsibility for the complaint.

RPP 5-3-8

All complaints lodged with the DFSA are held in confidence in accordance with the Regulatory Law. However, in order to assess a complaint properly, the DFSA may need to speak to third parties including any Person who is the subject of the complaint.

RPP 5-3-9

There are two types of referrals, internal and external. Internal referrals originate from the DFSA's supervisory activities conducted by the Supervision or Markets Division. The DFSA's supervisory framework is designed to detect and mitigate risks to the DIFC and the financial services industry in the DIFC. An internal referral occurs when a DFSA supervisory division refers a matter to the Enforcement Division, when the supervisory division has identified possible contraventions of Laws and Rules.

RPP 5-3-10

When Enforcement receives an internal referral, the referring division may continue to be responsible for the on-going supervision of the Person who is the subject of the referral.

RPP 5-3-11

The DFSA may also receive allegations of misconduct through an external referral from other regulatory authorities and law enforcement agencies. Such allegations are generally received pursuant to the IOSCO or IAIS Multilateral Memoranda of Understanding (MMoU), or bilateral arrangements for the exchange of information between the DFSA and other regulatory and enforcement agencies.

RPP 5-3-12

Complaints about the conduct and activities of the DFSA and its employees are administered and assessed separately by the DFSA's Office of General Counsel.

RPP 5-3-13

Information on how the DFSA's Office of General Counsel assesses complaints against the DFSA and its employees can be found on the DFSA's website (see http://www.dfsa.ae).

RPP 5-4-1

Upon receipt of an internal or external referral, the allegation will be assessed to determine if there is a suspicion of a contravention of the Law. If a suspicion arises and it is appropriate and expedient, then the DFSA may commence an investigation.

RPP 5-4-2

In determining whether to commence an investigation, the DFSA will consider a number of factors including, but not limited to:

RPP 5-4-3

Article 78 empowers the DFSA to conduct such investigations as it considers appropriate and expedient:

RPP 5-4-4

Whether an investigation of a matter is appropriate and expedient is determined by reference to factors such as those set out in paragraph 5-4-2.

RPP 5-4-5

Whether the DFSA has "reason to suspect" a contravention of the Law is a question which the DFSA will determine on the facts and circumstances, available at the time, of the determination.

RPP 5-4-6

While the DFSA is not bound to disclose, to any party, that an investigation has commenced or is on-going or the basis upon which an investigation is commenced, it may notify a Person who is the subject of an investigation that an investigation has commenced, and the nature of the investigation.

RPP 5-4-7

The DFSA will not make a notification referred to in 5-4-6 if to do so is likely to compromise or prejudice the investigation. The DFSA will not advise a Person of the conclusion of an investigation unless the Person has earlier been notified of its commencement.

RPP 5-4-8

The decision to commence an investigation is not a decision that can be referred to the Financial Markets Tribunal for review.

RPP 5-5-1

Once an investigation is commenced, the DFSA may exercise its powers to gather information to advance its objectives.

RPP 5-5-2

The DFSA's information-gathering powers may only be exercised by delegates of the Chief Executive. The delegation need not be limited to DFSA employees. The Chief Executive may delegate DFSA powers to non-DFSA staff who are able to assist a DFSA investigation.

RPP 5-5-3

Similarly, where the DFSA is exercising its powers on behalf of another regulator, it may also delegate powers to a representative of that regulator.¹⁶

¹⁶ Article 40.

RPP 5-5-4

During an investigation, the DFSA may obtain relevant information and documents on a compulsory basis, principally through the exercise of its powers under Article 80(1), and on a voluntary basis.

RPP 5-5-5

The Article 80(1) power to obtain information is a key component of the DFSA's investigative powers. Without the compulsory powers in Article 80(1), the DFSA would not be able to conduct effective and thorough investigations into suspected misconduct or suspected contraventions of the Law, and consequently would not be able to meet its objectives.

RPP 5-5-6

The powers under Article 80(1) are different from the supervisory powers under Article 73(1). The key distinctions are that the Article 80 powers may be used:

RPP 5-5-7

By comparison, the Article 73(1) power permits the DFSA to request information and documents from an Authorised Person, DNFBP, Domestic Fund, Registered Auditor and any director, officer, employees or agent of such Person, which the DFSA considers is necessary or desirable to meet the objectives of the DFSA.

RPP 5-5-8

When the DFSA uses its powers under Article 80(1) (b), (c), (d) or (e), it will provide a written notice to the Person on whom the requirement is being imposed.

RPP 5-5-9

Article 80(1)(a) empowers the DFSA to enter business premises of a Person during the course of an investigation for the purpose of inspecting and copying information or documents. This power will be exercised when the DFSA considers that such Person is or may be able to provide information or documents that are or may be relevant to an investigation.

RPP 5-5-10

The DFSA will generally not provide prior notice of an inspection in circumstances where the provision of prior notice may prejudice the investigation.

RPP 5-5-11

When exercising its power to enter business premises under Article 80(1)(a), the DFSA may:¹⁷

¹⁷ Article 80(2).

RPP 5-5-12

Article 80(1)(b) empowers the DFSA to require a Person to give, or procure the giving of, information. The DFSA considers that the term "information" should be interpreted broadly, in accordance with its ordinary meaning.

RPP 5-5-13

Information may include, for example, the following:

RPP 5-5-14

The DFSA will allow a reasonable period for compliance with the requirement to give information. The reasonableness of the requirement will depend upon the circumstances of each case. The DFSA may, in some circumstances, require the giving of information straightaway where the giving of prior notice may prejudice the investigation.

RPP 5-5-15

Article 80(1)(c) empowers the DFSA to require a Person to produce, or procure the production of, specified documents. The DFSA considers that the term "document" should be interpreted broadly, in accordance with its ordinary meaning. Specified documents may include, for example, any record of information, including:

RPP 5-5-16

This power can only be used when an investigation has commenced and the DFSA considers that the Person to whom the notice is addressed is, or may be, able to produce documents which may be relevant to the investigation.

RPP 5-5-17

Article 80(1)(c) empowers the DFSA to require production of original documents or copies. Whether original or copy documents are required by the DFSA will be determined taking into account the facts and circumstances of the investigation.

RPP 5-5-18

When exercising its Article 80(1)(c) power, the DFSA may retain possession of any original document for so long as is necessary for the investigation to which the notice relates. When a Person is unable to produce documents in compliance with a requirement made by the DFSA, the DFSA may require the Person to state, to the best of that Person's knowledge or belief, where the documents may be found and who last had possession, custody or control of those documents.

RPP 5-5-19

The DFSA will allow a reasonable period of time for compliance with the requirement to produce documents. The reasonableness of the requirement will depend upon the circumstances of each case. The DFSA may, in some circumstances, require the production of documents straightaway, where the giving of prior notice may prejudice the investigation.

RPP 5-5-20

Article 80(1)(d) empowers the DFSA to require a Person (the interviewee) to attend before an officer, employee or agent of the DFSA (the interviewer) for a compulsory interview to provide oral evidence relevant to an investigation it is conducting.

RPP 5-5-21

During the course of an investigation, not all interviews will be conducted under compulsion. The DFSA may, where appropriate, conduct voluntary interviews. The decision as to whether a compulsory or voluntary interview will be conducted will depend upon the circumstances of the particular case.

RPP 5-5-22

A Person attending a compulsory interview must first be served with a written notice requiring his attendance. An interviewee is not entitled to refuse or fail to answer a question on the basis that his answers may incriminate him or make him liable for a penalty.¹⁸

¹⁸ Article 82.

RPP 5-5-23

A compulsory interview will be conducted in private and the interviewer may give directions¹⁹ to the interviewee regarding:

¹⁹ Article 80(3).

RPP 5-5-24

An interviewee is entitled to legal representation during the course of a compulsory or voluntary interview. At the conclusion of the interview, the lawyer will be permitted to address any issues with the interviewer or interviewee relevant to the investigation. However, the lawyer is not permitted to answer questions on behalf of the interviewee or obstruct the investigation.

RPP 5-5-25

All compulsory interviews will be recorded. The DFSA will, upon a written request from the interviewee at the conclusion of the interview, provide the interviewee or his lawyer with a copy of the recording or a transcript of the interview. The provision of a recording or transcript may be subject to any reasonable conditions imposed by the DFSA.

RPP 5-5-26

Article 80(1)(e) empowers the DFSA to require a Person to give it any assistance in relation to an investigation which the Person is able to give.

RPP 5-5-27

The DFSA considers that providing assistance may include requiring a Person to do a physical act or provide information to advance an investigation. For example, this may include the situation where the DFSA requires a Person to provide assistance by commenting on the accuracy of a document or compiling information that had been stored in a different manner.

RPP 5-5-28

The power under Article 80(1)(e) can be used independently, or in conjunction with, the exercise of other Article 80(1) powers. For example, the DFSA can exercise its powers under Article 80(1)(d), to require a Person to attend a compulsory interview and under Article 80(1)(e), to require the interviewee to provide reasonable assistance during the interview. For example, the interviewee may be required, during the interview, to draw a diagram, or locate and produce a document referred to in an answer to a question.

RPP 5-5-29

When carrying out its regulatory functions, the DFSA must maintain confidentiality of information, unless disclosure is expressly sanctioned by Article 38. The DFSA's Policy Statement with respect to Confidential Regulatory Information outlines its policy in respect of the treatment of information and documents.

RPP 5-5-30

The DFSA may also impose obligations of confidentiality in respect of information and documents provided during the exercise of its powers under Article 80(1).

RPP 5-5-31

The DFSA can make directions²⁰ to protect the confidentiality of information and documents which are part of a compulsory interview.

²⁰ Article 80(3)(b).

RPP 5-5-32

The DFSA can direct the recipient of an Article 80(1) (b), (c), (d) or (e) notice not to disclose the receipt of the notice, or any information relating to compliance with it, to any other Person, other than his legal representative, if it considers that such disclosure may hinder an investigation²¹.

²¹ Article 80A(6).

RPP 5-5-33

Confidentiality directions are made to ensure that an investigation is not prejudiced by the disclosure of the nature of the information sought or the questions asked during an investigation. In each case, the DFSA needs to consider whether or not such directions are appropriate in the circumstances of that matter.

RPP 5-5-34

Parties who are required to comply with a requirement made by the DFSA during the course of an investigation, and Persons who are the subject of an investigation, benefit from certain protections in the Regulatory Law, including:

RPP 5-5-35

A claim by a Person that information is a Privileged Communication is not of itself an excuse for failing to comply with a requirement made by the DFSA during the course of an investigation.²²

²² Article 82.

RPP 5-5-36

A lawyer may refuse to comply with a requirement to provide information where to comply would require the lawyer to disclose a Privileged Communication made by, to, or on behalf of, the lawyer in his capacity as a lawyer in relation to a client.

RPP 5-5-37

Should a lawyer refuse to disclose a Privileged Communication, the lawyer must disclose sufficient information to identify the Person entitled to claim the privilege and the document which contains the privileged information. In such a case, the DFSA considers it appropriate for a lawyer to secure those documents, pending the resolution of any claim for privilege.

RPP 5-5-38

The DFSA will enforce compliance with its requirements, under Articles 73, 74 or 80, whenever there is less than full compliance by seeking orders in the DIFC Court.²³

²³ Article 84(1).

RPP 5-5-39

Articles 84(1) and (2) empower the DFSA to apply to the Court for an injunction or the issue of a search warrant in order to enforce compliance with its requirements under Articles 73, 74 or 80. An application to the Court for a search warrant will be made in circumstances where:

RPP 5-5-40

Should the Court exercise its discretion to issue a search warrant, it may be addressed to a named Dubai Police Officer together with any other individual, including a DFSA officer or third party, named in the warrant.

RPP 5-5-41

The DFSA may exercise its right to apply for a search warrant, rather than seeking compliance with its requirement through some other process (such as an injunction), only where it is satisfied that:

RPP 5-5-42

Any material seized by officers of the DFSA pursuant to a search warrant issued under Article 84 may be dealt with by the DFSA as if the material had been produced to it under a notice to produce documents.

RPP 5-5-43

A Person must not, without reasonable excuse, engage in conduct that is intended to obstruct the DFSA in the exercise of its investigative powers by any means including, but not limited to, the following:

²⁴ Article 83.

RPP 5-5-44

Any breach of Article 83 will be regarded seriously by the DFSA and appropriate action will be taken.

RPP 5-5-45

Where the DFSA²⁵ has obtained originals of information or documents during the course of an investigation, the DFSA will usually return such information or documents to the Person, from whom the information and documents were received, as soon as practicable after the conclusion of the investigation or related proceedings.

²⁵Article 80A(3).

RPP 5-5-46

Where information or documents have been produced to the DFSA in the course of an investigation to assist another regulator or agency, the DFSA may²⁶ release the information or documents to that other regulator or agency. The information and documents will usually be returned to the Person, from whom the information and documents were received, as soon as practicable after receiving them back from the other regulator or agency.

²⁶Article 38.