Entire Section

  • RPP 2-5 RPP 2-5 Start-Up Entities in the DIFC

    • [Deleted]

      • RPP 2-5-1 [Deleted]

        Deleted by Notice of Updates (Made 11th February 2015). February 2015 Edition

    • What are "Start up Entities"?

      • RPP 2-5-1

        Start up entities are, either:

        (a) new financial services businesses; or
        (b) existing financial services businesses which have never been subject to financial services regulation, for whatever reason.
        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 11th February 2015). February 2015 Edition

      • 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.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 11th February 2015). February 2015 Edition

    • Entities seeking authorisation as Banks

      • 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:

        (a) a branch of an existing bank; or
        (b) a subsidiary of an existing bank (wholly or partially owned); or
        (c) a start-up entity
        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 11th February 2015). February 2015 Edition
        Amended by Notice of Updates (Made 23rd January 2017). February 2017 Edition

      • 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

        Derived from Notice of Updates (Made 23rd January 2017). February 2017 Edition

      • 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.

        Derived from Notice of Updates (Made 23rd January 2017). February 2017 Edition

      • 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.

        Derived from Notice of Updates (Made 23rd January 2017). February 2017 Edition

      • 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:

        (a) business plan, including any impact on current or prospective credit ratings;
        (b) adequacy of capital and capital management plan;
        (c) plans for liquidity management; and
        (d) ability to deal with stressed situations, including a resolution plan.
        Derived from Notice of Updates (Made 23rd January 2017). February 2017 Edition

      • 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.

        Derived from Notice of Updates (Made 23rd January 2017). February 2017 Edition

    • The DFSA's Risk-Based Approach to Start Up Entities: Broad Risk Categories

      • 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.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 11th February 2015). February 2015 Edition
        Amended by Notice of Updates (Made 23rd January 2017). February 2017 Edition

      • 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.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 11th February 2015). February 2015 Edition
        Amended by Notice of Updates (Made 23rd January 2017). February 2017 Edition

      • 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.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 11th February 2015). February 2015 Edition
        Amended by Notice of Updates (Made 23rd January 2017). February 2017 Edition

      • 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.

        Derived from Notice of Updates (Made 23rd January 2017). February 2017 Edition

    • Financial Risk

      • 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.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 11th February 2015). February 2015 Edition
        Amended by Notice of Updates (Made 23rd January 2017). February 2017 Edition

      • 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.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 11th February 2015). February 2015 Edition
        Amended by Notice of Updates (Made 23rd January 2017). February 2017 Edition

    • Governance Risk

      • 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.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 11th February 2015). February 2015 Edition
        Amended by Notice of Updates (Made 23rd January 2017). February 2017 Edition

      • 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.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 11th February 2015). February 2015 Edition
        Amended by Notice of Updates (Made 23rd January 2017). February 2017 Edition

    • Business/Operational Risk

      • 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.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 11th February 2015). February 2015 Edition
        Amended by Notice of Updates (Made 23rd January 2017). February 2017 Edition

    • Compliance Risk

      • 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.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 11th February 2015). February 2015 Edition
        Amended by Notice of Updates (Made 23rd January 2017). February 2017 Edition

    • Main Information Requirements

      • 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.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 11th February 2015). February 2015 Edition
        Amended by Notice of Updates (Made 23rd January 2017). February 2017 Edition

      • 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:

        (a) An introduction and background;
        (b) Strategy and rationale for establishing in the DIFC;
        (c) Organisational structure;
        (d) Management structure;
        (e) Proposed resources;
        (f) High level controls;
        (g) Risk management;
        (h) Operational controls;
        (i) Systems overview; and
        (j) Financial projections.
        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 11th February 2015). February 2015 Edition
        Amended by Notice of Updates (Made 23rd January 2017). February 2017 Edition

      • 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.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 11th February 2015). February 2015 Edition
        Amended by Notice of Updates (Made 23rd January 2017). February 2017 Edition

      • 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.

        Derived from DFSA GM8/2011 (Made 28th April 2011). [VER 1/02-11]
        Amended by Notice of Updates (Made 11th February 2015). February 2015 Edition
        Amended by Notice of Updates (Made 23rd January 2017). February 2017 Edition