RPP 5 RPP 5 Enforcement
RPP 5-1 RPP 5-1 The DFSA's Approach to Enforcement
This chapter sets out the
DFSA'sapproach 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'sapproach to imposing a penalty can be found in chapter 6 of this sourcebook.
A reference to:(a) an Article in this chapter is a reference to an Article in the
Regulatory Law, unless otherwise stated;(b) the Law in this chapter is a reference to any legislation administered by the DFSA; and(c) a notice of decision includes, where applicable, a Decision Notice.
DFSA'senforcement philosophy is guided by the following principles, which govern the DFSA'sapproach to fulfilling its objectives as set out in Article 8:(a) the DFSAadopts a risk based approach to regulation. This means that the DFSAwill generally focus its efforts on those activities that it perceives as posing the greatest risk to the fulfilment of its objectives;(b) the DFSAwill act swiftly and decisively to stop conduct which threatens the integrity of the DIFCor the stability of the financial services industry in the DIFC, minimise its effects, and prevent such conduct re-occurring;(c) the DFSAworks closely with home state regulators of international firms to ensure that there is a co-ordinated approach to regulation;(d) the DFSAwill act fairly, openly, accountably and proportionally in the exercise of its enforcement powers; and(e) the DFSAwill not publish details of the commencement or conduct of investigations, unless it is in the furtherance of the DFSA'sobjectives or the public interest to do so. The DFSAwill generally publish details of the outcome of an enforcement action in keeping with its fair and transparent approach and to maintain the integrity of the DIFCby deterring contraventions of Laws or other misconduct.
RPP 5-2 RPP 5-2 Enforcement Framework
DFSAwill 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.
General Contravention Provisions
Personcontravenes the Law when that Person:(a) does an act or thing that the Personis prohibited from doing by or under the Law;(b) does not do an act or thing that the Personis required or directed to do by or under the Law; or(c) otherwise contravenes a provision of the Law.14
Involvement in Contravention
Personis knowingly concerned in a contravention by another Personof the Law then, under Article 86, both Personsmay be held liable for committing a contravention.
Personis "knowingly concerned" in a contravention15 if the Person:(a) has aided, abetted, counselled or procured the contravention;(b) has induced, whether by threats or promises or otherwise, the contravention;(c) has in any way, by act or omission, directly or indirectly, been knowingly involved in or been party to, the contravention; or(d) has conspired with another or others to effect the contravention.
When taking enforcement action, the
DFSAwill generally adopt the enforcement process described in this chapter. The DFSA'senforcement process is comprised of the following elements:(a) Assessment of complaints and referrals (section 5-3);(b) Commencement of an investigation (section 5-4);(c) Information gathering (section 5-5);(d) Remedies (section 5-6); and(e) Conclusion of the Investigation (section 5-19).
See Appendix 1 for a diagram of the enforcement process.
RPP 5-3 RPP 5-3 Assessment of Complaints and Referrals
The assessment of complaints and referrals concerning suspected misconduct or suspected contraventions of the Law is a key function of the
DFSA'sregulatory remit and enforcement framework. Every complaint and referral, regardless of source, is assessed to determine whether an investigation or other action ought to take place.
Sources of Complaints and Referrals
DFSAmay become aware of suspected misconduct or suspected contraventions of Laws from a variety of sources including:(a) members of the public;(b) its supervisory activities; and(c) other external regulatory authorities or law enforcement agencies.
DFSAreceives and assesses two types of complaints:
Personwishing to lodge a complaint with the DFSAshould do so in writing. A complaint can be lodged:(a) electronically via the complaints portal on the DFSAwebsite (see http://www.dfsa.ae);(b) by facsimile to 04 362 0801;(c) by sending the complaint to PO Box 75850 Dubai, UAE; or(d) delivering the complaint to the DFSAat Level 13, The Gate Building, DIFC.
When a complaint is received, the
DFSAwill send an acknowledgement letter to the complainant which will include the contact details of the DFSAcomplaints management function.
Complaints received by the
DFSAfrom members of the public which relate to:(a) any conduct of or dissatisfaction with any Personregulated by the DFSA;(b) a potential contravention of a Law or Rule; or(c) any conduct that causes, or may cause, damage to the reputation of the DIFCor the financial services industry in the DIFC;
are classified as regulatory complaints and are assessed through the
DFSA'scomplaints management function.
If, during the assessment of a regulatory complaint, the
DFSAidentifies suspected misconduct or a suspected contravention of a Law, it will refer the complaint to the relevant DFSAdivision for further consideration. Thereafter, the relevant division assumes responsibility for the complaint.
All complaints lodged with the
DFSAare held in confidence in accordance with the Regulatory Law. However, in order to assess a complaint properly, the DFSAmay need to speak to third parties including any Personwho is the subject of the complaint.
There are two types of referrals, internal and external. Internal referrals originate from the
DFSA'ssupervisory activities conducted by the Supervision or Markets Division. The DFSA'ssupervisory framework is designed to detect and mitigate risks to the DIFCand the financial services industry in the DIFC. An internal referral occurs when a DFSAsupervisory division refers a matter to the Enforcement Division, when the supervisory division has identified possible contraventions of Laws and Rules.
When Enforcement receives an internal referral, the referring division may continue to be responsible for the on-going supervision of the
Personwho is the subject of the referral.
DFSAmay 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 IOSCOor IAIS Multilateral Memoranda of Understanding (MMoU), or bilateral arrangements for the exchange of information between the DFSAand other regulatory and enforcement agencies.
Complaints Against the DFSA and Its Employees
Complaints about the conduct and activities of the
DFSAand its employees are administered and assessed separately by the DFSA'sOffice of General Counsel.
Information on how the
DFSA'sOffice of General Counsel assesses complaints against the DFSAand its employees can be found on the DFSA'swebsite (see http://www.dfsa.ae).
RPP 5-4 RPP 5-4 Commencement of Investigations
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
DFSAmay commence an investigation.
In determining whether to commence an investigation, the
DFSAwill consider a number of factors including, but not limited to:(a) the nature, seriousness and impact of the suspected contravention and whether the suspected contravention is on-going;(b) whether the suspected contravention affects, or has the potential to affect, the DFSAobjectives;(c) whether those involved in the suspected contravention are likely to co-operate;(d) whether it is likely that the suspected contravention may be proven;(e) the disciplinary record and compliance history of the Personor Personsinvolved in the suspected contravention;(f) whether, if proven, a suitable remedy is available;(g) the extent to which another law enforcement agency or Financial Services Regulatorcan adequately address the matter and, if so, that body's attitude toward the matter;(h) the nature of any request for assistance made by another regulator or body under Article 39; and(i) whether any party who may have suffered some detriment as a result of the suspected contravention is able to take his own remedial action.
Article 78 empowers the
DFSAto conduct such investigations as it considers appropriate and expedient:(a) where it has reason to suspect that a contravention of the Law or the Rules is being or may have been committed; or(b) further to a request for assistance made under Article 39.
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.
DFSAhas "reason to suspect" a contravention of the Law is a question which the DFSAwill determine on the facts and circumstances, available at the time, of the determination.
DFSAis 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 Personwho is the subject of an investigation that an investigation has commenced, and the nature of the investigation.
DFSAwill not make a notification referred to in 5-4-6 if to do so is likely to compromise or prejudice the investigation. The DFSAwill not advise a Personof the conclusion of an investigation unless the Personhas earlier been notified of its commencement.
The decision to commence an investigation is not a decision that can be referred to the
Financial Markets Tribunalfor review.
RPP 5-5 RPP 5-5 Information Gathering
Once an investigation is commenced, the
DFSAmay exercise its powers to gather information to advance its objectives.
DFSA'sinformation-gathering powers may only be exercised by delegates of the Chief Executive. The delegation need not be limited to DFSAemployees. The Chief Executivemay delegate DFSApowers to non-DFSA staff who are able to assist a DFSAinvestigation.
Similarly, where the
DFSAis exercising its powers on behalf of another regulator, it may also delegate powers to a representative of that regulator.16
16 Article 40.
Article 80 Powers
During an investigation, the
DFSAmay 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.
The Article 80(1) power to obtain information is a key component of the
DFSA'sinvestigative powers. Without the compulsory powers in Article 80(1), the DFSAwould 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(a) only for the purposes of an investigation; and(b) in circumstances where the
DFSAconsiders that a Personis or may be able to give information or produce a document which is or may be relevant to an investigation.
By comparison, the Article 73(1) power permits the
DFSAto request information and documents from an Authorised Person, DNFBP, Domestic Fund, Registered Auditorand any director, officer, employees or agent of such Person, which the DFSAconsiders is necessary or desirable to meet the objectives of the DFSA.
DFSAuses its powers under Article 80(1) (b), (c), (d) or (e), it will provide a written notice to the Personon whom the requirement is being imposed.
Article 80(1)(a) empowers the
DFSAto enter business premises of a Personduring the course of an investigation for the purpose of inspecting and copying information or documents. This power will be exercised when the DFSAconsiders that such Personis or may be able to provide information or documents that are or may be relevant to an investigation.
DFSAwill generally not provide prior notice of an inspection in circumstances where the provision of prior notice may prejudice the investigation.
When exercising its power to enter business premises under Article 80(1)(a), the
DFSAmay:17(a) require any appropriate Personto:(i) make available any relevant information stored at the business premises for inspection or copying; or(ii) convert any relevant information into a physical form capable of being copied; and(b) use the facilities of the occupier of the business premises, free of charge, to make copies.
17 Article 80(2).
Production of Information
Article 80(1)(b) empowers the
DFSAto require a Personto give, or procure the giving of, information. The DFSAconsiders that the term "information" should be interpreted broadly, in accordance with its ordinary meaning.
Information may include, for example, the following:(a) knowledge communicated or received concerning a particular matter, fact or circumstance;(b) knowledge gained through work, commerce, study, communication, research or instruction;(c) data obtained as output from a computer by means of processing input data with a program or any data at any stage of processing including input, output, storage or transmission data;(d) an explanation or statement about a matter;(e) the identification of a
Person, matter or thing; and(f) the provision of a response to a question.
DFSAwill 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 DFSAmay, in some circumstances, require the giving of information straightaway where the giving of prior notice may prejudice the investigation.
Production of Documents
Article 80(1)(c) empowers the
DFSAto require a Personto produce, or procure the production of, specified documents. The DFSAconsiders 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:(a) anything on which there is writing;(b) anything on which there are marks, figures, symbols or perforations having a meaning for Personsqualified to interpret them;(c) anything from which sounds, images or writings can be reproduced with or without the aid of anything else; or(d) a map, plan, drawing or photograph.
This power can only be used when an investigation has commenced and the
DFSAconsiders that the Personto whom the notice is addressed is, or may be, able to produce documents which may be relevant to the investigation.
Article 80(1)(c) empowers the
DFSAto require production of original documents or copies. Whether original or copy documents are required by the DFSAwill be determined taking into account the facts and circumstances of the investigation.
When exercising its Article 80(1)(c) power, the
DFSAmay retain possession of any original document for so long as is necessary for the investigation to which the notice relates. When a Personis unable to produce documents in compliance with a requirement made by the DFSA, the DFSAmay require the Personto state, to the best of that Person'sknowledge or belief, where the documents may be found and who last had possession, custody or control of those documents.
DFSAwill 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 DFSAmay, in some circumstances, require the production of documents straightaway, where the giving of prior notice may prejudice the investigation.
Article 80(1)(d) empowers the
DFSAto 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.
During the course of an investigation, not all interviews will be conducted under compulsion. The
DFSAmay, 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.
Personattending 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.
A compulsory interview will be conducted in private and the interviewer may give directions19 to the interviewee regarding:(a) who may be present during the interview;(b) swearing an oath, or giving an affirmation, that the answers provided will be true;(c) what, if any, information may be disclosed by the interviewee or any other
Personpresent at the interview to any third party;(d) the conduct of any Personand the manner in which they will participate during the interview; and(e) answering any question which is relevant to the investigation.
19 Article 80(3).
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.
All compulsory interviews will be recorded. The
DFSAwill, 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.
Article 80(1)(e) empowers the
DFSAto require a Personto give it any assistance in relation to an investigation which the Personis able to give.
DFSAconsiders that providing assistance may include requiring a Personto do a physical act or provide information to advance an investigation. For example, this may include the situation where the DFSArequires a Personto provide assistance by commenting on the accuracy of a document or compiling information that had been stored in a different manner.
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
DFSAcan exercise its powers under Article 80(1)(d), to require a Personto 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.
When carrying out its regulatory functions, the
DFSAmust maintain confidentiality of information, unless disclosure is expressly sanctioned by Article 38. The DFSA'sPolicy Statement with respect to Confidential Regulatory Information outlines its policy in respect of the treatment of information and documents.
DFSAmay also impose obligations of confidentiality in respect of information and documents provided during the exercise of its powers under Article 80(1).
DFSAcan make directions20 to protect the confidentiality of information and documents which are part of a compulsory interview.
20 Article 80(3)(b).
DFSAcan 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).
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
DFSAneeds to consider whether or not such directions are appropriate in the circumstances of that matter.
Parties who are required to comply with a requirement made by the
DFSAduring the course of an investigation, and Personswho are the subject of an investigation, benefit from certain protections in the Regulatory Law, including:(a) Article 38, which provides that confidential information provided to the DFSAmust not be disclosed except in certain limited circumstances;(b) Article 80A(2), which provides that where a Persontakes part in a compulsory interview, any statements made during the interview cannot be disclosed by the DFSAto a law enforcement agency for the purpose of criminal proceedings unless the Personconsents to the disclosure or the DFSAis required by law or court order to disclose the statement; and(c) Article 81, which ensures that a Personwho is required to comply with a requirement made during the course of an investigation cannot be subject to any liability or liable in any proceeding because of that Person'scompliance with the requirement.
Claims of Privilege and Other Protections
A claim by a
Personthat information is a Privileged Communicationis not of itself an excuse for failing to comply with a requirement made by the DFSAduring the course of an investigation.22
22 Article 82.
A lawyer may refuse to comply with a requirement to provide information where to comply would require the lawyer to disclose a
Privileged Communicationmade by, to, or on behalf of, the lawyer in his capacity as a lawyer in relation to a client.
Should a lawyer refuse to disclose a
Privileged Communication, the lawyer must disclose sufficient information to identify the Personentitled to claim the privilege and the document which contains the privileged information. In such a case, the DFSAconsiders it appropriate for a lawyer to secure those documents, pending the resolution of any claim for privilege.
Enforcement of the DFSA's Investigative Powers
23 Article 84(1).
Articles 84(1) and (2) empower the
DFSAto apply to the Courtfor 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 Courtfor a search warrant will be made in circumstances where:(a) information or documents were required to be given or produced by the exercise of a compulsory power;(b) the documents or information required to be produced have not been given or produced; and(c) the DFSAhas reasonable grounds to suspect that within the next three business days, the information or those documents are, or may be, on particular premises.
Courtexercise its discretion to issue a search warrant, it may be addressed to a named Dubai Police Officer together with any other individual, including a DFSAofficer or third party, named in the warrant.
DFSAmay 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:(a) the preconditions in Article 84(2) for the issue of a warrant are met;(b) the DFSAconsiders it necessary or desirable to seek the assistance of the Dubai Police;(c) there does not appear to be a legitimate basis for non-compliance; and(d) in the absence of the execution of a search warrant, the information or documents sought may be removed or destroyed or otherwise not made available.
Any material seized by officers of the
DFSApursuant to a search warrant issued under Article 84 may be dealt with by the DFSAas if the material had been produced to it under a notice to produce documents.
Obstruction of the DFSA
Personmust not, without reasonable excuse, engage in conduct that is intended to obstruct the DFSAin the exercise of its investigative powers by any means including, but not limited to, the following:(a) the destruction of documents;(b) the failure to give or produce information or documents specified by the DFSA;(c) the failure to attend before the DFSAat a specified time and place to answer questions;(d) the giving of information that is false or misleading; or(e) the failure to give any assistance in relation to an investigation which the Personis able to give24.
24 Article 83.
Any breach of Article 83 will be regarded seriously by the
DFSAand appropriate action will be taken.
Return of Information and Documents
DFSA25 has obtained originals of information or documents during the course of an investigation, the DFSAwill 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.
Where information or documents have been produced to the
DFSAin the course of an investigation to assist another regulator or agency, the DFSAmay26 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.
RPP 5-6 RPP 5-6 Remedies
At the conclusion of an investigation, the
DFSAmay:(a) take no further action;(b) commence a settlement negotiation;(c) accept a settlement;(d) accept an enforceable undertaking;27(e) seek to have the matter referred to a decision-maker (see Chapter 7);(f) commence Courtproceedings;28(g) exercise a power on behalf of another regulator;29 and(h) delegate a power to another regulator.30
There are a range of remedies which the
DFSAmay pursue to achieve its objectives and the DFSAmay, in any matter, pursue more than one remedy. The types of remedies, along with an indication of the DFSA'sapproach to the use of these remedies, are set out in sections 5-7 to 5-18 of this chapter and in chapter 4.
The Decision Making Committee (DMC) is an internal committee of the
DFSAestablished to consider and make certain regulatory decisions of the DFSA. For more information on the DMC see section 7-7 in chapter 7.
Whilst not an exhaustive list, the
DFSAmay refer a matter for determination to the DMC for the:(a) imposition of a fine;31(b) imposition of a censure;19(c) imposition of conditions or restrictions on a Licenceor in relation to a Licenceendorsement;32(d) withdrawal of an authorisation under, or endorsement on, a Licence;33(e) withdrawal of a Licence;34(f) imposition of conditions or restrictions on an Authorised Individualor Key Individual;35(g) restriction or suspension of an Authorised Individualor Key Individual, or the withdrawal of his or her authorisation;36(h) withdrawal of the registration of a DNFBP;(i) revocation of recognition;(j) appointment of a manager;37 or(k) withdrawal or suspension of the registration of a Registered Auditoror Audit Principal;38
31 Article 90.
32 Article 49.
33 Article 50.
34 Article 51.
35 Article 56.
36 Article 58.
37 Article 88.
38 Article 98A.
DFSAuses a power specified in sections 5-7 to 5-9 in this chapter, it will follow the decision making procedures set out in Schedule 3 of the Regulatory Law. See also chapter 7 of the RPP regarding the DFSA'sdecision making process.
DFSAdoes not have criminal jurisdiction. Should criminal conduct be identified, then it will be referred to the appropriate law enforcement agency.
RPP 5-7 RPP 5-7 Appointment of Managers
Under Article 88, the
DFSAmay require an Authorised Personto appoint one or more individuals to act as a manager of the business of the Personon such terms as the DFSAmay stipulate. Such individuals must be nominated or approved by the DFSA.
The types of circumstances in which the
DFSAmay exercise this power are set out in Article 88(3). For example, the DFSAmay require an Authorised Personto appoint a manager where it has concerns about the solvency or the level of compliance with prudential requirements of an Authorised Person.
Authorised Personmay receive an opportunity to make representations prior to being required to appoint a manager in accordance with the procedures set out in Schedule 3 of the Regulatory Law. However, in circumstances of urgency, the DFSAmay not give advance notice of the proposed requirement and may not provide the relevant Authorised Personwith the opportunity to make representations prior to the imposition of the requirement.
DFSAdoes require an Authorised Personto appoint a manager, it will do so in writing, setting out:(a) that the Authorised Personis required to appoint a manager;(b) the time by which such manager must be appointed;(c) the reasons for the Authorised Personbeing required to appoint a manager;(d) the individual nominated by the DFSAto be the manager or the process by which approval may be given by the DFSA; and(e) the fact that the Authorised Personmay have the decision reviewed by the Financial Markets Tribunal.
DFSArecognises that the use of its Article 88 power to appoint a manager is likely to have a significant impact on an Authorised Person. Accordingly, the DFSAis likely to exercise such power only in exceptional circumstances.
In considering whether a manager should be appointed, the
DFSAwill take into consideration all relevant circumstances including, but not limited to, the following matters:(a) the nature and extent of the business of the Authorised Person;(b) the nature of the DFSA'sconcerns in relation to the Authorised Personand whether they affect, or have the potential to affect, the DFSA'sobjectives;(c) whether the DFSA'sconcerns in relation to the Authorised Personmay be addressed by the appointment of a manager;(d) where the DFSAconsiders it necessary to protect regulated entities and customers in the DIFC;(e) whether an appropriately qualified manager may be available and willing to undertake the appointment;(f) the likely duration of the appointment; and(g) the likely impact of costs associated with the appointment of a manager.
RPP 5-8 RPP 5-8 Fines
DFSAmay seek to impose a fine under Article 90 on a Personwhom it considers has contravened a provision of the Law. The DFSAmay impose a fine in any amount considered appropriate.
In determining whether to impose a fine and the quantum of the fine, the
DFSAwill take into consideration the circumstances of the conduct and will be guided by the penalty guidance set out in chapter 6 of the RPP.
The decision to impose a fine on a
Personwill be made by the DMC.
Personreceives a notice imposing a fine and does not pay the full amount of the fine, the DFSAmay recover so much of the fine as remains outstanding as a debt due, together with costs incurred by the DFSAin recovering such amount.
RPP 5-9 RPP 5-9 Censures
DFSAmay, under Article 90, seek to censure a Personwhom it considers has contravened a provision of the Law and Rules it administers.
In determining whether to censure a
Person, the DFSAwill take into consideration the circumstances of the conduct and will be guided by the penalty guidance set out in section 6-3 of this sourcebook.
RPP 5-10 RPP 5-10 Injunctions and Orders
DFSAhas a broad power to make an application to the Courtfor injunctive relief and other orders (Article 92). The DFSAmay seek orders including, but not limited to:(a) an order restraining a Personthat is engaging in conduct that would constitute a contravention of the Law;(b) an order requiring a Personto do an act or thing to remedy a contravention or to minimise loss or damage; or(c) any other order as the Courtsees fit, including an order restraining the transfer of assets or the movement of individuals.
In deciding whether an application for an injunction or other order is appropriate in any given case, the
DFSAwill consider all relevant circumstances including, but not limited to, the following matters:(a) the nature, seriousness and impact of the contravention and whether the contravention is on-going;(b) whether the contravention affects, or has the potential to affect, the DFSA'sobjectives;(c) whether any party who may have suffered some detriment as a result of the contravention is able to take their own remedial action;(d) where the DFSAconsiders it necessary to protect regulated entities and customers in the DIFC;(e) whether there is a danger of assets being dissipated or removed from the jurisdiction of the Court;(f) whether there is a danger that the Personor Personsmay leave the jurisdiction and, if so, the effect that their absence may have on the effectiveness of the Court'sorders;(g) the costs the DFSAwould incur in applying for and enforcing an injunction or other orders and the likely effectiveness of such an injunction or other order;(h) the disciplinary record and compliance history of the Person;(i) whether a suitable remedy is available;(j) the extent to which another law enforcement agency or Financial Services Regulatorcan adequately address the matter and, if so, that body's attitude to the matter; and(k) whether there is information to suggest that the Personwho is the subject of the possible application is or has been involved in money laundering, terrorist financing or other form of financial crime or criminal conduct.
RPP 5-11 RPP 5-11 Civil Proceedings
Article 94 provides that where a
Personhas:(a) intentionally, recklessly or negligently committed a breach of duty, requirement, prohibition, obligation or responsibility imposed under the Law; or(b) committed fraud or other dishonest conduct in connection with the matter arising under the Law;
Personis liable to compensate any other Personfor any loss or damage caused to that other Personas a result of such conduct.
Article 94(2) provides that the
Courtmay, on application of the DFSA, or of a Personwho has suffered the loss or damage, make orders for the recovery of damages or for compensation or for the recovery of property or other order as the Courtsees fit, except where such liability is excluded under the Law and Rules administered by the DFSA.
Article 94 gives the
DFSA, and any aggrieved Persons, broad powers to make application for recovery of damages and other orders where there has been an identified contravention of the Laws and Rules administered by the DFSA. An aggrieved Personmay exercise rights provided under Article 94 independently of, or contemporaneously with, the DFSA.
DFSAmay decide not to commence proceedings in every case where there may have been a relevant contravention. This does not, however, prevent any aggrieved Personfrom commencing his own proceedings.
In determining whether to commence proceedings, the
DFSAwill take into account all relevant circumstances. It is not possible to provide an exhaustive list of the circumstances that may be taken into account, as they may depend on the facts of the particular matter. However, the following list indicates some of those matters that may be considered:(a) the nature, seriousness and impact of the suspected contravention and whether the alleged contravention is on-going;(b) whether the conduct and contravention affects, or has the potential to affect, the DFSAobjectives;(c) whether any party who may have suffered some detriment as a result of the alleged contravention is able to take his own remedial action;(d) in circumstances where more than one Personhas suffered loss or damage:(i) the number of those that have suffered loss or damage and the amount of loss or damage involved; and(ii) whether it is convenient or possible for a class of aggrieved Personsto run a proceeding;(e) the cost that the DFSAwould incur in applying for or enforcing any order that it is successful in obtaining;(f) whether the conduct in question can be adequately addressed by the use of other regulatory powers;(g) whether there is information to suggest that the Personis or has been, involved in money laundering, terrorist financing or other form of financial crime or criminal conduct; and(h) whether the DFSAhas a reasonable prospect of success in the relevant proceedings.
RPP 5-12 RPP 5-12 The Compulsory Winding Up of a Regulated Entity
DFSAmay apply to the Courtfor the winding up of a company which is, or has been, an Authorised Person, or operating in breach of the Financial Services Prohibition, where it considers it is just and equitable and in the interests of the DIFC39.
39 Article 93.
In deciding whether such an application is just and equitable and in the interests of the
DIFC, the DFSAwill consider all relevant circumstances, including but not limited to, the following matters:(a) the need to protect the company's Clients, particularly in cases where an Authorised Firmholds or controls Client Assets;(b) whether the company has operated in accordance with the laws of the DIFC;(c) where the company has contravened the Law, the nature, seriousness and impact of the contravention and whether the contravention is on-going;(d) where the company has contravened the Law, whether any alleged contravention affects, or has the potential to affect, the DFSAobjectives;(e) where the company has contravened the Law, whether there are any other steps a Personcould take or other orders a Courtcould make to remedy any contravention;(f) whether the needs of those operating in the DIFCand the interests of the DIFCare best served by the company ceasing to operate;(g) in the case of an Authorised Firm, where the DFSAconsiders that its Licenceshould be withdrawn or where it has been withdrawn, the extent to which there is other business that the firm carries on without authorisation;(h) whether there is information to suggest that the company is or has been involved in money laundering, terrorist financing or other form of financial crime or other criminal conduct;(i) where there is a significant cross-border or international element to the business being carried on by the company, the impact on the business in other jurisdictions and whether another law enforcement agency or Financial Services Regulatorcan adequately address the matter and, if so, that body's attitude to the matter;(j) the extent to which the company has cooperated, and is likely to continue to cooperate, with the DFSA; and(k) the nature of the involvement of the officers of a company in the foregoing and whether this suggests a systemic failure within the company.
RPP 5-13 RPP 5-13 Markets Law — Orders in the Interests of the DIFC
Article 68 of the Markets Law 2012 provides that the
Court, on application by the DFSA, may make one of a range of orders in relation to a Person, irrespective of whether a contravention has occurred, if it is satisfied that it is in the interests of the DIFCfor such an order to be made.
DFSAmay seek orders from the Court, including, but not limited to:(a) an order that trading in any Investmentscease permanently or for such period as is specified in the order;(b) an order that a disclosure be made to the market;(c) an order that a Personis prohibited from making offers of Securitiesin or from the DIFC; or(d) an order that a Personis prohibited from being involved in Reporting Entities, Listed Fundsor Securitieswithin the DIFC.
DFSAcan make an application for an order (whether interim, ex parte or final), the DFSAmust be satisfied that such an order would be in the interests of the DIFCand will take into account all relevant circumstances, including, but not limited to, the following:(a) the nature and extent of the conduct or any other matters in question;(b) the effect of the conduct or any other matters on the market and the DFSA'sobjectives;(c) whether the market is currently informed of all material information;(d) what steps the relevant Personhas taken in respect of the conduct or any other matters being considered;(e) whether any other form of relief is available to the DFSAor appropriate in the circumstances;(f) whether the relevant conduct or any other matters could have a significant impact on the integrity of the DIFCmarket or the confidence in that market; and(g) the effect of the conduct or any other matters on the interests of participants in the DIFC.
RPP 5-14 RPP 5-14 Intervention Power
Article 95 empowers the
DFSAto intervene as a party in any proceeding in the Courtwhere it considers such intervention appropriate to meet the objectives of the DFSA. Where the DFSAintervenes, it shall be subject to any other law, and have all the rights, duties and liabilities of such a party.
This provision does not affect the ability of the
DFSAto seek leave to appear in proceedings as amicus curiae (i.e. someone not a party to a case, who volunteers to offer information to assist a court in deciding a matter before it), to make submissions on an issue of significance to the DIFC, or to place material before the Courtthat may otherwise not be available.
DFSAwill generally only exercise this right of intervention where it forms the view that it will not be able to meet its objectives by simply appearing as amicus curiae and that, to serve the interests of the DIFCfully, it is necessary to join the proceeding as a party and stay involved in the matter throughout.
RPP 5-15 RPP 5-15 Settlement Guidance
A settlement is a resolution, between the
DFSAand a Personwho is subject to potential enforcement action, to agree an outcome resulting from an investigation. A Personwho is or may be the subject of any form of enforcement action arising out of, or during the course of, an investigation may enter into settlement discussions with the DFSA.
Settlement discussions are possible at any stage of the enforcement process, either before or after enforcement action has commenced. However, to be eligible for a discount on the amount of a financial penalty, settlement must be agreed within the period specified by the DFSA (see section 6-8). When considering whether or not to enter into negotiations for settlement, or a settlement agreement, the
DFSAwill consider its objectives.
DFSAgenerally considers that settlement of an investigation advances its objectives in that it may result in, for example, consumers obtaining compensation sooner, the saving of DFSAand industry resources, and the promotion of good business and regulatory practices.
DFSA'sgeneral view is that settlement discussions should take place as early as possible. However, the DFSAwill only be able to settle when it is confident it has sufficient understanding of the nature and gravity of the suspected misconduct to make a reasonable assessment of the appropriate outcome.
DFSAconducts settlement discussions on a "without prejudice" basis; namely, that no party to the discussions may subsequently rely upon any admissions or statements made during the course of the settlement discussion or on any document recording those discussions.
DFSAwill only settle when the agreed terms result in what the DFSAconsiders to be an appropriate regulatory outcome.
Settlement in particular circumstances should not be regarded as binding precedent for future settlement discussions.
Where appropriate, the
DFSAwill provide the other party to a settlement discussion with copies of relevant material which it has relied upon in making findings in an investigation. However, some information may not be provided at the settlement stage. This would include information which is privileged, or information which the DFSAdoes not have the right or authority to disclose to the other party, such as information provided to the DFSAin confidence by another regulator.
Settlement Decision Makers
The process for reaching a settled outcome is different to the process for the DFSA to exercise formally a discretionary power. For example, most of the DFSA’s formal decision making policy in chapter 7 of RPP and many of the requirements in Schedule 3 to the Regulatory Law do not apply.
The decision about whether to accept a settlement offer will be taken by a senior member of DFSA staff who has not been directly involved in establishing the evidence on which the decision to take the action is based. That person is referred to as a Settlement Decision Maker.
Settlement Decision Makers will generally come from the same pool of staff as persons who may be on a Decision Making Committee (DMC) (see section 7-7). The DMC is the DFSA’s decision maker for enforcement decisions in cases that have not been resolved through settlement. If a Settlement Decision Maker has been involved in considering a matter which ultimately does not result in agreement, then that person will generally not be a member of the DMC for that matter.
The case team will conduct the settlement negotiations with the Person(s) concerned. If agreement is reached, the case team will recommend to the Settlement Decision Maker that the settlement be approved. It will be for the Settlement Decision Maker to decide, on behalf of the DFSA, whether to accept the settlement on the agreed terms. If approved, the agreed terms will then be included in the appropriate form of settlement as set out in the following paragraphs.
Form of Settlement
DFSAwill generally only settle an enforcement matter on the basis of either:(a) a notice of decision setting out the action taken (see 5-15-14); or(b) an Enforceable Undertaking (EU) (see 5-15-15).
In appropriate cases, the
DFSAmay settle a matter on the basis of both a notice of decision and an EU. Any settlement entered into by the DFSA, which results in a notice of decision, will be documented in the form of a legally enforceable agreement executed by all parties.
Notice of Decision
DFSAagrees to settle an enforcement matter, the outcome of the settlement may result in an agreed notice of decision. The issue of such a notice promotes consistency of regulatory outcomes and transparency of approach to enforcement decision making.
An EU is a written promise, made under Article 89, to do or refrain from doing a specified act or acts. It is an alternative mechanism for addressing the
DFSA'sconcerns, including regulating contraventions of the Law. It may, amongst other things, include remedial actions that are not otherwise available under a notice of decision.
Acceptance of an Enforceable Undertaking
An EU may be given by a
Personand accepted by the DFSAat any time, either before, during or after an investigation, the making of a decision or the commencement of litigation or proceedings in the Court. The DFSAdoes not have the power to require a Personto enter into an EU nor can a Personcompel the DFSAto accept an EU. This does not mean, however, that the DFSAcannot propose an EU to a Person, during the course of settlement negotiations, or provide a Personwith a draft EU to provide guidance as to the terms of an EU that the DFSAwould be willing to accept.
DFSAmay accept an EU that it considers necessary or desirable in pursuit of its objectives. Article 89 does not prescribe a particular structure or format to an EU or the circumstances in which an EU would be acceptable to the DFSA. The DFSAwill consider all the relevant circumstances of a matter when deciding whether to accept an EU including whether other regulatory tools, for example a notice of decision, might achieve a more appropriate outcome in the particular matter. However, in the context of an enforcement matter, the DFSAwill generally only accept an EU that:(a) contains an admission or acknowledgement of any contraventions of the Law or the DFSA'sconcerns;(b) contains undertakings that address the DFSA'sconcerns; and(c) contains an agreement to make the EU public, and an agreement not to make public statements that conflict with the spirit of the EU.
Personoffering an EU to the DFSAmay also undertake in the EU to pay a pecuniary penalty and/or the DFSA'scosts, including any costs associated with compliance with the EU.
An EU will not take effect until it is formally accepted by the
Chief Executiveof the DFSAor his delegate.
Variation or Withdrawal
Once accepted by the
DFSA, an EU can only be withdrawn or varied with the consent of the DFSAin writing. The DFSAwill only consider a request to vary an undertaking if:(a) the variation will not alter the spirit of the original undertaking;(b) compliance with any one or more terms of the undertaking is subsequently found to be impractical or impossible; or(c) there has been a material change in the circumstances which led to the undertaking being given.
Compliance with an EU or Decision
DFSAconsiders that a Personhas not complied with a term of the EU or a decision, the DFSAmay apply to the Courtfor appropriate orders. The DFSAmay publish the fact of the application to the Courtand any subsequent orders of the Court. The DFSAwill also seek the costs of the application.
RPP 5-16 RPP 5-16 Costs
DFSAwill generally seek litigation costs orders from the Courtwhere it has commenced a proceeding and been successful in achieving all or part of the outcome sought.
Personis found by the FMTor the Courtto have contravened a provision of the Law, the FMTor Courtmay order40 that Personto reimburse the DFSAin respect of the whole or a specified part of the costs and expenses of the investigation, including the remuneration of an officer involved in the investigation.
40 Article 79(2).
Undertakings as to Damages
Under Article 47(1) of the
CourtLaw, the Courtshall not require the DFSAto give an undertaking as to damages as a condition for granting an injunction or any order made under DIFC Law. In making any order the Courtshall not take into account, in determining the merits of an application for the injunction, that the DFSAhas not given an undertaking as to damages.
Enforcement of Orders
DFSAwill do all things necessary and, where appropriate, commence relevant actions to ensure full compliance with any orders of the FMTor of the Courtwhich arise out of an investigation.
In particular, Article 90(10) provides that the
DFSAmay apply to the Courtfor recovery, as a debt due, of so much of a fine as is not paid by a party together with costs. Further, in appropriate circumstances, the DFSAmay apply to the Courtfor the winding up of a body corporate.
RPP 5-17 RPP 5-17 Publicity
This section describes how the
DFSAmay comment publicly on investigations, enforcement actions and other formal regulatory decisions41, subject to any independent determinations by the Financial Markets Tribunal(FMT) or Court.
41 In the remainder of the section we refer to 'enforcement actions', for brevity. Formal regulatory decisions are those that are made by the
DFSAand are reviewable by the Financial Markets Tribunal.
General Policy on Publicity of Enforcement Actions
DFSAwill generally publish, in such form and manner as it regards appropriate, information and statements relating to enforcement actions, including censures and any other matters which the DFSAconsiders relevant to the conduct. The publication of enforcement outcomes is consistent with the DFSA'scommitment to open and transparent processes and its objectives.
In all cases the
DFSAretains the discretion to take a different course of action, where it furthers the DFSA'sachievement of its objectives or is otherwise in the public interest to do so. For example, the DFSAmay decide to publish at an earlier stage than suggested by the general policy, where circumstances justify this.
Commencement and Conclusion of Investigations
DFSAgenerally will not publish information about the commencement, conduct or conclusion of the investigative phase of its enforcement actions.
DFSAhas published the fact that it is conducting an investigation and no enforcement action results, the DFSAmay issue a press release confirming the conclusion of the investigation and that no action is to be taken.
DFSAexpects not to publish information about referrals to the DMC.
Commencement of Proceedings
The Decision Making Committee (DMC)
The DMC will generally be the decision maker for enforcement decisions under Article 90 of the
Regulatory Law. Information about matters before the DMC (e.g. a Preliminary Notice) is not normally published prior to a notice of decision being given to a Person (see RPP 5-17-9 to 5-17-11). Reasons for this include:(a) representations in regard to a matter before the DMC are confidential and made in private;(b) DMC meetings, if any, are held in private; and(c) the release of information by the DMC prior to a full and complete consideration of all representations and facts may be contrary to the DFSA'sobjectives or not in the public interest.
FMT or a court
DFSAexpects to publish appropriate information about the commencement or hearing of proceedings before the FMTor court, unless otherwise ordered by the FMTor court.
Disclosure of Decisions
DFSAwill generally make public any decision made by the DMC, and will do so in a timely manner after any relevant period to institute a referral of the decision to the FMThas expired or when a matter is referred to the FMT (see RPP 15-17-11).
If the affected
Personexercises its right of referral then, as required by Article 29 of the Regulatory Law, the DFSAwill publish appropriate information about the decision which has been referred to the FMT unless publication would, in the DFSA’s opinion, be prejudicial to the interests of the DIFC or the FMT has made an order that such information should not be published. When the referral has been heard and determined, or the FMT proceedings have otherwise come to an end, the DFSAexpects to publish information about the outcome of those proceedings (subject only to the FMTordering otherwise — see 5-17-12).
FMT or a court decision
Regulatory Lawrequires all FMThearings to be heard in public unless the FMTorders otherwise or its rules of procedure provide otherwise. The FMTmay exercise its discretion not to make public any decisions it may make. Where it does determine to publish a decision or interim decision, the FMTwill publish these on the DFSAwebsite. Following hearings and decisions by the FMT, the DFSAexpects to make timely public disclosure of the FMT'sdecisions, including any interim decisions, unless otherwise ordered.
Decisions made by the courts will be published by the
DFSAin a timely manner, unless ordered otherwise.
This approach is adopted on the basis that any delay in disclosure may hinder and unfairly prejudice the
DFSAin achieving some of its primary objectives. For example, non-disclosure may potentially prejudice users and prospective users of financial services in the DIFCif they are acting unaware of facts known in the enforcement action.
Disclosure of Settled Enforcement Actions
DFSAexpects to disclose publicly the outcome of any settlement of an enforcement action, including the notice of decision or EU, to ensure all stakeholders and the general public are clearly informed as to the outcome. Settlement agreements which result in a notice of decision or EU will result in the publication of the relevant notice of decision or EU on the DFSAwebsite as well as an associated press release.
DFSAmay be ordered, or required by law, not to publish information regarding a settlement. For example, disclosure may not occur if a third party has commenced proceedings in the courts in respect of the same conduct and the publication of the undertaking or settlement may prejudice that party's case in the courts. However, simply because a third party has commenced proceedings does not preclude the DFSAfrom publishing its settlements, including the notice of decision or EU.
Disclosure of Information about Certain Temporary Suspensions
DFSAwill not generally publish information about temporary suspensions imposed under Article 58(5) or Article 98A(5),42 when an investigation is ongoing. However, the DFSAretains discretion to publicise such a suspension if it is considered appropriate.
42 That is, suspensions of
Authorised Individuals, Key Individuals, Registered Auditorsor Audit Principalspending completion of an investigation.
Content of Publication
DFSAwill generally make appropriate disclosures when publishing notices of decision, EUs proceedings before, and decisions of the FMTor a court.
DFSAwill take into consideration any privileged or sensitive information when considering the content of its publications. In doing so, it will also consider the possibility that any publication may also potentially affect the rights of a third party and, if so, will endeavour to give that third party an opportunity to make representations on the publication.
Mode of Publication
Publication may take any one or more forms including, for example, a media release, a statement on the
DFSAwebsite, and any other suitable forums as determined by the DFSA.
RPP 5-18 RPP 5-18 Maintenance of Registers
DFSAis also required to publish and maintain a register43 of:(a) grants, withdrawals and suspensions of Licences, Licenceendorsements and authorisations of Authorised Persons, Authorised Individualsand Key Individuals;(c) current and past registrations of DNFBPs; and(d) current and past registrations, withdrawals and suspensions of registrations of Registered Auditorsand Audit Principals.
43 Article 62.
RPP 5-19 RPP 5-19 Conclusion of an Investigation
DFSAwill conclude an investigation when:(a) it determines to take no further action in response to the suspected contraventions of the Law and Rules subject of the investigation; and(b) all remedies and obligations resulting from an investigation are concluded and fulfilled.
DFSAmay determine to take no further action in respect of the suspected contraventions that are the subject of an investigation due to insufficiency of evidence or in circumstances where pursuing an enforcement action in respect of the suspected contraventions would not accord with the DFSA'sobjectives.
RPP Appendix 1 — The Enforcement Process