RPP 10 RPP 10 Permissible Company and Trading Names for Entities Established in the DIFC
10-1 10-1 Introduction
This chapter sets out the
DFSA'spolicy on the names that Applicants, Authorised Firms, Fundsand other entities established in the DIFCshould use.
This chapter also sets out the
DFSApolicy on approving applicants' use of particular names in the DIFC, and when the DFSAwill use its prohibition power to prohibit an Authorised Firm, Fundor other entity established in the DIFCfrom using a name which is contrary to the DFSA'spolicy.
This chapter is structured as follows:(a) Section 10-2 sets out the purpose and scope of the chapter, including who it applies to;(b) Section 10-3 explains some of the guiding principles behind the policy;(c) Section 10-4 explains the source of the
DFSApowers in relation to names of firms;(d) Section 10-5 describes the DFSA'sgeneral policy on the use by firms of the words "bank", "insurance" and "trust";(f) Section 10-7 describes the DFSApolicy on other matters such as the use of the words "investment bank", "fund" or "Islamic" and on the use of trading names;(g) Section 10-8 sets out the DFSApolicy on the use of its power to prohibit the use of a particular name by an Authorised Personor a Fund; and(h) Section 10-9 sets out the DFSApolicy on giving consent to the use of certain names by unregulated entities.
10-2 10-2 Purpose and Scope of the DFSA's Naming Policy
This policy aims to ensure that entities operating in or from the
DIFCuse names that are fair and clear so as not to mislead consumers. Naming conventions for Authorised Firmsare an important element of consumer protection.
This policy is aimed primarily at entities which are authorised to carry on a
Financial Service, which include applicants for Authorisation, or others which otherwise fall within the DFSAregulatory perimeter e.g. funds and trusts (referred to collectively as "firms" in this chapter). However, this policy will also be relevant to unregulated entities to the extent that such a person uses a name that suggests, or could suggest, that the person is authorised to carry on a Financial Service.
This policy applies to any entity in the
DIFCthat uses or proposes to use in its business name or trading name:(a) the word "bank" or any of its derivatives;(b) the word "insurer" or any of its derivatives;(c) the word "trust" or any of its derivatives;(d) any other words connected to financial services;(e) any other words which suggest that it is authorised to carry on a Financial Service; and(f) any other words that are misleading in light of its actual business activities.
Any reference in this policy to words used in names, such as "bank" or "insurance" includes their derivations, regardless of the language used, unless expressly stated otherwise.
10-3 10-3 Guiding Principles
DFSAhas considered and adopted international best practice in formulating this policy. In particular the DFSAhas considered the international standards promulgated by the Basel Committee on Banking Supervision in its Core Principles for Effective Banking Supervision. These principles require financial services regulators to control the use of specific words related to the conduct of banking business. The key requirement is set out under "Principle 4":
"The permissible activities of institutions that are licensed and subject to supervision as banks are clearly defined and the use of the word "bank" in names is controlled";
DFSAadopts a similar policy approach for entities which use the word "insurance" or "trust" in their name and for the general use of names connected to financial services which may be misleading to consumers. This is to ensure consistency across industry sectors and to reflect the standards set out in the DIFCCompanies Regulations.
10-4 10-4 Relevant Laws and Regulations
DIFC, a company, general partnership or limited liability partnership must seek the approval of the Registrar to the use of a particular name. The Registrar also has a very broad power to direct such persons to change their name if the name by which the person is registered is "misleading, conflicting or otherwise undesirable" (see for instance Article 19 of the DIFCCompanies Law).
DIFCCompanies Regulations (COR) contain, in COR 2.3.2, a requirement to seek the prior approval of the DFSAif their proposed name contains:"(i) the word 'bank', 'insurance' or 'trust';(ii) words which suggest that it is a bank, an insurance company or trust company; or(iii) words which suggest in some other way that it is authorised to carry on a Financial Service within the DIFC."
Regulation 2.2.2 of both the General Partnership Regulations and the Limited Liability Partnership Regulations contain an identical rule.
Under Article 75(1)(a)(iv) of the Regulatory Law 2004, the
DFSAhas a power to prohibit an Authorised Personfrom "using a particular name or description in respect of the Authorised Person". Under Article 75(1)(a)(v) of the Regulatory Law, the DFSAcan also prohibit an Authorised Personfrom "using a particular name for a Fundor sub-fund of a Fund".
DFSAcan also exercise the Registrar's powers under DIFClaws and regulations when acting as the Registrar's delegate.
10-5 10-5 The General Policy on Use of the Words "Bank", "Insurance" and "Trust"
Any applicant for incorporation or registration in the
DIFCneeds to seek DFSAconsent to the use of certain names, including names which use the words "bank", "insurance" or "trust". The DFSAwill generally consent to the use of a particular name if the use of the name would not be misleading. The DFSAwill generally look at substance over form when considering requests to use a particular name.
The basis upon which the
DFSAwould consider a business name to be misleading would include:(a) where the use of a name is misleading because it does not accurately describe the actual activities of the firm; or(b) where the use of a name is misleading because it implies that the firm has a particular status that it in fact does not have.
DFSAconsiders that if a firm name includes the word "bank" this can be misleading if the business does not, in fact, have the appropriate licence to carry out any banking activities. It may also mislead actual or potential clients about the quality and quantity of the firm's financial resources. The word "bank" also suggests that the firm may benefit from the protections afforded to banking customers by a depositor protection scheme or an express or implied government guarantee.
DFSApolicy approach set out above is the same, irrespective of whether a business uses a derivative word such as "banking", "banker", "investment bank/banking", "merchant bank/banking", "commercial bank" or "private bank/banking". The word "Bank" is defined in the DFSARulebook, Glossary Module (GLO) as:
Authorised Firmwhich holds a Licenceauthorising it to carry on the Financial Servicesof Accepting Deposits"
DFSAwill, therefore, only permit a firm to use the word "bank" or any of its derivatives if the firm holds a Licenceto Accept Depositsand/or Manage a Profit Sharing Investment Accounton an Unrestricted basis. There are exceptions to this general policy, which we set out below in section 10-6.
"Insurance" and "Trust"
The same general principles in 10-5-2 (a) and (b) apply to the use of the words "insurance" and "trust" and any of their derivatives such as "insurer", "reinsurance", "reinsurer", "insurance/reinsurance company", "insurance/reinsurance broker", "trustee", or "trust company".
In the case of the use of the word "insurance" in a firm name, it should be noted that "Insurance Business" is defined in GLO as:
"The business of
Effecting Contracts of Insuranceor Carrying Out Contracts of Insurance, including effecting or carrying out contracts of reinsurance (as reinsurer)."
DFSAwill, therefore, only permit a firm to use the word "insurance" or any of its derivatives if the firm holds a Licenceto Effect Contracts of Insuranceor Carry Out Contracts of Insurance. There are exceptions to this general policy which we set out below in section 10-6.
10-6 10-6 Exceptions to the General Policy
Branches of non-DIFC companies and partnerships
An exception to the general policy on the use of the terms "bank" and "insurance" set out in section 10-5 above is where the relevant firm is a
Branchof a non- DIFClicensed bank or insurance company.
For example, if a firm is a
Branchof a bank, which is licenced as a bank in its home state jurisdiction, because the Branchis the same legal entity as its Head Office, it is in fact itself a bank. However, such firms should use their Head Office name with added words which describe their legal status. This is to ensure that the name does not mislead in any way. For example, the Head Office of ABC Bank PLC may call its DIFC Branch "ABC Bank PLC (DIFC Branch)".
The above policy would apply even if the DIFC Branch is not authorised to
Accept Deposits. However, the Head Office's licence in its home state must include authorisation to Accept Depositsor the equivalent local financial service if the firm wishes to use the word "bank" in its name in the DIFC. In other words, if the name of the Head Office includes the word "bank" but the Head Office is not in fact permitted to Accept Deposits, the DIFC Branch will not be permitted to use the word "bank" in its name or would be required to follow the policy set out in paragraphs 10-6-4 to 10-6-6 below.
DIFC-incorporated companies and partnerships
The examples above would apply equally to insurance companies and intermediaries. In particular, the
DFSAwould expect an insurance broker or other intermediary which uses the word "insurance" in its name to ensure that its name adequately describes its permitted activities by, for example, appending the word "broker" in the name. The use of the word "insurance" by an insurance intermediary without further description could be misleading; consumers might assume that the firm is an insurer which benefits from a strong capital base.
A further exception to the general policy on the use of the terms "bank" and "insurance" set out in section 10-5 above applies to a
Domestic Firm. The DFSAwould permit a Domestic Firm, whose immediate parent is a Bankor Insurer, to refer to the parent's name in its name, provided that the name is not actually or potentially misleading.
In order to not be misleading, the
DFSAwould expect the firm to append words to their parent's name which describe the firm's DIFCactivities. For example, assuming that ABC Bank PLC has a DIFCsubsidiary which is a Category 3C firm, the DFSAwould accept the name "ABC Bank Asset Management Limited" for the firm.
For the avoidance of doubt, if the
DIFCentity does not itself hold a Licenceto Accept Deposits, it will not be able to use the name of its parent (which is a bank) without some qualification.
In some cases, a firm's immediate parent may be an intermediate company. In such cases, provided that the intermediate company is not an operating company (for example, because it has been established to hold the Group's Middle East subsidiaries or because it was established for tax purposes) the firm may refer to the intermediate company's parent's name in their name, provided that the name does not mislead in any way.
For example, assuming that ABC Bank PLC has a subsidiary, ABC Bank Middle East Holdings Ltd, which was established to hold ABC Bank PLC's Middle East subsidiaries, a Category 3C
DIFCsubsidiary of ABC Bank Middle East Holdings Ltd could use the name "ABC Bank Asset Management Limited".
10-7 10-7 Other Matters
Investment, Merchant or Private Bank
DFSAconsiders that firms which include the words "investment bank" in their name pose less risk of misleading the consumers because the concept of an investment bank is less closely associated with deposit taking. Historically, the DFSAhas permitted a firm to use the words "investment bank" in its name (in the absence of the firm having a Deposit Taking authorisation) provided that the firm's activities involve what would commonly be described as investment banking activities. The DFSAconsiders that investment banking activities would generally include Dealing as Principal in combination with one or more of Providing Credit, and Advising or Arranging on Financial Products or Credit.
When assessing whether a firm is undertaking investment banking activities, the
DFSAwill adopt a substance over form approach. As a general rule, the DFSAwould not consider that a Prudential Category 4 firm is undertaking investment banking activities. The DFSAwould adopt the same general policy to the use of the words "merchant bank" or "private bank" in an Authorised Firm'sname.
DFSAnaming policy for entities which use the word "fund" in their name, including a Fund, adopts the same fundamental principle as that described in section 10-5 above. When considering whether the name of a Fundis appropriate, or whether to permit an entity which is not a Fundto use the word "fund" in its name, the DFSAwill adopt a substance over form approach and in particular will consider whether the use of a name is misleading because the name:(a) does not accurately describe the actual activities of the firm or Fund; or(b) implies that the entity has a particular status that it, in fact, does not have.
An example of a misleading name for a
Fundwould be where the name does not reflect the actual nature of the investments which the Fundinvests in. So "ABC Emerging Markets Fund" would not be an appropriate name for a Fundthat does not in fact invest in emerging markets investments. CIR Rule 7.1.4, and the subsequent Guidance, provide further information on what is and is not permissible as regards the name of a Domestic Fund.
Where a firm uses the word "Islamic" in its name, the
DFSAwould expect the firm to have an endorsement on its Licenceto carry out Islamic Financial Businessas an Islamic Financial Institutionor by way of an Islamic Window.
Authorised Firmwhich is a Representative Office must be a Branch. Therefore, it will generally take the name of its Head Office. However, in order not to mislead consumers, the DFSAwill require a Representative Officeto ensure that its name adequately describes the very restrictive nature of its Licencee.g. "ABC Bank (DIFC Representative Office)".
DFSAnaming policy for firms applies to any trading names used by firms and would also apply to any name used by a firm to describe a particular capability or division of the firm, including on the firm's website or in brochures. For example, the DFSAwould consider it misleading if a Prudential Category 4 firm stated on its website that it has an "investment banking" or "asset management" division in the DIFC.
10-8 10-8 Using the Prohibition Power
Article 75(1)(a)(iv) of the Regulatory Law 2004 permits the
DFSAto prohibit an Authorised Personfrom using a particular name or description in relation to its business. It is a strong power that the DFSAwill use if it considers that a prohibition is necessary in order to ensure customers, Authorised Personsor the financial system are not adversely affected.
Before deciding whether to use of the Article 75(1)(a)(iv) power, the
DFSAwill generally try to resolve any concerns that it has with an Authorised Person'sname using informal channels, and would generally seek a voluntary undertaking by the firm to change its name. However, in urgent cases, the DFSAmay use the prohibition power without, or with very little, prior notice in accordance with paragraph 4(7) of Schedule 3 of the Regulatory Law 2004.
Ordinarily, if the
DFSAhas concerns about an Authorised Person's name, trading name or business description, it will write to the person explaining its concerns about the particular name and will provide the firm with a period in which to respond to its concerns. If, following receipt of any response, the DFSAremains dissatisfied with the continued use of the particular name, the DFSAwill write to the firm and ask the firm to agree to cease using the name. The DFSAwill give the person a reasonable period of time in order to change their name. If the person does not agree to change their name or continues to use the name after the time allowed to change the name, the DFSAwill use Article 75(1)(a)(iv) of the Regulatory Law in order to prohibit the use of the name. Where a person refuses to comply with an Article 75(1)(a)(iv) notice, the DFSAwould generally seek to enforce the notice in the DIFCCourt under Article 92 of the Regulatory Law.
DFSAwould take this naming policy into consideration when deciding whether to use its Article 75(1)(a)(iv) power and, in particular, relevant factors that it would consider prior to using the power would include:(a) whether the Authorised Personholds the required DFSAAuthorisations to carry on the relevant Financial Services;(b) the extent to which the Authorised Person'sname or description reflects the substance of the firm's Financial Services activities in or from the DIFC;(c) whether the use of certain words could mislead the public into thinking that the Authorised Firmis operating a banking or insurance business in or from the DIFCwhen the firm is not; and(d) whether the use of certain words could otherwise mislead consumers about the Authorised Person'sactivities in or from the DIFC.
DFSAwill adopt a similar process and approach when deciding to use its Article 75(1)(a)(v) power in relation to a Fund.
DFSAexercises its Article 75(1)(a)(v) power in relation to an Authorised Person, the person may refer the matter to the Financial Markets Tribunalfor review.
10-9 10-9 Unregulated Entities
DFSAconsent to the use of a particular name is sought by an unregulated entity, the DFSAwill only consent to the use of the name if it is reasonably satisfied that the name does not suggest in some way that the person is authorised to carry on a Financial Servicein or from the DIFC. Where the DFSAconsiders that a person in the DIFC, which is an unregulated entity, has a name that uses words which suggest in some way that the person is authorised to carry on a Financial Servicein or from the DIFC, the DFSAwill write to the person and ask them to cease using the name. The DFSAwill give the person a reasonable period of time in order to change their name. If the person continues to use the name after the time allowed to change the name, the DFSAwill use legal means to stop the person using the name.