COB 12.2 General duties and functions COB 12.2 General duties and functions
General duties General duties
COB 12.2.1 COB 12.2.1
The Operator and Administrator of a Scheme must:(a) act in the best interests of the Members of the Scheme and, if there is a conflict between the interests of the Operator or Administrator of a Scheme and the interests of Members of the Scheme, give priority to the interests of Members;(b) not improperly make use of information acquired through being the Operator or Administrator of a Scheme to:(i) gain an advantage for itself or another Person; or(ii) cause detriment to Members of the Scheme;(c) ensure that its officers, employees and agents do not improperly make use of information acquired through being officers, employees or agents of the Operator or Administrator of a Scheme to:(i) gain an advantage for itself or another Person; or(ii) cause detriment to Members of the Scheme;(d) ensure that any Related Party Transaction is on terms at least as favourable to the Scheme as any comparable arrangement on normal commercial terms negotiated at arm’s length with an independent third party; and(e) report to the DFSA, any breach of legislation administered by the DFSA or other applicable laws that relates to the Scheme and has had, or is likely to have, a materially adverse effect on the interests of Members of the Scheme, as soon as practicable after it becomes aware of the breach.
COB 12.2.1 Guidance1. The general duties set out in COB Rule 12.2.1 that apply to an Operator and Administrator, are in addition to the Principles for Authorised Firms that also apply to all firms.Application of AML procedures2. An Administrator that performs AML functions on behalf of an Operator of a Scheme, is required to satisfy applicable AML requirements. The AML module provides flexibility to apply a risk-based approach, taking into account the nature of the product or service involved, and the customer relationship. For example, the Administrator:a. is required to undertake a risk-based assessment of every Participating Employer of the Scheme, and assign a risk rating proportionate to that employer (see AML Rule 6.1.1);b. may assign to Members of an Employee Money Purchase Scheme a low AML risk rating, taking into account the low AML risks associated with schemes or arrangements that provide employment benefits, such as pension, gratuity, retirement and superannuation schemes where:(i) the contributions are made by the Participating Employer in respect of each Member, and not by the Member;(ii) the employment benefits of the Member are not assignable to a third-party; and(iii) there are no other factors that suggest a higher risk of money laundering3. AML Rule 6.1.2 sets out factors that may indicate higher money laundering risks and AML Rule 6.1.3 sets out factors that may indicate lower money laundering risks.4. AML screening of a Member may be warranted before accepting voluntary contributions to a Scheme in certain circumstances, such as where the voluntary contributions:a. substantially exceed the amount of mandatory contributions for that Member; orb. are fully or freely withdrawable or assignable by the Member before the release of the mandatory contributions.
Approval of Scheme
An Operator of a Scheme must obtain the DFSA’s prior written approval for:(a) that Scheme before it operates the Scheme in or from the DIFC; and(b) any material change to the Scheme after it has been approved under (a).
Additional oversight functions
COB 12.2.2A COB 12.2.2A(1) This Rule applies to a DIFC Scheme that is exempted under the Employment Regulations from the requirement to have a Supervisory Body.(2) The Operator of a DIFC Scheme referred to in (1) must ensure that each employer making contributions to the Scheme:(a) carries out the oversight function for the Scheme that would, but for the exemption, be carried out by the Supervisory Body;(b) has sufficient information relating to the operation of the Scheme to be able to properly carry out the oversight function;(c) has the power under the Constitution of the Scheme, to appoint and remove the Operator of the Scheme, in accordance with the requirements under the Employment Law or any other applicable law; and(d) covenants, in the Constitution of the Scheme, to negotiate the fees and charges of the Operator and to assess the performance of the Operator, in the best interests of the Members of the Scheme.
COB 12.2.2A Guidance1. Under the Employment Law and the DFSA requirements, all Schemes established in the DIFC are required to be constituted as a trust.2. Under the Employment Regulations, a Qualifying Scheme must have a Supervisory Body, unless an exemption has been granted by the DIFCA Board. The DIFCA Board will grant an exemption from the requirement for a Supervisory Body, where the employer making contributions to the Scheme is able to demonstrate certain matters to the Board. COB Rule 12.2.2A(2) reflects the matters that the employer must be able to demonstrate. If an exemption is granted, the oversight function in respect of the Scheme may be carried out either by the employer itself or by a delegate acting on its behalf.
Additional requirements for a Non-DIFC Scheme
COB 12.2.3 COB 12.2.3
The Operator and Administrator of a Non-DIFC Scheme must:(a) in addition to complying with any applicable requirements of legislation in the DIFC, comply with the applicable requirements of legislation in the jurisdiction in which the Scheme is established; and(b) notify the DFSA, as soon as is practicable, of any event or matter that has, or could have, a material adverse impact on its ability to comply with the requirements referred to in (a).
COB 12.2.3 Guidance
An Operator or Administrator is prohibited under GEN Rule 2.2.10H from Operating or Acting as the Administrator of a Non-DIFC Scheme if that Scheme receives contributions required to be made by a DIFC employer under the Employment Law or contributions required to be made by any other employer under a Dubai law.
Constitution of the Scheme
An Operator of a Scheme must:(a) manage the Scheme and any property of the Scheme in accordance with the terms of the Constitution and any applicable laws;(b) perform the functions and duties conferred on it by the Constitution and applicable laws; and(c) ensure that the Administrator carries out the functions and duties in accordance with the Constitution and applicable laws.
An Operator of a Scheme must ensure that the Constitution of the Scheme:(a) does not contain any provision that is inconsistent with the requirements of legislation administered by the DFSA that apply to the Operator or Administrator of a Scheme or a Third Party Service Provider;(b) requires the property of the Scheme to be held irrevocably for the benefit of the Members of the Scheme;(c) does not permit the payment of benefits in circumstances contrary to any applicable legislation; and(d) provides for any amount due to a Member, which has not been paid by a Participating Employer, to be recoverable as a debt due to the Scheme.
Any provision in the Constitution of a Scheme is void to the extent that it is inconsistent with a requirement in these Rules.
Delegations and Outsourcing
COB 12.2.6 Guidance1. GEN Rules 5.3.21 and 5.3.22 provide overarching requirements that govern outsourcing of functions and activities by an Authorised Firm. The Rules in this section apply in addition to the requirements in GEN Rules where an Operator of a Scheme delegates or outsources functions and activities in relation to the Scheme.2. Under GEN Rule 5.3.21, if the Operator of a Scheme delegates any activities or outsources any functions to an Administrator of a Scheme or a Third Party Service Provider, it is not relieved of its regulatory obligations and remains responsible for its compliance with the legislation applicable in the DIFC.3. Where the Operator of a Scheme delegates any activities or outsources any functions to an Administrator of a Scheme, and there is a failure to comply with the regulatory obligations by that Administrator, while the Operator is liable for that non-compliance, the Administrator will still be liable for breach of its regulatory obligations to conduct its licensed activities properly.
An Operator of a Scheme must ensure that if it delegates or outsources an activity that is a financial service, the activity is carried on by a person who is either:(a) authorised by the DFSA to carry on that activity; or(b) regulated and supervised for that activity by a Financial Services Regulator.