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  • Collective Investment Law Amendment Law (Investment Trust) DIFC Law No. 6 of 2006

    • The Enactment Notice

      In respect of the Collective Investment Law Amendment Law
      (Investment Trust) DIFC Law No. 6 of 2006

      We, Mohammed bin Rashid Al Maktoum, Ruler of Dubai hereby enact
      on this 1st day of August 2006:

      Collective Investment Law Amendment Law
      (Investment Trust) DIFC Law No. 6 of 2006

      in the form now attached.

      This Law shall come into force on the 1st day of August 2006.

      Mohammed bin Rashid Al Maktoum

      Ruler of Dubai

    • Part 1 Part 1 General

      • 1. Title

        This Law may be cited as the "Collective Investment Law Amendment Law (Investment Trust) 2006".

      • 2. Legislative Authority

        This Law is made by the Ruler of Dubai.

      • 3. Date of enactment

        This Law is enacted on the date specified in the Enactment Notice in respect of this Law.

      • 4. Commencement

        This Law comes into force on the date specified in the Enactment Notice in respect of this Law.

    • Part 2 Part 2 Amendments

      • 5.

        The Collective Investment Law 2006 shall be amended as prescribed in this Law.

      • 6.

        Article 8 is replaced as follows:

        "General Power to make Rules

        (1) The DFSA Board of Directors may, and where required under this Law shall, make Rules for the purposes of this Law pursuant to the power conferred under Article 23 of the Regulatory Law 2004.
        (2) Without limiting the generality of Article 23 of the Regulatory Law 2004, the DFSA Board of Directors shall make Rules governing the establishment, management, operations and activities of a Fund, including Rules:
        (a) governing the rights and obligations, including voting rights, of Unitholders;
        (b) governing the powers and duties of a Trustee and the investment and borrowing powers of an Operator including leveraging or gearing and the issue, pricing and redemption of Units;
        (c) governing the appointment, removal, powers and duties of an auditor or eligible custodian of a Fund; and
        (d) governing the preparation, publication and audit of the accounts of a Fund and the preparation and contents of periodic reports.
        (3) Where any legislation made under this Law purports to be made in the exercise of a particular power or powers, it shall be taken also to be made in the exercise of all powers under which it may be made.

      • 7.

        Article 17 is replaced as follows:

        "General prohibitions

        (1) A person shall not:
        (a) operate or act as trustee of a Foreign Fund from the DIFC; or
        (b) operate or act as trustee of a Domestic Fund from outside the DIFC.
        (2) A person shall not, establish or otherwise operate a Domestic Fund or act as the Trustee of an Investment Trust in the DIFC unless that person is:
        (a) a body corporate; and
        (b) an Authorised Firm whose Licence authorises it to operate a Fund or act as Trustee of a Fund, as the case may be, of that specific type or class.
        (3) For the purposes of this Law, a person "operates" a Fund if he:
        (a) is responsible for the management of the property held for or within a Fund under the Fund's Constitution whether or not, he delegates any activity which is prescribed in rules made for the purposes of Article 41(2) of the Regulatory Law 2004 as a Financial Service in respect of such property; and
        (b) establishes, operates or winds up the Fund.
        (4) For the purpose of Article 17(3), a person is not operating a Fund merely because:
        (a) he is acting as an agent or employee of an Operator;
        (b) he is appointed under a written agreement by an Operator to provide investment management and other Financial Services for the Fund;
        (c) he is winding up or taking steps to wind up or dissolve the Fund or remedy a defect that led to the Fund being deregistered; or
        (d) he is acting as a trustee of a Fund."

      • 8.

        Article 20 (3) is replaced as follows:

        (3) "Any country or territory recognised under this Article shall be a "Recognised Jurisdiction" and the DFSA shall publish a list of such jurisdictions by means of a written notice. The DFSA may remove from that list any jurisdiction or Fund where the DFSA is no longer satisfied that the jurisdiction or Fund meets the criteria in Article 20(2)".

      • 9.

        Article 21(2) is replaced as follows:

        (2) "Any provision in the Constitution of a Domestic Fund is void in so far as it would have the effect of exempting the Fund, the Trustee or the Operator from liability for any failure to discharge its obligations under this Law, the Regulatory Law 2004, the Law Regulating Islamic Financial Business 2004, the Investment Trust Law 2006 or any rules made under any of these laws."

      • 10.

        Article 21(5) and 21(6) are replaced as follows:

        (5) "The Operator of a Domestic Fund shall appoint an auditor in accordance with Part 5 and, except in respect of a Fund which is an Investment Trust, appoint an eligible person with whom the legal title of the Fund's property is registered.
        (6) The DFSA shall, for the purposes of Article 21(5) make Rules prescribing criteria that a person must meet to be considered "eligible" and such Rules may permit the Operator to be considered "eligible" for the purposes of specified types of Fund."

      • 11.

        In Article 22(3) "the jurisdiction" is replaced by "the DIFC".

      • 12.

        In Article 27(2), insert "relevant" before "requirements".

      • 13.

        In Article 28(1), insert "the Trustee" after "the Operator" and delete "of" in front of "the DFSA" and "a Unitholder".

      • 14.

        In Article 28(2), insert "the Trustee" after "the DFSA" and delete "of" in front of "a Unitholder".

      • 15.

        Article 30(2) is replaced as follows:

        (2) "In addition to the other applicable oversight arrangements, a Domestic Fund which is an Islamic Fund or holds itself out as being an Islamic Fund or otherwise Shari'a compliant shall appoint a Shari'a Supervisory Board."

      • 16.

        Article 31(2) is replaced as follows:

        (2) "Any suitably qualified person appointed to oversee the operation of the Fund must be:
        (a) in the case of a Trustee, independent in accordance with Article 19 of the Investment Trust Law 2006; and
        (b) in any other case, independent in accordance with Article 34."

      • 17.

        In Article 32(1)(a), replace "their" with "its".

      • 18.

        Replace Article 32(1)(d), (e) and (f) as follows:

        (d) "report to the DFSA if any one of the persons providing oversight is of the view that:
        (i) the Operator has not taken, or does not propose to take, appropriate action to deal with a matter reported under Article 32(1)(c); and
        (ii) on reasonable grounds that the breach has had, or is likely to have, a materially adverse effect on the interests of the Unitholders.
        (e) assess at regular intervals whether the Fund's internal systems and controls are adequate, report to the Operator on the assessment and make recommendations to the Operator about any changes that are considered appropriate or necessary to be made; and
        (f) do any other matter or thing as may be prescribed in the Rules and in the case of a Trustee, under the Investment Trust Law 2006."

      • 19.

        Article 35 is replaced as follows:

        "Appointment and removal of auditors

        (1) The Operator of a Domestic Fund shall:
        (a) pursuant to Article 21(5) and subject to Article 35(7), appoint an auditor; and
        (b) at each annual general meeting appoint an auditor to hold office from the conclusion of that meeting to the conclusion of the next annual general meeting; or
        (c) at the beginning of each financial year appoint an auditor to hold office until the beginning of the next financial year.
        (2) The appointment of a firm as an auditor of a Domestic Fund is taken to be an appointment of all persons who are partners of the firm.
        (3) An Operator and, if appointed, the Trustee shall ensure that at all times the Fund has an auditor.
        (4) The Operator of a Domestic Fund shall not appoint an auditor under this Article unless:
        (a) the auditor has, prior to the appointment, consented in writing to serve as the auditor for the Domestic Fund;
        (b) the Operator and, if appointed, the Trustee is not, on reasonable inquiry, aware of any matter which should preclude the auditor from giving its consent under Article 35(5); and
        (c) the auditor is registered with the DFSA in accordance with Part 8 of the Regulatory Law 2004.
        (5) An auditor shall not consent to an appointment as an auditor of a Domestic Fund if:
        (a) the auditor has, or may reasonably be perceived to have, a conflict of interest of a nature prescribed in the Rules;
        (b) the auditor does not have, or may reasonably be perceived not to have, a requisite degree of independence from the Operator and, if appointed, the Trustee or other members of the Governing Body of the Domestic Fund as prescribed in the Rules; or
        (c) the auditor or any associate of the auditor in a firm or business undertaking has acted as an auditor of the Domestic Fund and, if appointed, the Trustee within such earlier period or frequency as prescribed in the Rules.
        (6) The Operator of a Domestic Fund may, subject to Articles 35(7) and 38, at any time remove an auditor notwithstanding anything in any agreement between it and the auditor.
        (7) In the case of an Investment Trust, the Operator must obtain the prior approval of the Trustee before carrying out any activities under Article 35 in relation to the appointment or removal of an auditor.
        (8) The Court may, on application made by the DFSA, order the removal of an auditor of a Domestic Fund.
        (9) Nothing in this Article is to be taken as depriving an auditor removed under it of compensation or damages payable to the auditor in respect of the termination of appointment as auditor."

      • 20.

        In Article 37, insert "and, if appointed the trustee" after "Operator" in (1) (a) and insert "the Trustee or" after "disclose to" in (4).

      • 21.

        In Article 38, insert "and, if appointed, the Trustee's" after "the Domestic Fund's" in (2) and insert "or, if appointed the Trustee" after "Domestic Fund" in (3).

      • 22.

        Article 39 is replaced as follows:

        "Co-operation with auditors

        (1) A Domestic Fund, any member of its Governing Body, any person providing oversight, any officer, employee or agent of the Domestic Fund, its Operator or where appointed its Trustee, shall not knowingly or recklessly make to the auditor a statement (whether written or oral) which:
        (a) conveys or purports to convey any information or explanation which the auditor requires, or is entitled to require, as auditor of the Domestic Fund; and
        (b) is either:
        (i) false, misleading or deceptive in a material particular; or
        (ii) such that it omits information where the omission of such information is likely to mislead or deceive the auditor.
        (2) A Domestic Fund, any member of its Governing Body, any person providing oversight, any officer or employee of the Domestic Fund, its Operator or where appointed its Trustee, or any person acting under the direction or authority of such persons, shall not without reasonable excuse engage in conduct, including without limitation the:
        (a) destruction or concealment of documents;
        (b) coercion, manipulation, misleading, or influencing of the auditor;
        (c) failure to provide access to information or documents specified by the auditor; or
        (d) failure to give any information or explanation which the person is able to give;
        where the Domestic Fund, Operator, Trustee, member of the Governing Body, officer, employee or other person knows or ought to know that such conduct could, if successful:
        (e) obstruct the auditor in the performance of his duties under this Part; or
        (f) result in the rendering of the accounts of the Domestic Fund or the auditor's report being materially misleading."

      • 23.

        In Article 40(3), insert "the Trustee" after "relevant Domestic Fund" and insert "the Trustee's" after "the Domestic Fund's".

      • 24.

        Article 47(1) is replaced as follows:

        "Application for registration

        (1) An application for the registration of a Public Fund shall be made to the DFSA by the Operator or if the Fund is in the form of an Investment Trust, jointly by the Operator and Trustee."

      • 25.

        Article 48 is replaced as follows:

        "Registration requirements

        (1) In relation to the legal structure of a Public Fund, subject to any limitations prescribed by the Rules, registration may be granted by the DFSA only where the Fund takes the form of:
        (a) an Investment Company;
        (b) an Investment Partnership: or
        (c) an Investment Trust.
        (2) The DFSA may make Rules prescribing the requirements that a Public Fund must meet before registration can be granted by the DFSA. Such Rules may include requirements relating to the appointment of a Trustee, an eligible custodian or a Fund Administrator and requirements relating to fitness and proprietary of the Governing Body, persons providing oversight functions and employees of the Fund.
        (3) The DFSA may make Rules providing such requirements referred to in Article 48(2) to be varied in cases where a person, other than a Trustee, referred in Article 48(2) are at the time of application, regulated in a jurisdiction other than the DIFC;
        (a) prescribing certain persons or categories of person to be exempted from the requirements referred to in Article 48(2); and
        (b) providing for any such exemptions to be:
        (i) limited to certain types of Fund or specified circumstances; or
        (ii) subject to certain conditions and restrictions."

      • 26.

        In Article 49, insert "or, if appointed the Trustee" after Operator each time it appears.

      • 27.

        Article 50(2) is replaced as follows:

        (2) "Upon refusing to grant registration, the DFSA shall without undue delay inform the Operator and, if appointed, the Trustee in writing of such refusal and, where requested by the Operator or Trustee, the reasons for such refusal."

      • 28.

        In Article 51, insert "and, if appointed, the Trustee" after "Operator".

      • 29.

        Replace Article 52 as follows:

        "Withdrawal of registration

        (1) The DFSA may withdraw the registration of a Fund where:
        (a) one or more of the following circumstances apply:
        (i) the Fund is not operating or has been wound up;
        (ii) the Operator or, if appointed, the Trustee has, in purported compliance with any requirement under the Law or the Rules, knowingly or recklessly given the DFSA information which is false or misleading in a material particular;
        (iii) the Operator or, if appointed, the Trustee has contravened a requirement imposed on him by or under the Law or the Investment Trust Law 2006;
        (iv) the Operator or, if appointed, the Trustee or member of the Fund's Governing Body has not complied with a direction issued by the DFSA under the Law;
        (v) a person is exercising significant influence over the Fund or Operator or any member of the Fund's Governing Body and that person is not a member of the Fund's Governing Body, Shari'a Supervisory Board, the Trustee or a person providing oversight functions;
        (vi) the Operator is no longer fit and proper to operate the Fund or is incapable of operating the Fund in compliance with the Law or Rules or the terms of its Constitution;
        (vii) the Trustee is no longer fit and proper to act as Trustee of the Fund or is incapable of acting as Trustee of the Fund in compliance with the Law or Rules or the terms of its Constitution and the Investment Trust Law 2006; or
        (viii) the Operator or, if appointed, the Trustee requests the DFSA to withdraw the registration on the grounds that a Special Resolution has been passed by the relevant Unitholders that the Fund should be deregistered; and
        (b) the DFSA considers that:
        (i) the withdrawal of registration is in the interests of the Unitholders of the Fund; or
        (ii) appropriate steps have been taken or may reasonably be taken to protect the interests of the Unitholders.
        (2) Where the DFSA has withdrawn, or proposes to withdraw, a registration under this Article, it may, by written notice, direct the Operator or where appointed the Trustee to take such steps as the DFSA considers necessary or desirable to protect the interests of Unitholders in the Fund.
        (3) Subject to Article 52(4), the DFSA may only exercise its power under Article 52(1) if it has given the relevant Operator or where appointed the Trustee a suitable opportunity to make representations in person and in writing to the DFSA in relation to the proposed withdrawal and the DFSA has informed the Operator or where appointed the Trustee in writing of its response to any such representation.
        (4) The restriction imposed on the DFSA under Article 52(3) shall not apply if the Operator or where appointed the Trustee requests the DFSA to withdraw the registration or the Operator is no longer authorised under its Licence to operate the Fund.
        (5) Upon deciding to withdraw a registration, the DFSA shall without undue delay inform the Operator in writing of:
        (a) such decision;
        (b) the date on which such withdrawal shall be deemed to take effect; and
        (c) where requested by the Operator or where appointed the Trustee, the reasons for the decision.
        (6) The Court may order the DFSA to withdraw the registration of a Public Fund."

      • 30.

        Article 55 is replaced as follows:

        "Permitted investment vehicles

        A Domestic Fund which is a Private Fund may only adopt one of the following legal structures:

        (a) Investment Company;
        (b) Investment Partnership; or
        (c) Investment Trust."

      • 31.

        In Article 58, insert "the Trustee" after "the Operator" in (1)(b), insert "and if appointed, the Trustee" after "Operator" when it first appears in (3) and when it appears for a second time in (5) and insert a new (7) as follows:

        (7) "An approved change must not be made to the trust deed of an Investment Trust except by a deed, expressed to be supplemental to the trust deed, entered into jointly by the Operator and the Trustee."

      • 32.

        In Article 62 insert "or Trustee" after "Operator".

      • 33.

        In Article 63, insert "or where appointed the Trustee" after "Operator".

      • 34.

        In Article 64(2)(c) and (3), insert "or where appointed the Trustee" after "Operator" when the word first appears.

      • 35.

        In Article 65, insert "or where appointed the Trustee" after "Governing Body" in (1)(d) and after "Operator" when the word first appears in (2)(a) and insert "or Trustee" after "Operator" when the word appears for the second time and in (3) insert "the Trustee" as a new "(b)"."

      • 36.

        Article 69 is replaced as follows:

        "Suspension of dealings

        (1) The Operator may, subject to (2), suspend the issue, cancellation, sale and redemption of Units in a Domestic Fund, where due to exceptional circumstances it is in the interest of the Unitholders in the Domestic Fund.
        (2) Where a Trustee has been appointed, the Operator must consult the Trustee and obtain the Trustee's agreement before proceeding with such suspension. If no agreement is reached the Operator may request the DFSA to issue a stop order under Article 70.
        (3) The Operator must notify the DFSA and all Unitholders of any suspension of dealing and the reasons for such suspension.
        (4) The DFSA may prescribe Rules governing the suspension of dealing in a Domestic Fund."

      • 37.

        In Article 70(2) insert "the Trustee" after "the Fund".

      • 38.

        Article 71 is replaced as follows:

        "Jurisdiction

        Without in anyway limiting the jurisdiction of the Regulatory Appeals Committee conferred upon it by or under the Regulatory Law 2004 or any other Law administered by the DFSA, the Regulatory Appeals Committee has additional jurisdiction in accordance with Article 27(2)(k) of the Regulatory Law 2004 to hear and determine any appeal where:

        (a) an applicant appeals the decision of the DFSA in relation to an application for the registration of a Fund;
        (b) a Fund, its Trustee or any member of its Governing Body appeals a decision of the DFSA in relation to the exercise of its power to withdraw the registration of the Fund;
        (c) a Fund, its Trustee or any member of its Governing Body appeals the decision of the DFSA to issue vary or withdraw a notice in relation to the Fund or any member of its Governing Body;
        (d) a Fund, its Trustee or any member of its Governing Body appeals the decision of the DFSA in relation to the proposed alteration of a Fund under Part 9; or
        (e) a Fund, its Trustee or any member of its Governing Body appeals the decision of the DFSA to issue a direction, objection or requirement or a stop order under the Law."

      • 39.

        In the Defined Terms of the schedule, insert the following definitions:

        Investment Trust a trust created under the Investment Trust Law 2006 for the purposes of collective investment.
        Trustee the person described in Article 18 of the Investment Trust Law 2006, who holds the property of the Fund on trust for the Unitholders and, is authorised under a Licence granted by the DFSA to act as Trustee of a Fund.

      • 40.

        In the Defined Terms of the schedule, replace the definition of "Prospectus" as follows:

        Prospectus a document containing such information as prescribed by this Law and under any Rules made thereunder and includes a supplementary Prospectus.

      • 41.

        In the Defined Terms of the schedule, delete the definition of "Qualified Investor".