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Annex A

DUBAI INTERNATIONAL FINANCIAL CENTRE
DUBAI Financial Services AUTHORITY

DRAFT OF PROPOSED
COLLECTIVE Investment LAW

OCTOBER 2005

THIS DRAFT LAW IS PUBLISHED FOR CONSULTATION PURPOSES ONLY. THE DFSA RESERVES THE RIGHT TO AMEND THIS DRAFT AT ITS SOLE DISCRETION.

Part 1: General

1. Title

This Law may be cited as the "Collective Investment Law 2005".

2. Legislative Authority

This Law is made by the Ruler of Dubai.

3. Application of the Law

This Law applies in the jurisdiction of the Dubai International Financial Centre.

4. Date of enactment

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

5. Commencement

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

6. Interpretation

The Schedule contains interpretative provisions and a list of defined terms used in this Law.

7. Administration of the Law

This Law and any legislation made under this Law is administered by the DFSA.

8. Relationship between this Law and the Markets Law

(1) An Offer of a Unit or any right or interest in a Unit in a Collective Investment Fund constitutes an Offer of a Security and is subject to the application of the Markets Law 2004 and the Offered Securities Rules made thereunder, except to the extent that any provision of such law or rules shall not apply, pursuant to the provision of this Article, in accordance with Article 12 of the Markets Law 2004.
(2) In relation to a Collective Investment Fund which is a Domestic Fund, Part 3 of the Markets Law 2004 and the Offered Securities Rules made for the purpose of that Part, shall not apply. Instead, this Law and any Rules made under it shall govern an Offer of the type referred to in Article 8(1).
(3) In relation to a Collective Investment Fund which is a Foreign Fund, the DFSA Board of Directors may make Rules governing the Offer of Units of such a Fund or any rights or interests in such Units, including Rules as to the manner of communication of invitations or inducements to participate in such a Fund.
(4) Any such rules made under Article 8(3) may waive, modify or disapply all or part of Part 3 of the Markets Law 2004 or of any Offered Securities Rules made for the purpose of that part, in their application to collective investment funds or to any Category or Class of Collective Investment Fund.

9. 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 shall make Rules governing the establishment, management, operations and activities of a Collective Investment Fund, including Rules:
(a) permitting or requiring a Fund, or any Category or Class of Fund, to be established in a particular legal form;
(b) requiring a Fund, or any Category or Class of Fund, to establish and implement a written constitution or articles and to issue and publish a prospectus;
(c) prescribing the form and content of such constitution, articles or Prospectus including with respect to its amendment;
(d) governing the rights and obligations of participants;
(e) specifying the powers, duties, rights and liabilities of the Operator of a Fund;
(f) governing the appointment, removal, powers and duties of an auditor of a Fund;
(g) in relation to the appointment, removal, powers and duties of a Person to whom any function has been outsourced;
(h) prescribing the contents of any communication which is an invitation or inducement to participate in a Fund and the manner in which such communication may be made and to whom;
(i) governing the Investment powers of the Operator and the issue, pricing and redemption of Units; and
(j) governing the merger, consolidation, dissolution or winding up of a Fund.
(3) Such rules may, in particular, make provisions:
(a) as to publication or other forms of disclosure in relation to the constitution, Prospectus or operation of the Fund or in relation to changes to the contents of such documents or material changes to the operation of the Fund;
(b) for setting limits in relation to Investment and borrowing powers including leveraging or gearing;
(c) setting initial capital Investment amounts in relation to an Operator's provision of initial capital into its Fund and in relation to a participant's initial Investment in the Fund;
(d) as to the preparation and lodging of periodic reports and the keeping and inspection of records;
(e) in respect of notifications to the DFSA of changes of circumstances and other matters;
(f) governing the voting rights in relation to Units and of unitholders, procedures and the conduct of unitholders meetings;
(g) governing the preparation, publication and audit of the accounts of a Fund; and
(h) specifying forms, procedures, and requirements in relation to any applications, submissions, requests and other representations to the DFSA.
(4) 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.

10. Consultation

The DFSA shall publish draft Rules in the manner prescribed under Article 24 of the Regulatory Law 2004.

11. Waivers and Modifications of the Rules

The DFSA may by written notice provide that one or more provisions of the Rules either:

(a) shall not apply in relation to a person; or
(b) shall apply to a Person with such modifications as are set out in the written notice;

as provided for in Article 25 of the Regulatory Law 2004.

Part 2: Collective Investment Funds

12. Incorporated and unincorporated structures

(1) A Person shall not, by way of business, establish or otherwise operate a Collective Investment Fund in the DIFC unless the Fund conforms to the provisions of Article 12(2) or (3) as applicable.
(2) A Domestic Fund which is a Fund shall be restricted to adopting one of the following legal structures:
(a) an Investment Company; or
(b) an Investment Partnership.
(3) A Domestic Fund which is an Exempt Fund may adopt any legal structure whether an incorporated, unincorporated or trust structure other than a Protected Cell Company.

13. Prohibitions in relation to the operation of Domestic Funds

(1) A Person shall not, in or from the DIFC, operate a Domestic Fund unless that Person is an Authorised Firm whose Licence authorises it to operate a Collective Investment Fund.
(2) For the purposes of this Article, a Person "operates" a Domestic Fund if, for the purposes of managing a Collective Investment Fund, he carries on as principal any activity which is prescribed in legislation made under Article 41(3) of the Regulatory Law 2004 as a Financial Service.
(3) For the purpose of this Article, a Person is not operating a Fund merely because:
(a) he is acting as an agent or Employee of another person; or
(b) he is taking steps to wind up or dissolve the Fund or remedy a defect that led to the Fund being deregistered.

14. Registration of Domestic Funds

(1) An Operator of a Domestic Fund shall not, subject to (2), in or from the DIFC, Offer, issue or sell a Unit in a Domestic Fund to another Person unless the Fund is a Registered Fund.
(2) An Operator is exempt from the prohibition in Article 14(1) if the Units in question are those of a Fund which has exempt status in accordance with Part 8 of this Law and any Rules made for the purpose of exemption under this Law.

15. Prohibitions in relation to Foreign Funds

(1) A Person shall not, in or from the DIFC, Offer, issue or sell a Unit in a Foreign Fund to another Person unless the Offer complies with the Markets Law 2004 and the Offered Securities Rules made thereunder.
(2) If an Offeror is located within the DIFC then that Person shall be an Authorised Firm.

16. Rules in relation to Foreign Funds

The DFSA may make Rules in relation to the activities of Foreign Funds, including Rules as to requirements, prohibitions, conditions or restrictions in relation to Offering, issuing or selling Units in such Funds in or from the DIFC.

17. Certain Representations

A Person shall not in or from the DIFC represent that a Fund is:

(a) an Exempt Fund; or
(b) a Registered Fund;

unless the Fund is such a Fund, or make any other misrepresentation with respect to a Fund.

18. Arrangements constituting a Collective Investment Fund

(1) A Collective Investment Fund ("Fund") is any arrangement with respect to Property of any description, including Money, where:
(a) the purpose or effect of the arrangement is to enable persons taking part in the arrangement (whether by becoming owners of the Property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the Property or sums paid out of such profits or income;
(b) the persons who are to participate ("participants") in the arrangement do not have day-to-day control over the management of the Property, whether or not they have the right to be consulted or to give directions; and
(c) the arrangement has either or both of the following characteristics:
(i) the contributions of the participants and the profits or income out of which payments are to be made to them are pooled; or
(ii) the Property is managed as a whole by or on behalf of the operator of the Fund.
(2) If the arrangement provides for such pooling as is mentioned in Article 18 (1)(c)(i) in relation to separate parts of the Property, the arrangement is not to be regarded as constituting a single Collective Investment Fund unless the participants are entitled to Exchange rights in one part for rights in another.

19. Arrangements not constituting a Collective Investment Fund

The DFSA may make Rules excluding certain arrangements or types of arrangements from constituting a Collective Investment Fund.

Part 3: Operators of Domestic Funds

20. The Operator of a Fund

(1) A Domestic Fund shall have at all times an Operator which is:
(a) a Body Corporate; and
(b) an Authorised Firm whose Licence authorises it to carry on such Financial Services relevant to its operation of the Fund.
(2) An Operator shall:
(a) operate the Fund; and
(b) perform the functions conferred on it by the Fund's constitution and by or under this Law.
(3) An Operator shall comply with any requirement imposed by or under legislation administered by the DFSA relevant to its approval or authorisation to operate the Fund.
(4) The DFSA shall make Rules prescribing financial limits and other Related matters in respect of the interests an Operator may acquire and hold in its Fund.

21. Participants

An Operator shall take reasonable steps to ensure that when it sells the Units in its Domestic Fund it does so only to persons who are Qualified Investors.

22. Duties of the Operator and its officers, Employees and agents

(1) In exercising its powers and carrying out its duties, the Operator of a Domestic Fund shall:
(a) act honestly;
(b) exercise the degree of care and diligence that a reasonable Person would exercise if he were in the Operator's position;
(c) act in the best interests of the unitholders and, if there is a conflict between the unitholders' interests and its own interests, give priority to the unitholders' interests;
(d) treat the unitholders who hold interests of the same Class equally and unitholders who hold interests of different Classes fairly;
(e) not improperly make use of information acquired through being the Operator in order to:
(i) gain an advantage for itself or another person; or
(ii) cause detriment to the unitholders in the Fund;
(f) ensure that Fund Property is:
(i) clearly identified as Fund property; and
(ii) held separately from Property of the Operator and Property of any other Fund;
(g) report to the DFSA any breach of this Law or relevant provisions of any other legislation administered by the DFSA, or of any Rules made under those laws , that:
(i) relates to the Fund; and
(ii) has had, or is likely to have, a materially adverse effect on the interests of unitholders;
as soon as practicable after it becomes aware of the breach;
(h) comply with any other duty or obligation as may be prescribed by or under this Law or any other legislation administered by the DFSA; and
(i) carry out or comply with any other duty, not inconsistent with DIFC Law, that is conferred on the Operator by the Fund's constitution.
(2) An officer, Employee or agent of the Operator shall:
(a) not improperly make use of information acquired through being such an officer, Employee or agent of the Operator in order to:
(i) gain an advantage for himself or another person; or
(ii) cause detriment to unitholders in the Fund;
(b) not make improper use of his position as such an officer, Employee or agent to gain, directly or indirectly, an advantage for himself or for any other Person or to cause detriment to the unitholders in the Fund;
(c) comply with any other duty or obligation as may be prescribed by or under this Law or any other legislation administered by the DFSA; and
(d) carry out or comply with any other duty, not inconsistent with DIFC Law, that is conferred on him by the Fund's constitution.

23. Retirement or removal of an Operator

(1) The DFSA may make Rules prescribing the manner and circumstances in which:
(a) an Operator may retire;
(b) unitholders in a Fund may resolve to remove an Operator;
(c) the DFSA may withdraw an Operator's Licence;
(d) a new Operator may be appointed to a Fund; and
(e) a temporary Operator may be appointed to a Fund pending the choice or appointment of a new Operator.
(2) A Person cannot be chosen or appointed as a new Operator or temporary Operator unless such a Person meets the requirements of Article 20.

24. Orders of the Court relating to retirement or removal

(1) Where an Operator seeks to retire from a Domestic Fund and a new Operator cannot be found, the Court may, on application of the Operator, of a unitholder in the Fund, or of the DFSA, make one or more of the following orders:
(a) an order for the appointment of a temporary Operator;
(b) an order for the winding up of the Fund;
(c) any other order as the Court considers just and equitable and in the interests of the Fund and of its unitholders.
(2) If:
(a) a Domestic Fund does not have an Operator that meets the requirements of Article 20(1); or
(b) in the event of misconduct, default or breach of duty by the Operator, the Court considers that it is just and equitable and in the interests of the Fund and of its unitholders to make such an order;

the Court may, on application of the DFSA or of a unitholder in the Fund, make one or more of the following orders:
(c) an order for the appointment of a new or temporary Operator;
(d) an order for the winding up of the Fund; or
(e) any other order as the Court considers appropriate.

25. Appointment of third party providers to carry out certain functions

(1) An Operator may, subject to any restriction in the constitution of the Domestic Fund and any provisions of the Rules, delegate any of its functions, including its prescribed functions, to another Person (a third party provider), whether that third party provider is located in or outside the DIFC.
(2) The DFSA may make Rules as to:
(a) any functions which the Operator may not delegate to a third party provider;
(b) any functions which constitute prescribed functions for the purpose of this Article;
(c) any requirement, process and procedure for notification to or approval by the DFSA of appointment of a third party provider to carry out any prescribed functions;
(d) duties, obligations and requirements of the Operator and of any of its third party providers in relation to a Domestic Fund or a Class or Category of Domestic Fund; and
(e) the manner or circumstances in which a third party provider may perform a prescribed function.
(3) Where the Operator delegates a function, the Operator remains responsible for any acts or omissions of the third party provider as if they were the acts or omissions of the Operator.

Part 4: Oversight of Domestic Funds

26. Oversight Panel

(1) The Operator of a Domestic Fund which is, or is to be, a Registered Fund shall appoint and maintain an Oversight Panel in accordance with the provisions of this part.
(2) Such a panel shall be established with powers and functions to:
(a) monitor the Operator's compliance with the Fund's constitution and Fund particulars and to report on its findings to the Operator;
(b) monitor the Operator's compliance with any obligation or requirement imposed on the Fund under any legislation administered by the DFSA including any requirement to establish and maintain proper systems and controls and to report on its findings to the Operator;
(c) report to the Operator:
(i) any breach of this Law or any other legislation administered by the DFSA or of any rule made under those laws which may relate to the Fund;
(ii) any breach of a term, condition or restriction of a Licence involving the Fund; or
(iii) any breach of the provisions of the Fund's constitution;
of which the Oversight Panel becomes aware or that it suspects;
(d) report to the DFSA if any Member of the panel is of the view that the Operator has not taken, or does not propose to take, appropriate action to deal with a matter reported under Article 26(2)(c);
(e) assess at regular intervals whether the constitution or the Fund's internal systems and controls are adequate, to report to the Operator on the assessment and make recommendations to the Operator about any changes that it considers should be made; and
(f) do any other matter or thing as may be prescribed in the Rules.
(2) The DFSA may make Rules in respect of any matters relating to the functions and powers of a Fund's Oversight Panel, including Rules as to:
(a) the power of a panel to Commission and rely on independent legal, accounting or other professional advice or assistance;
(b) the payment of costs and expenses of an Oversight Panel;
(c) the proceedings of an Oversight Panel, including as to the conduct of meetings, the keeping of minutes, and the making of reports and recommendations;
(d) submission of reports by an Oversight Panel to the DFSA; and
(e) disclosure by Members of an Oversight Panel of any interests or circumstances which may conflict with the proper performance of their duties.

27. Membership of the Oversight Panel

(1) The Oversight Panel which is to be established and maintained by the Fund is to be comprised of three or more Members in accordance with this Article.
(2) In relation to a Fund which is in the form of an Investment Company, the panel Members shall be non-executive Board Members who are Members of the Registered Fund's Board and who are independent of the Authorised Corporate Director (the Operator).
(3) In relation to a Fund which is in the form of an Investment Partnership, the panel Members shall be designated partners of the Partnership who are independent of the Authorised Corporate Partner (the Operator).
(4) In relation to a Fund which is in the form of an Investment Trust, the panel Members shall be trustees who are Members of the Board of Trustees and who are independent of the Authorised Corporate Trustee (the Operator).
(5) A Member of the panel is independent for the purposes of Article 27 if he:
(a) is not, and has not been in the previous 2 years, an Employee of the Operator or a Body Corporate in the same Group (a "related body corporate");
(b) is not, and has not been in the previous 2 years, an executive officer of a Related body corporate;
(c) is not, and has not been in the previous 2 years, involved in material business dealings, or in a professional capacity, with the Operator or a Related body corporate;
(d) is not a Member of a Partnership, a trustee of a trust that is, or has been in the previous 2 years, substantially involved in business dealings, or in a professional capacity, with the Operator or in a Related body corporate;
(e) does not have a material interest in the Operator or a Related body corporate; and
(f) is not a relative or de facto spouse of a Person who has a material interest in the Operator or a Related Body Corporate of a kind described in (a) to (e) of this Article.
(6) The number of independent Members of the Governing Body of a Fund, shall at all times exceed the number of non-independent Members.
(7) The DFSA may make Rules prescribing the constitution of the Fund's Oversight Panel and the criteria for membership on the Fund's Oversight Panel.
(8) The DFSA may, in its absolute discretion, object to the appointment of a Person to the Oversight Panel of a Domestic Fund and require the Operator to appoint a replacement.
(9) The DFSA shall notify the Operator of such objection and requirement in writing and, where requested by the Operator, the reasons for such objection.

28. Duties of Members of an Oversight Panel

(1) A Member of a Fund's Oversight Panel shall:
(a) act honestly;
(b) exercise the degree of care and diligence that a reasonable Person would exercise if he were in the member's position;
(c) not make use of information acquired through being such a Member in order to:
(i) gain an improper advantage for himself or another person; or
(ii) cause detriment to unitholders in the Fund;
(d) not make improper use of his position as such a Member to gain, directly or indirectly, an advantage for himself or for any other Person or to cause detriment to the unitholders in the Fund;
(e) comply with any other duty or obligation as may be prescribed by or under this Law or any other legislation administered by the DFSA, and
(f) carry out or comply with any other duty, not inconsistent with DIFC Law, that is conferred on him by the Fund's constitution.
(2) A Member of the Oversight Panel is to take all reasonable steps to assist the DFSA in carrying out an inquiry under Part 5 of the Regulatory Law 2004.

29. Exempt Funds

A Domestic Fund which is an Exempt Fund is not required to appoint and maintain an Oversight Panel.

30. Islamic Funds

(1) 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.
(2) The DFSA may make Rules prescribing circumstances in which a Fund will be taken to, or will be taken not to, be holding itself out as being Shari'a compliant or an Islamic Fund.
(3) The DFSA may make Rules prescribing the appointment, formation, conduct and operation of a Shari'a Supervisory Board.
(4) The DFSA may make Rules providing that certain persons or Categories of Person may not market a particular Fund or an Islamic Fund by promoting the Islamic quality of the Fund by using the words Shari'a compliant or Islamic in the name of the Fund or otherwise holding out that the Fund is in any way Islamic or Shari'a compliant.

Part 5: Auditors of Domestic Funds

31. Appointment and removal of auditors

(1) The Operator of a Domestic Fund shall:
(a) 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 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 is not, on reasonable inquiry, aware of any matter which should preclude the auditor from giving his consent under Article 31(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 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 within such earlier period or frequency as prescribed in the Rules.
(6) The Operator of a Domestic Fund may at any time remove an auditor notwithstanding anything in any agreement between it and the auditor.
(7) The Court may, on application made by the DFSA, order the removal of an auditor from a Domestic Fund.
(8) 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.

32. Auditor's reports

(1) An auditor of a Domestic Fund shall be required to make two types of report:
(a) an audit report; and
(b) in the case of an Exempt Fund, an oversight report.
(2) The DFSA may make Rules in relation to:
(a) the functions to be carried out by an auditor when auditing a Domestic Fund's accounts and when reviewing an Exempt Fund's Transaction records;
(b) the scope of the auditor's audit and oversight reports; and
(c) the scope of ad-hoc reports of the auditor.

33. Auditors' duties

(1) An auditor shall, in preparing the audit report in relation to the accounts of a Domestic Fund, carry out such investigations as will enable the auditor to form an opinion as to the following matters:
(a) whether proper accounting records have been kept by the Operator on behalf of the Domestic Fund;
(b) whether the Domestic Fund's accounts are in agreement with the accounting records and regulatory returns;
(c) whether the Domestic Fund's accounts have been prepared in compliance with the applicable accounting standards; and
(d) whether the accounts of the Domestic Fund represent a true and fair view of the financial condition and State of affairs of the Domestic Fund.
(2) If the auditor is of the opinion that proper accounting records have not been kept, or that the accounts are not in agreement with the accounting records and returns, or that the accounts do not comply with accounting standards, the auditor shall State that fact in the audit report.
(3) An auditor of an Exempt Fund shall, in preparing the oversight report in relation to the Operator's exercise of its Investment powers, carry out such investigations as will enable the auditor to form an opinion as to the following matters:
(a) whether the Operator acted at all times in the best interests of unitholders and substantially in accordance with the Exempt Fund's constitution and short form Prospectus terms; and
(b) whether the Operator has prepared and maintained proper records of all Investment transactions in compliance with the applicable Rules.
(4) If the auditor is of the opinion that the permitted Investment parameters have been materially exceeded to the detriment of the unitholders or breached the applicable Rules or that proper Transaction records have not been kept, the auditor shall State that fact in the oversight report.
(5) If the auditor fails to obtain all the information and explanations which, to the best of the auditor's knowledge and belief are necessary for the purposes of the audit or oversight review, the auditor shall State that fact in the report.

34. Resignation of an auditor

(1) An auditor of a Domestic Fund may resign from office by depositing a notice in writing to that effect together with a statement under Article 34(2) at the Domestic Fund's registered office and with the DFSA; and any such notice operates to bring its term of office to an end on the date on which the notice is deposited, or on such later date as may be specified in it.
(2) When an auditor ceases for any reason to hold office the auditor shall Deposit at the Domestic Fund's registered office and with the DFSA:
(a) a statement to the effect that there are no circumstances Connected with the ceasing to hold office which the auditor considers should be brought to the notice of the Members or creditors of the Domestic Fund; or
(b) a statement of any circumstances as are mentioned above.
(3) Where a statement under Article 34(2) falls within sub-paragraph (b) of that Article, the Operator, or failing which the other Members of the Governing Body of the Domestic Fund, shall send a copy of the statement to the DFSA along with any comments.

35. Co-operation with auditors

(1) A Domestic Fund, and any Member of its Governing Body, officer, Employee or agent of the Domestic Fund or the Operator, 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 or both:
(i) false, misleading or deceptive in a material particular; or
(ii) is 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 officer or Employee of the Domestic Fund or of the Operator, 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, 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.

36. Obligation of Disclosure to the DFSA

(1) An auditor is subject to the obligations of disclosure under Article 36(3).
(2) Without limiting the application of any other provision of this Law, an auditor does not contravene any duty to which the auditor is subject merely because the auditor gives to the DFSA:
(a) a notification as required under this Article; or
(b) any other information or opinion in relation to any such matter;
if the auditor is acting in good faith and reasonably believes that the notification, information or opinion is relevant to any functions of the DFSA.
(3) Subject to Article 36(4), an auditor shall disclose to the DFSA any matter which reasonably tends to show one of the following:
(a) a breach, or likely breach of a provision of this Law or the Rules;
(b) a failure, or likely failure, to comply with any obligation to which a Person is subject under such legislation; or
(c) any other matter as the DFSA may prescribe in Rules;
which may be attributable to the conduct of the relevant Domestic Fund, Operator or other Member of the Governing Body including the Domestic Fund's or Operator's Directors, officers, Employees or agents.
(4) Article 36(3) shall not apply to the extent that compliance with such requirement would disclose a Privileged Communication.
(5) A Domestic Fund shall establish and implement appropriate systems and internal procedures to enable it and its auditor to comply with Article 36(3).
(6) Any provision in an agreement between a Domestic Fund and a Director, officer, Employee, agent or auditor is void in so far as it purports to hinder any Person from causing or assisting the auditor to comply with an obligation under Article 36(3).
(7) No Person shall be subjected to detriment or loss or damage merely by reason of Undertaking any act to cause or assist an auditor to comply with an obligation under Article 36(3).
(8) A Court may, on application of an aggrieved Person, make any order for relief where the Person has been subjected to any such detriment or loss or damage referred to in Article 36(7).

Part 6: Prospectus Requirements for Domestic Funds

37. Prospectus

(1) The Operator of a Domestic Fund shall, subject to Article 38(1), produce, publish and make available to prospective participants a standard form Prospectus in accordance with this Law and any Rules made under this Law.
(2) The Prospectus shall be a clear, concise and understandable presentation of information which is not, by virtue of the omissions of relevant Material Information, the inclusion of misstatements or otherwise, misleading.
(3) The Prospectus shall comply with the contents requirements set out in the Rules and contain any other Material Information investors would reasonably require for the purpose of making an informed decision on whether to become a participant in the Fund.
(4) If at any time after the preparation of a Prospectus which has been issued, there is a significant change affecting any matter contained in the Prospectus or a significant new matter arises, the Operator shall in accordance with the Rules issue a supplementary Prospectus which:
(a) provides details of the change or new matter;
(b) complies with the requirements of this Article; and
(c) complies with any information required by the Rules.
(5) The Operator shall file any supplementary Prospectus issued with the DFSA.
(6) No advertisement or publicity may be issued in respect of a Prospectus or supplementary Prospectus or the Units offered in the Prospectus or supplementary Prospectus, unless the information contained in the Prospectus complies with the Rules and the Operator has filed a copy with the DFSA.

38. Short Form Prospectus

(1) The Operator of a Domestic Fund which is an Exempt Fund may produce and make available to prospective participants a short form Prospectus in accordance with this Law and the Rules made under this Article.
(2) Such a Prospectus and the Operator of the Exempt Fund shall comply with the provisions in Articles 37(2), (4) and (6) save that the Prospectus shall comply with the reduced contents requirements prescribed in the Rules made for the purpose of this Article and a copy need not be filed with the DFSA.

39. Liability for misleading statements

(1) Any Person prescribed in Rules made by the DFSA as being responsible for a Prospectus is liable to pay compensation to another Person who has acquired Units to which the Prospectus relates and who has suffered loss or damage arising from any untrue or misleading statement in the Prospectus or the omission from it of any material matter required to have been included in the Prospectus under the Law or Rules.
(2) In Article 39(1) the term 'prospectus' includes a standard form Prospectus, a short form Prospectus and a supplementary Prospectus issued in relation to a standard form or short form Prospectus.
(3) The DFSA may make Rules prescribing circumstances in which a Person who would otherwise be liable under Article 39(1) will not be so liable.
(4) Nothing in this Article affects the powers, rights or liabilities that any Person may have apart from this Article including the power to institute proceedings under Article 94 of the Regulatory Law 2004.

40. Mandatory Statements

(1) Every Prospectus shall contain a prominent statement in respect of the relevant Fund's regulatory status and the regulatory regime applying to the Fund and, in particular, its Prospectus.
(2) A Prospectus shall include the text prescribed in Rules made by the DFSA for the purposes of this Article.
(3) In Article 40(1) the term 'prospectus' includes a standard form Prospectus, a short form Prospectus and a supplementary Prospectus issued in relation to a standard form or short form Prospectus.

Part 7: Registration of Domestic Funds

41. Application for Registration

(1) An application for the registration of a Fund may be made to the DFSA by the Operator of a Domestic Fund which is a Fund.
(2) Such an application shall be accompanied by the Fund's Prospectus which shall be in accordance with the requirements of this Law.
(3) The DFSA shall make Rules containing the requirements which an application for a registration shall meet before such application can be accepted by the DFSA.
(4) The DFSA may make Rules prescribing the requirements that a Domestic Fund shall meet before registration can be granted by the DFSA. Such Rules may include requirements relating to the legal form the Fund shall adopt and requirements relating to fitness and proprietary of the Governing Body and Employees of the Domestic Fund.
(5) The DFSA may make Rules providing such requirements referred to in Article 41(4) to be varied in cases where an application is made by a Person which is, 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 41(4); and
(b) providing for any such exemptions to be:
(ii) limited to certain types of Fund or specified circumstances; or
(iii) subject to certain conditions and restrictions.
(6) The DFSA may make Rules providing that certain types of Funds may not be granted registration.
(7) The name of the Fund shall not in the opinion of the DFSA be undesirable or misleading.
(8) Any provision of the constitutional documents or Prospectus of a Domestic Fund is void in so far as it would have the effect of exempting the Fund or the Operator from liability for any failure to exercise due care and diligence in the discharge of its activities.
(9) The unitholders shall be entitled to have their Units redeemed by the Operator of the Fund at a price:
(a) Related to the net value of the Property to which the Units relate; and
(b) determined in accordance with the Fund's constitutional documents or Prospectus.
(10) A Fund is to be treated as complying with Article 41(9) if it requires the Operator to ensure that a unitholder is able to sell his Units on an Investment Exchange at a price not significantly different from that mentioned in that Article.

42. Providing Information in relation to the Application

(1) The DFSA may require the applicant to provide additional information reasonably required for the DFSA to be able to make a decision with regard to the application.
(2) If at any time between the filing of an application for registration and the grant of a registration the applicant becomes aware of a material change reasonably likely to be relevant to the application under consideration, it shall inform the DFSA in writing of such change without delay.

43. Rejection of an Application

(1) The DFSA may in its absolute discretion refuse to grant an application for registration.
(2) Upon refusing to grant registration, the DFSA shall without undue delay inform the applicant in writing of such refusal and, where requested by the applicant, the reasons for such refusal.

44. Granting registration

The DFSA may register a Fund and shall without undue delay inform the relevant applicant in writing of:

(a) such decision; and
(b) the date on which the registration shall be deemed to take effect.

45. 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 Fund or Operator 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 Fund or Operator has contravened a requirement imposed on him by or under the Law;
(iv) the Fund or Operator 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, Oversight Panel or Shari'a Supervisory Board;
(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; or
(vii) the Operator 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 to take such steps as the DFSA considers necessary or desirable to protect the interests of unitholders in the Fund.
(3) Subject to Article 45(4), the DFSA may only exercise its power under Article 45(1) if it has given the relevant Operator 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 in writing of its response to any such representation.
(4) The restriction imposed on the DFSA under Article 45(3) shall not apply if the Operator requests the DFSA to withdraw the registration.
(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, the reasons for the decision.

46. Reinstatement

The DFSA may reinstate the registration of a Fund if the DFSA is satisfied that the Fund should not have been deregistered or if the defect that led to registration being withdrawn has been remedied.

Part 8: Exemption of Domestic Funds

47. Notifications and other matters in relation to exempt status

(1) The Operator of a Domestic Fund need not apply to the DFSA to register its Fund if the Fund is able to satisfy the criteria for exempt status.
(2) The DFSA may make Rules in respect of an Exempt fund or its Operator which may be required for the exercise of the DFSA's functions under this Law.
(3) In particular, the DFSA shall make Rules setting out the exemption criteria:
(a) a Fund shall satisfy to be classified as an Exempt Fund under this Part; and
(b) which the Fund shall continue to satisfy if it is to remain classified as an Exempt Fund.
(4) The Operator of an Exempt Fund shall notify the DFSA immediately prior to the initial issue or Offer of Units in the Fund in the manner prescribed in the Rules.

Part 9: Alteration to a Domestic Fund

48. Alterations

(1) Subject to Article 49(3), the constitution, Operator, Member of the Governing Body, Member of the Shari'a Supervisory Board or the auditor of a Fund may be changed:
(a) by a Special Resolution; or
(b) by the Operator if the Operator considers on reasonable grounds that the change will not adversely affect unitholders' rights.
(2) The DFSA may prescribe by Rules further requirements in relation to such changes and in regard to other alterations in respect of the Fund.

49. Notice of Alterations

(1) A Domestic Fund shall give notice in writing to the DFSA of any proposal to alter the constitution of the Fund, to replace the Operator or any Member of the Governing Body or the Shari'a Supervisory Board, or to replace the Fund's auditor.
(2) Any such notice given to the DFSA in relation to a proposal to alter the constitution shall be accompanied by a Certificate signed by the Governing Body of the Fund and its legal advisors to the effect that the change will not affect compliance with this Law or any Rules made under this law.
(3) Effect is not to be given to any proposal under Article 49(1) unless the DFSA has, by notice in writing, given its approval to the proposal.

50. Rejection of Proposed Alteration

(1) The DFSA may in its absolute discretion refuse to grant approval of a proposed alteration.
(2) Upon refusing to grant approval, the DFSA shall without undue delay, inform the Domestic Fund in writing of such refusal and, where requested by the Fund, the reasons for such refusal.

Part 10: Transfer Schemes and Winding up of Domestic Funds

51. Transfer Schemes

(1) Pursuant to Part 9 of the Regulatory Law 2004, a Domestic Fund may be transferred in whole or in part to another body in accordance with that Part.
(2) The DFSA may make Rules for the purposes of this Article pursuant to the power conferred under Article 113 of the Regulatory Law 2004.

52. When a Domestic Fund may be wound up

A Domestic Fund may be wound up:

(a) by order of the Court as provided by or under this Law and the Insolvency Law 2004;
(b) where not inconsistent with such Laws, in the manner and circumstances provided in the Fund's constitution; or
(c) in any other circumstances as may be prescribed in the Rules.

53. Winding up required by a Fund's constitution

The constitution of a Fund may provide that the Fund is to be wound up:

(a) at a specified time; or
(b) in specified circumstances or on the happening of a specified event;

but a provision of the constitution that purports to provide that the Fund is to be wound up if a particular Authorised Firm ceases to be its Operator is of no effect including for the purposes of Article 56(1)(a).

54. Winding up at direction of Unitholders

If the unitholders of a Fund want the Fund to be wound up, such persons may call an extraordinary meeting to pass a Special Resolution directing the Operator to wind up the Fund.

55. Winding up if the Funds purpose has been accomplished or cannot be accomplished

(1) If the Operator of a Fund considers that the purpose of the Fund:
(a) has been accomplished; or
(b) cannot be accomplished;

it may, in accordance with this section, take steps to wind up the Fund.
(2) The Operator shall give to the unitholders of the Fund and to the DFSA a notice in writing;
(a) explaining the proposal to wind up the Fund, including explaining how the Fund's purpose has been accomplished or why that purpose cannot be accomplished;
(b) informing the unitholders of their rights to call a unitholders' meeting to consider the proposed winding up of the Fund and to vote on any extraordinary resolution unitholders propose about the winding up of the Fund; and
(c) informing the unitholders that the Operator is permitted to wind up the Fund unless a meeting is called to consider the proposed winding up of the Fund within 28 days of the Operator giving the notice to the unitholders.
(3) If no meeting is called within that 28 days to consider the proposed winding up, the Operator may wind up the Fund.

56. Winding up by order of the Court

(1) The Court may order the winding up of a Domestic Fund if:
(a) in contravention of this Law, the Operator of the Fund has not been granted consent to incorporate or register the Fund as an Investment Company, Investment Partnership or Investment Trust, as the case may be, or has not so incorporated or registered;
(b) in contravention of Part 8 of this Law, the Fund has not been registered with the DFSA;
(c) the Operator or other Member of the Fund's Governing Body believes on reasonable grounds that a scheme of arrangement is not practical or possible;
(d) the Court thinks it is just and equitable to make the order; or
(e) within 3 months before the application for the order was made, execution or other process was issued on a judgment, decree or order obtained in the Court or in any other Court (whether in the United Arab Emirates or otherwise) which is final and not subject to appeal in favour of a creditor of, and against, the Fund or the Operator in its capacity as the operator of the Fund and the execution or process has been returned unsatisfied.
(2) The Court may make any orders it considers appropriate for the winding up of the Domestic Fund, including but not limited to:
(a) an order appointing a Person other than the Operator to take responsibility for ensuring the Fund is wound up in accordance with its constitution and any orders under Article 63(2) if the Court thinks expedient (including for the reason that the Operator has ceased to exist or is not properly discharging its obligations in relation to the winding up); and
(b) directions as to how the Fund is to be wound up including for the reason that the provisions in the Fund's constitution are inadequate or impracticable.
(3) Orders under Article 56(1)(a), (b) or (c) or (2) may be made on the application of:
(a) the Operator or other Members of the Governing Body including Members of the oversight panel and Sharia Supervisory Board of the Fund;
(b) the auditor of the Fund;
(c) a unitholder in the Fund; or
(d) the DFSA.
(4) An order under Article 56(1)(c) may be made on the application of a creditor.

57. The winding up of the Fund

(1) The Operator of a Fund or the Person appointed by the Court shall ensure that the Fund is wound up in accordance with its constitution and any orders under Article 60(2) if:
(a) the Fund's constitution provides that the Fund is to be wound up at a specified time, in specified circumstances or on the happening of a specified event and that time is reached, those circumstances occur or that event occurs;
(b) the unitholders pass a Special Resolution directing the Operator to wind up the Fund; or
(c) the Court makes an order directing the Operator to wind up the Fund; or
(2) The Operator of a registered Fund may wind up the Fund in accordance with its constitution and any orders under this part if the Operator or appointed Person is permitted under this part to wind up the Fund.
(3) Interests shall not be issued in a Fund at a time after the Operator or appointed Person has become obliged to ensure the Fund is wound up, or after the Fund has started to be wound up.
(4) If, on completion of the winding up of a Fund, the Person who has been winding up the Fund has in their possession or under their control any unclaimed or undistributed Money or other Property that was part of the Fund Property, the Person shall, as soon as practicable, pay the Money into Court or transfer the Property or to the Court.

58. Reinstatement of a Domestic Fund

(1) Where a Domestic Fund has been or is in the course of being wound up in accordance with or in purported accordance with this Law, the Rules or its constitution, the Court may make any order for reinstatement of the Fund if:
(a) an application for reinstatement is made to the Court by:
(i) a Person aggrieved by the winding up; or
(ii) a Person who was winding up the Fund; and
(b) the Court is satisfied that it is just and equitable that the Fund be reinstated.
(2) The Court may give any directions it thinks just for putting the Fund and other persons in the same position, as far as possible, as if the Fund had not been wound up.

Part 11: DFSA Powers in Relation to a Fund

59. Powers of supervision of a Domestic Fund and Operator

(1) Nothing in this Article affects the powers, rights or liabilities that the DFSA has under Part 5 of the Regulatory Law 2004.
(2) The DFSA may, from time to time, inquire whether the Operator of a Domestic Fund is complying with the Fund's constitution and with relevant provisions of or made under any legislation administered by the DFSA.
(3) The Operator and its officers, Employees or agents shall take all reasonable steps to assist the DFSA in carrying out any inquiry under Article 48(1).
(4) The DFSA may require a Domestic Fund or any Member of its Governing Body, or any Director, officer, Employee or agent of such Person, by written notice to:
(a) give, or procure the giving of, such specified information; or
(b) produce, or procure the giving of, such specified documents;

to the DFSA as the DFSA considers necessary or desirable for the purpose of conducting its inquiry under Article 48(1).
(5) Information given or a document produced as a result of the exercise by the DFSA of powers under this Article is admissible in evidence in any proceedings, provided that any such information or document also complies with any requirements relating to the admissibility of evidence in such proceedings.
(6) Nothing in this Article shall be taken to limit or restrict the performance or exercise of any other function or power of the DFSA, including a function or power under Part 5 of the Regulatory Law 2004, for the purpose of conducting an inquiry under this Article or for any other purpose.

60. Suspension of Dealings

(1) The Operator may, with the prior agreement of:
(a) the Oversight Panel of the Fund in the case of a Fund; or
(b) the auditor of the Fund, in the case of an Exempt Fund;
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) The DFSA may prescribe Rules governing the suspension of dealing in a Domestic Fund.

61. Stop orders

(1) This Article does not limit in any way the application of or generality of Article 16 of the Markets Law 2004 or of any Articles in this Law.
(2) If the DFSA is satisfied that:
(a) any dealings in a Unit in a Collective Investment Fund or any right or interest in such a Unit would contravene or has contravened this Law or the Rules; or
(b) that due to exceptional circumstances it is in the interest of the unitholders in the Fund;
the DFSA may issue a stop order directing that no offers, issues, redemptions, sales or transfers of such Units or rights or interests may be made for such a period of time as it thinks appropriate.
(3) Upon making a decision in relation to Article 51(2) the DFSA shall without undue delay inform the Fund and the Operator in writing of its decision and where requested by any such persons the reasons for the decision.
(4) The DFSA may only exercise its power to issue a stop order if it has given the relevant Person a suitable opportunity to make representations in Person and in writing to the DFSA in relation to the proposed stop order.
(5) The requirements imposed on the DFSA in Article 51(4) shall not apply where the DFSA concludes that any delay likely to arise as a result of such requirements is prejudicial to the interests of the DIFC or unitholders in the Fund.
(6) Where pursuant to Article 51(5) the DFSA has issued a stop order directing that no offers, issues, redemptions, sales or transfers of Units or Shares in a Fund or any rights or interests in such Units or Shares may be made without providing a prior opportunity to make representations, the DFSA shall:
(a) provide the relevant Person an opportunity to make representations in Person and in writing to the DFSA within the period of 14 days, or such further period as may be agreed, from the date on which such direction was made; and
(b) provide a response to any such submission, and make any consequential direction, variation or withdrawal of the direction, without undue delay.

Part 12: The Regulatory appeals Committee

62. 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 Collective Investment Fund;
(b) a Collective Investment Fund 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 Collective Investment Fund or any Member of its Governing Body appeals the decision of the DFSA to issue vary or withdraw a notice to the Fund or to any Member of its Governing Body or to make the requirement of the Fund or of any of the Members of its governing body;
(d) a Collective Investment Fund 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 Collective Investment Fund or any Member of its Governing Body appeals the decision of the DFSA to issue a direction or a stop order under the Law.

Part 13: The Financial Markets Tribunal

63. Jurisdiction of the Financial Markets Tribunal

(1) Without in any way limiting the jurisdiction of the Financial Markets Tribunal conferred upon it by any other DIFC Law, the Financial Markets Tribunal has additional jurisdiction as set out in Article 63(2).
(2) The Financial Markets Tribunal has jurisdiction to hear and determine a proceeding between persons in relation to an issue arising out of an Offer of Units of a Collective Investment Fund or out of the operation of a Collective Investment Fund.

64. Powers to hear and determine matters

(1) For the purposes of any proceeding before it, the Financial Markets Tribunal shall be constituted as provided in Article 31 of the Regulatory Law 2004.
(2) The Financial Markets Tribunal may, for the purposes of any proceedings commenced under this Law, on its own motion or that of any party to the proceedings:
(a) receive and consider any material by way of oral evidence, written statements or documents, even if such material may not be admissible in evidence in civil or criminal proceedings in a Court of law;
(b) by notice in writing require a Person to attend before it at any sitting and to give evidence and produce any item, record or document in his possession or control relating to the subject matter of the proceedings;
(c) administer oaths or affirmations;
(d) examine or cause to be examined on oath or otherwise a Person attending before it and require the Person to answer truthfully any question which the Financial Markets Tribunal considers appropriate for the purposes of the proceedings;
(e) order a witness to provide evidence in a truthful manner for the purposes of the proceedings by sworn statement;
(f) order a Person not to publish or otherwise disclose any material disclosed by any Person to the Financial Markets Tribunal;
(g) stay the proceedings on such grounds and on such terms and conditions as it considers appropriate having regard to the interests of justice; or
(h) exercise such other powers or make such other orders as the Financial Markets Tribunal considers necessary for or ancillary to the conduct of the proceedings or the performance of its function.
(3) At the conclusion of any proceedings, under this Law, the Financial Markets Tribunal may make a finding or declaration of unacceptable circumstances or a contravention of the Law or Rules, and may make one or more of the following orders, in addition to any orders it may make under Article 54 of the Markets Law:
(a) an order requiring the respondent to comply with the Law;
(b) an order in resolution of any commercial proceeding arising under this Law;
(c) an order requiring the respondent to do any act or thing; or
(d) any consequential orders as the Financial Markets Tribunal sees fit following a finding or the making of a declaration.

Part 14: Miscellaneous

65. Fees

The DFSA may make Rules providing for the payment of Fees to the DFSA as provided for in Article 16 of the Regulatory Law 2004.

66. Filing of material with the DFSA

Without in any way limiting the generality of the Article 115 of the Regulatory Law 2004, the DFSA may by means of Rules require the filing of certain material, including without limitation, in relation to applications for registration, authorisation, constitutional documents, prospectuses and other similar documents.