Annex C Conduct of Business Module (COB)
This module (COB) applies to every Authorised Firm with respect to the carrying on in or from the DIFC of:
This module is divided into six parts:
3 INVESTMENT BUSINESS AND BANKING BUSINESS
This chapter applies to an Authorised Firm intending to conduct, in or from the DIFC, Investment Business or Banking Business with or for a Person.
For the purposes of this chapter, Person includes a Collective Investment Fund, even if it does not have a separate legal personality.
PART 6 — CONDUCT OF TRUST COMPANIES
18 TRUST SERVICE PROVIDERS
This chapter applies to a Trust Service Provider with respect to the conduct of Providing Trust Services.
For the purposes of this Part, the settlor and named beneficiaries of a trust in respect of whom the Trust Service Provider Provides Trust Services are to be treated as Clients of the firm.
For the purposes of this Part, the settlor and named beneficiaries of a trust in respect of which the Trust Service Provider Provides Trust Services are to be treated as Clients of the firm.
A Trust Service Provider must maintain adequate knowledge of, and comply with, all applicable laws, rules and regulations relevant to Providing Trust Services.
A Trust Service Provider must be able to demonstrate that it is in compliance with appropriate standards of corporate governance.
A Trust Service Provider must transact its business (including the establishing, transferring or closing of business relationships with its Clients) in an expeditious manner where appropriate unless there are reasonable grounds to do otherwise.
Exercise of Discretion
Where a Trust Service Provider is responsible for exercising discretion for, or in relation to, its Clients, it must take all reasonable steps to obtain sufficient information in order to exercise, subject to 18.2.6, its discretion or other powers in a proper manner.
A Trust Service Provider must only exercise its power or discretion for a proper purpose.
The Trust Service Provider must ensure that its understanding of Client’s business is refreshed with regular reviews.
The Trust Service Provider must ensure that any trustee exercises his discretion in accordance with his fiduciary and other duties under the laws governing the trust of which he is a trustee.
18.3 Conflicts of interest
Delegation of duties or powers
Any delegation of duties or powers by a Trust Service Provider , whether by Power of Attorney or otherwise, must only be entered into for a proper purpose, permissible by law, limited and monitored as appropriate.
A Trust Service Provider must ensure that adequate procedures are implemented to ensure that regular reviews at appropriate intervals are conducted in respect of the Provision of Trust Services to its Clients.
When communicating information to a Person in relation to Providing Trust Services, a Trust Service Provider must take reasonable steps to ensure that the communication is clear, fair and not misleading.
A Trust Service Provider must not, in any form of communication with a Person, attempt to limit or avoid any duty or liability it may have to that Person or any other Person under relevant legislation.
Where a Rule in COB requires information to be sent to a Client, the Trust Service Provider must provide that information directly to the Client and not to another Person, unless it is on the written instruction of the Client.
18.6 Marketing material
A Trust Service Provider must take reasonable steps to ensure that no other Person communicates or otherwise uses marketing material on behalf of a Trust Service Provider unless it is in compliance with the Rules in this section.
18.7 Professional indemnity insurance cover
Professional indemnity insurance cover appropriate to the nature and size of the Trust Service Provider’s business must be maintained.
A Trust Service Provider must (a) provide the DFSA with a copy of professional indemnity insurance cover and (b) notify the DFSA of any changes to the cover including termination and renewal.
A Trust Service Provider must provide the DFSA on yearly basis details of the arrangements in force together with evidence of the cover. Any claims in excess of $10,000 or changes to the arrangements previously notified to the DFSA under this paragraph must be notified to the DFSA as they arise.
18.8 Dual control
The Trust Service Provider must have adequate internal controls, including having two persons with appropriate skills and experience managing the business.
While a Trust Service Provider may have a single Person with overall responsibility, the “four eyes” requirement demands that at least another Person must have the skills and experience to be able to run the business of the Trust Service Provider in the absence of the senior Person and must be in a position to challenge the actions of the senior Person where they consider that those actions may be contrary to the provisions of DIFC Laws, Rules or Regulations or any other applicable legislation, may not be in the interests of the Client, or may be contrary to sound business principles.
18.9 Internal reporting
The Trust Service Provider must have arrangements for internal reporting to ensure that the directors or the partners can satisfy themselves that:
18.10 Recording of Selection Criteria
Where the Trust Service Provider seeks the advice of a third party in connection with a Client’s affairs, for example to advise on or manage investments, the Trust Service Provider must record the criteria for selection of the adviser and the reasons for the selection made.
The Trust Service Provider must monitor the performance of the adviser and ensure that it is in a position to change advisers if it is in the interests of the Client.
18.11 Qualification and experience of Trust Service Provider staff
Staff employed or Persons recommended by the Trust Service Provider must have appropriate qualifications and experience.
A Trust Service Provider must ensure that all transactions or decisions entered into, taken by or on behalf of Clients are properly authorised and handled by Persons with an appropriate level of knowledge, experience, qualifications and status according to the nature and status of the transactions or decisions involved (this applies also to decisions taken by trustees who are recommended by, but not employed by, a Trust Service Provider).
A Trust Service Provider must ensure that, each of its officers and employees, agents, Persons acting with its instructions and Persons it recommends to act as trustees have an appropriate understanding of the fiduciary and other duties of a trustee and any duties arising under the laws relevant to the administration and affairs of Clients for which they are acting in the jurisdictions in which they are carrying on business and in which the assets being managed are held.
A Trust Service Provider must ensure that staff competence is kept up to date through training and continuous professional development as appropriate.
A Trust Service Provider must ensure that staff receives appropriate training on the defences against money laundering and terrorist financing.
18.12 Books and records
A Trust Service Provider ’s books and records must be sufficient to demonstrate adequate and orderly management of Clients’ affairs. There must be proper accounts prepared, at appropriately regular intervals on the trusts and underlying companies administered for Clients. Where trusts and underlying companies are governed by the laws of a jurisdiction that require accounts to be kept in a particular form, the Trust Service Provider must meet those requirements. In any case, the Trust Service Provider’s books and records must be sufficient to allow the recreation of the transactions of the business and its Clients and to demonstrate what assets are due to each Client and what liabilities are attributable to each Client.
18.13 Due diligence
A Trust Service Provider must, at all times, have verified documentary evidence of the settlors, trustees (in addition to the Trust Service Provider itself) and principal named beneficiaries of trusts for which it Provides Trust Services. In the case of discretionary trusts with the capacity for the trustee to add further beneficiaries, a Trust Service Provider must also have verified documentary evidence of any Person who receives a distribution from the trust and any other Person who is named in a memorandum or letter of wishes as being a likely recipient of a distribution from a trust.
A Trust Service Provider must demonstrate that it has knowledge of the source of funds that have been settled into trusts or have been used to provide capital to companies, or have been used in transactions with which the Trust Service Provider has an involvement.
A Trust Service Provider must keep record of information required under 18.14.1 for a minimum of six years.
Attribution of knowledge
When a COB Rule applies to a Trust Service Provider that acts with knowledge, the Trust Service Provider will not be taken to act with knowledge for the purposes of that Rule as long as none of the relevant individuals involved on behalf of the Trust Service Provider acts with that knowledge as a result of a Chinese Wall arrangement established under Rule 18.3.1(3).
A Trust Service Provider must have systems and controls, policies and procedures to ensure that neither it, nor any of its Employees, offers, gives, solicits or accepts any inducement which is likely to conflict significantly with any duty that it owes to its Clients.
Subject to Rule 8.16.3, a Trust Service Provider must before Providing Trust Services to a Client provide him with a written client agreement containing the matters referred to in Rule 8.16.2 or if impractical to do so, provide it within a reasonable period.
Changes to client agreement
If the client agreement provided to a Client allows a Trust Service Provider to amend its client agreement without the Client’s consent, the Trust Service Provider must give at least ten days notice to a Client before Providing Trust Services to that Client on any amended terms, unless it is impractical to do so.
Fitness and Propriety of Persons acting as trustees
Where a Trust Service Provider arranges for a Person who is not an employee of the Trust Service Provider to act as trustee for a Client of the Trust Service Provider, the Trust Service Provider must ensure that such Person is fit and proper.
A Trust Service Provider must notify the DFSA of the appointment of a Person under 18.17.1, including the name and business address if applicable and the date of commencement of the appointment.
Prior to the appointment of such Person to act as trustee, the Trust Service Provider must take reasonable steps to ensure that the Person has the required skills, experience and resources to act as trustee for a Client of the Trust Service Provider.
A Trust Service Provider must notify the DFSA immediately if the appointment of such Person is or is about to be terminated, or on the resignation of such Person, giving the reasons for the resignation of such Person and the measures which have been taken to ensure that a new trustee has been appointed.
A Person appointed to act as trustee for a Client of a Trust Service Provider who is not an employee of the Trust Service Provider, must agree in writing to be bound by and comply with the same legal and regulatory requirements as if he were an employee of the Trust Service Provider.
A Trust Service Provider must make a record of each client agreement including any amendments it provides to a Client and retain them for a minimum of six years from the date the Client ceases to be a Client of the Authorised Firm.
App2 CLIENT AGREEMENT
A2.1 Content of client agreement