COB 2.3.5 Guidance

1. Rule 2.3.5(1)(c) enables an Authorised Firm to classify an Undertaking as a Professional Client for the purposes of Providing Credit for businesses purposes, not only for the Undertaking itself, but also for its related entities (such as a controller or member of its Group) as specified in that Rule, provided that the Undertaking has not opted-in to be classified as a Retail Client.
2. It is possible that an Undertaking obtaining credit may also fall within the category of a 'deemed' Professional Client under Rule 2.3.4 — see, for example, a Large Undertaking under Rule 2.3.4(2). An Authorised Firm may Provide Credit to such a Person without having to meet the requirements in Rule 2.3.5.
3. Joint ventures are generally contractual arrangements under which parties contribute their assets and/or expertise to develop or to undertake specified business activities. An Undertaking can be set up by a number of joint venture partners for obtaining credit for use in the ordinary course of their joint venture business. Although joint venture partners would themselves not have a controlling interest in the joint venture, as credit is obtained for use in the joint venture business, they have the benefit of the professional client status available to the Undertaking under Rule 2.3.5.
4. While an Authorised Firm is not required to undertake a detailed assessment of a 'service-based' Professional Client's expertise or net assets (as required in the case of an 'assessed' Professional Client), a firm still needs to have a reasonable basis for classifying a Person as falling within the circumstances specified in this Rule (or Rule 2.3.6). For example, to verify that an Undertaking is obtaining credit for use in the business of its Holding Company or another member of its Group, a firm would need some documentation to demonstrate the Group member relationship. Such documents may include a diagram of the Group structure and copies of certificates of incorporation and shareholdings of the relevant companies.
Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]