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Why are we issuing this paper?
1. This Consultation Paper seeks public comments on the DFSA's proposals to
amend its fees regime. A number of detailed changes are proposed, to take
effect from 1 December 2007 onwards. In addition to the substantive
changes, the fees provisions which currently reside in several Modules of the
DFSA Rulebook are to be brought together in a new single module namely
the Fees Rules Module (FER).
Who should read this paper?
2. The proposals in this paper will be of primary interest to Authorised Firms,
Authorised Market Institutions, Ancillary Service Providers, Recognised
Members, Recognised Bodies, Registered Auditors and those seeking, or
considering seeking, such status. The proposal will also be of interest to a
Bidder in respect of a takeover and a Person filing a Prospectus with the
DFSA. They will also be of interest to Reporting Entities, though no changes
are currently proposed in the fees payable by those entities.
How is this paper structured?
3. In this paper, we set out:
(a) definitions — paragraph 7
(b) background to the DFSA's fees regime — paragraphs 8–10;
(c) proposals relating to Authorised Firms, and applicants for
authorisation — paragraphs 11–18;
(d) proposals relating to Authorised Market Institutions, and applicants for
authorisation — paragraph 19
(e) proposals relating to registered Auditors, and applicants for
registration — paragraph 20;
(f) proposals relating to Ancillary Service Providers, and applicants for
registration — paragraph 21;
(g) proposals relating to Recognised Bodies, and applicants for
Recognition — paragraph 22;
(h) proposals relating to Recognised Members, and applicants for
Recognition — paragraph 23;
(i) proposals relating to other fees — paragraph 24;
(j) proposals relating to currency and payment — paragraph 25;
(k) proposals relating to commencement — paragraph 26 and 27.
How to provide comments?
4. All comments should be forwarded to the person specified below. You may, if
relevant, identify the organisation you represent in providing your comments.
The DFSA reserves the right to publish, including on its website, any
comments you provide, unless you expressly request otherwise at the time of
What happens next?
5. The deadline for providing comments on these proposals is 2 August 2007.
Once we receive your comments, we will consider if any further refinements
are required to these proposals. We will then proceed to enact the changes
to the DFSA's Rulebook. You should not act on these proposals until the
relevant changes to the DFSA Rulebook are made. We will issue a notice on
our website telling you when this happens.
6. It is proposed that the final changes will be enacted at the DFSA Board's
meeting on 3 September 2007. It is therefore important that responses are
received by the deadline mentioned above.
Comments to be addressed to:
PO Box 75850
or e-mailed to: firstname.lastname@example.org
7. In this paper, generally, capitalised terms are defined in the GLO Module of
the DFSA Rulebook. For convenience, the following terms have the meaning
set out below:
(a) Ancillary Service Provider — A Person who is registered by the DFSA
in relation to the carrying on of one or more Ancillary Services.
(b) Annual Audited Expenditure — The expenditure calculated in
[PIB Rule 2.5.2].
(c) Auditor — A partnership or company that is registered by the DFSA to
provide audit services to Authorised Firms and Authorised Market
Institutions that are Domestic Firms or to Domestic Funds.
References to "Auditor" include "applicant" where relevant.
(d) Authorised Firm — A Person, other than an Authorised Market
Institution, who holds a Licence.
(e) Authorised Individuals — An individual who has been authorised by
the DFSA to carry out one or more Licensed Functions.
(f) Authorised Market Institution — A Person who is Licensed by the
DFSA in relation to the carrying on either or both of the Financial
Services prescribed in
[GEN Rule 2.17.1] and [GEN Rule 2.18.1].
(g) Authorised Person — An Authorised Firm or an Authorised Market
(h) Bidder — includes, but is not limited to, companies wherever
incorporated and individuals wherever resident who or which make a
Bid under TKO.
(i) Recognised Body
— A Person who holds a Recognition Notice, issued
to it pursuant to Article 61
of the Regulatory Law 2004, recognising it
as a Recognised Body.
(j) Recognised Member
— A Person who holds a Recognition Notice,
issued to that Person pursuant to Article 61
of the Regulatory Law
2004, recognising it as a Recognised Member.
(k) Takeover — has the meaning given in the Markets Law 2004.
Background to the DFSA's fees regime
8. The fee policy of the DFSA aims to embody the following principles:
• partial cost recovery;
• the cost of regulation to the market should be proportionate, transparent
• fees should not be a disincentive to locate in the DIFC, as opposed to
broadly comparable centres;
• fees should not provide any perverse behavioural incentives; and
• fees should be efficient to be administered.
9. There are currently different fee structures for different DFSA activities. For
entities with which we have a continuing regulatory relationship, we generally
levy an authorisation fee (or equivalent) and an annual supervision fee (or
equivalent), with limited transaction fees for particularly large regulatory
transactions (e.g. a major change in the scope of a licence). For entities with
which we do not have such a relationship (e.g. Reporting Entities) there is
greater reliance on transaction charges, for example for considering
takeovers. We see no reason at present to propose a fundamental change to
10. The current and proposed fees are set out in Annex AAnnex A
, and explained in the
paragraphs that follow.
11. Authorised Firms currently pay an annual supervision fee which contains
three components. The first (the base component) is based on the Financial
Services for which the firm is licensed, the second on the number of
Authorised Individuals in the firm, and the third on turnover. The total fee is
capped at $150,000. The application fee is made up of the first two of these
12. In 2006, the DFSA abolished the Licensed Representatives element of its
Authorised Individuals regime. This means that the number of Authorised
Individuals does not vary between firms as much as before and no longer
functions as an effective proxy for conduct of business supervision. We
therefore propose to simplify the regime by removing it.
13. The current turnover metric has posed problems in practice, especially for
firms where income deriving from DIFC-originated business is booked outside
the DIFC. We propose to replace this by expenditure, defined in the same
way as in calculating our expenditure based capital requirement. For DFSA
incorporated firms this will be the whole-firm expenditure. For firms
incorporated elsewhere, it will be the expenditure in the DIFC. This
information is already collected, and audited, as part of the annual return.
14. At present, firms that have been authorised but have not yet submitted an
annual return pay a turnover component based on figures in the most recent
business plan submitted to the DFSA. This has also posed problems in
practice, and we therefore propose to remove this provision. This means that
firms which have not yet submitted an annual return will pay no turnover
15. To offset the loss of income from this proposal and the abolition of the
Authorised Individual component, we propose to increase the general level of
base components. We have also introduced a new charging band for some
firms in asset management, reflecting the levels of supervision they involve.
We have, however, reduced the base component for insurance companies.
16. The maximum annual fee is currently capped at $150,000. There are no firms
that currently benefit from this cap, and we are proposing that it be removed.
17. Application fees for Authorised Firms currently consist of the base component
plus the Authorised Individuals component. In future it is proposed that they
should consist solely of the base component.
18. Where an Authorised Firm seeks to add new Financial Services to its Licence,
a charge will be made on the same basis as now, when the new Financial
Services will take the firm into a higher charging band.
Authorised Market Institutions
19. No change is proposed to the present regime, which involves flat rate fees
based on the Financial Services involved. The DFSA may, however, consider
at a later stage the possibility of introducing transaction based fees in respect
of DIFC exchanges.
20. The new registered Auditors regime involves a programme of assessments of
registered Auditors carried out by an external party on DFSA's behalf and at
DFSA's expense. As a result, we propose to increase the annual fee for a
registered Auditor to $6,000. On the other hand, we consider that the initial
registration fee can be reduced to $4,000. We also make new proposals for
the first annual fee to be reduced where registration is granted in the last
quarter of the year.
Ancillary Service Providers
21. No change is proposed except that Ancillary Service Providers who are also
registered Auditors will have to pay only the registered Auditors annual fee.
22. Recognised Bodies are non-DIFC exchanges who offer their services
electronically to firms within the Centre. At present we charge an initial fee of
$10,000 and no annual fee. This is out of line with practice elsewhere and
may create a perverse incentive for firms to provide their services from
outside the Centre. It is proposed to raise the initial fee to $25,000 and
charge an annual fee of $10,000. It is also proposed to reduce the first
annual fee when Recognition is granted in the last quarter of a year.
23. Recognised Members are firms who trade on DIFC exchanges from outside
the Centre. At present, they pay no fees. It is proposed that they should be
charged fees equivalent to those for Ancillary Service Providers, that is, an
application fee of $2,000 and an annual fee of $1,000.
24. No change is proposed to other DFSA fees, specifically those relating to
Collective Investment Funds, the filing of Prospectus documents and
Currency and Payment method
25. The DFSA is proposing to clarify by way of a Rule that all fees are payable
only in United States Dollars and by bank transfer.
26. The FER module is due to come into force on 1 December 2007. The effect of
the coming into force of the Rules on that date is:
(a) All applications filed on or after 1 December will be subject to the new
fee structure in respect of application fees and, thereafter, in respect of
initial and subsequent annual fees.
(b) All applications filed prior to 1 December will be subject to the current
application fees set out in the relevant modules. However, the initial
annual fee to be charged will depend on whether Registration,
Authorisation or Recognition is granted prior to 1 December in which
case the current fees remain applicable or if the Registration,
Authorisation or Recognition is granted on or after 1 December then the
new fee structure applies in respect of initial annual fees and
subsequent annual fees.
27. In paragraph 26, "applications" include applications to extend the scope of a
Licence, to wind up a Fund, upon filing a prospectus and in respect of bid
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