W589/2018 — Smart Crowd Limited
WAIVER AND MODIFICATION NOTICE
|To||Smart Crowd Limited|
The FinTech HIVE at DIFC, Level 4, Gate Precinct 5, DIFC,
|DFSA Firm Reference No.||F004285|
THE DFSA HEREBY GIVES NOTICE THAT:
The previous Waiver and Modification Notice No. W582/2018 is revoked and replaced by this Notice.
The Rules specified in Table 1 to this notice are waived in relation to SmartCrowd Limited.
The Rules specified in the left hand column of Table 2 to this notice do not apply to SmartCrowd Limited in the form appearing in the Rulebook but instead apply as modified in the right hand column of that table.
|COB||Rules 11.3.2 and 11.3.5|
|GEN||Section 5.2, Rules 5.3.4, 5.3.5, 5.3.6, 5.3.13, 5.3.14, 5.3.15, 5.3.16, 5.3.17, 5.3.30, 5.3.31, 7.4.5, 7.4.6, 7.4.8 and Section 8|
|AML||Rules 11.2.1, 11.2.3 and 11.2.4|
A Crowdfunding Operator must not Operate a Crowdfunding Platform that facilitates a Person investing in the following kinds of Investments through the platform:
(1) In Rule 2.2.2, a Person carries on the activity of Operating a Crowdfunding Platform if the Person:
(a) Operates a Loan Crowdfunding Platform; or
(b) Operates an Investment Crowdfunding Platform.
(2) A Person Operates a Loan Crowdfunding Platform under (1)(a) if it does both of the following:
(a) operates an electronic platform that facilitates the bringing together of potential lenders and borrowers; and
(b) administers a loan agreement that results from operating the electronic platform.
(3) If the Person referred to in (2) also provides a facility that assists a lender to transfer his rights and obligations under a loan agreement referred to in that paragraph, that activity is also included within Operating a Loan Crowdfunding Platform.
(4) A Person Operates an Investment Crowdfunding Platform under (1)(b) if it does both of the following:
(a) operates an electronic platform that facilitates the bringing together of potential investors and Persons who wish to sell property
(b) administers an Investment that results from operating the electronic platform.
(5) If the Person referred to in (4) also provides a facility that assists an investor to sell an investment referred to in that paragraph, that activity is also included within Operating an Investment Crowdfunding Platform.
(6) In this Rule:
(a) “administer a loan agreement” means:
(i) provide information or perform other duties under the loan agreement on behalf of the borrower or lender;
(ii) take steps to obtain the repayment of the loan; or
(iii) exercise rights or perform obligations under the loan agreement on behalf of the borrower or lender;
(b) “administer an Investment” means:
(i) provide information or perform other duties relating to the property or Investment on behalf of the
(ii) take steps to obtain the payment of any amount payable
(iii) exercise rights or perform obligations relating to the Investment on behalf of the
(iv) arrange for any services to be provided relating to the property; or
(v) arrange for the sale of the property at the end of the investment period;
(c) “electronic platform” means a website or other form of electronic media.; and
(d) “property” means a house, villa or apartment including if applicable, any land attached to the house, villa or apartment.
(7) A Person (A) administers a loan agreement or an Investment for the purposes of this Rule if A performs a function itself or through another Person who has been appointed by A, acts under an arrangement with A or acts at A's direction.
(8) In this Rule, a reference to an investor making an Investment in property includes making an investment in a legal vehicle that owns the property (whether directly or indirectly).
An Authorised Person must ensure that
An Authorised Person must ensure that persons performing compliance duties have
The Senior Executive Officer function is carried out by an individual who:
(a) has, either alone or jointly with other Authorised Individuals, ultimate responsibility for:
(i) the day-to-day management, supervision and control of one or more (or all) parts of an Authorised Firm's Financial Services carried on in or from the DIFC;
(ii) compliance matters in relation to the Authorised Firm's Financial Services; and
(iii) implementation of the Authorised Firm's anti-money laundering policies, procedures, systems and controls and oversight of its compliance with the Rules in AML and any relevant anti money laundering legislation applicable in the DIFC; and
(b) is a Director, Partner or Senior Manager of the Authorised Firm.
(1) An Authorised Firm must, subject to (2),
An Authorised Firm must ensure, in the case of an individual
In this chapter:
(a) “borrower” means a Person that has borrowed or is seeking to borrow money using a Loan Crowdfunding Platform;
(b) “commitment period” means the period specified by the operator during which lenders may commit to lending money to a particular borrower or investors may commit to investing
(c) “cooling-off period”, for Investment Crowdfunding, means the period referred to in Rule 11.5.2 when an investor may withdraw his commitment to invest
(d) “investor” means an investor or potential investor using an Investment Crowdfunding Platform;
(e) “lender” means a Person who:
(i) lends money under a loan agreement; or
(ii) by assignment has assumed the rights and obligations of a Person who has lent money under a loan agreement;
(f) “loan agreement” means a loan agreement between a borrower and lender referred to in Rule 11.4.1;
(g) “operator” means a Crowdfunding Operator;
(h) “platform” means the website or other electronic media used to provide the service;
(ha) “property” means a house, villa or apartment including, if applicable, any land attached to the house, villa or apartment.
(hb) “seller” means a person selling property using a Real Estate Crowdfunding Platform;
(i) “service” means Operating a Crowdfunding Platform; and
(j) “transfer”, in relation to a loan agreement, means the assignment by the lender of his rights and obligations under the agreement to another Person.
An operator must disclose prominently on its website the main risks to lenders or investors of using a Crowdfunding Platform, including that:
(b) the investor will not own the property; rather the investor will have an interest in another legal entity that owns the property;
(c) as the investor's interest in that entity is not listed or traded, it is likely to be an 'illiquid' investment; that is, it may be difficult to sell the interest because of a lack of investors willing to buy such an interest. So the investor must be prepared to commit to investing for the full investment period;
(d) as real estate is an 'illiquid asset'; that is, an asset that cannot always be easily sold, it may be difficult to sell the property at the end of the investment period, resulting in a delay in investors receiving their capital or in the property being sold at a loss; and
An operator must disclose prominently on its website key information about how its service operates, including:
(a) details of how the platform functions;
(b) details of how and by whom the operator is remunerated for the service it provides, including fees and charges it imposes;
(c) any financial interest of the operator or a Related Person that may create a conflict of interest;
(d) the eligibility criteria for borrowers or
(e) the minimum and maximum amounts, if any, of loans or Investments that may be sought by a borrower or
(g) the eligibility criteria for lenders or investors that use the service;
(h) any limits on the amounts
(j) what will happen if
(k) the precise nature of the legal interest investors will receive in relation to the property;
(ka) what, if any, rights, obligations or role an investor has in relation to the property after he has invested;
(kb) the term of the Investment, what happens at the end of the term, the circumstances if any in which the property may be sold before the end of the term or the term may be extended and if there are any circumstances in which the property may be sold contrary to the wishes of some investors, for example, if a majority of investors agree or at the operator's direction;
(l) how the operator will deal with overdue payments
(la) the expenses likely to be incurred in relation to the property, including valuation, management, maintenance, insurance expenses and taxes and how they will be paid for;
(lb) who will arrange valuation, management, maintenance and insurance services, how the provider of those services is chosen and remunerated, their role and how potential conflicts of interest will be prevented or managed;
(m) arrangements for the holding of title to property on behalf of investors, including any Special Purpose Vehicle that is used for that purpose and the role and duties of the Special Purpose Vehicle and how the interests of investors are protected;
(n) arrangements and safeguards for Client
(o) any facility it provides to facilitate the transfer of loans or the sale of Investments, the conditions for using the facility and any risks relating to the use of that facility;
(p) measures it has in place to ensure the platform is not used for money-laundering or other unlawful activities;
(q) measures it has in place for the security of information technology systems and data protection; and
(r) contingency arrangements it has in place to ensure the orderly administration of loans or Investments if it ceases to carry on business.
(1) An operator must conduct due diligence on each borrower or
(2) The due diligence under (1) must include, as a minimum, taking reasonable steps to verify in relation to the borrower or
(a) its identity, including if it is a Body Corporate details of its incorporation and business registration;
(b) the identity and place of domicile of each of its directors, officers and controllers if it is a Body Corporate; and
(c) the fitness and propriety of the seller.
(3) The due diligence under (1) must include, as a minimum, the operator taking reasonable steps to verify in relation to the property that:
(a) the seller holds valid legal title to the property and is able to sell the property free of any encumbrance;
(b) construction of the property is fully completed; and
(c) the property is available for letting or, if it is not available for letting because it requires renovation, refurbishment or alteration, that planning permission for the renovation, refurbishment or alteration can be readily obtained.
(4) The due diligence under (1) must include the operator obtaining an independent valuation report on the property.
An operator must disclose prominently on its website relevant information about each property and seller
(a) full details about the property, including the location and condition of the property and whether it is currently rented;
(b) the information about the property referred to in Rule 11.3.6(3);
(c) information about the seller referred to in Rule 11.3.6(2);
(d) an independent valuation report on the property referred to in Rule 11.3.6(4);
(e) the precise nature of the legal interest that investors will receive in relation to the property;
(f) the estimated charges and expenses relating to the property; and
(g) the estimated annual rental income on the property, after deducting charges and expenses and setting out key assumptions made.
An operator must:
(a) not advertise a specific lending or Investment proposal that is available on its platform; and
(b) take reasonable steps to ensure that borrowers and
unless the advertisement is made on the platform and is accessible only to existing Clients who use the platform.
(1) This Rule applies if a material change occurs relating to a property or Investments in a property
(2) In this Rule, a “material change” means any change or new matter that may significantly affect the value of the property, the ability to rent the property, the return on the property or the value of the Investment
(3) If the material change occurs during the commitment period, the operator must:
(a) disclose prominently on its website details of the material change;
(b) notify committed lenders or investors of the material change and require them to reconfirm their commitment within 5 business days; and
(c) if reconfirmation is not provided within the period specified in (b), cancel the commitment.
(4) If the material change occurs after the commitment period, the operator must disclose prominently on its website:
(a) details of the material change;
(b) any change in the rights
(c) what steps, if any, the operator is proposing to take as a result of the change.
(5) A disclosure or notification under (3) or (4) must be made as soon as practicable after the operator becomes aware of the material change.
An operator must take reasonable steps to restrict a seller
An operator must ensure that lenders or investors who use its service are able to have access to the same information on its website about a seller, property
If an operator provides an
If an operator provides an
(1) An operator must take reasonable steps to ensure that its officers and employees and their family members do not:
(a) invest in a property using the platform;
(b) rent a property that has been purchased using the platform; or
(c) sell a property or any interest in a property using the platform.
(2) The restriction in (1)(a) does not apply to an investment that has been made by an officer, employee or family member from the date of issue of this Notice until the Test Period ends.
If an operator provides a means of communication (a “forum”) for
(b) restrict posting of comments on the forum to Persons who are Clients using the service;
(c) ensure that all Clients using the forum have equal access to information posted on the forum;
(d) require a Person posting a comment on the forum to disclose clearly if he is affiliated in any way with a
(e) take reasonable steps to monitor and prevent posts on the forum that are potentially misleading or fraudulent;
(f) immediately take steps to remove a post, or to require a post to be deleted or amended, if the operator becomes aware that (d) or (e) have not been complied with; and
(g) not participate in discussions on the forum except to moderate posts or to take steps referred to in (f).
If an operator provides a facility that assists
(a) the facility relates only to loans or Investments originally facilitated using its service;
(b) transfers can take place only
(e) potential transferees or buyers have access to all information on the website about the property and investment
(f) fees it charges for the use of the facility are designed to recover its costs of providing the facility, rather than generating additional income.
The operator must:
(a) maintain a business cessation plan that sets out appropriate contingency arrangements to ensure the orderly administration of property and
(b) ensure, as far as reasonably practicable, that the contingency arrangements can be implemented if necessary.
(1) An Investment Crowdfunding Operator must ensure that investors who have committed to investing in a property
(2) In (1), “cooling-off period” means the period of at least 48 hours starting at the end of the commitment period.
(1) An Investment Crowdfunding Operator must maintain effective systems and controls to ensure that a Retail Client does not invest more than US$ 50,000 in total in any calendar year using its service.
(2) The restriction in (1) does not apply to an investment that has been made by a Retail Client from 19 April 2018 until 30 October 2018.
The following terms must be included in a Client Agreement between a Crowdfunding Operator and a Client that is a lender or an investor:
(a) the operator's obligations to administer the loan or Investment, including:
(i) how payments made by the borrower or
(ii) steps that will be taken if payments by a borrower or an
(b) if the Client is a Retail Client, the steps that will be taken by the operator and lender or investor to ensure that the lender or investor complies with any applicable limits relating to the amounts of loans or investments that may be made using the platform;
(c) for Investment Crowdfunding, if the Client is a Retail Client, that the Client agrees to sign a risk acknowledgement form each time before he makes an Investment using the platform; and
(d) the contingency arrangements that the operator will put in place to deal with a platform failure or if the operator ceases to carry on its business.
The following terms must be included in a Client Agreement between a Crowdfunding Operator and a Client that is a borrower
(a) a restriction on the borrower
(b) a restriction on the borrower
(c) a restriction on the borrower
(d) a requirement on the borrower
(e) the obligations of the borrower
(f) an obligation on the borrower
The table below sets out the Base Capital Requirement for each Category of an Authorised Firm.
|CIR 2.1.18 (new)||
An arrangement does not constitute a Collective Investment Fund if:
(a) the arrangement consists of an Investment made through a Real Estate Crowdfunding Platform operated by a Crowdfunding Operator;
(b) the Investment is made only by investors who are Clients of the Crowdfunding Operator; and
(c) the underlying property in which investors are investing is a single apartment, villa or house in Dubai.
|GLO (new)||Real Estate Crowdfunding Platform: An Investment Crowdfunding Platform that facilitates Investments in property (as defined in GEN 2.29.1(6)).|
Special Purpose Vehicle:
(1) In FER 1.2.7(3) and MKT App 5, a legal entity the object and purpose of which is primarily to issue Securities; and
(2) In any other case, a Body Corporate whose sole purpose, either generally or when acting in a particular capacity, is to carry out one or more of the following functions:
(a) issuing Investments;
(b) redeeming or terminating or repurchasing, whether with a view to re-issue or to cancellation, an issue, in whole or par, of Investments; or
(c) entering into transactions or terminating transactions involving Investments in connection with the issue, redemption, termination or re-purchase of Investments;
and has been explicitly established for the purpose of:
(d) securitising assets; or.
(e) investing in Real Property or property (as defined in GEN 2.29.1(6)).
and, in the case of (d), has been assessed by a rating agency.
A Relevant Person may outsource
A Relevant Person must ensure that
(a) direct access to its senior management;
(b) sufficient resources including, if necessary, an appropriate number of appropriately trained Employees to assist in the performance of his duties in an effective, objective and independent manner;
(c) a level of seniority and independence within the Relevant Person to enable him to act on his own authority; and
(d) timely and unrestricted access to information sufficient to enable him to carry out his responsibilities in Rule 11.4.1.
A Relevant Person must ensure that its
(a) the day-to-day operations for compliance by the Relevant Person with its AML policies, procedures, systems and controls;
(b) acting as the point of contact to receive notifications from the Relevant Person's Employees under Rule 13.2.2;
(c) taking appropriate action under Rule 13.3.1 following the receipt of a notification from an Employee ;
(d) making, in accordance with Federal Law No. 4 of 2002, Suspicious Activity Reports;
(e) acting as the point of contact within the Relevant Person for competent U.A.E. authorities and the DFSA regarding money laundering issues;
(f) responding promptly to any request for information made by competent U.A.E. authorities or the DFSA;
(g) receiving and acting upon any relevant findings, recommendations, guidance, directives, resolutions, sanctions, notices or other conclusions described in chapter 10; and
(h) establishing and maintaining an appropriate money laundering training programme and adequate awareness arrangements under chapter 12.
A Relevant Person must:
(a) provide AML training to all relevant Employees at appropriate and regular intervals;
(b) ensure that its AML training enables its Employees to:
(i) understand the relevant legislation relating to money laundering, including Federal Law No. 4 of 2002, Federal Law No. 1 of 2004 and any other relevant Federal laws;
(ii) understand its policies, procedures, systems and controls related to money laundering and any changes to these;
(iii) recognise and deal with transactions and other activities which may be related to money laundering;
(iv) understand the types of activity that may constitute suspicious activity in the context of the business in which an Employee is engaged and that may warrant a notification to the
(v) understand its arrangements regarding the making of a notification to the
(vi) be aware of the prevailing techniques, methods and trends in money laundering relevant to the business of the Relevant Person;
(vii) understand the roles and responsibilities of Employees in combating money laundering
(viii) understand the relevant findings, recommendations, guidance, directives, resolutions, sanctions, notices or other conclusions described in chapter 10; and
(c) ensure that its AML training:
(i) is appropriately tailored to the Relevant Person's activities, including its products, services, customers, distribution channels, business partners, level and complexity of its transactions; and
(ii) indicates the different levels of money laundering risk and vulnerabilities associated with the matters in (c)(i).
A Relevant Person must have policies, procedures, systems and controls to ensure that whenever any Employee, acting in the ordinary course of his employment, either:
(b) suspects; or
(c) has reasonable grounds for knowing or suspecting;
that a person is engaged in or attempting money laundering or terrorist financing, that Employee promptly notifies the Relevant Person's
A Relevant Person must ensure that where the Relevant Person's
(a) investigates and documents the circumstances in relation to which the notification made under Rule 13.2.2 was made;
(b) determines whether in accordance with Federal Law No. 4 of 2002 a Suspicious Activity Report must be made to the AMLSCU and documents such determination;
(c) if required, makes a Suspicious Activity Report to the AMLSCU as soon as practicable; and
(d) notifies the DFSA of the making of such Suspicious Activity Report immediately following its submission to the AMLSCU.
Where, following a notification to the
A Relevant Person must ensure that if the
This notice comes into effect on the date of issue.
The waivers in GEN Section 5.2, Rules 5.3.4, 5.3.5, 5.3.6, 5.3.13, 5.3.14, 5.3.15, 5.3.16, 5.3.17, 5.3.30, 5.3.31, 7.4.5, 7.4.6, 7.4.8, Section 8 and AML Rules 11.2.1, 11.2.3, 11.2.4 will remain in force until the Test Period ends. The other waivers will remain in force until revoked by the DFSA.
The modifications in GEN Rules 5.3.9, 5.3.10, 7.4.2, 7.5.1, 7.6.13, PIB Rule 3.6.2 and AML Rules 11.2.5, 11.3.1, 11.4.1, 12.1.1, 13.2.2, 13.3.1, 13.3.2, 13.3.3 will remain in force until the Test Period ends. The other modifications will remain in force until revoked by the DFSA.
The provisions in this notice are to be construed in accordance with GEN section 6.2 as if these provisions are provisions of the Rulebook.
Defined terms (other than any terms that are specifically defined above in lower case) are identified in this notice by the capitalisation of the initial letter of a word or of each word in a phrase and are defined in the Glossary (GLO). Unless the context otherwise requires, where capitalisation of the initial letter is not used, an expression has its natural meaning.
“Test Period” means the period specified on the Licensee's Licence during which the Licensee may test its Real Estate Crowdfunding Platform.
THIS NOTICE IS ISSUED UNDER ARTICLE 25 OF THE REGULATORY LAW 2004 BY:
|DATE OF ISSUE:||13 December 2018|