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Jul 19 2012 onwards

Policy Statement 1/2012 Policy Statement on Appointment of a Sponsor



Sponsor Appointment

1. The Market Rules of the DFSA Rulebook (MKT) requires an Applicant who makes or intends to make a Prospectus OfferG in the DIFC to appoint a sponsor in sufficient time to enable the sponsor to comply with the requirements of MKT Chapter 7.
2. This statement describes the views of the DFSA on matters relating to sponsors, including:
(a) the purpose and role of a sponsor;
(b) what kind of knowledge, experience, qualifications and resources a sponsor should have;
(c) what are the regulatory obligations of a sponsor; and
(d) what are the obligations of an Applicant who makes a Prospectus OfferG regarding its sponsor.
3. This statement applies to:
(a) An Applicant who makes or intends to make a Prospectus OfferG of SharesG in the DIFC; and
(b) A sponsor appointed under Chapter 7 of MKT
4. The requirement for the appointment of a sponsor is designed to ensure that an Applicant who makes or intends to make a Prospectus OfferG is aware of, and complies with, all applicable conditions for the OfferG of SecuritiesG and any other relevant requirements under MKT.
5. MKT Rule 7.1.8 provides that a sponsor has a duty of care to the Applicant who appoints the sponsor. A sponsor may also be bound by other obligations that flow from its contractual relationship with the Applicant who appointed it. This statement does not address those obligations.
6. The DFSA believes that it is in the interests of the developing DIFC capital markets for an Applicant who makes or intends to make a Prospectus OfferG to have a sponsor to ensure the ProspectusG complies with regulatory requirements and that the offering itself proceeds properly. Rule 7.1.2 of MKT provides that the appointment of a sponsor remains in effect for the Offer PeriodG or such other period as the DFSA determines as appropriate.
7. It is important to understand that although the requirement to have a sponsor is made under the law and that a sponsor has regulatory obligations of its own, the Applicant who makes or intends to make a Prospectus OfferG does not, and cannot, avoid or diminish its regulatory obligations simply because it has a sponsor. The responsibility for the Applicant making the Prospectus OfferG to comply with the MKT remains the responsibility of the Applicant who is making a Prospectus OfferG .
8. A sponsor should be a person fully familiar with the MKT and who has appropriate knowledge, experience, qualifications and resources to be able to assist and guide an Applicant who makes or intends to make a Prospectus OfferG .
9. The obligation is on the Applicant who makes or intends to make a Prospectus OfferG to demonstrate that its sponsor possesses the necessary knowledge, experience, qualifications and, resources, including systems and controls, to be able to advise the Applicant on its obligations under the MKT.
10.The DFSA expects a sponsor to have a track record in providing advice on all applicable conditions for OfferG of SecuritiesG and other related matters to companies whose SecuritiesG trade publicly in the DIFC or in jurisdictions whose regulatory and legal regimes are broadly comparable to the DIFC.
11. A sponsor may be a specialist corporate finance advisory firm, investment bank or a firm that provides legal, accounting or compliance services in the financial services field. The DFSA expects sponsors to be partnerships or corporations with significant financial services and compliance experience. The DFSA expects key employees of the sponsor to have professional training in accounting, finance, economics or law and at least 5 years of relevant experience. The DFSA may require a sponsor to be domiciled in the DIFC.
12. A sponsor's regulatory obligations under the MKT are statutory obligations and are found under MKT Rule 7.1.6. Rule 7.1.6(a) prescribes the obligation on a sponsor to ensure it satisfies itself, through due and careful enquiry, that the Applicant making or intending to make a Prospectus Offer satisfies all applicable obligations under Markets Law 2012 and MKT.
13.The sponsor should be proactive by making enquiries to ensure all applicable obligations will be satisfied.
14. A sponsor's regulatory obligations flowing from the MKT should not be interpreted as imposing strict liability on a sponsor where the sponsor makes due and careful enquiry and exercises its duty of care. The DFSA's intention is not to impose strict liability on the sponsor in circumstances where the sponsor has taken all reasonable steps to ensure that the Applicant who makes or intends to make a Prospectus OfferG has complied with all applicable conditions related to the OfferG of SecuritiesG .
15. Any breach of the sponsor's regulatory obligations in MKT Rule 7.1.6 will subject the sponsor to its own regulatory liability under MKT. Under these provisions, it is the obligation of the sponsor to, among other things:
(a) provide to the DFSA any information that the DFSA may require for verifying that the MKT is being complied with;
(b) to exercise a duty of care with respect to the Applicant which has appointed it;
(c) notify the DFSA in the case of a failure by the Applicant to comply with its obligations under MKT; and
(d) notify the DFSA of any non-co-operation by the Applicant who makes or intends to make the Prospectus OfferG , or its EmployeesG .
16. An Applicant making a Prospectus OfferG in the DIFC has specific regulatory obligations in relation to its sponsor. These are found under MKT Rule 7.1.9. Under these provisions it is the obligation of the Applicant making a Prospectus OfferG to, among other things:
(a) take all reasonable steps to ensure that the proposed sponsor has the required knowledge, experience, qualifications and resources to carry out its duties;
(b) take reasonable steps to ensure that the relevant sponsor is independent and has managed conflicts of interest appropriately;
(c) ensure the Applicant and its employees cooperate with the sponsor and do not interfere with the sponsor's ability to discharge its duties;
(d) report to the sponsor any matter which may significantly affect the financial position of the Applicant or the price or value of the SecuritiesG ; and
(e) promptly advise the DFSA in writing when a sponsor resigns or is terminated including providing details of all relevant facts and circumstances.

Dubai Financial Services Authority
July 2012