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Appendix 1 Law Regulating Islamic Financial Business

DIFC Law No.xx of 2004

Part 1: General Provisions

1. Title

This Law may be cited as "Law Regulating Islamic Financial Business 2004."

2. Legislative Authority

This Law is made by the Ruler of Dubai.

3. Application of the law

This Law applies in the jurisdiction of the DIFC.

4. Date of enactment

This Law is enacted on the date specified in the Enactment Notice in respect of this Law.

5. Commencement

This Law comes into force on the date specified in the Enactment Notice in respect of this Law.

6. Interpretation

Schedule 1 contains:

(1) interpretative provisions which apply to this Law; and
(2) a list of defined terms used in this Law.

7. Administration of this Law

This Law and any legislation made under this Law is administered by the DFSA.

8. Relationship between this Law and the Regulatory Law and the Markets Law

The provisions of this Law are additional to the provisions of the Regulatory Law 2004 and the Markets Law 2004, and the provisions of those Laws, as far as they are applicable, shall apply accordingly.

Part 2: Conduct of Islamic Financial Business

9. Prohibition from conducting Islamic Financial Business

(1) An Authorised Firm or Authorised Market Institution shall not hold itself out as conducting Islamic Financial Business unless it has an endorsed Licence authorising it to conduct Islamic Financial Business:
(a) as an Islamic Financial Institution; or
(b) by operating an Islamic Window.
(2) The Council of the DFSA may make Rules prescribing circumstances in which an Authorised Firm or Authorised Market Institution will be taken to, or will be taken not to, hold itself out as conducting Islamic Financial Business.

10. Islamic Financial Business

(1) Conducting Islamic Financial Business means carrying on one or more Financial Services in accordance with Shari'a.
(2) Islamic Financial Institution means an Authorised Firm or Authorised Market Institution whose entire business operations are conducted in accordance with Shari'a.
(3) An Authorised Firm or Authorised Market Institution, other than an Islamic Financial Institution, operates an Islamic Window if it conducts Islamic Financial Business as part of its overall business operations.

11. Application for an endorsement

(1) An application for an endorsement on a Licence authorising an Authorised Firm or Authorised Market Institution to conduct Islamic Financial Business may be made to the DFSA by any:
(a) body corporate;
(b) partnership; or
(c) unincorporated association
when applying for a Licence under Article 45 of the Regulatory Law 2004.
(2) An Authorised Firm or Authorised Market Institution may apply to the DFSA for an endorsement to conduct Islamic Financial Business or to vary such an endorsement.
(3) The Council of the DFSA may make Rules providing that certain persons or Categories of Person may not be granted an endorsement in relation to Islamic Financial Business.
(4) The Council of the DFSA may make Rules:
(a) prescribing the requirements an applicant applying for an endorsement must meet before an endorsement can be granted by the DFSA. Such Rules may include requirements relating to the legal form an applicant must adopt;
(b) providing for such requirements referred to in Article 11(4)(a) to be varied in cases where an application is made by a Person which is, at the time of application, regulated in a jurisdiction other than the DIFC;
(c) prescribing certain persons or Categories of Person to be exempted from the requirements referred to in Article I I (4)(a); and
(d) providing for any such exemptions to be:
(i) limited to certain Islamic Financial Business activities or specified circumstances; or
(ii) subject to certain conditions and restrictions.
(5) The DFSA may in its absolute discretion refuse to grant an application for an endorsement or for a variation to an endorsement.
(6) Upon refusing to grant an endorsement or a variation to an endorsement, the DFSA shall without undue delay inform the applicant in writing of such refusal and, if requested by the applicant, the reasons for such refusal.
(7) The Regulatory Appeals Committee has jurisdiction to hear and determine any appeal in relation to a decision to refuse an application for an endorsement or a variation to an endorsement made under this Article.

12. Endorsements

(1) The DFSA may endorse the Licence of an Authorised Firm or Authorised Market Institution authorising it to conduct Islamic Financial Business as an Islamic Financial Institution or by operating an Islamic Window.
(2) Subject to Articles 12(3) and (4), the DFSA may at any time by written notice to an Authorised Firm or Authorised Market Institution;
(a) impose conditions and restrictions or additional conditions and restrictions in relation to an endorsement;
(b) vary or withdraw conditions and restrictions imposed in relation to an endorsement.
(3) The DFSA may act under Article 12(2) on its own initiative or at the request of an Authorised Firm or Authorised Market Institution.
(4) Subject to Article 12(5), the DFSA may only impose conditions and restrictions or additional conditions and restrictions or vary or withdraw conditions and restrictions in relation to an endorsement if it has given the relevant Authorised Firm or Authorised Market Institution a suitable opportunity to make representations in Person and in writing to the DFSA in relation to the proposed changes.
(5) The requirement imposed on the DFSA under Article 12(4) shall not apply:
(a) in relation to the imposition of conditions and restrictions when a Licence is first endorsed;
(b) where the relevant Person has requested the imposition, variation or withdrawal of conditions and restrictions under Article 12(3); or
(c) where the DFSA concludes that any delay likely to arise as a result of such requirement is prejudicial to the interests of the DIFC.
(6) Where pursuant to Article 12(5)(c) the DFSA imposes, varies or withdraws a condition or restriction without providing a prior opportunity to make representations, the DFSA shall:
(a) provide the relevant Authorised Firm or Authorised Market Institution an opportunity to make representations in Person and in writing to the DFSA within the period of 14 days, or such further period as may be agreed, from the date on which such condition or restriction is imposed, varied or withdrawn; and
(b) provide a response to any such submission, and make any consequential imposition, variation or withdrawal of the condition or restriction, without undue delay.
(7) The Regulatory Appeals Committee has jurisdiction to hear and determine any appeal in relation to a decision. to impose, vary or withdraw a condition or restriction made under this Article.

13. Requirements to conduct Islamic Financial Business

(1) An Authorised Firm or Authorised Market Institution which has an endorsed Licence authorising it to conduct Islamic Financial Business shall appoint a Shari'a Supervisory Board.
(2) The Council of the DFSA may make Rules prescribing the appointment, formation, conduct and operation of a Shari'a Supervisory Board.