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Consultation Paper No. 19 Trust Companies Law DIFC Law No. [ ] of 2005
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Consultation Paper No. 19 Trust Companies Law DIFC Law No. [ ] of 2005



AUGUST 2005

THIS DRAFT LAW IS PUBLISHED FOR CONSULTATION PURPOSES ONLY. THE DFSA RESERVES THE RIGHT TO AMEND THIS DRAFT AT ITS SOLE DISCRETION.

TRUST COMPANIES LAW
OF THE DUBAI INTERNATIONAL FINANCIAL CENTRE

PRIMARY PURPOSE

1. The primary purpose of the Trust Companies Law is to provide a regulatory framework for the Regulation of Trust Companies in the DIFC and regulate the conduct of Trust Companies and the services they provide.

MATERIAL PROVISIONS OF THE LAW

2. Part 1 - General

This Part deals with the application and administration of the Law and sets out the DFSA's power to make Rules, inter alia, in relation to licensing and supervision of Trust Companies, administration and operation of express trusts, and exempt persons.
3. Part 2 - Providing Trust Services
4. The Law regulates the following Trust Services activities:
a. the provision of services with respect to the creation of an express trust;
b. arranging for any Person to act as a trustee in respect of an express trust;
c. acting as a trustee in relation to an express trust;
d. the provision of trust administration services in relation to an express trust; or
e. acting as protector or enforcer in relation to an express trust.
5. Anyone wishing to provide any of these Trust Services to the public is required to hold a License. Trust Companies are service providers who, by way of business, engage in regulated Trust Services activities. The licensing regime will apply in relation to Trust Services provided in or from the DIFC unless that Person is exempted under the Law.
6. Under the Regulatory Law 2004 and Trust Companies Law, Trust Companies are Authorised Firms and the activities specified above are Financial Services. As Authorised Firms, Trust Companies will be subject to the DIFC Laws and the DFSA Rulebook in relation to the Financial Services they carry on. The classification of Trust Companies as Authorised Firms will ensure high standards of Regulation and business conduct in the DIFC.
7. However, holding a Licence for providing Trust Services under the Trust Companies Law will not exempt a Trust Company from the Financial Service Prohibition set forth in the Regulatory Law 2004. This will, in practice, mean that a Trust Company may need to be authorised to carry on other Financial Services in addition to providing Trust Services.
8. Part 3 - Probate and administration

These provisions enable a Trust Company to act as executor or administrator in relation to a will and apply for probate of the will.
9. Part 4 - Miscellaneous

Article 12 validates corporate trusteeship whereby a Trust Company can be appointed as trustee as if the Trust Company were a natural Person. Article 13 clarifies that a Trust Company may act as agent or attorney for any Person under any Instrument by which the Trust Company is so appointed as such agent.
10. Article 14 allows the DFSA to petition to the Court to transfer trusts to a new trustee where the DFSA believes it is necessary to do so in the interests of a Trust Company Client.

RULES UNDER THE TRUST COMPANIES LAW AND EXEMPTIONS

11. The DFSA will make Rules under the Law in relation to fitness and propriety of a Trust Company and its key Employees, financial requirements, professional indemnity insurance requirement, management, Director and shareholder requirements, and conduct of business.
12. The Rules will also provide exemptions for certain persons from holding a Licence. The proposed exemptions will be in relation to family trust companies, law and accountancy firms and Banks. The exemption will only apply to activities which are incidental to the primary professional service carried on by the firm. However, if a law or accountancy firm wishes to act as trustee or administer an express trust, it will need to apply for a Licence.
13. Regarding family trust companies, these trust companies will often be created by high-net worth families to manage their assets. A family trust company will be defined as a trust company that provides Trust Services exclusively to family Members such as father, mother, son, adopted son and other enumerated relatives. The family trust company will be prohibited from holding itself out to the public as carrying on Trust Services. Although family trust companies will be exempt from holding a License, they will be subject to certain legislation such as the anti-money laundering and anti-terrorism laws. Another requirement for a family trust company will be to engage a professional Trust Company to administer the trusts for which it acts as trustee.

SUBMISSION OF COMMENTS

The Law is published for consultation purposes only. Please note that although the draft is in near final form, the DFSA reserves the right to amend the draft at its sole discretion and as it is still "work in progress" it may therefore undergo further amendments prior to enactment.

Any persons wishing to submit comments should, where applicable, provide details of the organizations they represent. In addition, persons suggesting alternative approaches are encouraged to submit the proposed text of possible amendments that would be necessary to incorporate their suggestions.

Please note that the names of the commentators and the content of their submissions may be published on the DFSA Website and in other documents to be published by the DFSA. If you wish your name to be withheld from publication by the DFSA, please indicate this when you make your submission.

Any comments should be addressed to:
Sema Dursun-Carver
Legal Counsel
DFSA
PO Box 75850
Dubai, UAE

or e-mail to sdursuncarver@dfsa.ae

All comments should be provided in writing, on or before 28 September 2005.

DUBAI Financial Services AUTHORITY

28 AUGUST 2005