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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
Laws
Rulebook Modules
Conduct of Business Module (COB) [VER33/07-19]
Sourcebook Modules
Consultation Papers
Policy Statements
DFSA Codes of Practice
Amendments to Legislation
Media Releases
Notices
Financial Markets Tribunal
Archive

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  • COB 3.5 Conflicts of Interest

    • Fair Treatment

      • COB 3.5.1

        (1) An Authorised FirmG must take reasonable steps to ensure that conflicts and potential conflicts of interest between itself and its ClientsG and between one ClientG and another are identified and then prevented or managed in such a way that the interests of a ClientG are not adversely affected and to ensure that all its ClientsG are fairly treated and not prejudiced by any such conflicts of interest.
        (2) Where an Authorised FirmG is aware of a conflict or potential conflict of interest, it must prevent or manage that conflict of interest by using one or more of the following arrangements as appropriate:
        (a) establishing and maintaining effective Chinese WallsG to restrict the communication of the relevant information;
        (b) disclosing the conflict of interest to the ClientG in writing either generally or in relation to a specific TransactionG ; or
        (c) relying on a written policy of independence, which requires an EmployeeG to disregard any conflict of interest when advising a ClientG or exercising a discretion.
        (3) If an Authorised FirmG is unable to prevent or manage a conflict or potential conflict of interest as provided in (2), it must decline to act for that ClientG .
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

    • Attribution of Knowledge

      • COB 3.5.2

        When a COB Rule applies to an Authorised FirmG that acts with knowledge, the Authorised FirmG will not be taken to act with knowledge for the purposes of that Rule as long as none of the relevant individuals involved for on behalf of the Authorised FirmG acts with that knowledge as a result of a Chinese WallG arrangement established under COB Rule 3.5.1(2)(a).

        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

    • Inducements

      • COB 3.5.3

        (1) An Authorised FirmG must have systems and controls including policies and procedures to ensure that neither it, nor an EmployeeG or AssociateG of it, offers, gives, solicits or accepts inducements such as commissions or other direct or indirect benefits where such inducements are reasonably likely to conflict with any duty that it owes to its ClientsG .
        (2) Subject to (3), an Authorised FirmG must, before recommending a financial product as defined in GEN Rule 2.11.1(4) to, or Executing a TransactionG for, a Retail ClientG , disclose to that ClientG any commission or other direct or indirect benefit which it, or any AssociateG or EmployeeG of it, has received or may or will receive, in connection with or as a result of the firm making the recommendation or executing the TransactionG .
        (3) An Authorised FirmG need not disclose to a Retail ClientG under (2) any details about inducements where it:
        (a) believes on reasonable grounds that the Retail ClientG is already aware of the relevant inducements;
        (b) is undertaking an Execution-Only TransactionG for that Retail ClientG ; or
        (c) is executing a TransactionG pursuant to the terms of a Discretionary Portfolio Management AgreementG for that Retail ClientG .
        (4) An Authorised FirmG may provide the information required under (2) in summary form, provided it informs the ClientG that more detailed information will be provided to the ClientG upon request and complies with such a request.
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
        [Amended] DSFA RM185/2016 (Made 7th December 2016). [VER28/02-17]

        • COB 3.5.3 Guidance

          In relation to COB Rule 3.5.3 (1), in circumstances where an Authorised FirmG believes on reasonable grounds that the Client'sG interests are better served by a PersonG to whom the referral is to be made, any commission or other benefit which the firm or any of its EmployeesG or AssociatesG receives in respect of such a referral would not be a prohibited inducement under that Rule.

          Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

      • COB 3.5.4

        An Authorised FirmG may only accept goods and services under a Soft Dollar AgreementG if the goods and services are reasonably expected to:

        (a) assist in the provision of Investment BusinessG services to the Authorised Firm'sG ClientsG by means of:
        (i) specific advice on dealing in, or on the value of, any InvestmentG ;
        (ii) research or analysis relevant to (i) or about InvestmentsG generally; or
        (iii) use of computer or other information facilities to the extent that they are associated with specialist computer software or research services, or dedicated telephone lines;
        (b) provide custody services relating to InvestmentsG belonging to, or managed for, ClientsG ;
        (c) provide services relating to portfolio valuation or performance measurement services; or
        (d) provide market price services.
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

        • COB 3.5.4 Guidance

          An Authorised FirmG should undertake a thorough assessment of the nature of the goods and services and the terms upon which they are to be provided under a Soft Dollar AgreementG to ensure that the receipt of such goods and services provide commensurate value. This is particularly the case if any costs of such goods and services are to be passed through to ClientsG . Where the ClientG bears the cost of the goods and services, the disclosure obligation relating to costs and charges under COB Rule 3.3.2 (see AppG 2) will apply to such costs.

          Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

      • COB 3.5.5

        An Authorised FirmG must not DealG in InvestmentsG as AgentG for a ClientG , either directly or indirectly, through any broker under a Soft Dollar AgreementG , unless:

        (a) the agreement is a written agreement for the supply of goods or services described in COB Rule 3.5.4, which do not take the form of, or include, cash or any other direct financial benefit;
        (b) TransactionG execution by the broker is consistent with any best execution obligations owed to the ClientG ;
        (c) the Authorised FirmG has taken reasonable steps to ensure that the services provided by the broker are competitive, with no comparative price disadvantage, and take into account the interests of the ClientG ;
        (d) for TransactionsG in which the broker acts as principal, the Authorised FirmG has taken reasonable steps to ensure that CommissionG paid under the agreement will be sufficient to cover the value of the goods or services to be received and the costs of execution; and
        (e) the Authorised FirmG makes adequate disclosure in accordance with Rules COB 3.5.6 and COB 3.5.7.
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

      • COB 3.5.6

        Before an Authorised FirmG enters into a TransactionG for or on behalf of a Retail ClientG or Professional ClientG , either directly or indirectly, with or through the agency of another PersonG , in relation to which there is a Soft Dollar AgreementG which the Authorised FirmG has, or knows that another member of its GroupG has, with that other PersonG , it must disclose to its ClientG :

        (a) the existence of a Soft Dollar AgreementG ; and
        (b) the Authorised Firm'sG or its Group'sG policy relating to Soft Dollar AgreementsG .
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

      • COB 3.5.7

        (1) If an Authorised FirmG or member of its GroupG has a Soft Dollar AgreementG under which either the Authorised FirmG or member of its Group DealsG for a ClientG , the Authorised FirmG must provide that ClientG with the following information:
        (a) the percentage paid under Soft Dollar AgreementsG of the total CommissionG paid by or at the direction of:
        (i) the Authorised FirmG ; and
        (ii) any other member of the Authorised Firm'sG GroupG which is a party to those agreements;
        (b) the value, on a cost price basis, of the goods and services received by the Authorised FirmG under Soft Dollar AgreementsG , expressed as a percentage of the total CommissionG paid by or at the direction of:
        (i) the Authorised FirmG ; or
        (ii) other members of the Authorised Firm'sG GroupG ;
        (c) a summary of the nature of the goods and services received by the Authorised FirmG under the Soft Dollar AgreementsG ; and
        (d) the total CommissionG paid from the portfolio of that ClientG .
        (2) The information in (1) must be provided to that ClientG at least once a year, covering the period since the Authorised FirmG last reported to that ClientG .
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]