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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
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  • IFR 6.2 Shari'a Supervisory Board for an Islamic Fund

    • IFR 6.2.1

      (1) A Fund ManagerG of a Domestic FundG that is a Public FundG  must, subject to (3), appoint a Shari'a Supervisory BoardG to its FundG that meets the following requirements:
      (a) the Shari'a Supervisory BoardG has at least three members;
      (b) the members appointed to the Shari'a Supervisory BoardG are competent to perform their functions as Shari'a Supervisory BoardG members of the FundG ;
      (c) any appointments, dismissals or changes in respect of members of the Shari'a Supervisory BoardG are approved by the Governing BodyG of the Fund ManagerG ; and
      (d) no member of the Shari'a Supervisory BoardG is a director or Controller of the FundG or its Fund ManagerG .
      (2) A Fund ManagerG may comply with the requirement in (1) by appointing to the FundG the same Shari'a Supervisory BoardG as it has appointed to the firm in accordance with IFR Rule 3.5.1, provided the requirements in (1) are also met.
      (3) A Fund ManagerG is not required to comply with the requirement in (1) where it relies, for the purposes of making investments for the FundG , on a widely accepted Shari'a screening process such as investing in securities included in, or recognised by reference to, an Islamic index, sukuk, or treasury instruments issued by a Shari'a compliant financial services provider regulated by a Financial Services RegulatorG .
      Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
      [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
      [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

      • IFR 6.2.1 Guidance

        1. In appointing a Shari'a Supervisory BoardG for the purposes of IFR Rule 6.2.1(1), the Fund ManagerG should consider the previous experience and qualifications of the proposed Shari'a Supervisory BoardG members to assess whether the proposed Shari'a Supervisory BoardG member is competent to advise on the activities undertaken by the Islamic FundG . If the Fund ManagerG is appointing the same Shari'a Supervisory BoardG as it has appointed to the firm pursuant to IFR Rule 6.2.1(2), the Fund ManagerG should still consider whether the requirements in both Rule IFR 3.5.1(1) and IFR 6.2.1(1) are met in respect of that board.
        2. If the Fund ManagerG is relying on Shari'a screening methodologies such as the Dow Jones Shari'a index, such screening is generally regarded as widely accepted and accessible. However, if less widely known methodologies are used, the Fund ManagerG should be able, upon request by the DFSAG , to demonstrate to the satisfaction of the DFSAG the grounds on which it considers the particular methodology used to be acceptable and reliable.
        3. Although the Fund ManagersG of Exempt FundsG and Qualified Investor FundsG are not subject to the requirement for the appointment of a Shari'a Supervisory BoardG for such a Fund, they would need to ensure that the Exempt FundsG or Qualified Investor FundsG they manage continue to meet the applicable Shari'a requirements applicable to the FundG . They may use a member of the Shari'a Supervisory BoardG appointed at the firm level for the purposes of ascertaining compliance with the Shari'a requirements. The manner in which they demonstrate to the UnitholderG of the Exempt FundG or Qualified Investor FundG as to how they achieve such compliance is a matter left to negotiation (i.e. subject to contractual terms) between the UnitholdersG and the Fund ManagerG .
        4. An External Fund Manager may not be able to take advantage of IFR 6.2.1(2), unless it has a Shari'a Supervisory Board appointed at the firm level. In contrast the Fund Manager of an External Fund will be able to use its Shari'a Supervisory BoardG to meet the Shari'a Supervisory BoardG requirement relating to the FundG as set out in IFR 6.2.1(2).
        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]
        [Amended] DFSA RM139/2014 (Made 21st August 2014). [VER8/06-14]

    • IFR 6.2.2

      (1) Subject to (2), the Fund ManagerG of a FundG must document the Fund'sG policy in relation to:
      (a) how appointments, dismissals or changes will be made to the Shari'a Supervisory BoardG ;
      (b) the process through which the suitability of Shari'a Supervisory BoardG members will be considered; and
      (c) the remuneration of the members of the Shari'a Supervisory BoardG .
      (2) If the Fund ManagerG , pursuant to IFR Rule 6.2.1(2), appoints to the FundG the same Shari'a Supervisory Board it has appointed to the firm, the documents required under IFR Rule 6.2.2(1) must be included in or otherwise form part of the records required under IFR Rule 3.5.2.
      Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
      [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

    • IFR 6.2.3

      (1) Subject to (2), the Fund ManagerG of a FundG must establish and retain, for six years, records of:
      (a) its assessment of the competency of the Shari'a Supervisory BoardG members;
      (b) the agreed terms of engagement of each member of the Shari'a Supervisory BoardG ; and
      (c) the matters in Rules IFR 6.2.1(1)(c) and IFR 6.2.2.
      (2) If the Fund ManagerG , pursuant to IFR Rule 6.2.1(2), appoints to the FundG the same Shari'a Supervisory BoardG it has appointed to the firm, the records required under IFR Rule 6.2.3(1) must be included in or otherwise form part of the records required under IFR Rule 3.5.3.
      Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
      [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

      • IFR 6.2.3 Guidance

        1. The records of the assessment of competency of Shari'a Supervisory BoardG members should clearly indicate, at least:
        a. the factors that have been taken into account when making the assessment of competency;
        b. the qualifications and experience of the Shari'a Supervisory BoardG members;
        c. the basis upon which the Fund ManagerG has deemed that the proposed Shari'a Supervisory BoardG member is suitable; and
        d. details of any other Shari'a Supervisory BoardsG of which the proposed Shari'a Supervisory BoardG member is, or has been, a member.
        2. If the Fund ManagerG is relying on IFR Rule 6.2.1(2), then the due diligence process, and the records maintained under Rules IFR 3.5.2 and IFR 3.5.3, should be augmented with the matters specified under IFR Rule 6.2.1(1).
        Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
        [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

    • IFR 6.2.4

      (1) The Islamic Financial BusinessG policy and procedures manual must provide that:
      (a) a member of the Shari'a Supervisory BoardG is obliged to notify the Fund ManagerG of any conflict of interest that such member may have with respect to the FundG or the Fund ManagerG , and if appointed, or in the case of an Investment TrustG , the TrusteeG ; and
      (b) the Fund ManagerG will take appropriate steps to manage any such conflict of interest so that the Islamic Financial BusinessG is carried out appropriately and in compliance with Shari'a, the interest of a UnitholderG is not adversely affected and all UnitholdersG are fairly treated and not prejudiced by any such interests.
      (2) If a Fund ManagerG is unable to manage a conflict of interest as provided above, it must dismiss or replace the member as appropriate.
      Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
      [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

    • IFR 6.2.5

      The Fund ManagerG of a FundG must provide the DFSAG at its request with information on the qualifications, skills, experience and independence of the individuals who are appointed or proposed to be approved as members of the Shari'a Supervisory BoardG .

      Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
      [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]

    • IFR 6.2.6

      (1) The Fund ManagerG of a FundG must take reasonable steps to ensure that the Fund ManagerG and the Fund'sG EmployeesG :
      (a) provide such assistance as the Shari'a Supervisory BoardG reasonably requires to discharge its duties;
      (b) give the Shari'a Supervisory BoardG right of access at all reasonable times to relevant records and information;
      (c) do not interfere with the Shari'a Supervisory Board'sG ability to discharge its duties; and
      (d) do not provide false or misleading information to the Shari'a Supervisory BoardG .
      (2) If appointed, the TrusteeG must also take reasonable steps to ensure that its EmployeesG comply with (1)(a)–(d).
      Derived from DFSA RM69/2010 (Made 1st March 2010). [VER1/03-10]
      [Amended] DFSA RM72/2010 (Made 11th July 2010). [VER2/07-10]