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  • Part 5: Governance of Domestic Funds

    • Chapter 1: Fund's Systems and Controls

      • 38. Systems and Controls Requirement

        (1) A Fund Manager of a Domestic Fund shall establish and maintain systems and controls including but not limited to financial and other risk controls to ensure sound management of the Fund:
        (a) in accordance with the Fund's Constitution, its most recent Prospectus, this Law and the Rules made for the purposes of this Law; and
        (b) taking account of the risks to which the Fund may be exposed, due to the nature, scale and complexity of the Fund's investments and operations.
        (2) The DFSA may, by Rules, prescribe any additional requirements relating to systems and controls that must be established and implemented by the Fund Manager of certain types of, or specialist classes of, Domestic Funds.

    • Chapter 2: Oversight of Public Funds

      • 39. Requirements Relating to Oversight Arrangements

        (1) A Fund Manager of a Domestic Fund which is, or is to be, a Public Fund shall:
        (a) establish and maintain one of the permitted oversight arrangements prescribed in the Rules; and
        (b) ensure that a person appointed to carry out the oversight function for the Fund meets:
        (i) the independence criteria set out in Article 42 of this Law; and
        (ii) any additional suitability criteria prescribed in Rules made for the purposes of this Article.
        (2) The DFSA may at any time object to a particular oversight arrangement or an individual appointed to carry out the oversight function for a Fund and require the Fund Manager to appoint a replacement if it appears to the DFSA that the requirements in Article 39(1) are not being met.
        (3) The procedures in Schedule 3 to the Regulatory Law 2004 apply to a decision of the DFSA under this Article.
        (4) If the DFSA decides to exercise its power under this Article, the Fund Manager may refer the matter to the FMT for review.

      • 40. Powers and Functions of the Persons Undertaking the Oversight Function

        (1) The Fund Manager shall ensure that each person undertaking the oversight function for the Fund is appointed with the necessary powers and resources to discharge its duties and functions and is required to:
        (a) monitor whether the Fund Manager is:
        (i) managing the Fund in accordance with the Constitution and the most recent Prospectus of the Fund and any investments and borrowing limitations or other restrictions imposed on the Fund under this Law or any Rules made for the purposes of this Law; and
        (ii) complying with any terms and conditions on the Fund Manager's Licence, particularly with respect to the management of the Fund; and
        (b) assess whether the Fund Manager's systems and controls, particularly those relating to risk management and compliance, operate as intended and remain adequate;
        (c) report to the Fund Manager on its findings, including any actual or potential breaches or inadequacies in relation to the matters specified in Article 40(1)(a) and (b), as soon as such breaches or inadequacies are identified or suspected; and
        (d) report to the DFSA if:
        (i) the Fund Manager has failed, or appears likely to fail, to take appropriate action to rectify or remedy a matter reported to it within 30 days of that matter being so reported; and
        (ii) that person believes that the matter has had, or is likely to have, a materially adverse impact on the interests of the Unitholders of the Fund.
        (2) The DFSA may, by Rules, prescribe any additional matters or requirements relating to the oversight function or persons providing the oversight function for a Public Fund, including any period shorter than the period referred to in Article 40(1)(d) for reporting certain matters to the DFSA.

      • 41. Duties of a Person Providing Oversight Functions

        (1) Each person appointed to provide the oversight function to a Fund shall:
        (a) act honestly;
        (b) exercise the degree of care and diligence that a reasonable person would exercise if he were in that person's position;
        (c) act in the best interests of the Unitholders in the Fund and, if there is a conflict between the Unitholders' interests and his own interests, give priority to the Unitholders' interests;
        (d) not make improper use of his position, or information acquired in that position, in order to:
        (i) gain an improper advantage for himself or another person; or
        (ii) cause detriment to Unitholders in the Fund;
        (e) disclose to the Fund's auditor any information relevant for the auditor to discharge its obligations;
        (f) comply with any other duty or obligation as the DFSA may prescribe under this Law or any other legislation administered by the DFSA, and
        (g) carry out or comply with any other duty, not inconsistent with DIFC Law, that is conferred on him by the Fund's Constitution.
        (2) A person providing the oversight function for a Fund is to take all reasonable steps to assist the DFSA in exercising its powers under Part 5 of the Regulatory Law 2004.
        (3) Without limiting the application of any provision of this Law and any Rules made for the purposes of this Law, a person providing oversight function does not contravene any duty to which that person is subject where that person gives to the DFSA:
        (a) a notification as required under this chapter; or
        (b) any other information or opinion in relation to any such matter;
        if the person is acting in good faith and reasonably believes that the notification, information or opinion is relevant to any functions of the DFSA.

      • 42. Independence

        (1) A person providing the oversight function meets the independence criteria specified in Article 39(1)(b)(i) if, subject to Article 42(3), he:
        (a) is not, and has not been in the previous 2 years, an employee or an executive director or officer of the Fund Manager or a body corporate in the same group (a "related body corporate");
        (b) is not, and has not been in the previous 2 years, involved in material business dealings, or in a professional capacity, with the Fund Manager or a related body corporate;
        (c) is not a member of a partnership or a trustee of a trust that is, or has been in the previous 2 years, substantially involved in business dealings, or in a professional capacity, with the Fund Manager or a related body corporate;
        (d) does not have a material interest in the Fund Manager or a related body corporate;
        (e) is not a relative or de facto spouse of a person who has a material interest in the Fund Manager or a related body corporate of a kind described in Article 42(1)(a) and to (d); and
        (f) if he is a person acting for the Trustee of the Fund where the latter is appointed for providing the oversight function, meets the independence criteria set out in Article 19 of the Investment Trust Law 2006.
        (2) A person does not cease to be independent for the purposes of this Article merely by virtue of being appointed as a person providing the oversight function for a Fund.
        (3) The DFSA may, by Rules, prescribe when a legal entity appointed as the person providing the oversight function to a Fund may or may not meet the independence criteria for the purposes of this Article.