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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
Laws
Rulebook Modules
Conduct of Business Module (COB) [VER32/02-19]
Sourcebook Modules
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Policy Statements
DFSA Codes of Practice
Amendments to Legislation
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Financial Markets Tribunal
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  • COB 2 Client Classification

    • COB 2.1 Application

      • COB 2.1.1

        (1) This chapter applies, subject to Rule 2.1.2, to an Authorised FirmG , which carries on, or intends to carry on, any Financial ServiceG with or for a PersonG .
        (2) For the purposes of this chapter, a PersonG includes a FundG , pension fund or trust, even if it does not have a separate legal personality.
        Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

      • Exclusions

        • COB 2.1.2

          (1) This chapter does not apply to a Credit Rating AgencyG in so far as it carries on, or intends to carry on, the Financial ServiceG of Operating a Credit Rating AgencyG .
          (2) This chapter does not apply to an Authorised FirmG in so far as it carries on the activity described in GEN Rule 2.26.1, provided that no other Financial ServiceG is carried on.
          (3) This chapter does not apply to an Authorised ISPVG .
          Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

          • COB 2.1.2 Guidance

            1. The activity described in GEN Rule 2.26.1 is marketing of financial services and financial products which are offered in a jurisdiction outside the DIFCG . Such marketing activities can be conducted by an Authorised FirmG , which holds a Representative OfficeG Licence, provided the financial services or financial products marketed by it are those offered by its head office or a member of its GroupG .
            2. As a Representative OfficeG conducting marketing activities of the kind described in GEN Rule 2.26.1 does not have a client relationship with a Person to whom it markets a financial service or financial product, the client classification requirements in this chapter do not apply to the firm with regard to that Person.
            3. Other Authorised FirmsG can also conduct marketing activities, of the kind described in GEN Rule 2.26.1, under the exclusion in GEN Rule 2.26.2.
            Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

    • COB 2.2 Overview

      • COB 2.2 Guidance

        1. This chapter sets out the manner in which an Authorised FirmG is required to classify its ClientsG , as well as good practice it may follow. The scope of application of the Rulebook modules will vary depending on whether the PersonG with or for whom an Authorised FirmG is carrying on Financial ServicesG is classified as a Retail ClientG , Professional ClientG or Market CounterpartyG .

        Risk based approach

        2. The Rules in this chapter reflect the DFSA's risk based approach to regulation. Therefore, to achieve the underlying objective of client classification, which is to ensure that firms provide to their clients an appropriate level of regulatory protection, the Rules, for example:
        a. take into account the higher degree of knowledge and experience ('expertise') and resources available to certain institutional and wholesale clients (see Rule 2.3.4);
        b. take into account who primarily bears the risk associated with a particular type of a Financial ServiceG (see Rule 2.3.5);
        c. take into account the type of PersonsG to whom a Financial ServiceG is usually provided (see Rules 2.3.6, 2.3.7 and 2.3.8);
        d. provide flexibility for an Authorised FirmG to rely on a client classification made by its head office or a GroupG member, provided risks associated with such reliance are effectively addressed (see Rules 2.4.4 and 3.3.4);
        e. provide flexibility for group-based Financial ServicesG to be provided where risks associated with such services are effectively addressed (see Rule 2.4.5); and
        f. provide flexibility for look-through arrangements where reliance can be placed on expertise and resources available to a ClientG , such as at its Holding CompanyG or controller level (see Rule 2.3.8(2)).

        Types of clients

        3. There are three types of ClientsG :
        a. a Retail ClientG ;
        b. a Professional ClientG ; or
        c. a Market CounterpartyG .
        However, a PersonG may be classified as a Professional ClientG in relation to one Financial ServiceG or financial product, but a Retail ClientG in relation to another. Similarly, a PersonG classified as a Professional ClientG may be classified as a Market CounterpartyG in relation to some Financial ServicesG or financial products but not others (see paragraphs 8 and 9 below).

        Retail clients

        4. A PersonG who cannot be classified as a Professional ClientG or Market CounterpartyG in accordance with the Rules is required to be classified as a Retail ClientG (see Rule 2.3.2). If an Authorised FirmG chooses to provide Financial ServicesG to a PersonG as a Retail ClientG , it may do so by simply classifying that PersonG as a Retail ClientG without having to follow any further procedures as required for classifying PersonsG as Professional ClientsG or Market CounterpartiesG .

        Professional Clients

        5. There are three routes through which a PersonG may be classified as a Professional ClientG :
        a. 'deemed' Professional ClientsG under Rule 2.3.4. As these PersonsG have significant assets under their control, and, therefore, either possess, or have the resources to obtain, the necessary expertise to manage such assets, they can be classified as 'deemed' Professional ClientsG without having to meet any additional net asset and expertise criteria;
        b. 'service-based' Professional ClientsG under Rule 2.3.5, Rule 2.3.6 or Rule 2.3.6A. Due to their inherent nature, certain Financial ServicesG activities such as credit provided to an UndertakingG for business purposes ('commercial credit'), advisory and arranging activities relating to corporate structuring and financing and crowdfunding services provided to a Body CorporateG that is a borrower or an IssuerG , are generally provided to PersonsG with sufficient expertise to obtain such services or are of relatively low risk to the Client. Therefore, a PersonG to whom such a Financial Service is provided can be classified as a 'service-based' Professional ClientG ; and
        c. 'assessed' Professional ClientsG under Rules 2.3.7 and 2.3.8. These PersonsG are either individuals or Undertakings which can be classified as a Professional ClientG only if they meet the specified net assets and expertise requirements set out in Rules 2.4.2 and 2.4.3.
        Investment vehicles and family member joint account holders of individuals who are themselves Professional ClientsG can also be classified as Professional ClientsG where certain conditions are met — see Rule 2.3.7(2) and (3).

        Market Counterparties

        6. A 'deemed' Professional ClientG under Rule 2.3.4 may be classified as a Market CounterpartyG provided the Authorised FirmG has complied with the procedures set out in Rule 2.3.9(2). When an Authorised FirmG carries on Financial ServicesG with a Market CounterpartyG , only a limited number of requirements in the Rulebook modules apply to such firms. This is because an Authorised FirmG transacts with a Market CounterpartyG on an equal footing and, therefore, most of the client protection provisions in the Rulebook modules are not needed to protect such a party.
        7. When an Authorised FirmG carries on Financial ServicesG with another Authorised FirmG or a Regulated Financial InstitutionG , such services would generally qualify as Financial ServicesG that can be carried on with a Market CounterpartyG (provided the procedures in Rule 2.3.9(2) are met). Examples of such services include:
        a. providing reinsurance or insurance management services to an insurer; and
        b. providing one or more Financial Services of custody, managing assets, or fund administration services to a fund manager, collective investment fund or a pension fund.
        Such activities would not attract most of the client protection provisions contained in the Rulebook modules for the reasons set out under item 6 above.

        Multiple classifications

        8. In some circumstances, an Authorised FirmG may provide a Financial ServiceG to a PersonG who qualifies under more than one category of Professional ClientG . For example, a ClientG to whom an Authorised FirmG provides commercial credit or corporate structuring and financing advice or arranging credit, in the circumstances specified in Rule 2.3.5 or Rule 2.3.6, may also be a 'deemed' Professional ClientG under Rule 2.3.4. In such circumstances, an Authorised FirmG can classify such a PersonG as a 'deemed' Professional ClientG , in which case the firm may also be able to classify that ClientG as a Market CounterpartyG following the procedures in Rule 2.3.9(2).
        9. It is also possible that an Authorised FirmG may provide a range of Financial ServicesG to a single ClientG . If the ClientG can be classified as a Professional ClientG with regard to certain Financial ServicesG (such as Providing CreditG under the requirements in Rule 2.3.5, and similarly providing corporate structuring and financing advice or arranging credit under Rule 2.3.6), and not so with regard to other Financial ServicesG , an Authorised FirmG needs to take care that the ClientG is appropriately and correctly classified with respect to each Financial ServiceG . This may mean that the same ClientG may receive both Professional ClientG treatment with regard to some Financial ServicesG and Retail ClientG treatment with regard to other Financial ServicesG . Where a ClientG cannot be classified as a Professional ClientG with regard to some Financial ServicesG , the Authorised FirmG can only provide such services to the ClientG if it has a Retail EndorsementG on its LicenceG .

        Client classifications and Client Agreements

        10. Rule 2.4.4 provides a degree of flexibility for an Authorised FirmG which is a BranchG operation or member of a Group to rely on client classifications made by its head office or any other branch of the same legal entity, or by a member of its GroupG . Where such reliance is placed, the Authorised FirmG should be able to demonstrate to the satisfaction of the DFSAG that the reliance is reasonable because the applicable requirements are substantially similar and, where this is not the case, any identified differences (i.e. gaps) are suitably addressed to enable the firm to meet its obligations relating to client classification under this chapter.
        11. It is also possible that an Authorised FirmG which is a member of a GroupG may have some ClientsG to whom it provides Financial ServicesG as a Retail ClientG , whilst other GroupG members may provide Financial ServicesG to the same ClientG as a Professional ClientG . While an Authorised FirmG may rely on the client classifications made by a GroupG member under Rule 2.4.4, it is the responsibility of the firm to ensure that the correct classification is adopted by it for the purposes of the Financial ServicesG it provides to the ClientG (see Rule 2.4.4). See also Rule 3.3.4, which provides a degree of flexibility for an Authorised FirmG which is a BranchG to rely on a Client AgreementG made by its head office or any other branch of the same legal entity, or by a member of the GroupG , provided the requirements in that Rule are met.

        Group clients

        12. Rule 2.4.5 is designed to provide a greater degree of flexibility to an Authorised FirmG providing Financial ServicesG to a ClientG in a GroupG context, where more than one member of the GroupG may be providing Financial ServicesG which form a bundle of services. Each GroupG may have different arrangements to provide a number of services to a ClientG . Depending on the nature of the arrangement the GroupG adopts, and the Financial ServicesG involved, risks associated with such arrangements could also differ. Therefore, Rule 2.4.5 sets out the outcomes which need to be achieved by an Authorised FirmG where it participates in a GroupG arrangement under which a bundle of Financial ServicesG is provided to a ClientG by different members within its GroupG . See also Rule 3.3.4, which provides a degree of flexibility for an Authorised FirmG participating in an arrangement under which a bundle of Financial ServicesG is provided to a ClientG where reliance can be made on a Client AgreementG executed by a GroupG member, provided the requirements in that Rule are met.

        Transitional Rules

        13. Section 2.6 contains provisions designed to enable Authorised FirmsG to make a smooth transition to the new client classification regime that came into force on 1 April 2015. These Rules, among other things:
        a. keep in force the client classifications made under the old client classification regime for the Financial ServicesG that were provided to those ClientsG under that regime;
        b. provide for the increased asset threshold of $1 million to come into effect on 1 April 2016; and
        c. retain the asset threshold at $500,000 until 1 April 2016.
        Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]
        [Amended] DFSA RMI202/2017 (Made 14th June 2017). [VER29/08-17]

    • COB 2.3 Types of Clients

      • COB 2.3.1

        (1) An Authorised FirmG must, before carrying on a Financial ServiceG with or for a PersonG , classify that PersonG as a:
        (a) Retail ClientG ;
        (b) Professional ClientG ; or
        (c) Market CounterpartyG ,
        in accordance with the requirements in this chapter.
        (2) An Authorised FirmG may classify a PersonG as a different type of a ClientG for different Financial ServicesG or financial products that are to be provided to such a ClientG .
        (3) If an Authorised FirmG is aware that a PersonG ('the agent'), with or for whom it is intending to carry on a Financial ServiceG is acting as an agent for another PersonG ('the principal') in relation to the service then, unless the agent is another Authorised FirmG or a Regulated Financial Institution, the Authorised FirmG must treat the principal as its ClientG in relation to that service.
        (4) If an Authorised FirmG intends to provide any Financial ServiceG to a trust, it must, unless otherwise provided in the Rules, treat the trustee of the trust, and not the beneficiaries of the trust, as its ClientG .
        Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

        • COB 2.3.1 Guidance

          1. When a PersonG becomes a ClientG of an Authorised FirmG is a question of fact that needs to be addressed by the firm in light of the nature of the relevant Financial ServiceG (or financial product) involved, and the relations and interactions which the firm has with that PersonG . For instance, in certain types of Financial ServicesG (such as corporate advisory services), a number of conversations (such as marketing and promotional activities) may occur between an Authorised FirmG and a potential client before it may appear to the firm on a reasonable basis that the PersonG is likely to obtain a Financial ServiceG from the firm, at which point a client classification is required.
          2. Given the many different circumstances in which interactions between a potential client and an Authorised FirmG take place, it is not possible to include a more specific requirement than the current provision which requires the client classification to occur "before" a firm provides a Financial ServiceG to a PersonG — see Rule 2.3.1(1). This provides an Authorised FirmG flexibility to determine when exactly it would be appropriate for the firm to undertake client classification.
          3. The DFSAG expects Authorised FirmsG to adopt practices which are consistent with the underlying intent of the client classification provisions, which is to provide ClientsG an appropriate level of regulatory protection in light of the resources and expertise available to such Clients. Therefore, as soon as it is reasonably apparent that a potential customer is likely to obtain a Financial ServiceG from the firm, it would need to undertake the client classification process relating to that customer (unless such a customer is classified as a Retail ClientG for the purposes of the Rules — see Rule 2.3.2).
          4. For example, an Authorised FirmG is not expected to undertake advising or arranging activities relating to a Financial ServiceG or financial product which is suited to Professional ClientsG (such as complex derivatives) with a potential customer without having a reasonable basis to consider that such a customer has sufficient knowledge and experience relating to the relevant service or product. While a formal client classification may not be needed at the early stages of interaction with a potential customer, a firm is expected to form a reasonable view about the professional status of a potential customer when exposing such a customer to Financial ServicesG or financial products (such as investments in a Qualified Investor FundG ) which are intended for Professional ClientsG .
          5. Rule 2.3.1(2) allows an Authorised FirmG to classify a ClientG as a Retail ClientG in respect of some Financial ServicesG and a Professional ClientG in respect of other Financial ServicesG . For example, a ClientG classified as a 'service-based' Professional ClientG under Rule 2.3.5 for the Financial ServiceG of Providing CreditG may not necessarily meet the criteria to be classified as an 'assessed' Professional ClientG under Rule 2.3.7 or Rule 2.3.8 in respect of any other Financial ServiceG to be provided to that ClientG . Therefore, such a ClientG would need to be classified as a Retail ClientG with respect to Financial ServicesG other than Providing CreditG .
          Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

      • Retail Clients

        • COB 2.3.2

          An Authorised FirmG must classify as a Retail ClientG any PersonG who is not classified as a Professional ClientG or a Market CounterpartyG .

          Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]
          [Amended] DSFA RM185/2016 (Made 7th December 2016). [VER28/02-17]

      • Professional Clients

        • COB 2.3.3

          (1) An Authorised FirmG may classify a PersonG as a Professional ClientG if that Person:
          (a) meets the requirements to be:
          (i) a "deemed" Professional ClientG pursuant to Rule 2.3.4;
          (ii) a "service-based" Professional ClientG pursuant to Rule 2.3.5, Rule 2.3.6 or Rule 2.3.6A; or
          (iii) an "assessed" Professional ClientG pursuant to either Rule 2.3.7 or Rule 2.3.8; and
          (b) has not opted-in to be classified as a Retail ClientG in accordance with the requirements in Rule 2.4.1.
          (2) If an Authorised FirmG becomes aware that a Professional ClientG no longer fulfils the requirements to remain classified as a Professional ClientG , the Authorised FirmG must, as soon as possible, inform the ClientG that this is the case and the measures that are available to the firm and the ClientG to address that situation.
          Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]
          [Amended] DFSA RMI202/2017 (Made 14th June 2017). [VER29/08-17

          • COB 2.3.3 Guidance

            The measures referred to in Rule 2.3.3(2) may include classifying the ClientG as a Retail ClientG with respect to any future Financial ServicesG to be provided to that ClientG or, if the firm does not have a Retail Endorsement, discontinuing the provision of Financial ServicesG to that ClientG .

            Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

      • 'Deemed' Professional Clients

        • COB 2.3.4

          (1) For the purposes of Rule 2.3.3(1)(a)(i), a PersonG is a 'deemed' Professional ClientG if that PersonG is:
          (a) a supranational organisation whose members are either countries, central banks or national monetary authorities;
          (b) a properly constituted government, government agency, central bank or other national monetary authority of any country or jurisdiction;
          (c) a public authority or state investment body;
          (d) an Authorised Market InstitutionG , Regulated ExchangeG or regulated clearing house;
          (e) an Authorised FirmG , a Regulated Financial InstitutionG or the management company of a regulated pension fund;
          (f) a Collective Investment FundG or a regulated pension fund;
          (g) a Large Undertaking as specified in (2);
          (h) a Body CorporateG whose shares are listed or admitted to trading on any exchange of an IOSCO member country;
          (i) any other institutional investor whose main activity is to invest in financial instruments, including an entity dedicated to the securitisation of assets or other financial transactions;
          (j) a trustee of a trust which has, or had during the previous 12 months, assets of at least $10 million; or
          (k) a holder of a licence under the Single Family OfficeG Regulations with respect to its activities carried on exclusively for the purposes of, and only in so far as it is, carrying out its duties as a Single Family OfficeG .
          (2) A PersonG is a Large Undertaking if it met, as at the date of its most recent financial statements, at least two of the following requirements:
          (a) it has a balance sheet total of at least $20 million;
          (b) it has a net annual turnover of at least $40 million; or
          (c) it has own funds or called up capital of at least $2 million.
          (3) In (2):
          (a) a 'balance sheet total' means the aggregate of the amounts shown as assets in the balance sheet before deducting both current and long-term liabilities;
          (b) 'own funds' mean cash and investments as shown in the balance sheet; and
          (c) 'called up capital' means all the amounts paid-up on allotted shares, less any amounts owing on allotted shares.
          Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

          • COB 2.3.4 Guidance

            1. Although an Authorised FirmG is not required to undertake a detailed assessment of a 'deemed' Professional Client'sG expertise or net assets (as is required in the case of an 'assessed' Professional ClientG ), a firm still needs to have a reasonable basis for classifying a PersonG as falling within the list of 'deemed' Professional ClientsG in Rule 2.3.4(1) or (2). For example, in order to verify whether a trustee of a trust can be classified as a 'deemed' Professional ClientG under Rule 2.3.4(1)(j), an Authorised FirmG should obtain a verified copy of the most recent balance sheet of the relevant trust.
            2. An individual trustee on the board of a trust where the trust has at least $10 million assets under its control can qualify as a 'deemed' Professional ClientG under Rule 2.3.4(1)(j) but only in relation to that particular trust.
            Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

      • 'Service-based' Professional Clients

        • Guidance

          Rule 2.3.5, Rule 2.3.6 and Rule 2.3.6A each set out different circumstances in which a PersonG can be classified as a 'service-based' Professional ClientG . The professional status allowed under these three 'service-based' Professional ClientG categories can only be used for those three Financial ServicesG and not for any other Financial ServiceG provided to the same ClientG . If such a ClientG also obtains other Financial ServicesG from the same firm, unless the ClientG can qualify either as a 'deemed' or 'assessed' Professional ClientG , that ClientG will need to be classified as a Retail ClientG for those other Financial ServicesG .

          Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]
          [Amended] DFSA RMI202/2017 (Made 14th June 2017). [VER29/08-17]

        • COB 2.3.5

          (1) For the purposes of Rule 2.3.3(1)(a)(ii), a PersonG is a 'service-based' Professional ClientG if:
          (a) the Financial ServiceG provided to that PersonG is Providing CreditG ;
          (b) the PersonG is an UndertakingG ; and
          (c) the Credit FacilityG in question is provided for use in the business activities of:
          (i) the PersonG ;
          (ii) a controller of the PersonG ;
          (iii) any member of the GroupG to which the PersonG belongs; or
          (iv) a joint venture of a PersonG referred to in (i)–(iii).
          (2) In (1)(c)(ii), a controller is an individual who:
          (a) owns a majority of the shares of the UndertakingG ;
          (b) is able to appoint or remove a majority of the board members of the UndertakingG ; or
          (c) controls a majority of the voting rights of the UndertakingG (or that of a Holding CompanyG of the UndertakingG ).
          Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

          • COB 2.3.5 Guidance

            1. Rule 2.3.5(1)(c) enables an Authorised FirmG to classify an UndertakingG as a Professional ClientG for the purposes of Providing CreditG for businesses purposes, not only for the UndertakingG itself, but also for its related entities (such as a controller or member of its GroupG ) as specified in that Rule, provided that the UndertakingG has not opted-in to be classified as a Retail Client.
            2. It is possible that an UndertakingG obtaining credit may also fall within the category of a 'deemed' Professional ClientG under Rule 2.3.4 — see, for example, a Large Undertaking under Rule 2.3.4(2). An Authorised FirmG may Provide Credit to such a PersonG without having to meet the requirements in Rule 2.3.5.
            3. Joint ventures are generally contractual arrangements under which parties contribute their assets and/or expertise to develop or to undertake specified business activities. An UndertakingG can be set up by a number of joint venture partners for obtaining credit for use in the ordinary course of their joint venture business. Although joint venture partners would themselves not have a controlling interest in the joint venture, as credit is obtained for use in the joint venture business, they have the benefit of the professional client status available to the UndertakingG under Rule 2.3.5.
            4. While an Authorised FirmG is not required to undertake a detailed assessment of a 'service-based' Professional Client's expertise or net assets (as required in the case of an 'assessed' Professional ClientG ), a firm still needs to have a reasonable basis for classifying a PersonG as falling within the circumstances specified in this Rule (or Rule 2.3.6). For example, to verify that an UndertakingG is obtaining credit for use in the business of its Holding CompanyG or another member of its GroupG , a firm would need some documentation to demonstrate the GroupG member relationship. Such documents may include a diagram of the GroupG structure and copies of certificates of incorporation and shareholdings of the relevant companies.
            Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

        • COB 2.3.6

          (1) For the purposes of Rule 2.3.3(1)(a)(ii), a PersonG is a 'service-based' Professional ClientG if:
          (a) the Financial ServiceG provided to that PersonG is "Advising on Financial ProductsG ", "Arranging Deals in InvestmentsG ", or "Arranging Credit and Advising on CreditG "; and
          (b) the service in (a) is provided for the purposes of 'corporate structuring and financing'.
          (2) In (1), 'corporate structuring and financing':
          (a) includes:
          (i) providing advice relating to an acquisition, disposal, structuring, restructuring, financing or refinancing of a corporation or other legal entity; or
          (ii) arranging credit for a purpose referred to in (i); and
          (b) excludes any Advising on Financial ProductsG , Arranging Deals in InvestmentsG or Arranging Credit and Advising on CreditG , provided to an individual for the purposes of, or in connection with, the management of that individual's investments.
          Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]
          [Amended] DSFA RM185/2016 (Made 7th December 2016). [VER28/02-17]

          • COB 2.3.6A

            For the purposes of the reference in Rule 2.3.3(1)(a)(ii) to this RuleG , a PersonG is a 'service-based' Professional ClientG if:

            (a) the Financial ServiceG being provided to the PersonG is Loan CrowdfundingG or Investment CrowdfundingG ; and
            (b) the PersonG is a Body CorporateG and is using the service to borrow funds from lenders or to obtain funds from investors.
            [Added] DFSA RMI202/2017 (Made 14th June 2017). [VER29/08-17]

            • COB 2.3.6 Guidance

              1. This Rule enables an Authorised FirmG to classify a PersonG obtaining advice or arranging credit for the purposes of corporate structuring and financing as a Professional ClientG based on the nature of such activities, which are generally sought by PersonsG with greater expertise and resources than Retail ClientsG . Such advice and arranging occurs in the context of takeovers and merger activities and capital raising activities of companies, including any Initial Public OfferingsG or other offers of securities for capital raising purposes.
              2. If a ClientG seeking corporate structuring and financing services is also a PersonG who falls within the category of a 'deemed' Professional ClientG under Rule 2.3.4, an Authorised FirmG may provide to such a PersonG those services without having to meet the requirements in Rule 2.3.6.
              3. Under Rule 2.3.6(2)(b), any advisory and arranging services given to an individual who is a wealth management ClientG for the purposes of their investment activities or portfolio management are excluded because such ClientsG are not necessarily Professional ClientsG . Therefore, for such a ClientG to qualify as a Professional ClientG , he would need to be an 'assessed' Professional ClientG , which requires an assessment of his net assets and expertise against the requirements in Rules 2.4.2 and 2.4.3.
              Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

      • 'Assessed' Professional Clients

        • Undertakings

          • COB 2.3.8

            (1) For the purposes of Rule 2.3.3(1)(a)(iii), an UndertakingG is an 'assessed' Professional ClientG if the UndertakingG :
            (a) has own funds or called up capital of at least $1 million; and
            (b) appears, on reasonable grounds, to have sufficient experience and understanding of relevant financial markets, products or transactions and any associated risks, following the analysis set out in Rule 2.4.3.
            (2) An Authorised FirmG may also classify an UndertakingG as a Professional ClientG if the UndertakingG has:
            (a) a controller;
            (b) a Holding CompanyG ;
            (c) a SubsidiaryG ; or
            (d) a joint venture partner,
            who meets the requirements to be classified as an 'assessed' Professional ClientG pursuant to either Rule 2.3.7(1)(a) and (b)(ii) or Rule 2.3.8(1) as applicable, or a 'deemed' Professional ClientG pursuant to Rule 2.3.4(1).
            (3) In this Rule:
            (a) the terms 'own funds' and 'called up capital' in (1)(a) have the meaning given under Rule 2.3.4(3)(b) or (c) as the case may be; and
            (b) the term 'controller' in (2)(a) means an individual who meets the criteria in Rule 2.3.5(2).
            Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

            • COB 2.3.8 Guidance

              1. Under Rule 2.6.3, the asset test referred to in Rule 2.3.8(1)(a) remains $500,000 until 1 April 2016.
              2. Where an Authorised FirmG proposes to classify an UndertakingG as a Professional ClientG under (2), the firm must assess whether the PersonG on whom reliance is placed, i.e. a Person referred to in (2)(a) to (d) as is relevant, meets the Professional ClientG criteria, unless that PersonG falls within a category of 'deemed' Professional Client.
              3. Where an UndertakingG is set up by partners in a joint venture for the purposes of their joint venture, the UndertakingG itself can be treated as a Professional ClientG provided a joint venture partner meets the Professional ClientG criteria (see Guidance paragraph 3 under Rule 2.3.5 for a description of a joint venture). To be able to rely on a joint venture partner's Professional ClientG status, such a partner should generally be a key decision maker with respect to the business activities of the joint venture, and not just a silent partner.
              Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

        • Individuals

          • COB 2.3.7

            (1) For the purposes of Rule 2.3.3(1)(a)(iii), an individual is an 'assessed' Professional ClientG if:
            (a) the individual has net assets of at least $1 million calculated in accordance with Rule 2.4.2; and
            (b) either:
            (i) the individual is, or has been, in the previous two years, an EmployeeG in a relevant professional position of an Authorised FirmG or a Regulated Financial InstitutionG ; or
            (ii) the individual appears, on reasonable grounds, to have sufficient experience and understanding of relevant financial markets, products or transactions and any associated risks, following the analysis set out in Rule 2.4.3.
            (2) An Authorised FirmG may classify any legal structure or vehicle, such as an UndertakingG , trust or foundation, which is set up solely for the purpose of facilitating the management of an investment portfolio of an individual assessed as meeting the requirements in (1) as a Professional ClientG .
            (3) An Authorised FirmG may also classify as a Professional ClientG another individual (the "joint account holder") who has a joint account with an individual assessed as meeting the requirements in (1) (the "primary account holder") if:
            (a) the joint account holder is a family member of the primary account holder;
            (b) the account is used for the purposes of managing investments for the primary account holder and the joint account holder; and
            (c) the joint account holder has confirmed in writing that investment decisions relating to the joint account are generally made for, or on behalf of, him by the primary account holder.
            (4) In (3), a 'family member' of the primary account holder is:
            (a) his spouse;
            (b) his children and step-children, his parents and step-parents, his brothers and sisters and his step-brothers and step-sisters; and
            (c) the spouse of any individual within (b).
            Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

            • COB 2.3.7 Guidance

              1. Under Rule 2.6.3, the net asset test referred to in Rule 2.3.7(1)(a) remains $500,000 until 1 April 2016.
              2. An individual can generally only be classified as a Professional ClientG if he meets the requirements in Rule 2.3.7(1) or (3). This is because all the other criteria relevant to Professional ClientsG in this chapter apply to Undertakings and not to individuals, with the possible exception of a trustee of a trust under Rule 2.3.4(j).
              3. An individual classified as a Professional ClientG may operate a joint account with more than one family member. Under the general principle of interpretation that the singular includes the plural, provided each such family member meets the requirements set out in Rule 2.3.7(3), they can all be classified as Professional ClientsG .
              4. A legal structure or vehicle of a Professional ClientG , which is itself classified as a Professional ClientG under Rule 2.3.7(2), does not have a right to opt-in as a Retail ClientG , as that right belongs to the Professional ClientG for whose purposes the vehicle is set up.
              5. A family member of a Professional ClientG classified as a Professional ClientG under Rule 2.3.7(3) also does not per se have a right to opt-in to be classified as a Retail ClientG with regard to the operation of the joint account. However, such an individual has the right to withdraw his confirmation given under Rule 2.3.7(3)(c) to have decisions on behalf of him made by the Professional ClientG who is the primary account holder of the joint account. An Authorised FirmG must ensure that once such a withdrawal is made, the withdrawing individual is no longer classified as a Professional ClientG . The joint account arrangements would also need to be reviewed as the primary account holder would no longer have the power to make decisions on behalf of the withdrawing individual.
              6. In the case of a joint account operated by a primary account holder who is a parent or legal guardian of a minor, the procedures for obtaining the formal consent referred to in Rule 2.3.7(3)(c) would generally not be required, as such parent or guardian would have the authority to act for the minor where he is the joint account holder.
              Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

        • Market Counterparties

          • COB 2.3.9

            (1) An Authorised FirmG may classify a PersonG as a Market CounterpartyG if:
            (a) that PersonG is:
            (i) a 'deemed' Professional ClientG pursuant to COB Rule 2.3.4;
            (ii) an 'assessed' Professional ClientG pursuant to COB Rule 2.3.8(2)(b) which is wholly owned by a Holding CompanyG that is a 'deemed' Professional ClientG pursuant to COB Rule 2.3.4(1)(g) or (h); or
            (iii) a 'deemed' Market CounterpartyG pursuant to Rule (1A); and
            (b) in the case of PersonsG referred to in (a)(i) and (ii), the requirements in (2) have been met.
            (1A) An InsurerG , Insurance IntermediaryG or Insurance ManagerG may 'deem' any one or more of the following PersonsG to be a Market CounterpartyG :
            (a) a ceding insurer; and
            (b) in respect of the services provided to that ceding insurer, any reinsurer, insurance agent or insurance broker that facilitates the provision of the services to the ceding insurer.
            (2) For the purposes of (1)(b), an Authorised FirmG must, before classifying a PersonG as a Market CounterpartyG , ensure that:
            (a) the PersonG has been given a prior written notification of the classification as a Market CounterpartyG ; and
            (b) that PersonG has not requested to be classified otherwise within the period specified in the notice.
            (3) The notification in (2)(a) may be given in respect of particular Financial ServicesG or TransactionsG or in respect of all Financial ServicesG and TransactionsG .
            (4) The notification in (2)(a) need only be given:
            (a) in the case of a FundG , either to the FundG or its Fund ManagerG ; and
            (b) in the case of a pension fund, either to such fund or its management company.
            Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]
            [Amended] DFSA RM182/2016 (Made 19th June 2016) [VER27/08-16]

            • COB 2.3.9 Guidance

              When an Authorised FirmG carries on, or provides or obtains, Financial ServicesG with or from another Authorised FirmG or a Regulated Financial InstitutionG , as those entities are 'deemed' Professional ClientsG under Rule 2.3.4(1), they could be classified as Market CounterpartiesG , provided the procedures set out in Rule 2.3.9(2) are complied with. For example, such services may include providing the Financial ServicesG of custody, managing assets, or fund administration services to a Fund ManagerG of a Collective Investment FundG or a pension fund.

              Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]
              [Amended] DFSA RM182/2016 (Made 19th June 2016) [VER27/08-16]

    • COB 2.4 Procedures relating to client classification

      • Option for a Professional Client to be classified as a Retail Client

        • COB 2.4.1

          (1) For the purpose of Rule 2.3.3(1)(b), an Authorised FirmG must, subject to (4), when first establishing a relationship with a PersonG as a Professional ClientG , inform that PersonG in writing of:
          (a) that Person'sG right to be classified as a Retail ClientG ;
          (b) the higher level of protection available to Retail ClientsG ; and
          (c) the time within which the PersonG may elect to be classified as a Retail ClientG .
          (2) If the PersonG does not expressly elect to be classified as a Retail ClientG within the time specified by the Authorised FirmG , the Authorised FirmG may classify that PersonG as a Professional ClientG .
          (3) If a PersonG already classified as a Professional ClientG by an Authorised FirmG expressly requests the Authorised FirmG to be re-classified as a Retail ClientG , the Authorised FirmG must, subject to (4), re-classify such a PersonG as a Retail ClientG .
          (4) If an Authorised FirmG does not provide Financial Services to Retail ClientsG , it must inform the PersonG of this fact and any relevant consequences.
          Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

          • COB 2.4.1 Guidance

            1. The obligation in Rule 2.4.1(1) applies to an Authorised FirmG when it first provides, or intends to provide, a Financial ServiceG to a Professional ClientG .
            2. Once an Authorised FirmG has first classified a PersonG as a Professional ClientG , under the procedures in Rule 2.3.3(1), that Professional ClientG has a right at any subsequent time to ask, under Rule 2.4.1(3), to be re-classified as a Retail ClientG to obtain a higher level of protection. Although the right to ask the firm to be re-classified as a Retail ClientG is available to the Professional ClientG , as a matter of good practice:
            a. the firm should also periodically review whether the circumstances relating to the particular ClientG remain the same; and
            b. if the firm becomes aware of any circumstances which would warrant a re-classification of the ClientG , initiate the process with the ClientG to give that ClientG a more appropriate classification.
            3. Where an existing Professional ClientG is offered a new Financial ServiceG or new financial product, a re-classification might be appropriate if:
            a. the new Financial ServiceG or financial product is substantially different to those previously offered to that ClientG ; and
            b. the Client'sG experience and understanding appears not to extend to the new Financial ServiceG or financial product.
            4. An Authorised FirmG cannot provide Financial ServicesG to a Retail ClientG unless it has a Retail EndorsementG on its LicenceG . However, such a firm may refer to another appropriately licensed firm any PersonG who elects to opt-in as a Retail ClientG .
            Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

      • Assessment of net assets

        • COB 2.4.2

          An Authorised FirmG , when calculating net assets of an individual for the purposes of the requirement under Rule 2.3.7(1)(a):

          (a) must exclude the value of the primary residence of that PersonG ; and
          (b) may include any assets held directly or indirectly by that PersonG .
          Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

          • COB 2.4.2 Guidance

            1. The reference to "assets held directly or indirectly" is designed to include assets held by direct legal ownership, by beneficial ownership (for example, as a beneficiary in a trust), or by both legal and beneficial ownership. Such assets may be held, for instance, through a special purpose or personal investment vehicle, a foundation, or the like. Similarly, any real property held subject to an Islamic mortgage, where the lender has the legal title to the property, may be counted as indirectly held property of a ClientG , less the amount owing on the mortgage, where it is not a primary residence.
            2. As the test is to determine the net assets (not gross assets) of an individual, any mortgages or other charges held over the property to secure any indebtedness of the individual should be deducted from the value of the assets.
            3. An individual's primary residence is excluded from the calculation of their net assets. If an individual who is an expatriate has a primary residence in his home country, such a residence should not generally be counted for the purposes of meeting the net asset test, particularly if the current residence in their host country is rented. However, if the current residence in the host country is owned by the individual, then that may be treated as their primary residence and the value of the residence in the home country of the individual may be counted for the purposes of meeting the net asset test, provided there is sufficient evidence of ownership and an objective valuation of the relevant premises.
            4. An Authorised FirmG should be able to demonstrate that it has objective evidence of the ownership and valuation of any assets taken into account for the purposes of meeting the net asset test.
            Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

      • Assessment of knowledge and experience

        • COB 2.4.3

          (1) For the purpose of the analysis required under Rules 2.3.7(1)(b)(ii) and 2.3.8(1)(b), an Authorised FirmG must include, where applicable, consideration of the following matters:
          (a) the Person'sG knowledge and understanding of the relevant financial markets, types of financial products or arrangements and the risks involved either generally or in relation to a proposed TransactionG ;
          (b) the length of time the PersonG has participated in relevant financial markets, the frequency of dealings and the extent to which the PersonG has relied on professional financial advice;
          (c) the size and nature of transactions that have been undertaken by, or on behalf of, the PersonG in relevant financial markets;
          (d) the Person'sG relevant qualifications relating to financial markets;
          (e) the composition and size of the Person'sG existing financial investment portfolio;
          (f) in the case of credit or insurance transactions, relevant experience in relation to similar transactions to be able to understand the risks associated with such transactions; and
          (g) any other matters which the Authorised FirmG considers relevant.
          (2) Where the analysis is being carried out in respect of an UndertakingG , the analysis must be applied, as appropriate, to those individuals who are authorised to undertake transactions on behalf of the Undertaking.
          Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

          • COB 2.4.3 Guidance

            Generally, an Authorised FirmG may consider a PersonG to have relevant experience and understanding where such a PersonG :

            a. has been involved in similar transactions in a professional or personal capacity sufficiently frequently to give the Authorised FirmG reasonable assurance that the PersonG is able to make decisions of the relevant kind, understanding the type of risks involved; or
            b. is found to be acting, in relation to the particular transaction involved, in reliance on a recommendation made by an Authorised FirmG or Regulated Financial InstitutionG .
            Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

      • Reliance on a classification made elsewhere

        • COB 2.4.4

          (1) This Rule applies to an Authorised FirmG which is a BranchG or is a member of a GroupG .
          (2) An Authorised FirmG may, subject to (3), rely on a client classification made, if it is a BranchG , by its head office or any other branch of the same legal entity, or if it is a member of a GroupG , by any other member of its GroupG , if it has reasonable grounds to believe that such a client classification is substantially similar to the client classification required under this chapter.
          (3) If any gaps are identified between the requirements applicable to the Authorised FirmG under this chapter and the requirements under which the client classification is carried out by another entity referred to in (2), the Authorised FirmG may only rely on such a client classification if it has effectively addressed the identified gaps.
          Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

          • COB 2.4.4 Guidance

            1. Generally, an Authorised FirmG relying on this Rule should be able to demonstrate to the DFSAG the due diligence process that it had undertaken to assess whether the client classification made by its head office or other branch of the same legal entity or a member of its GroupG substantially meets the client classification requirements in this chapter and, if any gaps are identified, how those gaps are effectively addressed. See Rule 2.5.3, which requires the provision of unrestricted access to records for demonstrating to the DFSAG due compliance with this Rule.
            2. If an Authorised FirmG wishes to use any client classification undertaken by any third party other than its head office or another branch of the same legal entity, or a member of its GroupG , such an arrangement is generally treated as an outsourcing arrangement. Therefore, the Authorised FirmG would need to meet the GEN requirements relating to outsourcing.
            Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

      • Group clients

        • COB 2.4.5

          (1) This Rule applies to an Authorised FirmG which:
          (a) is a member of a GroupG ; and
          (b) provides to a ClientG one or more Financial ServicesG where the services provided by the firm form part of a bundle of financial services provided to that Client by it and its GroupG members.
          (2) An Authorised FirmG referred to in (1) must ensure that:
          (a) the client classification it adopts for any Financial ServiceG which it provides to the ClientG is both consistent with the requirements in this chapter and appropriate for the overall bundle of financial services provided to that ClientG ;
          (b) the ClientG has a clear understanding of the arrangement under which Financial ServicesG are provided to the ClientG by the Authorised FirmG in conjunction with the other members of the GroupG ; and
          (c) any risks arising from the arrangements referred to in (b) are identified and appropriately and effectively addressed.
          Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

          • COB 2.4.5 Guidance

            1. The provision of a 'bundle' of financial services may involve different arrangements within different GroupsG . The DFSAG considers that the provision of a 'bundle' of financial services occurs where:
            a. several members of a GroupG provide discrete stand-alone financial services to a single Client but do so as part of providing a complete suite of related financial services to that Client. An example would be where one member of the GroupG gives investment advice to the ClientG , another member of the GroupG executes the transaction (based on the advice) relating to a financial product and yet another member of the GroupG is the issuer of that financial product;
            b. several members of a GroupG provide different aspects of the same financial service to a single Client; or
            c. the bundle comprises any combination of both (a) and (b).
            2. A bundle of financial services referred to in 1 above can be project specific. An example is where a number of members within a GroupG providing discrete aspects of expertise that go to facilitate a merger and acquisition project of a ClientG . In such a situation, different members of the GroupG could prepare and provide:
            a. advice relating to a proposed restructure;
            b. advice relating to financing of the restructure; and
            c. arranging credit for financing the restructure.
            3. In order to provide flexibility for Authorised FirmsG which are members of a GroupG to provide such bundles of financial services to their Clients in a manner that suits the Client'sG needs and the nature of the service, Rule 2.4.5 sets out the overarching objectives that must be achieved (i.e. outcome based requirements), rather than any detailed requirements. This Rule goes beyond a simple reliance on a 'client classification' made by another member of a GroupG under Rule 2.4.4.
            4. Depending on the nature of the arrangement under which GroupG members choose to provide to the same ClientG a bundle of Financial ServicesG , and the nature of the Financial ServicesG involved, the risks associated with such arrangements may vary. Some of the common risks that could arise, and therefore would need to be addressed, include:
            a. conflicting legal requirements applicable to the provision of the relevant Financial ServicesG , particularly if the members of the GroupG are located in different jurisdictions; and
            b. a ClientG not being able to identify clearly the actual service provider or providers and resulting legal exposure to the ClientG that may arise for all members of the GroupG . To address this risk, it is good practice for each member of the GroupG to set out in writing (e.g. in the client agreement) the services for which it is responsible. See also Rule 3.3.4(3)(b) for the firm's obligations.
            5. GEN section 5.3 sets out the systems and controls requirements that apply to all Authorised FirmsG . In order to meet those GEN requirements, an Authorised FirmG relying on Rule 2.4.5 should consider, at a minimum, having the following:
            a. a clear description of the GroupG arrangement under which a bundle of financial services is provided – such as which member of the GroupG is responsible for which aspects of the bundle of Financial ServiceG provided to the ClientG , or alternatively, that collective responsibility would be assumed by all or some members of the GroupG ;
            b. how the ClientG is classified for the purposes of the relevant Financial ServiceG provided by the firm;
            c. identification of where records relating to client classification and Financial Services provided to the ClientG are maintained;
            d. which firm, if any, is responsible for the overall bundle of financial services and, if this is not the case, how the accountability for the financial services is apportioned among members within the GroupG ;
            e. a client agreement (whether entered into by the Authorised FirmG or by a member of its GroupG under Rule 3.3.4) which adequately covers all the financial services provided to the ClientG , including those provided by the firm; and
            f. what the identified risks are and how they are being addressed.
            6. See Rule 2.5.3 which requires the provision of unrestricted access to records for demonstrating to the DFSAG due compliance with this Rule.
            7. Rule 2.4.5 is not expressly extended to a Branch as it is not a separate legal entity, and hence would generally have greater flexibility than GroupG members providing a bundle of services when providing Financial ServicesG to a ClientG in conjunction with its head office or any other branch of the same legal entity. However, to the extent a Branch operates as a stand-alone entity, it may use the same outcome-based approach reflected in Rule 2.4.5 where it provides any Financial Services to a ClientG in conjunction with its head office or other branches of the same legal entity.
            Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

    • COB 2.5 Record keeping

      • COB 2.5.1

        An Authorised FirmG must keep records of:

        (1) the procedures which it has followed under the Rules in this chapter, including any documents which evidence the Client'sG classification; and
        (2) any notice sent to the ClientG under the Rules in this chapter and evidence of despatch.
        Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

      • COB 2.5.2

        (1) The records in Rule 2.5.1 must be kept by an Authorised FirmG for at least six years from the date on which the business relationship with a ClientG has ended.
        (2) In complying with (1), an Authorised FirmG may, if the date on which the business relationship with the ClientG ended is unclear, treat the date of the completion of the last TransactionG with the ClientG as the date on which the business relationship ended.
        Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

      • COB 2.5.3

        (1) Without limiting the generality of the record keeping requirements applicable to an Authorised FirmG , an Authorised FirmG must, where it relies on Rule 2.4.4 and Rule 2.4.5, ensure that the DFSA has unrestricted access to all the records required for the firm to be able to demonstrate to the DFSA its compliance with the applicable requirements, including any records maintained by or at its head office or any other branch of the same legal entity, or a member of its Group.
        (2) An Authorised FirmG must notify the DFSA immediately if, for any reason, it is no longer able to provide unrestricted access to records as required under (1).
        Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

      • Guidance

        1. See GEN Rules 5.3.245.3.27 for the requirements relating to record keeping. These Rules require, among other things, that Authorised FirmsG be able to produce records, however kept, within a reasonable period not exceeding three business days.
        2. If an Authorised FirmG is aware of any restrictions that prevent it from being able to produce relevant records relating to a client classification referred to in Rule 2.5.3(1), that firm would need to undertake its own client classifications.
        Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

    • COB 2.6 Transitional Rules

      • COB 2.6.1

        An Authorised FirmG may continue to treat a PersonG as a Retail ClientG , Professional ClientG , or Market CounterpartyG , as the case may be, without having to re-classify the PersonG under section 2.3:

        (a) where the Authorised FirmG was treating that PersonG as such a ClientG (including under a waiver or modification in force) immediately prior to 1 April 2015; and
        (b) with regard to the Financial Services carried on with or for that ClientG prior to that date.
        Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

      • COB 2.6.2

        Without limiting the generality of Rule 2.6.1, and for the avoidance of doubt, any client classification adopted, Transaction carried on with or for a ClientG , or Client AgreementG entered into with a ClientG for the purposes of section 3.3, prior to 1 April 2015, remains in force on and after that date.

        Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

        • COB 2.6.2 Guidance

          1. The introduction of the new client classification regime does not trigger the need to re-classify existing ClientsG . However, with regard to an existing ClientG who has been grandfathered under Rule 2.6.1, the need for a re-classification may subsequently arise in a number of circumstances such as those set out in paragraphs 2, 3 and 4.
          2. Where a Professional ClientG grandfathered under Rule 2.6.1 subsequently requests to opt-in as a Retail ClientG under Rule 2.4.1(3), the Authorised FirmG will need to re-classify that ClientG in accordance with the requirements in that Rule.
          3. Where a grandfathered ClientG wishes to obtain a new Financial ServiceG after the new regime came into force, an Authorised FirmG will not be able to rely on the existing client classification relating to that ClientG in respect of the new Financial ServiceG . This is because Rule 2.6.1 only applies in respect of the Financial ServicesG carried on with or for a ClientG before the new regime came into force. Therefore, the firm will need to make a new classification relating to such a ClientG in respect of the new Financial ServiceG and do so under the new client classification regime.
          4. If an Authorised FirmG becomes aware that a grandfathered professional client no longer fulfils the requirements to remain classified as a Professional ClientG , it will need to comply with the requirements in Rule 2.3.3(2).
          Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

      • COB 2.6.3

        (1) For the purposes of classifying a PersonG as an 'assessed' Professional ClientG under either Rule 2.3.7 or Rule 2.3.8, the reference to $1 million in each of Rules 2.3.7(1)(a) and 2.3.8(1)(a) is to be read as a reference to $500,000 on and before 31 March 2016.
        (2) An Authorised FirmG may continue to treat a PersonG as an 'assessed' Professional ClientG in reliance on the lower asset threshold specified in (1) on and after 1 April 2016 provided:
        (a) it is in respect of the Financial ServicesG carried on with or for the ClientG prior to that date; and
        (b) the firm continues to ensure that all the other applicable requirements in this chapter are met in respect of that ClientG .
        Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]