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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
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Rulebook Modules
General Module (GEN) [VER44/07-19]
Sourcebook Modules
Consultation Papers
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  • GEN App2 Investments

    • GEN A2.1 General definition of investments

      • Investments

        • GEN A2.1.1

          (1) An InvestmentG is, subject to (3), either:
          (a) a SecurityG ; or
          (b) a DerivativeG ,
          as defined in GEN Rule A2.1.2 or GEN Rule A2.1.3.
          (2) Such a SecurityG or DerivativeG includes:
          (a) a right or interest in the relevant SecurityG or DerivativeG ; and
          (b) any instrument declared as a SecurityG or DerivativeG pursuant to GEN Rule A2.4.1(1).
          (3) Where a RuleG provides that a SecurityG or DerivativeG has a different classification for a specified purpose, it shall have that effect for that specified purpose and no other purpose.
          [Added] DFSA RM62/2008 (Made 4th January 2009). [VER22/01-09]

          • GEN A2.1.1 Guidance

            1.  An example of the application of GEN Rule A2.1.1(3) is GEN Rule A2.1.2(2), where a DerivativeG is treated as a SecurityG for the purposes of the requirements in PIBG .
            [Added] DFSA RM62/2008 (Made 4th January 2009). [VER22/01-09]

      • Security

        • GEN A2.1.2

          (1) For the purposes of GEN Rule A2.1.1(1)(a), a SecurityG is:
          (a) a ShareG ;
          (b) a DebentureG ;
          (c) a WarrantG ;
          (d) a CertificateG ;
          (e) a UnitG ; or
          (f) a Structured ProductG .
          (2) For the purposes of the requirements in PIBG , each DerivativeG specified in GEN Rule A2.1.3 is to be treated as a SecurityG .
          [Added] DFSA RM62/2008 (Made 4th January 2009). [VER22/01-09]

      • Derivative

        • GEN A2.1.3

          For the purposes of GEN Rule A2.1.1(1)(b), a DerivativeG is:

          (a) an OptionG ; or
          (b) a FutureG .
          [Added] DFSA RM62/2008 (Made 4th January 2009). [VER22/01-09]

    • GEN A2.2 Definitions of specific securities

      • GEN A2.2.1

        For the purposes of GEN Rule A2.1.2:

        Shares

        (a) a ShareG is a share or stock in the share capital of any Body CorporateG or any unincorporated body but excluding a UnitG ;

        Debentures

        (b) a DebentureG is an instrument creating or acknowledging indebtedness, whether secured or not, but excludes:
        (i) an instrument creating or acknowledging indebtedness for, or for money borrowed to defray, the consideration payable under a contract for the supply of goods or services;
        (ii) a cheque or other bill of exchange, a banker's draft or a letter of credit (but not a bill of exchange accepted by a banker);
        (iii) a banknote, a statement showing a balance on a bank account, or a lease or other disposition of property;
        (iv) a Contract of InsuranceG ; and
        (v) a Crowdfunding Loan AgreementG ;

        Warrants

        (c) a WarrantG is an instrument that confers on the holder a right entitling the holder to acquire an unissued ShareG , DebentureG or UnitG ;

        Certificates

        (d) a CertificateG is an instrument:
        (i) which confers on the holder contractual or property rights to or in respect of a ShareG , DebentureG , UnitG or WarrantG held by a PersonG ; and
        (ii) the transfer of which may be effected by the holder without the consent of that other PersonG ;
        but excludes rights under an Option;

        Units

        (e) a Unit is a unit in or a share representing the rights or interests of a UnitholderG in a FundG ; and

        Structured Products

        (f) a Structured ProductG is an instrument comprising rights under a contract where:
        (i) the gain or loss of each party to the contract is ultimately determined by reference to the fluctuations in the value or price of property of any description, an index, interest rate, exchange rate or a combination of any of these as specified for that purpose in the contract ("the underlying factor") and is not leveraged upon such fluctuations;
        (ii) the gain or loss of each party is wholly settled by cash or set-off between the parties;
        (iii) each party is not exposed to any contingent liabilities to any other counterparty;
        (iv) there is readily available public information in relation to the underlying factor;
        but excludes any rights under an instrument:
        (v) where one or more of the parties takes delivery of any property to which the contract relates;
        (vi) which is a DebentureG ; or
        (vii) which is a Contract of InsuranceG .
        Derived from DFSA RM01/2004 (Made 16th September 2004). [VER1/09-04]
        [Added][VER5/09-05]
        [Amended] DFSA RM62/2008 (Made 4th January 2009). [VER22/01-09]
        [Amended] DFSA RMI201/2017 (Made 14th June 2017). [VER40/08-17]

        • GEN A2.2.1 Guidance

          Debentures

          1.  A DebentureG may include a bond, debenture stock, loan stock or note. Certain Islamic products ("SukukG ") structured as a debt instrument can also fall within this definition.
          2.  If the interest or financial return component on a debt instrument is to be calculated by reference to fluctuations of an external factor such as an index, exchange rate or interest rate, that does not prevent such an instrument being characterised as a DebentureG .

          Warrants

          A WarrantG confers on the holder an entitlement (but not an obligation) to acquire an unissued ShareG , DebentureG or UnitG , thereby distinguishing it from a call OptionG which entitles the holder, upon exercise, to acquire an already issued (i.e. existing) SecurityG .

          Certificates

          CertificatesG confer rights over existing SharesG , DebenturesG , UnitsG or WarrantsG held by a PersonG and include receipts, such as Global Depository ReceiptsG (i.e. GDRs).

          Structured Products

          1.  Instruments previously known as Designated InvestmentsG are now included within the definition of Structured ProductsG .
          2.  The reference in GEN Rule A2.2.1(f)(i) to "property of any description" covers tangible or intangible property, including SecuritiesG .
          [Added] DFSA RM62/2008 (Made 4th January 2009). [VER22/01-09]

    • GEN A2.3 Definitions of specific derivatives

      • GEN A2.3.1

        For the purposes of GEN Rule A2.1.3:

        Options

        (a) An OptionG is an instrument that confers on the holder, upon exercise, rights of the kind referred to in any of the following:
        (i) a right to acquire or dispose of:
        (A) a SecurityG (other than a WarrantG ) or contractually based investment;
        (B) currency of any country or territory;
        (C) a commodity of any kind;
        (ii) a right to receive a cash settlement, the value of which is determined by reference to:
        (A) the value or price of an index, interest rate or exchange rate; or
        (B) any other rate or variable; or
        (iii) a right to acquire or dispose of another OptionG under (i) or (ii).

        Futures

        (b) a FutureG is an instrument comprising rights under a contract:
        (i) for the sale of a commodity or property of any other description under which delivery is to be made at a future date and at a price agreed on when the contract is made and that contract:
        (A) is made or traded on a regulated exchange;
        (B) is made or traded on terms that are similar to those made or traded on a regulated exchange; or
        (C) would, on reasonable grounds, be regarded as made for investment and not for commercial purposes; or
        (ii) where the value of the contract is ultimately determined by reference, wholly or in part, to fluctuations in:
        (A) the value or price of property of any description; or
        (B) an index, interest rate, exchange rate, any combination of these, or other factor designated for that purpose in the contract; and
        which is wholly settled by cash or set-off between the parties but excludes:
        (C) rights under a contract where one or more of the parties takes delivery of any property to which the contract relates;
        (D) a contract under which money is received by way of deposit or an acknowledgement of a debt on terms that any return to be paid on the sum deposited or received will be calculated by reference to an index, interest rate, exchange rate or any combination of these or other factors; or
        (E) a Contract of InsuranceG .
        [Added] DFSA RM62/2008 (Made 4th January 2009). [VER22/01-09]

        • GEN A2.3.1 Guidance

          Options

          1.  For example, a call OptionG confers on the holder, upon exercise, a right but not an obligation to acquire an issued (i.e. existing) SecurityG , thereby distinguishing it from a WarrantG which entitles the holder, upon exercise, to acquire an unissued ShareG , DebentureG or UnitG .
          2.  OptionsG over a 'contractually based investment' referred to in GEN Rule A2.3.1(a)(i)(A) covers OptionsG over FuturesG .
          3.  Cash settled OptionsG such as Index OptionsG are covered under GEN Rule A2.3.1(a)(ii). Other cash settled OptionsG that are covered under this RuleG include instruments which confer rights determined by reference to climatic variables, inflation or other official economic statistics, freight rates or emission allowances.
          4.  OptionsG over OptionsG are covered under GEN A2.3.1(a)(iii).

          Futures

          1.  An over the counter (OTC) contract may qualify as a FutureG under GEN Rule A2.3.1(b)(i)(C) if it can reasonably be regarded as being made for investment and not for commercial purposes. Some of the indicative factors that such a contract is reasonably likely to be made for commercial rather than investment purposes include the following:
          a.  a party to the contract is the producer or a user of the underlying commodity;
          b.  the delivery of the underlying commodity is intended to take place within 7 days of the date of the contract;
          c.  there is no provision made in the contract for margin arrangements; and
          d.  the terms of the contract are not standardised terms.
          2.  A contract under GEN Rule A2.3.1(b)(i) can provide for the physical delivery of the underlying commodity or property. Further, the price agreed under such a contract can be by reference to an underlying factor, such as by reference to an index or a spot price on a given date.
          3.  Contracts for differences (CFDs) fall under the definition in GEN A2.3.1(b)(ii) and may include credit default swaps (CDSs) and forward rate agreements (FRAs). More exotic types of DerivativeG contracts may also fall within the definition in GEN A2.3.1(b)(ii). These can include weather or electricity derivatives where the underlying factor by reference to which the parties' entitlements are calculated can be the number of days in a period in which the temperature would reach below or above a specified level.
          [Added] DFSA RM62/2008 (Made 4th January 2009). [VER22/01-09]

    • GEN A2.4 Financial instrument declared as an investment

      • GEN A2.4.1

        (1) The DFSAG may, subject to (5), declare by written notice any financial instrument or class of financial instruments to be a particular type of an existing SecurityG or DerivativeG as defined in these RulesG or a new type of a SecurityG or DerivativeG . It may do so on such terms and conditions as it considers appropriate.
        (2) The DFSAG may exercise the power under (1) either upon written application made by a PersonG or on its own initiative.
        (3) Without limiting the generality of the matters that the DFSAG may consider when exercising its power under (1), it must consider the following factors:
        (a) the economic effect of the financial instrument or class of financial instruments;
        (b) the class of potential investors to whom the financial instrument is intended to be marketed;
        (c) the treatment of similar financial instruments for regulatory purposes in other jurisdictions; and
        (d) the possible impact of such a declaration on any person issuing or marketing such a financial instrument.
        (4) A PersonG who makes an application for a declaration under (1) must address, as far as practicable, the factors specified in (3).
        (5) The DFSAG must publish any proposed declaration under (1) for public consultation for at least 30 days from the date of publication, except where:
        (a) it declares a financial instrument to be a particular type of an existing SecurityG or DerivativeG ;
        (b) it determines that any delay likely to result from public consultation is prejudicial to the interests of the DIFCG ; or
        (c) it determines that there is a commercial exigency that warrants such a declaration being made without any, or shorter than 30 day, public consultation.
        [Added] DFSA RM62/2008 (Made 4th January 2009). [VER22/01-09]

        • GEN A2.4.1 Guidance

          1.  The terms and conditions that may be imposed on a declaration made by the DFSAG under GEN Rule A2.4.1(1) can include who should be the Reporting EntityG and the type of disclosure requirements that should apply to that Reporting EntityG .
          2.  If any issuer of a new financial instrument has any doubt as to whether that instrument can be included in an Official List of SecuritiesG as a particular type of a SecurityG , that PersonG should first raise those issues with the relevant Authorised Market InstitutionG before making an application to the DFSAG for the exercise of the declaration power under this RuleG . The DFSAG has a discrete power to object to any proposed inclusion of a SecurityG in an Official List of SecuritiesG of an Authorised Market InstitutionG (see Article 34(1) of the Markets Law 2012).
          [Added] DFSA RM62/2008 (Made 4th January 2009). [VER22/01-09]
          [Amended] DFSA RM95/2012 (Made 14th June 2012). [VER29/06-12]