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  • Rulebook Modules

    • Anti-Money Laundering, Counter-Terrorist Financing and Sanctions Module (AML) [VER15/07-18]

      • AML 1 Introduction

        • AML 1.1 Application

          • AML 1.1.1

            This module (AML) applies to:

            (a) every Relevant Person in respect of all its activities carried on in or from the DIFC;
            (b) the persons specified in Rule 1.2.1 as being responsible for a Relevant Person's compliance with this module; and
            (c) a Relevant Person, which is a DIFC entity, to the extent required by Rule 14.1.

            except to the extent that a provision of AML provides for a narrower application.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

          • AML 1.1.2

            For the purposes of these Rules, a Relevant Person means:

            (a) an Authorised Firm other than a Credit Rating Agency;
            (b) an Authorised Market Institution;
            (c) a DNFBP; or
            (d) a Registered Auditor.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM132/2014 (Made 21st August 2014). [VER10/06-14]

        • AML 1.2 Responsibility for compliance with this module

          • AML 1.2.1

            (1) Responsibility for a Relevant Person's compliance with this module lies with every member of its senior management.
            (2) In carrying out their responsibilities under this module every member of a Relevant Person's senior management must exercise due skill, care and diligence.
            (3) Nothing in this Rule precludes the DFSA from taking enforcement action against any person including any one or more of the following persons in respect of a breach of any Rule in this module:
            (a) a Relevant Person;
            (b) members of a Relevant Person's senior management; or
            (c) an Employee of a Relevant Person.
            Derived from RM117/2013 [VER9/07-13]

        • AML 1.3 Application table

          • AML 1.3 Guidance

            Relevant Person Applicable Chapters
            Authorised Person 1–14
            Representative Office 1–5* 10- 14
            Registered Auditor 1 -8 10–14
            DNFBP 1–8 10–15

            * Chapters 6–9 are unlikely to apply to a Representative Office as such an office is only permitted to carry on limited activities in the DIFC and therefore must not have Customers.

            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM132/2014 (Made 21st August 2014). [VER10/06-14]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

      • AML 2 Overview and Purpose of the Module

        • AML 2 Guidance

          1. In this module, for simplicity, a reference to "money laundering" also includes terrorist financing and the financing of unlawful organisations (see AML Rule 3.1.1).

          Overview of the DIFC's AML regime

          2. The DIFC is governed by two separate and complementary regimes in relation to AML regulation, both administered by the DFSA:
          a. The Federal regime: Under Article 3 of Federal Law No. 8 of 2004, the provisions of Federal Law No. 4 of 2002 on Combating Money Laundering and Terrorist Financing and Federal Law No. 7 of 2014 on Combating Terrorism Offences and the implementing regulations under those laws apply in the DIFC. The DFSA, as the DIFC's supervisory authority for the purposes of those laws, is obliged to issue regulations and guidance in the DIFC relating to the regulation of anti-money laundering and combating the financing of terrorism and unlawful organisations. The DFSA may also impose administrative penalties for breaches of those laws and the implementing regulations. See Article 11(2) of Federal Law No. 4 of 2002 and also Article 17 of Cabinet Resolution No. 38 of 2014; and
          b. The DIFC regime: Under Article 70(3) of the DIFC Regulatory Law 2004 (the "Regulatory Law"), the DFSA has jurisdiction for the regulation of anti-money laundering in the DIFC relating to Relevant Persons (see para 4 below) and their officers, employees and agents. The DIFC specific regime is contained in Chapter 2 of Part 4 of the Regulatory Law and any DFSA Rules made in connection with anti-money laundering measures, policies and procedures.
          3. Note that under Article 71(1) of the Regulatory Law, the DIFC regime requires compliance with the Federal regime. It follows that a failure to comply with a provision of Federal Law No. 4 of 2002 on Combating Money Laundering and Terrorist Financing or Federal Law No. 7 of 2014 on Combating Terrorism Offences or the implementing regulations under those laws may also provide evidence of failure to comply with Article 71(1), which may then be addressed under the disciplinary and remedial provisions of the Regulatory Law and DFSA Rules.

          Purpose of the AML module

          4. The AML module has been designed to provide a single reference point for all persons and entities (collectively called Relevant Persons) who are supervised by the DFSA for Anti-Money Laundering (AML), Counter-Terrorist Financing (CTF) and sanctions compliance under the two regimes referred to above. Accordingly it applies to Authorised Firms (other than Credit Rating Agencies), Authorised Market Institutions, Designated Non-Financial Businesses and Professions (DNFBPs), and Registered Auditors. The AML module takes into consideration the fact that Relevant Persons have differing AML risk profiles. A Relevant Person should familiarise itself with this module, and assess the extent to which the chapters and sections apply to it.
          5. The AML module cannot be read in isolation from other relevant legislation or developments in international policy and best practice and, to the extent applicable, Relevant Persons need to be aware of, and take into account, how these aforementioned matters may impact on the Relevant Person's day to day operations. This is particularly relevant when considering United Nations Security Council Resolutions (UNSCRs) which apply in the DIFC, and unilateral sanctions imposed by other jurisdictions which may apply to a Relevant Person depending on the Relevant Person's jurisdiction of origin, its business and/or customer base.

          Structure of the AML module

          6. Chapter 1 of this module contains an application table which should assist a Relevant Person to navigate through the module and to determine which chapters are applicable to it. Chapter 1 also specifies who is ultimately responsible for a Relevant Person's compliance with the AML module. The DFSA expects the senior management of a Relevant Person to establish a robust and effective AML/CTF and sanctions compliance culture for the business.
          7. Chapter 2 provides an overview of the AML module and chapter 3 sets out the key definitions in the module. Note that not all definitions used in this module are capitalised.
          8. Chapter 4 explains the meaning of the risk-based approach (RBA), which should be applied when complying with this module. The RBA requires a risk-based assessment of a Relevant Person's business (in chapter 5) and its customers (in chapter 6). A risk-based assessment should be a dynamic process involving regular review, and the use of these reviews to establish the appropriate processes to match the levels of risk. No two Relevant Persons will have the same approach, and implementation of the RBA and the AML module permits a Relevant Person to design and implement systems that should be appropriate to their business and customers, with the obvious caveat being that such systems should be reasonable and proportionate in light of the AML risks. The DFSA expects the RBA to determine the breadth and depth of the Customer Due Diligence (CDD) which is undertaken for a particular customer under chapter 7, though the DFSA understands that there is an inevitable overlap between the risk-based assessment of the customer in chapter 6 and CDDin chapter 7. This overlap may occur at the initial stages of customer on-boarding but may also occur when undertaking on-going CDD.
          9. Chapter 8 sets out when and how a Relevant Person may rely on a third party to undertake all or some of its CDDobligations. Reliance on a third-party CDDreduces the need to duplicate CDDalready performed for a customer. Alternatively, a Relevant Person may outsource some or all of its CDDobligations to a service provider.
          10. Chapter 9 sets out certain obligations in relation to correspondent banking, wire transfers and other matters which apply to Authorised Persons, and, in particular, to banks.
          11. Chapter 10 sets out a Relevant Person's obligations in relation to United Nations Security Council resolutions and sanctions, and government, regulatory and international findings (in relation to AML, terrorist financing and the financing of weapons of mass destruction).
          12. Chapter 11 sets out the obligation for a Relevant Person to appoint a Money Laundering Reporting Officer (MLRO) and the responsibilities of such a person.
          13. Chapter 12 sets out the requirements for AML training and awareness. A Relevant Person should adopt the RBA when complying with chapter 12, so as to make its training and awareness proportionate to the AML risks of the business and the employee role.
          14. Chapter 13 contains the obligations applying to all Relevant Persons concerning Suspicious Activity Reports, which are required to be made under Federal Law No. 4 of 2002.
          15. Chapter 14 contains the general obligations applying to all Relevant Persons, including Group policies, notifications, record-keeping requirements and the annual AML Return.
          16. Chapter 15 sets out specific Rules applying to DNFBPs, including the requirement to register with the DFSA, and Chapter 16 contains certain transitional Rules.

          The U.A.E. criminal law

          17. The U.A.E. criminal law applies in the DIFC and, therefore, persons in the DIFC must be aware of their obligations in respect of the criminal law as well as these Rules. Relevant U.A.E. criminal laws include Federal Law No. 4 of 2002 on Combating Money Laundering and Terrorist Financing, Federal Law No. 7 of 2014 on Combating Terrorism Offences and the Penal Code of the U.A.E.
          18. Under Federal AML legislation, a Person may be criminally liable for the offence of money laundering if it intentionally commits specified acts in relation to funds which it knows are the proceeds of crime. The DFSA notes that:
          a. the failure to report suspicions of money laundering;
          b. "tipping off"; and
          c. assisting in the commission of money laundering,
          may each constitute a criminal offence that is punishable under the laws of the State.
          19. The U.A.E Central Bank has the power under Federal AML legislation to freeze funds or other assets suspected of relating to money laundering, terrorist financing or the financing of unlawful organisations. Federal authorities also have powers to apply for the confiscation of funds or other assets that have been used for such purposes.
          20. In a number of places in this module, Guidance cross-refers to specific requirements in Federal AML legislation. As interpretation of Federal AML legislation is a matter for the relevant Federal authorities rather than the DFSA, any question about those requirements should be directed to the relevant Federal authorities. Rules or Guidance in this module should not be relied upon to interpret or determine the application of the laws of the State.

          Financial Action Task Force

          21. The Financial Action Task Force (FATF) is an inter-governmental body whose purpose is the development and promotion of international standards to combat money laundering and terrorist financing.
          22. The DFSA has had regard to the FATF Recommendations in making these Rules. A Relevant Person may wish to refer to the FATF Recommendations and interpretive notes to assist it in complying with these Rules. However, in the event that a FATF Recommendation or interpretive note conflicts with a Rule in this module, the relevant Rule takes precedence.
          23. A Relevant Person may also wish to refer to the FATF typology reports which may assist in identifying new money laundering threats and which provide information on money laundering and terrorist financing methods. The FATF typology reports cover many pertinent topics for Relevant Persons, including corruption, new payment methods, money laundering using trusts and company service providers, and vulnerabilities of free trade zones. These typology reports can be found on the FATF website www.fatf-gafi.org.
          24. The U.A.E., as a member of the United Nations, is required to comply with sanctions issued and passed by the United Nations Security Council (UNSC). These UNSC obligations apply in the DIFC and their importance is emphasised by specific obligations contained in this module requiring Relevant Persons to establish and maintain effective systems and controls to comply with UNSC sanctions and resolutions (See chapter 10).
          25. The FATF has issued guidance on a number of specific UNSC sanctions and resolutions regarding the countering of the proliferation of weapons of mass destruction. Such guidance has been issued to assist in implementing the targeted financial sanctions and activity based financial prohibitions. This guidance can be found on the FATF website www.fatf-gafi.org.
          26. In relation to unilateral sanctions imposed in specific jurisdictions such as the European Union, the U.K. (HM Treasury) and the U.S. (Office of Foreign Assets Control), the DFSA expects a Relevant Person to consider and take positive steps to ensure compliance where required or appropriate.

          Tax Issues and Exchange of Information for Tax purposes

          27. The DIFC benefits from an international customer base with a growing number of customers who may be investing with financial institutions outside their country of residence. These factors create a risk of the services of Relevant Persons being used to hide assets which are subject to taxation, or to launder the unlawful proceeds of tax crimes.
          28. The DFSA is committed to protecting the DIFC from being used to facilitate tax crimes and believes that strong AML policies, procedures, systems and controls, including robust customer due diligence requirements, are needed to mitigate the risk of tax crimes.
          29. Such measures will also ensure that a Relevant Person is able to comply with other international obligations such as the OECD Automatic Exchange of Information for Tax Purposes Programme and FATF Recommendations, which were updated in 2012 to expand the scope of money laundering predicate offences to include tax crimes (related to direct and indirect taxes).
          30. A Relevant Person should therefore establish and maintain appropriate policies, procedures, systems and controls to enable it to detect and deter the laundering of proceeds of tax crimes. For example, as part of its risk-based approach under chapter 4, it should consider its tax risk exposure as a result of the nature of its business, customers, products, services and other relevant factors. It should also conduct appropriate customer due diligence to identify customers who may be subject to tax crime risk (see also the Guidance after AML Rule 6.1.4).
          Derived from RM117/2013 [VER9/07-13]
          [Amended] DFSA RM132/2014 (Made 21st August 2014). [VER10/06-14]
          [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
          [Amended] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

      • AML 3 Interpretation and Terminology

        • AML 3.1 Interpretation

          • AML 3.1.1

            A reference in this module to "money laundering" in lower case includes a reference to terrorist financing and the financing of unlawful organisations, unless the context provides or implies otherwise.

            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

            • AML 3.1.1 Guidance

              Chapter 6, section 6.2, of the General (GEN) module sets out how to interpret the Rulebook, including this module.

              Derived from RM117/2013 [VER9/07-13]

        • AML 3.2 Glossary for AML

          • AML 3.2 Guidance

            1. In order to make this module easier to read, some of the defined terms in this module have not had the initial letter of each word capitalised in the same way as in other Rulebook modules.
            2. Some of the defined terms and abbreviations in this module may also be found in the DFSA's Glossary module (GLO). Where a defined term in this module does not appear in Rule 3.2.1, a Relevant Person should look in GLO to find the meaning. In addition, AML Rule 9.3.2 of this module sets out definitions relevant to AML section 9.3 (Electronic fund transfers).
            3. In accordance with the interpretation provisions in the Regulatory Law, a reference to legislation includes a reference to the legislation as amended or re-enacted from time to time.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • AML 3.2.1

            In this module, the terms and abbreviations listed in the table below have the following meanings:

            AML Means either "anti-money laundering" or this Anti-Money Laundering, Counter-Terrorist Financing and Sanctions module, depending on the context.
            Authorised Person Means an Authorised Firm or an Authorised Market Institution.
            Beneficial Owner

            (1) In relation to a customer, means a natural person who ultimately owns or controls the customer or a natural person on whose behalf a transaction is conducted or a business relationship is established, and includes:

            (a) in relation to a body corporate, a person referred to in AML Rule 7.3.3 (2) or (4);
            (b) in relation to a foundation, a person referred to in AML Rule 7.3.5 (2) or (3); and
            (c) in relation to a trust or other similar legal arrangement, a person referred to in AML Rule 7.3.6 (2) or (3).

            (2) In relation to a beneficiary of a life insurance or other similar policy, means a natural person who ultimately owns or controls the beneficiary.

            body corporate

            Any body corporate, including a limited liability partnership, whether constituted under the law of the DIFC, an Emirate, the State or any other country or territory.

            Branch Means a place of business within the DIFC:
            (a) which has no separate legal personality;
            (b) which forms a legally dependant part of a Relevant Person whose principal place of business and head office is in a jurisdiction other than the DIFC; and
            (c) through which the Relevant Person carries on business in or from the DIFC.
            Cabinet Resolution No. 38 of 2014 Means Federal Cabinet Resolution No. 38 of 2014 on the Implementing Regulations of Federal Law No. 4 of 2002.
            Client Has the meaning in chapter 2 of the Conduct of Business module.
            company service provider Means a person, not falling into parts (1)(a) to (e) or (g) of the definition of a DNFBP that, by way of business, provides any of the following services to a customer:
            (a) acting as a formation agent of legal persons;
            (b) acting as (or arranging for another person to act as) a director or secretary of a company, a partner of a partnership, or a similar position in relation to other legal persons;
            (c) providing a registered office, business address or accommodation, correspondence or administrative address for a company, a partnership or any other legal person or arrangement; or
            (d) acting as (or arranging for another person to act as) a nominee shareholder for another person.
            Contract of Insurance Has the meaning in GEN Rule A4.1.1.
            CTF Means counter-terrorist financing.
            customer Unless otherwise provided, means:
            (a) a person where, in relation to a business relationship between the person and a Relevant Person, there is a firm intention or commitment by each party to enter into a contractual relationship or where there is a firm commitment by each party to enter into a transaction, in connection with a product or service provided by the Relevant Person;
            (b) a Client of an Authorised Firm;
            (c) a Member or prospective Member of, or an applicant for admission of Securities to trading on, an Authorised Market Institution;
            (d) in relation to a Single Family Office, a member of the Single Family; or
            (e) a person with whom a Relevant Person is otherwise establishing or has established a business relationship.
            Customer Due Diligence (CDD) Means the measures referred to in AML section 7.3.
            Designated Non-Financial Business or Profession (DNFBP) Means:
            (1) The following class of persons whose business or profession is carried on in or from the DIFC:
            (a) a real estate developer or agency which carries out transactions with a customer involving the buying or selling of real property;
            (b) a dealer in precious metals or precious stones;
            [deleted]
            (d) a law firm, notary firm, or other independent legal business;
            (e) an accounting firm, audit firm or insolvency firm;
            (f) a company service provider; or
            (g) a Single Family Office.
            (2) A person who is an Authorised Person or a Registered Auditor is not a DNFBP.
            DIFC entity Means a legal person which is incorporated or registered in the DIFC (excluding a registered Branch).
            Domestic Fund A Fund established or domiciled in the DIFC.
            Employee Means an individual:
            (a) who is employed or appointed by a person in connection with that person's business, whether under a contract of service or for services or otherwise; or
            (b) whose services, under an arrangement between that person and a third party, are placed at the disposal and under the control of that person.
            Enhanced Customer Due Diligence Means undertaking Customer Due Diligence and the enhanced measures under Rule 7.4.1.
            FATF Means the Financial Action Task Force.
            FATF Recommendations Means the publication entitled the "International Standards on Combatting Money Laundering and the Financing of Terrorism and Proliferation" as published and amended from time to time by FATF.
            Federal AML legislation Means all U.A.E Federal Laws and their implementing regulations relating to money laundering, terrorist financing and the financing of unlawful organisations, as well as sanctions compliance, including Federal Law No. 4 of 2002, Federal Law No. 7 of 2014 and Cabinet Resolution No. 38 of 2014.
            Federal Law No. 4 of 2002 Means U.A.E Federal Law No. 4 of 2002 on Combating Money Laundering and Terrorist Financing.
            Federal Law No. 7 of 2014 Means U.A.E Federal Law No. 7 of 2014 on Combating Terrorism Offences.
            FID The Financial Intelligence Department of the U.A.E Central Bank.
            Financial Institution A regulated or unregulated entity, whose activities are primarily financial in nature.
            Financial Services Regulator Means a regulator of financial services activities established in a jurisdiction other than the DIFC.
            foundation Means a foundation established under the DIFC Foundations Law 2018 or under any other law.
            Governing Body Means the board of directors, partners, committee of management or other governing body of:
            (a) a Body Corporate or Partnership; or
            (b) an unincorporated association carrying on a trade or business, with or without a view to profit.
            Group Means a Group of entities which includes an entity (the 'first entity') and:
            (a) any parent of the first entity; and
            (b) any subsidiaries (direct or indirect) of the parent or parents in (a) or the first entity; or
            (c) for a legal person which is not a body corporate, refers to that person and any other associated legal persons who are in an equivalent relationship to that in (a) and (b).
            IMF The International Monetary Fund.
            International Organisation Means an organisation established by formal political agreement between member countries, where the agreement has the status of an international treaty, and the organisation is recognised in the law of countries which are members.
            Law Means the Regulatory Law.
            legal arrangement Means an express trust or any other similar legal arrangement.
            legal person Means any entity other than a natural person that can establish a customer relationship with a Relevant Person or otherwise own property. This can include companies, bodies corporate or unincorporate, foundations, anstalten, partnerships, associations, states and governments and other relevantly similar entities.
            Member A person admitted as a member of an Authorised Market Institution in accordance with its Business Rules.
            MENAFATF The Middle East and North Africa Financial Action Task Force.
            Money Laundering Reporting Officer (MLRO) Means the person appointed by a Relevant Person pursuant to Rule 11.2.1(1).
            natural person Means an individual.
            OECD The Organisation for Economic Co-operation and Development.
            person Means a natural or legal person.
            Politically Exposed Person (PEP) Means a natural person (and includes, where relevant, a family member or close associate) who is or has been entrusted with a prominent public function, whether in the State or elsewhere, including but not limited to, a head of state or of government, senior politician, senior government, judicial or military official, ambassador, senior person in an International Organisation, senior executive of a state owned corporation, an important political party official, or a member of senior management or an individual who has been entrusted with similar functions such as a director or a deputy director.

            This definition does not include middle ranking or more junior individuals in the above categories.
            Registered Auditor Has the meaning given to that term in the Regulatory Law
            Regulated Exchange Means an exchange regulated by a Financial Services Regulator.
            Regulated Financial Institution A person who does not hold a Licence but who is authorised in a jurisdiction other than the DIFC to carry on any financial service by another Financial Services Regulator.
            Relevant Person Has the meaning given to that term in Rule 1.1.2.
            senior management Means:

            (1) In relation to a Relevant Person every member of the Relevant Person's executive management and includes:

            (a) for a DIFC entity, every member of the Relevant Person's Governing Body;
            (b) for a Branch, the person or persons who control the day to day operations of the Relevant Person in the DIFC and would include, at a minimum, the senior executive report or equivalent officer, such as the managing director; or
            (c) for a Registered Auditor, every member of the Relevant Person's executive management in the U.A.E.

            (2) In relation to a customer that is a body corporate, every member of the body corporate's Governing Body and the person or persons who control the day-to-day operations of the body corporate, including its senior executive officer, chief operating officer and chief financial officer.

            Shell Bank A bank that has no physical presence in the country in which it is incorporated or licensed and which is not affiliated with a regulated financial group that is subject to effective consolidated supervision.
            Simplified Customer Due Diligence Means Customer Due Diligence as modified under Rule 7.5.1.
            Single Family Has the meaning given to that term in the DIFC Single Family Office Regulations.
            Single Family Office Has the meaning given to that term in the DIFC Single Family Office Regulations.
            source of funds Means the origin of funds which relate to a transaction or service and includes how such funds are connected to the source of wealth of a customer of Beneficial Owner.
            source of wealth Means how the global wealth or net worth of a customer or Beneficial Owner is or was acquired or accumulated.
            State Means the U.A.E.
            Suspicious Activity Report (SAR) Means a report in the prescribed format regarding suspicious activity (including a suspicious transaction) made to the FID under Rule 13.3.1(c).
            transaction Means any transaction undertaken by a Relevant Person for or on behalf of a customer in the course of carrying on a business in or from the DIFC.
            unlawful organisation Means an organisation the establishment or activities of which have been declared to be criminal under Federal AML legislation.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM132/2014 (Made 21st August 2014). [VER10/06-14]
            [Amended] DFSA RM156/2015 (Made 9th December 2015) [VER35/02-16]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
            [Amended] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

      • AML 4 Applying a Risk-Based Approach

        Figure 1. The Risk-Based Approach (RBA)

        Derived from RM117/2013 [VER9/07-13]

        • AML 4.1 The Risk-Based Approach

          • AML 4.1.1

            A Relevant Person must:

            (a) assess and address its AML risks under this module by reviewing the risks to which the person is exposed as a result of the nature of its business, customers, products, services and any other matters which are relevant in the context of money laundering and then adopting a proportionate approach to mitigate those risks; and
            (b) ensure that, when undertaking any risk-based assessment for the purposes of complying with a requirement of this module, such assessment is:
            (i) objective and proportionate to the risks;
            (ii) based on reasonable grounds;
            (iii) properly documented; and
            (iv) reviewed and updated at appropriate intervals.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

            • AML 4.1.1 Guidance

              1. Rule 4.1.1 requires a Relevant Person to adopt an approach to AML which is proportionate to the risks. This is called the "risk-based approach" ("RBA") and is illustrated in figure 1 above. The DFSA expects the RBA to be a key part of the Relevant Person's money laundering compliance culture and to cascade down from the senior management to the rest of the organisation. Embedding the RBA within its business allows a Relevant Person to make decisions and allocate AML resources in the most efficient and effective way.
              2. In implementing the RBA, a Relevant Person is expected to have in place processes to identify and assess money laundering risks. After the risk assessment, the Relevant Person is expected to monitor, manage and mitigate the risks in a way that is proportionate to the Relevant Person's exposure to those money laundering risks. The general principle is that where there are higher risks of money laundering, a Relevant Person is required to take enhanced measures to manage and mitigate those risks, and that, correspondingly, when the risks are lower, simplified measures are permitted.
              3. The RBA discourages a "tick-box" approach to AML. Instead a Relevant Person is required to assess relevant money laundering risks and adopt a proportionate response to such risks. The outcome of using the RBA is akin to using a sliding scale, where the type of CDD undertaken on each customer will ultimately depend on the outcome of the risk-based assessment made of such customer under this chapter.
              4. The Rules regarding record-keeping for the purposes of this module are in section 14.4. These Rules apply in relation to Rule 4.1.1(b)(iii).
              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

      • AML 5 Business Risk Assessment

        Figure 2. Business risk-based assessment

        Derived from RM117/2013 [VER9/07-13]

        • AML 5.1 Assessing business AML risks

          • AML 5.1.1

            A Relevant Person must:

            (a) take appropriate steps to identify and assess money laundering risks to which its business is exposed, taking into consideration the nature, size and complexity of its activities;
            (b) when identifying and assessing the risks in (a), take into account, to the extent relevant, any vulnerabilities relating to:
            (i) its type of customers and their activities;
            (ii) the countries or geographic areas in which it does business;
            (iii) its products, services and activity profiles;
            (iv) its distribution channels and business partners;
            (v) the complexity and volume of its transactions;
            (vi) the development of new products and new business practices, including new delivery mechanisms, channels and partners; and
            (vii) the use of new or developing technologies for both new and pre-existing products;
            (c) take appropriate measures to ensure that any risk identified as part of the assessment in (a) is taken into account in its day to day operations, including in relation to:
            (i) the development of new products, business practices and technologies referred to in AML Rule 5.1.3;
            (ii) the taking on of new customers; and
            (iii) changes to its business profile.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • AML 5.1.2

            A Relevant Person must use the information obtained in undertaking its business risk assessment to:

            (a) develop and maintain its AML policies, procedures, systems and controls required by Rule 5.2.1;
            (b) ensure that its AML policies, procedures, systems and controls adequately mitigate the risks identified as part of the assessment in Rule 5.1.1;
            (c) assess the effectiveness of its AML policies, procedures, systems and controls as required by Rule 5.2.1(c);
            (d) assist in allocation and prioritisation of AML resources; and
            (e) assist in the carrying out of the customer risk assessment under chapter 6.
            Derived from RM117/2013 [VER9/07-13]

          • New products, business practices and technologies

            • AML 5.1.3

              (1) This Rule applies in relation to:
              (a) the development of new products and new business practices, including new delivery mechanisms, channels and partners; and
              (b) the use of new or developing technologies for both new and existing products.
              (2) Without limiting AML Rules 5.1.1 and 5.1.2, a Relevant Person must take reasonable steps to ensure that it has:
              (a) assessed and identified the money laundering risks relating to the product, business practice or technology; and
              (b) taken appropriate steps to manage and mitigate the risks identified under (a), before it launches or uses the new product, practice or technology.
              before it launches or uses the new product, practice or technology.
              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

              • AML 5.1.3 Guidance

                1. Unless a Relevant Person understands the money laundering risks to which it is exposed, it cannot take appropriate steps to prevent its business being used for the purposes of money laundering. Money laundering risks vary from business to business depending on the nature of the business, the type of customers a business has, and the nature of the products and services sold.
                2. Using the RBA, a Relevant Person should assess its own vulnerabilities to money laundering and take all reasonable steps to eliminate or manage such risks. The results of this assessment will also feed into the Relevant Person's risk assessment of its customers under chapter 6.
                Derived from RM117/2013 [VER9/07-13]
                [Amended] RM196/2016 (Made 7th December 2016). [VER13/02-17]
                [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

        • AML 5.2 AML Systems and Controls

          • AML 5.2.1

            A Relevant Person must:

            (a) establish and maintain effective policies, procedures, systems and controls to prevent opportunities for money laundering in relation to the Relevant Person and its activities;
            (b) ensure that its systems and controls in (a):
            (i) include the provision to the Relevant Person's senior management of regular management information on the operation and effectiveness of its AML systems and controls necessary to identify, measure, manage and control the Relevant Person's money laundering risks;
            (ii) enable it to determine:
            (A) whether a customer or a Beneficial Owner is a Politically Exposed Person (PEP); and
            (B) if it provides a customer with a life insurance or other similar policy, whether a beneficiary of the policy, or a Beneficial Owner of the beneficiary, is a PEP; and
            (iii) enable the Relevant Person to comply with these Rules and Federal AML legislation; and
            (c) ensure that regular risk assessments are carried out on the adequacy of the Relevant Person's AML systems and controls to ensure that they continue to enable it to identify, assess, monitor and manage money laundering risk adequately, and are comprehensive and proportionate to the nature, scale and complexity of its activities.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 5.2.1 Guidance

              In Rule 5.2.1(c) the regularity of risk assessments will depend on the nature, size and complexity of the Relevant Person's business and also on when any material changes are made to its business.

              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

      • AML 6 Customer Risk Assessment

        Figure 3. Customer risk-based assessment

        Derived from RM117/2013 [VER9/07-13]
        [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

        • AML 6 Guidance

          1. This chapter prescribes the risk-based assessment that must be undertaken by a Relevant Person on a customer and the proposed business relationship, transaction or product. The outcome of this process is to produce a risk rating for a customer, which determines the level of Customer Due Diligence (CDD) which will apply to that customer under chapter 7. That chapter prescribes the requirements of CDD and of Enhanced CDDfor high risk customers and Simplified CDD for low risk customers.
          2. CDDin the context of AML refers to the process of identifying a customer, verifying such identification and monitoring the customer's business and money laundering risk on an ongoing basis. CDD is required to be undertaken following a risk-based assessment of the customer and the proposed business relationship, transaction or product.
          3. Relevant Persons should note that the ongoing CDD requirements in Rule 7.6.1 require a Relevant Person to ensure that it reviews a customer's risk rating to ensure that it remains appropriate in light of the AML risks.
          4. The DFSA is aware that in practice there will often be some degree of overlap between the customer risk assessment and CDD. For example, a Relevant Person may undertake some aspects of CDD, such as identifying a Beneficial Owner, when it performs a risk assessment of the customer. Conversely, a Relevant Person may also obtain relevant information as part of CDD which has an impact on its customer risk assessment. An example of such relevant information is information on the ownership and control structure of the customer. Where information obtained as part of CDD of a customer affects the risk rating of a customer, the change in risk rating should be reflected in the degree of CDD undertaken.
          Derived from RM117/2013 [VER9/07-13]
          [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

        • AML 6.1 Assessing Customer AML Risks

          • AML 6.1.1

            (1) A Relevant Person must:
            (a) undertake a risk-based assessment of every customer; and
            (b) assign the customer a risk rating proportionate to the customer's money laundering risks.
            (2) The customer risk assessment in (1) must be completed prior to undertaking Customer Due Diligence for new customers, and whenever it is otherwise appropriate for existing customers.
            (3) When undertaking a risk-based assessment of a customer under (1)(a) a Relevant Person must:
            (a) identify the customer and any Beneficial Owner;
            (b) obtain information on the purpose and intended nature of the business relationship;
            (c) obtain information on, and take into consideration, the nature of the customer's business;
            (ca) take into consideration the nature of the customer, its ownership and control structure, and its Beneficial Owner (if any);
            (d) take into consideration the nature of the customer business relationship with the Relevant Person;
            (e) take into consideration the customer's country of origin, residence, nationality, place of incorporation or place of business;
            (f) take into consideration the relevant product, service or transaction;
            (fa) if it is providing a customer with a life insurance or other similar policy, take into consideration the beneficiary of the policy and any Beneficial Owner of the beneficiary; and
            (g) take into consideration the outcomes of business risk assessment under chapter 5.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • Factors that may indicate higher money laundering risk

            • AML 6.1.2

              (1) When assessing if there is a high risk of money laundering in a particular situation, a Relevant Person must take into account, among other things:
              (a) customer risk factors, including whether:
              (i) the business relationship is conducted in unusual circumstances;
              (ii) the customer is resident, established or registered in a geographical area of high risk (as set out in paragraph (c));
              (iii) the customer is a legal person or legal arrangement that is a vehicle for holding personal assets;
              (iv) the customer is a company that has nominee shareholders or shares in bearer form;
              (v) the customer is a business that is cash intensive, such as a business that receives a majority of its revenue in cash; and
              (vi) the corporate structure of the customer is unusual or excessively complex given the nature of the business;
              (b) product, service, transaction or delivery channel risk factors, including whether:
              (i) the service involves private banking;
              (ii) the product, service or transaction is one that might favour anonymity;
              (iii) the situation involves non face-to-face business relationships or transactions, without certain safeguards, such as electronic signatures;
              (iv) payments will be received from unknown or unassociated third parties;
              (v) new products and new business practices are involved, including new delivery mechanisms or the use of new or developing technologies for both new and pre-existing products; and
              (vi) the service involves the provision of nominee directors, nominee shareholders or shadow directors, or the formation of companies in another country; and
              (c) geographical risk factors, including:
              (i) countries identified in reports by credible sources, such as mutual evaluations, detailed assessment reports or follow-up reports, as:
              (A) not having effective systems to counter money laundering; or
              (B) not implementing requirements to counter money laundering that are consistent with FATF Recommendations;
              (ii) countries identified by credible sources as having significant levels of corruption or other criminal activity, such as terrorism, money laundering or the production and supply of illicit drugs;
              (iii) countries subject to sanctions, embargos or similar measures issued by, for example, the United Nations or the State;
              (iv) countries providing funding or support for terrorism; and
              (v) countries that have organisations operating within their territory that have been designated by the State, other countries or International Organisations as terrorist organisations.
              (2) For the purposes of (1)(c), a credible source includes, but is not limited to, FATF, the IMF, the World Bank, the OECD and other International Organisations.
              (3) When assessing the risk factors referred to in (1), Relevant Persons must bear in mind that the presence of one or more risk factors may not always indicate a high risk of money laundering in a particular situation.
              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • Factors that may indicate lower money laundering risk

            • AML 6.1.3

              (1) When assessing if there is a low risk of money laundering in a particular situation, a Relevant Person must take into account, among other things:
              (a) customer risk factors, including whether the customer is:
              (i) a public body or a publicly owned enterprise;
              (ii) resident, established or registered in a geographical area of lower risk (as set out in paragraph (c));
              (iii) an Authorised Person;
              (iv) a Regulated Financial Institution that is subject to regulation and supervision, including AML regulation and supervision, in a jurisdiction with AML regulations that are equivalent to the standards set out in the FATF Recommendations;
              (v) a Subsidiary of a Regulated Financial Institution referred to in (iv), if the law that applies to the Parent ensures that the Subsidiary also observes the same AML standards as its Parent;
              (vi) a company whose Securities are listed by the DFSA, another Financial Services Regulator or a Regulated Exchange and which is subject to disclosure obligations broadly equivalent to those set out in the Markets Rules;
              (vii) a law firm, notary firm or other legal business that carries on its business in or from the DIFC; and
              (viii) an accounting firm, insolvency firm, Registered Auditor or other audit firm that carries on its business in or from the DIFC;
              (b) product, service, transaction or delivery channel risk factors, including whether the product or service is:
              (i) a Contract of Insurance that is non-life insurance;
              (ii) a Contract of Insurance that is a life insurance product with no investment return or redemption or surrender value;
              (iii) an insurance policy for a pension scheme that does not provide for an early surrender option and cannot be used as collateral;
              (iv) a Contract of Insurance which is a reinsurance contract that is ceded by an insurer who is a Regulated Financial Institution;
              (v) a pension, superannuation or similar scheme that satisfies the following conditions:
              (A) the scheme provides retirement benefits to employees;
              (B) contributions to the scheme are made by way of deductions from wages; and
              (C) the scheme rules do not permit the assignment of a member's interest under the scheme; and
              (vi) a product where the risks of money laundering are adequately managed by other factors such as transaction limits or transparency of ownership; and
              (c) geographical risk factors, including whether:
              (i) a country has been identified by credible sources as having effective systems to counter money laundering;
              (ii) a country is identified by credible sources as having a low level of corruption or other criminal activity, such as terrorism, money laundering, or the production and supply of illicit drugs; and
              (iii) on the basis of reports by credible sources, such as mutual evaluations, detailed assessment reports or follow-up reports, a country:
              (A) has requirements to counter money laundering that are consistent with the FATF Recommendations; and
              (B) effectively implements those Recommendations.
              (2) For the purposes of (1)(c), a credible source includes, but is not limited to, FATF, the IMF, the World Bank, the OECD and other International Organisations.
              (3) When assessing the risk factors referred to in (1), Relevant Persons must bear in mind that the presence of one or more risk factors may not always indicate a low risk of money laundering in a particular situation.
              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • Business relationship not to be established if ownership arrangements prevent identification of beneficial owners

            • AML 6.1.4

              A Relevant Person must not establish a business relationship with the customer which is a legal person or legal arrangement if the ownership or control arrangements of the customer prevent the Relevant Person from identifying one or more of the customer's Beneficial Owners.

              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

              • AML 6.1.2 Guidance [Deleted]

                [Deleted] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

              • AML 6.1.2 [Deleted]

                [Deleted] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

              • AML 6.1.2 Guidance [Deleted]

                [Deleted] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

          • Shell Banks

            • AML 6.1.5

              A Relevant Person must not establish or maintain a business relationship with a Shell Bank.

              Derived from RM196/2016 (Made 7th December 2016). [VER13/02-17]
              [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • Anonymous or fictitious accounts

            • AML 6.1.6

              A Relevant Person must not establish or maintain an anonymous account, an account in a fictitious name, or a nominee account which is held in the name of one person but which is controlled by or held for the benefit of another person whose identity has not been disclosed to the Relevant Person.

              Derived from DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
              [Amended] by DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • Use of numbered or abbreviated accounts for internal purposes

            • AML 6.1.7

              If a Relevant Person uses a numbered account or an account with an abbreviated name, it must ensure that:

              (a) such an account is used only for internal purposes;
              (b) it has undertaken the same Customer Due Diligence procedures in relation to the account holder as are required for other account holders;
              (c) it maintains the same information in relation to the account and account holder as is required for other accounts and account holders; and
              (d) staff performing AML functions, including staff responsible for identifying and monitoring transactions for suspicious activity, and staff performing compliance and audit functions, have full access to information about the account and the account holder.
              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

              • Guidance on the customer risk assessment

                1. The risk assessment of a customer, which is illustrated in figure 3 above, requires a Relevant Person to allocate an appropriate risk rating to every customer. The DFSA would expect risk ratings to be either descriptive, such as "low", "medium" or "high", or a sliding numeric scale such as 1 for the lowest risk to 10 for the highest. Depending on the outcome of a Relevant Person's assessment of its customer's money laundering risk, a Relevant Person should decide to what degree CDD will need to be performed. For a high risk customer, the Relevant Person will need to undertake Enhanced CDD under AML section 7.4 as well as the normal CDD set out in AML section 7.3. For a low risk customer, the Relevant Person may be able to undertake Simplified CDD in accordance with AML section 7.5. For any other customer, the Relevant Person will be required to undertake the normal CDD set out in AML section 7.3.
                2. Using the RBA, a Relevant Person could, when assessing two customers with near identical risk profiles, consider that one is high risk and the other low risk. This may occur, for example, where both customers may be from the same high risk country, but one customer may be a customer in relation to a low risk product or may be a long-standing customer of a Group company who has been introduced to the Relevant Person.
                3. In AML Rule 6.1.4, ownership arrangements which may prevent the Relevant Person from identifying one or more Beneficial Owners include bearer shares and other negotiable instruments in which ownership is determined by possession.
                Derived from DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
                [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

              • Guidance on the term "customer"

                4. The point at which a person becomes a customer will vary from business to business. However, the DFSA considers that it would usually occur at or prior to the business relationship being formalised, for example, by the signing of a customer agreement or the acceptance of terms of business.
                5. The DFSA does not consider that a person would be a customer of a Relevant Person merely because such person receives marketing information from a Relevant Person or where a Relevant Person refers a person who is not a customer to a third party (including a Group member).
                6. The DFSA considers that a counterparty would generally be a "customer" for the purposes of this module and would therefore require a Relevant Person to undertake CDD on such a person. However, this would not include a counterparty in a transaction undertaken on a Regulated Exchange. Nor would it include suppliers of ordinary business services, for consumption by the Relevant Person such as cleaning, catering, stationery, IT or other similar services.
                7. A Representative Office should not have any customers in relation to its DIFC operations.
                Derived from DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
                [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

              • Guidance on high risk customers [Deleted]

                [Deleted] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

              • Guidance on low risk customers [Deleted]

                [Deleted] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

              • Guidance on Shell Banks

                8. AML Rule 6.1.5 prohibits a Relevant Person from establishing or maintaining a business relationship with a Shell Bank. A Shell Bank is a bank that has no physical presence in the country in which it is incorporated or licensed, and is not affiliated with a regulated financial Group that is subject to effective consolidated supervision. The DFSA does not consider that the existence of a local agent or low level staff constitutes physical presence.
                Derived from DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
                [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

              • Guidance on fictitious and anonymous accounts

                9. A Relevant Person should note that, in addition to the prohibition in AML Rule 6.1.6 against establishing anonymous or fictitious accounts or accounts for unknown persons, the Federal AML legislation also prohibits the opening of accounts held under borrowed, mock or fake names or with numbers without the names of account holders.
                Derived from DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
                [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

              • Guidance on Tax Issues

                10. A Relevant Person should, when carrying out a customer risk assessment, consider and assess the tax crime risk associated with the customer and factor such risks into the overall risk assigned to that customer. Many of the factors described in AML Rule 6.1.2 on higher risk customers could also be an indicator of potential tax crimes. For example, the use of complex or unusual corporate structures, the customer's business not being located where the customer lives (without adequate explanation), unusual customer interface, or reluctance by the customer to communicate directly with the Relevant Person.
                11. If it is justified based on the risk assessment and where concerns arise, a Relevant Person may wish to seek comfort from its customers by obtaining disclosures or declarations to ascertain if a legitimate explanation exists for the concerns and therefore to allay those concerns.
                Derived from DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
                [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

      • AML 7 Customer Due Diligence

        Figure 4. CDD

        Derived from RM117/2013 [VER9/07-13]
        [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

        • AML 7.1 Requirement to Undertake Customer Due Diligence

          • AML 7.1.1

            (1) A Relevant Person must:
            (a) undertake Customer Due Diligence under AML section 7.3 for each of its customers; and
            (b) in addition to (a), undertake Enhanced Customer Due Diligence under AML Rule 7.4.1 in respect of any customer it has assigned as high risk.
            (2) A Relevant Person may undertake Simplified Customer Due Diligence in accordance with AML Rule 7.5.1 by modifying Customer Due Diligence under AML section 7.3 for any customer it has assigned as low risk.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 7.1.1 Guidance

              A Relevant Person should undertake CDD in a manner proportionate to the customer's money laundering risks identified under Rule 6.1.1(1). This means that all customers are subject to CDD under section 7.3. However, for high risk customers, additional Enhanced CDD measures should also be undertaken under section 7.4. For low risk customers, section 7.3 may be modified according to the risks in accordance with section 7.5.

              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

        • AML 7.2 Timing of Customer Due Diligence

          • AML 7.2.1

            (1) A Relevant Person must except as otherwise provided in AML Rule 7.2.2 or in AML section 7.3:
            (a) undertake the appropriate Customer Due Diligence under AML Rule 7.3.1(1)(a) to (c) and AML section 7.3 when it is establishing a business relationship with a customer; and
            (b) undertake the appropriate Customer Due Diligence under AML Rule 7.3.1(1)(d) after establishing a business relationship with a customer.
            (2) A Relevant Person must also undertake appropriate Customer Due Diligence if, at any time:
            (a) in relation to an existing customer, it doubts the veracity or adequacy of documents, data or information obtained for the purposes of Customer Due Diligence;
            (b) it suspects money laundering in relation to a person; or
            (c) there is a change in risk-rating of the customer, or it is otherwise warranted by a change in circumstances of the customer.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • Establishing a business relationship before verification

            • AML 7.2.2

              (1) A Relevant Person may establish a business relationship with a customer before completing the verification required by AML Rule 7.3.1 if the following conditions are met:
              (a) deferral of the verification of the customer or Beneficial Owner is necessary in order not to interrupt the normal conduct of a business relationship;
              (b) there is little risk of money laundering occurring and any such risks identified can be effectively managed by the Relevant Person;
              (c) in relation to a bank account opening, there are adequate safeguards in place to ensure that the account is not closed and transactions are not carried out by or on behalf of the account holder (including any payment from the account to the account holder) before verification has been completed; and
              (d) subject to (2), the relevant verification is completed as soon as reasonably practicable and in any event no later than 30 days after the establishment of a business relationship.
              (2) Where a Relevant Person is not reasonably able to comply with the 30 day requirement in (1)(d), it must, prior to the end of the 30 day period:
              (a) document the reason for its non-compliance;
              (b) complete the verification in (1) as soon as possible; and
              (c) record the non-compliance event in its annual AML Return.
              (3) The DFSA may specify a period within which a Relevant Person must complete the verification required by (1) failing which the DFSA may direct the Relevant Person to cease any business relationship with the customer.
              (4) A Relevant Person must ensure that its AML systems and controls referred to in AML Rule 5.2.1 include risk management policies and procedures concerning the conditions under which business relationships may be established with a customer before completing verification.
              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

              • AML 7.2.2 Guidance

                1. For the purposes of AML Rule 7.2.1(2)(a), examples of situations which might lead a Relevant Person to have doubts about the veracity or adequacy of documents, data or information previously obtained could be where there is a suspicion of money laundering in relation to that customer, where there is a material change in the way that the customer's account is operated, which is not consistent with the customer's business profile, or where it appears to the Relevant Person that a person other than the customer is the real customer.
                2. In AML Rule 7.2.2(1)(a), situations that the Relevant Person may take into account include, for example, accepting subscription monies during a short offer period or executing a time critical transaction, which if not executed immediately, would or may cause a customer to incur a financial loss due to price movement or loss of opportunity or when a customer seeks immediate insurance cover.
                3. When complying with AML Rule 7.2.1, a Relevant Person should also, where relevant, consider AML Rule 7.7.1 regarding failure to conduct or complete CDD and chapter 13 regarding SARs and tipping off.
                4. For the purposes of AML Rule 7.2.2(1)(d), the DFSA considers that in most situations as soon as reasonably practicable would be within 30 days after the establishment of a business relationship. However, it will depend on the nature of the customer business relationship.
                Derived from RM117/2013 [VER9/07-13]
                [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

        • AML 7.3 Customer Due Diligence Requirements

          • Undertaking customer due diligence

            • AML 7.3.1

              (1) In undertaking Customer Due Diligence required by AML Rule 7.1.1(1)(a) a Relevant Person must:
              (a) identify the customer and verify the customer's identity;
              (b) identify any Beneficial Owners of the customer and take reasonable measures to verify the identity of the Beneficial Owners, so that the Relevant Person is satisfied that it knows who the Beneficial Owners are;
              (c) if the customer is a legal person or legal arrangement, take reasonable measures to understand the nature of the customer's business and its ownership and control structure; and
              (d) undertake on-going due diligence of the customer business relationship under AML Rule 7.6.1.
              (2) If a person ("A") purports to act on behalf of the customer, the Relevant Person must, in addition to (1)(a):
              (a) verify that A is authorised to act on the customer's behalf; and
              (b) identify A and verify A's identity.
              (3) The verification under (1) and (2) must be based on reliable and independent source documents, data or information.
              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • AML 7.3.1 [Deleted]

            [Deleted] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • Identifying and verifying the customer

            • AML 7.3.2

              (1) For the purposes of AML Rule 7.3.1(1)(a), a Relevant Person must identify a customer and verify the customer's identity in accordance with this Rule.
              (2) If a customer is a natural person, a Relevant Person must obtain and verify information about the person's:
              (a) full name (including any alias);
              (b) date of birth;
              (c) nationality;
              (d) legal domicile; and
              (e) current residential address (other than a post office box).
              (3) If a customer is a body corporate, the Relevant Person must obtain and verify:
              (a) the full name of the body corporate and any trading name;
              (b) the address of its registered office and, if different, its principal place of business;
              (c) the date and place of incorporation or registration;
              (d) a copy of the certificate of incorporation or registration;
              (e) the articles of association or other equivalent governing documents of the body corporate; and
              (f) the full names of its senior management.
              (4) If a customer is a foundation, the Relevant Person must obtain and verify:
              (a) a certified copy of the charter and by-laws of the foundation or any other documents constituting the foundation; and
              (b) documentary evidence of the appointment of the guardian or any other person who may exercise powers in respect of the foundation.
              (5) If a customer is an express trust or other similar legal arrangement, the Relevant Person must obtain and verify:
              (a) a certified copy of the trust deed or other documents that set out the nature, purpose and terms of the trust or arrangement; and
              (b) documentary evidence of the appointment of the trustee or any other person exercising powers under the trust or arrangement.
              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • Identifying and verifying beneficial owners: body corporate

            • AML 7.3.3

              (1) If a customer is a body corporate, a Relevant Person must identify and verify the Beneficial Owners under AML Rule 7.3.1(1)(b) in accordance with this Rule.
              (2) The Relevant Person must identify:
              (a) the natural persons who ultimately have a controlling ownership interest in the body corporate, whether legal or beneficial, direct or indirect; and
              (b) if there is any doubt about whether the natural persons identified under (a) exert control through ownership interests, or if no natural person exerts control through ownership interests, the natural persons exercising control of the body corporate through other means.
              (3) A Relevant Person does not have to identify an ownership interest under (2)(a) if, having regard to a risk-based assessment of the customer, it is reasonably satisfied that the ownership interest is minor and in the circumstances poses no or negligible risk of money laundering.
              (4) If a Relevant Person has exhausted all possible means but has not been able to identify the Beneficial Owners under (2), and provided it has no grounds for suspecting money laundering, it must treat the senior management of the body corporate as the Beneficial Owners.
              (5) If (4) applies, the Relevant Person must keep a record in writing of all the actions it has taken to identify the Beneficial Owners of the body corporate.
              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

              • AML 7.3.3 Guidance

                1. In exceptional circumstances, a Relevant Person may not be able to identify any natural person as the ultimate owner or controller of a body corporate. In such a case, provided it has exhausted all other means of identifying the owner or controller and it has no grounds for suspecting money laundering, it can treat each of the members of the senior management of the body corporate as the Beneficial Owners (see AML Rule 7.3.3(4)). However, in such a case the Relevant Person will need to keep records of all the actions it has taken to identify the Beneficial Owners (see AML Rule 7.3.3(5)).
                2. If the ownership or control arrangements of a customer are of such a nature that the Relevant Person is prevented from identifying the Beneficial Owners (for example, if Beneficial Owners hold bearer shares or other negotiable instruments and there is no effective system for recording the current holder of the shares or instruments), the Relevant Person is prohibited from establishing a business relationship with the customer under AML Rule 6.1.4.
                3. For more detailed Guidance on identifying and verifying Beneficial Owners, see the guidance on CDD at the end of AML section 7.3.
                Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • AML 7.3.4

            A Relevant Person is not required to comply with AML Rules 7.3.1(1)(b) and (c) if the customer is either:

            (a) a body corporate that:
            (i) has its Securities listed by the DFSA, another Financial Services Regulator or a Regulated Exchange; and
            (ii) is subject to disclosure requirements which ensure that adequate information about its business, structure and beneficial ownership is publicly available; or
            (b) a majority-owned subsidiary of a body corporate referred to in (a).
            Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • Identifying and verifying beneficial owners: foundations

            • AML 7.3.5

              (1) If a customer is a foundation, a Relevant Person must identify and verify the Beneficial Owners under AML Rule 7.3.1(1)(b) in accordance with this Rule.
              (2) The Relevant Person must identify the founder, guardian, contributors, qualified recipients, other persons entitled to receive any property or income from the foundation and any other natural person who exercises ultimate effective control of the foundation.
              (3) If the qualified recipients, or other persons entitled to receive property or income from a foundation, are designated by characteristics or by class, the Relevant Person must obtain sufficient information to satisfy itself that it will be able to establish the identity of the qualified recipient or other person before it makes any payment or transfer of property to the recipient or person.
              (4) The Relevant Person must verify the identity of a qualified recipient or other person referred to in (3) before it makes any payment, or transfers any property, from the foundation to that recipient or person.
              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • Identifying and verifying beneficial owners: trusts and similar arrangements

            • AML 7.3.6

              (1) If a customer is a legal arrangement, a Relevant Person must identify and verify the Beneficial Owners under AML Rule 7.3.1(1)(b) in accordance with this Rule.
              (2) The Relevant Person must identify:
              (a) for a trust, the settlor, trustee, protector, enforcer, beneficiaries and any other natural person who exercises ultimate effective control over the trust; and
              (b) for other types of legal arrangements, persons in equivalent or similar positions to those persons referred to in (a).
              (3) If the beneficiaries of a trust or arrangement are designated by characteristics or by class, the Relevant Person must obtain sufficient information about the beneficiaries to satisfy itself that it will be able to establish the identity of a beneficiary:
              (a) before it makes a distribution to the beneficiary; or
              (b) when the beneficiary intends to exercise vested rights.
              (4) The Relevant Person must verify the identity of a beneficiary referred to in (3) before it makes a distribution to the beneficiary or the beneficiary exercises vested rights.
              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • Identifying and verifying beneficiary of a life insurance policy

            • AML 7.3.7

              (1) This Rule applies if a Relevant Person is providing a customer with a life insurance or other similar policy.
              (2) The Relevant Person must, in addition to complying with AML Rule 7.3.1:
              (a) if a beneficiary is specifically named in the policy, record the name of that person; and
              (b) if the beneficiaries of the policy are designated by characteristics or by class, obtain sufficient information to satisfy itself that it will be able to establish the identity of the beneficiaries when any payment is due to be made under the policy.
              (3) The Relevant Person must undertake the measures referred to in (2) as soon as the beneficiary of the policy is identified or designated.
              (4) The Relevant Person must verify the identity of beneficiaries and any Beneficial Owners of a beneficiary before it makes a payout under the policy.
              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

              • AML 7.3.7 Guidance

                An insurance policy that is similar to a life insurance policy includes life-related protection, or a pension or investment product that pays out to the policyholder or beneficiary upon a particular event occurring or upon redemption.

                Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • Politically Exposed Persons: other measures

            • AML 7.3.8

              (1) A Relevant Person must take reasonable measures to determine:
              (a) if a customer, or a Beneficial Owner of a customer, is a Politically Exposed Person (PEP); and
              (b) for a life insurance or other similar policy, if a beneficiary of the policy, or a Beneficial Owner of a beneficiary, is a PEP.
              (2) If a customer, or a Beneficial Owner of a customer, is a PEP, a Relevant Person must:
              (a) obtain the approval of senior management to commence or continue the business relationship with the customer;
              (b) take reasonable measures to establish the source of wealth and source of funds of the customer or Beneficial Owner; and
              (c) increase the degree and nature of monitoring of the business relationship, to determine whether the customer's transactions or activities appear unusual or suspicious.
              (3) If a beneficiary of a life insurance or other similar policy, or a Beneficial Owner of a beneficiary, is a PEP, a Relevant Person must:
              (a) obtain the approval of senior management to make any payout under the policy;
              (b) take reasonable measures to establish the source of wealth and source of funds of the beneficiary or Beneficial Owner of the beneficiary; and
              (c) increase the degree and nature of monitoring of its business relationship with the policyholder, to determine whether the customer's transactions or activities appear unusual or suspicious.
              (4) A Relevant Person must carry out the additional Customer Due Diligence referred to in (3) before it makes any payout under the policy.
              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

              • AML 7.3.8 Guidance on CDD

                1. Items (a) to (c) in AML Rule 7.3.2(2) should be obtained from a current valid passport or, where a customer does not possess a passport, an official identification document which includes a photograph. The concept of domicile generally refers to the place which a person regards as his permanent home and with which he has the closest ties or which is his place of origin.
                2. Under AML Rule 7.3.1(3), a Relevant Person is required to verify the identity of a person based on reliable and independent source documents, data or information. A Relevant Person should generally have sight of original identification documents and retain a copy of the identification document. However in complying with AML Rule 7.3.1, it may not always be possible to obtain original documents. Where identification documents cannot be obtained in original form, for example, because a Relevant Person has no physical contact with the customer, the Relevant Person should obtain a copy certified as a true copy by a person of good standing such as a registered lawyer or notary, a chartered accountant, a bank manager, a police officer, an Employee of the person's embassy or consulate, or other similar person. The DFSA considers that downloading publicly-available information from an official source (such as a regulator's or other official government website) is sufficient to satisfy the requirements of AML Rule 7.3.1. The DFSA also considers that CDD information and research obtained from a reputable company or information-reporting agency may also be acceptable as a reliable and independent source as would banking references and, on a risk-sensitive basis, information obtained from researching reliable and independent public information found on the internet or on commercial databases.
                3. For higher risk situations the DFSA would expect identification information to be independently verified, using both public and non-public sources.
                Derived from RM117/2013 [VER9/07-13]
                [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
                [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

              • AML 7.3.8 Guidance on identification and verification of Beneficial Owners

                4. In determining whether an individual meets the definition of a Beneficial Owner, regard should be had to all the circumstances of the case, in particular the size of an individual's legal or beneficial ownership in a transaction. The question of what is a "minor" ownership interest for the purposes of the definition of a Beneficial Owner in AML Rule 7.3.3 will depend on the individual circumstances of the customer. The DFSA considers that the question of whether an ownership interest is minor should be considered in the context of the Relevant Person's knowledge of the customer and the customer risk assessment and the risk of money laundering.
                5. When identifying Beneficial Owners, a Relevant Person is expected to adopt a substantive (as opposed to form over substance) approach to CDD for legal persons. Adopting a substantive approach means focusing on the money laundering risks of the customer and the product/service and avoiding an approach which focusses purely on the legal form of an arrangement or sets fixed percentages at which Beneficial Owners are identified (or not). It should take all reasonable steps to establish and understand a corporate customer's legal ownership and control and to identify the Beneficial Owner. The DFSA does not set explicit ownership or control thresholds in defining the Beneficial Owner because the DFSA considers that the applicable threshold to adopt will ultimately depend on the risks associated with the customer, and so the DFSA expects a Relevant Person to adopt the RBA and justify on reasonable grounds an approach which is proportionate to the risks identified. A Relevant Person should not set fixed thresholds for identifying the Beneficial Owner without objective and documented justification as required by AML Rule 4.1.1. An overly formal approach to defining the Beneficial Owner may result in a criminal "gaming" the system by always keeping his financial interest below the relevant threshold
                6. The DFSA considers that in some circumstances no threshold should be used when identifying Beneficial Owners because it may be important to identify all underlying Beneficial Owners in order to ensure that they are not associated or connected in some way. This may be appropriate where there are a small number of investors in an account or fund, each with a significant financial holding and the customer-specific risks are higher. However, where the customer-specific risks are lower, a threshold can be appropriate. For example, for a low-risk corporate customer which, combined with a lower-risk product or service, a percentage threshold may be appropriate for identifying "control" of the legal person for the purposes of the definition of a Beneficial Owner.
                7. For a retail investment fund which is widely-held and where the investors invest via pension contributions, the DFSA would not expect the manager of the fund to look through to any underlying investors where there are none with any material control or ownership levels in the fund. However, for a closely-held fund with a small number of investors, each with a large shareholding or other interest, the DFSA would expect a Relevant Person to identify and verify each of the Beneficial Owners, depending on the risks identified as part of its risk-based assessment of the customer. For a corporate health policy with defined benefits, the DFSA would not expect a Relevant Person to identify the Beneficial Owners.
                8. Under Federal AML legislation, if the customer is a legal person, the Relevant Person must obtain information identifying the names and addresses of partners and shareholders who each hold more than 5% of the capital of the legal person i.e. it applies a specified threshold. This does not affect the approach that should be taken under AML Rule 7.3.1(1)(b) and AML Rule 7.3.3 for verifying the identity of Beneficial Owners, where no threshold is specified (see Guidance items 4 to 7 above). As a result, under the Federal AML legislation a Relevant Person will need to obtain information identifying partners and shareholders who hold more than 5% of the capital of the legal person. Then, in accordance with the risk-based approach in Guidance items 4 to 7, the Relevant Person should determine whether it is necessary also to identify other persons who may be Beneficial Owners, and verify their identity
                Derived from RM117/2013 [VER9/07-13]
                [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
                [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

              • AML 7.3.8 Guidance on politically exposed persons

                9. Individuals who have, or have had, a high political profile, or hold, or have held, public office, can pose a higher money laundering risk to a Relevant Person as their position may make them vulnerable to corruption. This risk also extends to members of their families and to known close associates. Politically Exposed Person ("PEP") status itself does not, of course, incriminate individuals or entities.
                10. Generally, a foreign PEP presents a higher risk of money laundering because there is a greater risk that such person, if he was committing money laundering, would attempt to place his money offshore where the customer is less likely to be recognised as a PEP and where it would be more difficult for law enforcement agencies in his home jurisdiction to confiscate or freeze his criminal property.
                11. Corruption-related money laundering risk increases when a Relevant Person deals with a PEP. Corruption may involve serious crimes and has become the subject of increasing global concern. Corruption offences are predicate crimes under the Federal AML legislation. A Relevant Person should note that customer relationships with family members or close associates of PEPs involve similar risks to those associated with PEPs themselves.
                12. The DFSA considers that after leaving office a PEP may remain a higher risk for money laundering if such person continues to exert political influence or otherwise pose a risk of corruption.
                13. The fact that an individual is a PEP does not automatically mean that the individual must be assessed to be a high risk customer. A Relevant Person will need to assess the particular circumstances relating to each PEP to determine what risk category is appropriate. If the PEP is assigned a high risk, then the Relevant Person will need to undertake the Enhanced Customer Due Diligence measures under AML Rule 7.4.1. However, even if a PEP is not assigned a high risk, the Relevant Person is required as a minimum to undertake the additional customer due diligence measures specified in AML Rule 7.3.8(2) and (3) for PEPs.
                Derived from RM117/2013 [VER9/07-13]
                [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
                [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

        • AML 7.4 Enhanced Customer Due Diligence

          • AML 7.4.1

            Where a Relevant Person is required to undertake Enhanced Customer Due Diligence under AML Rule 7.1.1(1)(b) it must, to the extent applicable to the customer:

            (a) obtain and verify additional:
            (i) identification information on the customer and any Beneficial Owner;
            (ii) information on the intended nature of the business relationship; and
            (iii) information on the reasons for a transaction;
            (b) update more regularly the Customer Due Diligence information which it holds on the customer and any Beneficial Owners;
            (c) take reasonable measures to establish:
            (i) the source of funds; and
            (ii) the source of wealth,

            of the customer or, if applicable, of the Beneficial Owner;
            (d) increase the degree and nature of monitoring of the business relationship, in order to determine whether the customer's transactions or activities appear unusual or suspicious;
            (e) obtain the approval of senior management to commence a business relationship with a customer; and
            (f) where applicable, require that any first payment made by a customer in order to open an account with a Relevant Person must be carried out through a bank account in the customer's name with:
            (i) a Bank;
            (ii) a Regulated Financial Institution whose entire operations are subject to regulation and supervision, including AML regulation and supervision, in a jurisdiction with AML regulations which are equivalent to the standards set out in the FATF recommendations; or
            (iii) a Subsidiary of a Regulated Financial Institution referred to in (ii), if the law that applies to the Parent ensures that the Subsidiary also observes the same AML standards as its Parent.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 7.4.1 Guidance

              1. In AML Rule 7.4.1 Enhanced CDD measures are only mandatory to the extent that they are applicable to the relevant customer or the circumstances of the business relationship and to the extent that the risks would reasonably require it. Therefore, the extent of additional measures to conduct is a matter for the Relevant Person to determine on a case by case basis.
              2. In AML RM117/2013(e), senior management approval may be given by an individual member of the Relevant Person's senior management or by a committee of senior managers appointed to consider high risk customers. It may also be outsourced within the Group.
              3. For high risk customers, a Relevant Person should, in order to mitigate the perceived and actual risks, exercise a greater degree of diligence throughout the customer relationship and should endeavour to understand the nature of the customer's business and consider whether it is consistent and reasonable.
              4. A Relevant Person should be satisfied that a customer's use of complex legal structures and/or the use of trust and private investment vehicles, has a genuine and legitimate purpose.
              5. For enhanced CDD , a Relevant Person has to take reasonable measures to establish the source of funds. That is, where the funds for a particular service or transaction will come from (e.g. a specific bank account held with a specific financial institution) and whether that funding is consistent with the source of wealth of the customer or, if applicable, of the Beneficial Owner.
              6. For enhanced CDD, where there is a Beneficial Owner, establishing the customer's source of funds and wealth may require enquiring into the Beneficial Owner's source of funds and wealth because the source of the funds would normally be the Beneficial Owner and not the customer.
              7. The DFSA considers that taking reasonable measures to establish the source of funds includes obtaining independent corroborating evidence such as proof of dividend payments connected to a shareholding, bank statements, salary/bonus certificates, loan documentation and proof of a transaction which gave rise to the payment into the account. A customer should be able to demonstrate and document how the relevant funds are connected to a particular event which gave rise to the payment into the account or to the source of the funds for a transaction.
              8. The DFSA considers that verification of source of wealth includes obtaining independent corroborating evidence such as share certificates, publicly-available registers of ownership, bank or brokerage account statements, probate documents, audited accounts and financial statements, news items from a reputable source and other similar evidence. For example:
              a. for a legal person, this might be achieved by obtaining its financial or annual reports published on its website or news articles and press releases that reflect its financial situation or the profitability of its business; and
              b. for a natural person, this might include documentary evidence which corroborates answers given to questions on the source of wealth in an application form or customer questionnaire. For example, if a natural person attributes the source of his wealth to inheritance, he may be asked to provide a copy of the relevant will or grant of probate. In other cases, a natural person may be asked to provide sufficient bank or salary statements covering a number of years to draw up a picture of his source of wealth.
              9. A Relevant Person may commission a third party vendor report to obtain further information on a customer or transaction or to investigate a customer or Beneficial Owner in very high risk cases. A third party vendor report may be particularly useful where there is little or no publicly-available information on a person or on a legal arrangement or where a Relevant Person has difficulty in obtaining and verifying information.
              10. In AML Rule 7.4.1(f), circumstances where it may be applicable to require the first payment made by a customer in order to open an account with a Relevant Person to be carried out through a bank account in the customer's name with a financial institution specified in that paragraph include:
              a. where, following the use of other Enhanced CDD measures, the Relevant Person is not satisfied with the results of due diligence; or
              b. as an alternative measure, where one of the measures in AML Rule 7.4.1 (a) to (e) cannot be carried out.
              Derived from RM117/2013 [VER9/07-13]
              [Amended] RM196/2016 (Made 7th December 2016). [VER13/02-17]
              [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

        • AML 7.5 Simplified customer due diligence

          • AML 7.5.1

            (1) Where a Relevant Person is permitted to undertake Simplified Customer Due Diligence under AML Rule 7.1.1(2), modification of AML Rule 7.3.1 may include:
            (a) verifying the identity of the customer and any Beneficial Owners after the establishment of the business relationship under AML Rule 7.2.1(3);
            (b) deciding to reduce the frequency of, or as appropriate not undertake, customer identification updates;
            (c) deciding not to verify an identification document other than by requesting a copy;
            (d) reducing the degree of on-going monitoring of transactions, based on a reasonable monetary threshold or on the nature of the transaction; or
            (e) not collecting specific information or carrying out specific measures to understand the purpose and intended nature of the business relationship, but infering such purpose and nature from the type of transactions or business relationship established.
            (2) The modification in (1) must be proportionate to the customer's money laundering risks.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 7.5.1 Guidance

              1. AML Rule 7.5.1(1) provides examples of Simplified CDD measures. Other measures may also be used by a Relevant Person to modify CDD in accordance with the customer risks.
              2. A Relevant Person should not use a "one size fits all" approach for all its low risk customers. Notwithstanding that the risks may be low for all such customers, the degree of CDD undertaken needs to be proportionate to the specific risks identified on a case by case basis.
              3. A Relevant Person is not required to identify or verify Beneficial Owners for retail investment funds which are widely held and for investment funds where the investor invests via pension contributions.
              4. An example of circumstances where a Relevant Person might reasonably reduce the frequency of or, as appropriate, eliminate customer identification updates would be where the money laundering risks are low and the service provided does not offer a realistic opportunity for money laundering.
              5. An example of where a Relevant Person might reasonably reduce the degree of on-going monitoring and scrutinising of transactions, based on a reasonable monetary threshold or on the nature of the transaction, would be where the transaction is a recurring, fixed contribution to a savings scheme, investment portfolio or fund or where the monetary value of the transaction is not material for money laundering purposes given the nature of the customer and the transaction type.
              6. For the avoidance of doubt, a Relevant Person should not conduct Simplified CDD where there is any suspicion of money laundering.
              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
              [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

        • AML 7.6 Ongoing Customer Due Diligence

          • AML 7.6.1

            (1) When undertaking ongoing Customer Due Diligence under Rule 7.3.1(1)(d), a Relevant Person must, using the risk-based approach:

            (a) monitor transactions undertaken during the course of its customer relationship to ensure that the transactions are consistent with the Relevant Person's knowledge of the customer, his business and risk rating;
            (b) pay particular attention to any complex or unusually large transactions or unusual patterns of transactions that have no apparent or visible economic or legitimate purpose;
            (c) enquire into the background and purpose of the transactions in (b);
            (d) review the adequacy of the Customer Due Diligence information it holds on customers and Beneficial Owners to ensure that the information is kept up to date, particularly for customers with a high risk rating; and
            (e) review each customer to ensure that the risk rating assigned to a customer under Rule 6.1.1(1)(b) remains appropriate for the customer in light of the money laundering risks.

            (2) A Relevant Person must carry out a review under (1)(d) and (e) periodically and at other appropriate times when a material change or event occurs relating to a customer.

            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 7.6.1 Guidance

              1. In complying with Rule 7.6.1(1)(d), a Relevant Person should undertake a periodic review to ensure that non-static customer identity documentation is accurate and up-to-date. Examples of non-static identity documentation include passport number and residential/business address and, for a legal person, its share register or list of partners.
              2. A Relevant Person should undertake a review under Rule 7.6.1(1)(d) and (e), both periodically and at other appropriate times such as when:
              a. the Relevant Person changes its CDD documentation requirements;
              b. an unusual transaction with the customer is expected to take place;
              c. there is a material change in the business relationship with the customer; or
              d. there is a material change in the nature or ownership of the customer.
              3. The degree of the on-going due diligence to be undertaken will depend on the customer risk assessment carried out under Rule 6.1.1.
              4. A Relevant Person's transaction monitoring policies, procedures, systems and controls, which may be implemented by manual or automated systems, or a combination thereof, are one of the most important aspects of effective CDD. Whether a Relevant Person should undertake the monitoring by means of a manual or computerised system (or both) will depend on a number of factors, including:
              a. the size and nature of the Relevant Person's business and customer base; and
              b. the complexity and volume of customer transactions.
              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • AML 7.6.2 Ongoing sanctions screening

            A Relevant Person must review its customers, their business and transactions against United Nations Security Council sanctions lists and against any other relevant sanctions list when complying with Rule 7.6.1(1)(d).

            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 7.6.2 Guidance

              In AMLRule 7.6.2, a "relevant sanctions list" may include U.A.E EU, U.K. HM Treasury, U.S. OFAC lists and any other list which may apply to a Relevant Person.

              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

        • AML 7.7 Failure to conduct or complete customer due diligence

          • AML 7.7.1

            (1) Where, in relation to any customer, a Relevant Person is unable to conduct or complete the requisite Customer Due Diligence in accordance with AML Rule 7.1.1 it must, to the extent relevant:
            (a) not carry out a transaction with or for the customer through a bank account or in cash;
            (b) not open an account or otherwise provide a service;
            (c) not otherwise establish a business relationship or carry out a transaction;
            (d) terminate or suspend any existing business relationship with the customer;
            (e) return any monies or assets received from the customer; and
            (f) consider whether the inability to conduct or complete Customer Due Diligence necessitates the making of a Suspicious Activity Report under AML Rule 13.3.1(c).
            (2) A Relevant Person is not obliged to comply with (1) (a) to (e) if:
            (a) to do so would amount to "tipping off" the customer, in breach of Federal AML legislation; or
            (b) the FID directs the Relevant Person to act otherwise.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
            [Amended] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

            • AML 7.7.1 Guidance

              1. In complying with Rule 7.7.1(1) a Relevant Person should apply one or more of the measures in (a) to (f) as appropriate in the circumstances. Where CDD cannot be completed, it may be appropriate not to carry out a transaction pending completion of CDD. Where CDD cannot be conducted, including where a material part of the CDD, such as identifying and verifying a Beneficial Owner cannot be conducted, a Relevant Person should not establish a business relationship with the customer.
              2. A Relevant Person should note that Rule 7.7.1 applies to both existing and prospective customers. For new customers it may be appropriate for a Relevant Person to terminate the business relationship before a product or service is provided. However, for existing customers, while termination of the business relationship should not be ruled out, suspension may be more appropriate depending on the circumstances. Whichever route is taken, the Relevant Person should be careful not to tip off the customer.
              3. A Relevant Person should adopt the RBA for CDD of existing customers. For example, if a Relevant Person considers that any of its existing customers (which may include customers which it migrates into the DIFC) have not been subject to CDD at an equivalent standard to that required by this module, it should adopt the RBA and take remedial action in a manner proportionate to the risks and within a reasonable period of time whilst complying with Rule 7.7.1.
              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

      • AML 8 Reliance and Outsourcing

        Derived from RM117/2013 [VER9/07-13]

        • AML 8.1 Reliance on a third party

          • AML 8.1.1

            (1) A Relevant Person may rely on the following third parties to conduct one or more elements of Customer Due Diligence on its behalf:
            (a) an Authorised Person;
            (b) a law firm, notary, or other independent legal business, accounting firm, audit firm or insolvency practitioner or an equivalent person in another jurisdiction;
            (c) a Financial Institution; or
            (d) a member of the Relevant Person's Group.
            (2) In (1), a Relevant Person may rely on the information previously obtained by a third party which covers one or more elements of Customer Due Diligence.
            (3) Where a Relevant Person seeks to rely on a person in (1) it may only do so if and to the extent that:
            (a) it immediately obtains the necessary Customer Due Diligence information from the third party in (1);
            (b) it takes adequate steps to satisfy itself that certified copies of the documents used to undertake the relevant elements of Customer Due Diligence will be available from the third party on request without delay;
            (c) if a person in (1)(b) to (d) is in another country, the person is:
            (i) subject to requirements in relation to customer due diligence and record keeping which meet the standards set out in the FATF Recommendations; and
            (ii) supervised for compliance with those requirements in a manner that meets the standards for regulation and supervision set out in the FATF Recommendations;
            (d) the person in (1) has not relied on any exception from the requirement to conduct any relevant elements of Customer Due Diligence which the Relevant Person seeks to rely on; and
            (e) in relation to (2), the information is up to date.
            (4) Where a Relevant Person relies on a member of its Group, such Group member need not meet the condition in (3)(c) if:
            (a) the Group applies and implements a Group-wide policy on customer due diligence, record keeping, Politically Exposed Persons and AML programmes which meets the standards set out in the FATF Recommendations; and
            (b) where the effective implementation of those Customer Due Diligence, record keeping and PEP requirements and AML programmes are supervised at Group level by a Financial Services Regulator or other competent authority in a country, the supervision and regulation meets the standards set out in the FATF Recommendations.
            (5) If a Relevant Person is not reasonably satisfied that a customer or Beneficial Owner has been identified and verified by a third party in a manner consistent with these Rules, the Relevant Person must immediately perform the Customer Due Diligence itself with respect to any deficiencies identified.
            (6) Notwithstanding the Relevant Person's reliance on a person in (1), the Relevant Person remains responsible for compliance with, and liable for any failure to meet the Customer Due Diligence requirements in this module.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 8.1.1 Guidance

              1. In complying with AML Rule 8.1.1(3)(a), "immediately obtaining the necessary CDD information" means obtaining all relevant CDD information, and not just basic information such as name and address. Compliance can be achieved by having that relevant information sent by email or other appropriate means. For the avoidance of doubt, a Relevant Person is not required automatically to obtain the underlying certified documents used by the third party to undertake its CDD. A Relevant Person must, however, under AML Rule 8.1.1(3)(b) ensure that the certified documents are readily available from the third party on request.
              2. The DFSA would expect a Relevant Person, in complying with AML Rule 8.1.1(5), to fill any gaps in the CDD process as soon as it becomes aware that a customer or Beneficial Owner has not been identified and verified in a manner consistent with these Rules.
              3. If a Relevant Person acquires another business, either in whole or in part, the DFSA would permit the Relevant Person to rely on the CDD conducted by the business it is acquiring but would expect the Relevant Person to have done the following:
              a. as part of its due diligence for the acquisition, to have taken a reasonable sample of the prospective customers to assess the quality of the CDD undertaken; and
              b. to undertake CDD on all the customers to cover any deficiencies identified in a. as soon as possible following the acquisition, prioritising high risk customers.
              4. Where a particular jurisdiction's laws (such as secrecy or data protection legislation) would prevent a Relevant Person from having access to CDD information upon request without delay as referred to in AML Rule 8.1.1(3)(b), the Relevant Person should undertake the relevant CDD itself and should not seek to rely on the relevant third party.
              5. If a Relevant Person relies on a third party located in a foreign jurisdiction to conduct one or more elements of CDD on its behalf, the Relevant Person must ensure that the foreign jurisdiction has AML regulations that are equivalent to the standards in the FATF Recommendations (see AML Rule 8.1.1(3)(c) and AML Rule 8.1.2).
              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
              [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • AML 8.1.2

            (1) When assessing under AML Rule 8.1.1(3)(c) or (4) if requirements, supervision or regulation in another jurisdiction meet FATF standards, a Relevant Person must take into account factors including, among other things:

            (a) mutual evaluations, assessment reports or follow-up reports published by FATF, the IMF, the World Bank, the OECD or other International Organisations;
            (b) membership of FATF or other international or regional groups such as the MENAFATF or the Gulf Co-operation Council;
            (c) contextual factors such as political stability or the level of corruption in the jurisdiction;
            (d) evidence of recent criticism of the jurisdiction, including in:
            (i) FATF advisory notices;
            (ii) public assessments of the jurisdiction's AML regime by organisations referred to in (a); or
            (iii) reports by other relevant non-government organisations or specialist commercial organisations; and
            (e) whether adequate arrangements exist for co-operation between the AML regulator in that jurisdiction and the DFSA.

            (2) A Relevant Person making an assessment under (1) must rely only on sources of information that are reliable and up-to-date.

            (3) A Relevant Person must keep adequate records of how it made its assessment, including the sources and materials considered.

            Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

        • AML 8.2 Outsourcing

          • AML 8.2.1

            A Relevant Person which outsources any one or more elements of its Customer Due Diligence to a service provider (including within its Group) remains responsible for compliance with, and liable for any failure to meet, such obligations.

            Derived from RM117/2013 [VER9/07-13]

            • AML 8.2.1 Guidance

              1. Prior to appointing an outsourced service provider to undertake CDD, a Relevant Person should undertake appropriate due diligence to assure itself of the suitability of the outsourced service provider and should ensure that the outsourced service provider's obligations are clearly documented in a binding agreement.
              2. An Authorised Person should be mindful of its obligations regarding outsourcing set out in GEN Rules 5.3.21 and 5.3.22.
              Derived from RM117/2013 [VER9/07-13]

      • AML 9 Correspondent Banking, Electronic Fund Transfers and Audit

        • AML 9.1 Application

          • AML 9.1.1

            This chapter applies only to an Authorised Person.

            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

        • AML 9.2 Correspondent Banking

          • AML 9.2.1

            An Authorised Firm proposing to have a correspondent banking relationship with a respondent bank must:

            (a) undertake appropriate Customer Due Diligence on the respondent bank;
            (b) as part of (a), gather sufficient information about the respondent bank to understand fully the nature of the business, including making appropriate enquiries on its management, its major business activities and the countries or jurisdictions in which it operates;
            (c) determine from publicly-available information the reputation of the respondent bank and the quality of supervision, including whether it has been subject to a money laundering or terrorist financing investigation or relevant regulatory action;
            (d) assess the respondent bank's AML controls and ascertain if they are adequate and effective in light of the FATF Recommendations;
            (e) ensure that prior approval of the Authorised Firm's senior management is obtained before entering into a new correspondent banking relationship;
            (f) ensure that the respective responsibilities of the parties to the correspondent banking relationship are properly documented; and
            (g) be satisfied that, in respect of any customers of the respondent bank who have direct access to accounts of the Authorised Firm, the respondent bank:
            (i) has undertaken Customer Due Diligence (including ongoing Customer Due Diligence) at least equivalent to that in Rule 7.3.1 in respect of each customer; and
            (ii) is able to provide the relevant Customer Due Diligence information in (i) to the Authorised Firm upon request; and
            (h) document the basis for its satisfaction that the requirements in (a) to (g) are met.
            Derived from RM117/2013 [VER9/07-13]

          • AML 9.2.2

            An Authorised Firm must:

            (a) not enter into a correspondent banking relationship with a Shell Bank; and
            (b) take appropriate measures to ensure that it does not enter into, or continue a corresponding banking relationship with, a bank which is known to permit its accounts to be used by Shell BankS.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

            • AML 9.2.2 Guidance

              AML Rule 9.2.2 prohibits an Authorised Firm from entering into a correspondent banking relationship with a Shell Bank or a bank which is known to permit its accounts to be used by Shell Banks. See the Guidance after AML Rule 6.1.7 for more information about what constitutes a Shell Bank.

              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
              [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

        • AML 9.3 Electronic fund transfers

          • Application

            • AML 9.3.1

              (1) This section applies to an Authorised Person when it sends or transmits funds by electronic means, or when it receives funds (including serial payments and cover payments) by electronic means, on the account of a payer or payee.

              (2) This section does not apply to a transfer and settlement between Financial Institutions if the Financial Institutions are acting on their own behalf as the payer and the payee.

              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • Definitions

            • AML 9.3.2

              In this section:

              (a) "batch transfer" means a transfer that consists of a number of individual fund transfers that are bundled for transmission, whether the individual fund transfers are intended ultimately for one or more payees;
              (b) "beneficiary institution" means the Financial Institution that receives the fund transfer from the ordering institution, whether directly or through an intermediary institution, and makes the funds available to the payee;
              (c) "cover payment" means a fund transfer that combines a payment message sent directly by the ordering institution to the beneficiary institution with the routing of the funding instruction from the ordering institution to the beneficiary institution through one or more intermediary institutions;
              (d) "cross-border fund transfer" means a fund transfer where the ordering institution and the beneficiary institution are located in different countries and includes any chain of fund transfers in which at least one of the Financial Institutions involved is located in a different country;
              (e) "customer identification number" means a number that is different from the unique transaction reference number and:
              (i) uniquely identifies the payer to the ordering institution; and
              (ii) refers to a record held by the ordering institution that contains at least one of the following: the payer's address, national identity number or date and place of birth;
              (f) "domestic fund transfer" means a fund transfer where the ordering institution and beneficiary institution are located in the same country and includes any chain of fund transfers that takes place entirely within a country, even if the system used to transfer the payment message is located in another country;
              (g) "fund transfer" means any transaction carried out on behalf of a payer through a Financial Institution by electronic means with a view to making an amount of funds available to a payee at a beneficiary institution, irrespective of whether the payer and the payee are the same person;
              (h) "intermediary institution" means the Financial Institution in a serial payment or cover payment chain that receives and transmits a fund transfer on behalf of the ordering institution and the beneficiary institution, or another intermediary institution;
              (i) "ordering institution" means the Financial Institution that transfers the funds upon receiving the request for a fund transfer on behalf of the payer;
              (j) "payee" means the natural or legal person identified by the payer as the recipient of the requested fund transfer;
              (k) "payer" means the account holder who allows the fund transfer from that account or, if there is no account, the natural or legal person that places the fund transfer order with the ordering institution to perform the fund transfer;
              (l) "serial payment" means a direct sequential chain of payment where the fund transfer and accompanying payment message travel together from the ordering institution to the beneficiary institution, directly or through one or more intermediary institutions;
              (m) "straight-through processing" means payment transactions that are conducted electronically without the need for manual intervention; and
              (n) "unique transaction reference number" means a combination of letters, numbers or symbols, determined by the Financial Institution in accordance with the protocols of the payment and settlement system or messaging system used for the fund transfer, and which permits the traceability of the fund transfer.
              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • Requirements for ordering institution

            • AML 9.3.3

              Before effecting a fund transfer, an Authorised Person that is an ordering institution must:

              (a) identify the payer and verify the identity of the payer if the identity has not previously been identified; and
              (b) record adequate details of the fund transfer that are sufficient to permit its reconstruction, including but not limited to, the date of the transfer, the payer and payee, and the type and amount of currency transferred and the value date.
              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 9.3.4

              For a cross-border fund transfer where the amount to be transferred is $1000 or less, an Authorised Person that is an ordering institution must include in the message or payment instruction that accompanies or relates to the fund transfer the following:

              (a) the name of the payer;
              (b) the payer's account number (or unique transaction reference number if no account number exists);
              (c) the name of the payee; and
              (d) the payee's account number (or unique transaction reference number if no account number exists).
              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 9.3.5

              For a cross-border fund transfer where the amount to be transferred is more than $1,000, an Authorised Person that is an ordering institution must, in addition to the information required by AML Rule 9.3.4, include in the message or payment instruction that accompanies or relates to the fund transfer any one of the following:

              (a) the payer's address:
              (b) the payer's national identity number, such as an identity card number or passport number;
              (c) the payer's customer identification number; or
              (d) the date and place of birth of the payer.
              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 9.3.6

              If several individual cross-border fund transfers from a single payer are bundled in a batch file for transmission, then, in complying with AML Rules 9.3.4 and 9.3.5, an Authorised Person that is an ordering institution must ensure that:

              (a) the batch file contains the payer information required under AML Rule 9.3.4 and, if applicable, AML Rule 9.3.5;
              (b) it has verified the payer information referred to in (a); and
              (c) the batch file contains the payee information required under AML Rule 9.3.4 for each payee and that information is fully traceable in the payee's country.
              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 9.3.7

              For a domestic fund transfer, an Authorised Person that is an ordering institution must either:

              (a) include in the message or payment instruction that accompanies or relates to the fund transfer the following:
              (i) the name of the payer;
              (ii) the payer's account number (or unique transaction reference number if no account number exists); and
              (iii) any one of the following:
              (A) the payer's address;
              (B) the payer's national identity number, such as an identity card number or passport number;
              (C) the payer's customer identification number; or
              (D) the date and place of birth of the payer; or
              (b) include only the payer's account number (or unique transaction reference number if no account number exists), provided that:
              (i) those details will permit the transaction to be traced back to the payer and payee; and
              (ii) the ordering institution must provide the payer information set out in paragraph (a) within 3 business days of a request for the information by the beneficiary institution or the DFSA or immediately upon request of a law enforcement agency.
              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

              • AML 9.3.7 Guidance

                The payer's address referred to in AML Rule 9.3.5 or AML Rule 9.3.7 should be the address that the Relevant Person has verified as part of its Customer Due Diligence on the payer.

                Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 9.3.8

              An Authorised Person that is an ordering institution must retain a record of payer and payee information it has collected under this section.

              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 9.3.9

              An Authorised Person that is an ordering institution must not execute a fund transfer if it is unable to comply with the requirements in AML Rules 9.3.3 to 9.3.8.

              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • Requirements for beneficiary institution

            • AML 9.3.10

              An Authorised Person that is a beneficiary institution must take reasonable measures, including post-event monitoring or real-time monitoring where feasible, to identify cross-border fund transfers that lack the required payer or payee information.

              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 9.3.11

              For a cross-border fund transfer, an Authorised Person that is a beneficiary institution must identify and verify the identity of the payee if the identity has not been previously verified.

              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • Requirements for intermediary institution

            • AML 9.3.12

              An Authorised Person that is an intermediary institution must retain all the required payer and payee information accompanying the fund transfer.

              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 9.3.13

              If technical limitations prevent the required payer or payee information accompanying a cross-border fund transfer from remaining with a related domestic fund transfer, an Authorised Person that is a receiving intermediary institution must maintain a record, for at least five years, of all the information received from the ordering institution or another intermediary institution.

              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 9.3.14

              An Authorised Person that is an intermediary institution must take reasonable measures, which are consistent with straight-through processing, to identify crossborder fund transfers that lack the required payer or payee information.

              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • Systems and controls concerning fund transfers

            • AML 9.3.15

              A Relevant Person must ensure that its AML systems and controls referred to in AML Rule 5.2.1 include risk management policies and procedures specifying the steps to be taken if a fund transfer lacks information required under this section, including when to reject or amend a transfer and any follow-up action that is to be taken.

              Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

              • AML 9.3.15 Guidance

                The DFSA considers that concealing or removing in a fund transfer any of the information required by this section would be a breach of the requirement to ensure that the fund transfer contains accurate payer and payee information.

                Derived from RM117/2013 [VER9/07-13]
                [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

        • AML 9.4 Audit

          • AML 9.4.1

            An Authorised Person must ensure that its audit function, established under GEN Rule 5.3.13, includes regular reviews and assessments of the effectiveness of the Authorised Person's money laundering policies, procedures, systems and controls, and its compliance with its obligations in this AML module.

            Derived from RM117/2013 [VER9/07-13]

            • AML 9.4.1 Guidance

              1. The review and assessment undertaken for the purposes of Rule 9.4.1 may be undertaken:
              a. internally by the Authorised Person's internal audit function; or
              b. by a competent firm of independent auditors or compliance professionals.
              2. The review and assessment undertaken for the purposes of Rule 9.4.1 should cover at least the following:
              a. sample testing of compliance with the Authorised Person's CDD arrangements;
              b. an analysis of all notifications made to the MLRO to highlight any area where procedures or training may need to be enhanced; and
              c. a review of the nature and frequency of the dialogue between the senior management and the MLRO.
              Derived from RM117/2013 [VER9/07-13]

        • AML 9.5 [Deleted]

          • AML 9.5.1 [Deleted]

            Deleted by DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

      • AML 10 Sanctions and Other International Obligations

        • AML 10.1 [Deleted]

          • AML 10.1.1 [Deleted]

            [deleted]

            Deleted by DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

        • AML 10.2 Relevant United Nations resolutions and sanctions

          • AML 10.2.1

            (1) A Relevant Person must establish and maintain effective systems and controls to ensure that on an ongoing basis it is properly informed as to, and takes reasonable measures to comply with, relevant resolutions or sanctions issued by the United Nations Security Council.
            (2) A Relevant Person must immediately notify the DFSA when it becomes aware that it is:
            (a) carrying on or about to carry on an activity;
            (b) holding or about to hold money or other assets; or
            (c) undertaking or about to undertake any other business whether or not arising from or in connection with (a) or (b);
            for or on behalf of a person, where such carrying on, holding or undertaking constitutes or may constitute a contravention of a relevant sanction or resolution issued by the United Nations Security Council.
            (3) A Relevant Person must ensure that the notification stipulated in (2) above includes the following information:
            (a) a description of the relevant activity in (2) (a), (b) or (c); and
            (b) the action proposed to be taken or that has been taken by the Relevant Person with regard to the matters specified in the notification.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

            • AML 10.2.1 Guidance

              1. In AML Rule 10.2.1(1), taking reasonable measures to comply with a United Nations Security Council resolution or sanction may include, for example, a Relevant Person not undertaking a transaction for or on behalf of a person or undertaking further due diligence in respect of a person.
              2. Relevant United Nations Security Council resolutions or sanctions mentioned in AML Rule 10.2.1 may, among other things, relate to money laundering, terrorist financing or the financing of weapons of mass destruction or otherwise be relevant to the activities carried on by the Relevant Person. For example:
              a. a Relevant Person should exercise due care to ensure that it does not provide services to, or otherwise conduct business with, a person engaged in money laundering, terrorist financing or the financing of weapons of mass destruction; and
              b. an Authorised Market Institution should exercise due care to ensure that it does not facilitate fund raising activities or listings by persons engaged in money laundering or terrorist financing or financing of weapons of mass destruction.
              3. A Relevant Person should be proactive in checking for, and taking measures to comply with, relevant resolutions or sanctions issued by the United Nations Security Council. The DFSA expects Relevant Persons to perform checks on an ongoing basis against their customer databases and records for any names appearing in resolutions or sanctions issued by the United Nations Security Council as well as to monitor transactions accordingly.
              4. A Relevant Person may use a database maintained elsewhere for an up-to-date list of resolutions and sanctions, or to perform checks of customers or transactions against that list. For example, it may wish to use a database maintained by its head office or a Group member. However, the Relevant Person retains responsibility for ensuring that its systems and controls are effective to ensure compliance with this module.
              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
              [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

        • AML 10.3 Government, Regulatory and International Findings

          • AML 10.3.1

            (1) A Relevant Person must establish and maintain systems and controls to ensure that on an ongoing basis it is properly informed as to, and takes reasonable measures to comply with, any findings, recommendations, guidance, directives, resolutions, sanctions, notices or other conclusions (each of which is referred to in this Rule as a "finding") issued by:
            (a) the government of the U.A.E. or any government departments in the U.A.E.;
            (b) the Central Bank of the U.A.E. or the FID;
            (c) FATF;
            (d) U.A.E. enforcement agencies; and
            (e) the DFSA,
            concerning the matters in (2).
            (2) For the purposes of (1), the relevant matters are:
            (a) arrangements for preventing money laundering, terrorist financing or the financing of weapons of mass destruction in a particular country or jurisdiction, including any assessment of material deficiency against relevant countries in adopting international standards; and
            (b) the names of persons, groups, organisations or entities or any other body where suspicion of money laundering or terrorist financing or the financing of weapons of mass destruction exists.
            (3) For the purposes of (1), measures in a finding that a Relevant Person must comply with include, but are not limited to, measures:
            (a) requiring specific elements of enhanced due diligence;
            (b) requiring enhanced reporting mechanisms or systematic reporting of financial transactions;
            (c) limiting business relationships or financial transactions with specified persons or persons in a specified jurisdiction;
            (d) prohibiting Relevant Persons from relying on third parties located in a specified jurisdiction to conduct customer due diligence;
            (e) requiring correspondent relationships with banks in a specified jurisdiction to be reviewed, amended or, if necessary, terminated;
            (f) prohibiting the execution of specified electronic fund transfers; or
            (g) requiring increased external audit requirements for financial groups with respect to branches and subsidiaries located in a specified jurisdiction.
            (4) A Relevant Person must immediately notify the DFSA in writing if it becomes aware of non-compliance by a person with a finding and provide the DFSA with sufficient details of the person concerned and the nature of the non-compliance.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
            [Amended] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 10.3.1 Guidance

              1. The purpose of this Rule is to ensure that a Relevant Person takes into consideration the broad range of tools used by competent authorities and international organisations to communicate AML/CTF risks to stakeholders.
              2. The Rule also permits the DFSA to require enhanced due diligence or other specific countermeasures to address risks identified in a specific country or jurisdiction. The DFSA may impose such countermeasures either when called upon to do so by FATF or independently of any FATF request.
              3. Relevant Persons considering transactions or business relationships with persons located in countries or jurisdictions that have been identified as deficient, or against which the U.A.E. or the DFSA have outstanding advisories, should be aware of the background against which the assessments, or the specific recommendations have been made. These circumstances should be taken into account in respect of introduced business from such jurisdictions, and when receiving inward payments for existing customers or in respect of inter-bank transactions.
              4. The Relevant Person's MLRO is not obliged to report all transactions from these countries or jurisdictions to the FID if they do not qualify as suspicious under the Federal AML legislation. See AML chapter 13 on Suspicious Activity Reports.
              5. Transactions with counterparties located in countries or jurisdictions which are no longer identified as deficient or have been relieved from special scrutiny (for example, taken off sources mentioned in this Guidance) may nevertheless require attention which is higher than normal.
              6. In order to assist Relevant Persons, the DFSA will, from time to time, publish U.A.E., FATF or other findings, guidance, directives or sanctions. However, the DFSA expects a Relevant Person to take its own steps in acquiring relevant information from various available sources. For example, a Relevant Person may obtain relevant information from the consolidated list of financial sanctions in the U.A.E Cabinet, European Union Office, HM Treasury (United Kingdom) lists, and the Office of Foreign Assets Control (OFAC) of the United States Department of Treasury.
              7. In addition, the systems and controls mentioned in AML Rule 10.3.1 should be established and maintained by a Relevant Person taking into account its risk assessment under chapters 5 and 6. In AML Rule 10.3.1, taking reasonable measures to comply with a finding may mean that a Relevant Person cannot undertake a transaction for or on behalf of a person or that it may need to undertake further due diligence in respect of such a person.
              8. A Relevant Person should be proactive in obtaining and appropriately using available national and international information, for example, suspect lists or databases from credible public or private sources with regard to money laundering, including obtaining relevant information from sources mentioned in Guidance 6 above. The DFSA encourages Relevant Persons to perform checks against their customer databases and records for any names appearing on such lists and databases as well as to monitor transactions accordingly. As set out in the Guidance after Rule 10.2.1, a Relevant Person may use a database maintained elsewhere for an up-todate list of sanctions or to conduct checks of customers or transactions against the list. However, it retains responsibility for ensuring the effectiveness of its systems and controls.
              9. The risk of terrorists entering the financial system can be reduced if Relevant Persons apply effective AML strategies, particularly in respect of CDD. Relevant Persons should assess which countries carry the highest risks and should conduct an analysis of transactions from countries or jurisdictions known to be a source of terrorist financing.
              10. The DFSA may require Relevant Persons to take any special measures it may prescribe with respect to certain types of transactions or accounts where the DFSA reasonably believes that any of the above may pose a money laundering risk to the DIFC.
              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
              [Amended] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]
              [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

      • AML 11 Money Laundering Reporting Officer

        • AML 11.1 [Deleted]

          [deleted]

          Deleted by DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

          • AML 11.1.1 [Deleted]

            Deleted by DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

        • AML 11.2 Appointment of a MLRO

          • AML 11.2.1

            (1) A Relevant Person must appoint an individual as MLRO, with responsibility for implementation and oversight of its compliance with the Rules in this module, who has an appropriate level of seniority and independence to act in the role.
            (2) The MLRO in (1) and AML Rule 11.2.5 must be resident in the U.A.E., except in the case of the MLRO for a Registered Auditor.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] RM196/2016 (Made 7th December 2016). [VER13/02-17]

          • AML 11.2.2

            The individual appointed as the MLRO of a Representative Office must be the same individual who holds the position of Principal Representative of that Representative Office.

            Derived from RM117/2013 [VER9/07-13]

            • AML 11.2.2 Guidance

              1. Authorised Firms are reminded that under GEN Rule 7.5.1, the MLRO function is a mandatory appointment. For the avoidance of doubt, the individual appointed as the MLRO of an Authorised Firm, other than a Representative Office, is the same individual who holds the Licensed Function of Money Laundering Reporting Officer of that Authorised Firm. Authorised Firms are also reminded that the guidance under GEN Rule 7.5.2 sets out the grounds under which the DFSA will determine whether to grant a waiver from the residence requirements for an MLRO. The same guidance would apply by analogy to other Relevant Persons seeking a waiver from the MLRO residence requirements.
              2. The individual appointed as the MLRO of an Authorised Market Institution is the same individual who holds the position of Money Laundering Reporting Officer of that Authorised Market Institution under the relevant AMI Rule.
              Derived from RM117/2013 [VER9/07-13]

          • AML 11.2.3

            An Authorised Firm, other than a Representative Office, must appoint an individual to act as a deputy MLRO of the Authorised Firm to fulfil the role of the MLRO in his absence.

            Derived from RM117/2013 [VER9/07-13]

          • AML 11.2.4

            A Relevant Person's MLRO must deal with the DFSA in an open and co-operative manner and must disclose appropriately any information of which the DFSA would reasonably be expected to be notified.

            Derived from RM117/2013 [VER9/07-13]

            • AML 11.2.4 Guidance

              1. The individual appointed as the deputy MLRO of an Authorised Firm need not apply for Authorised Individual status for performing the Licensed Function of Money Laundering Reporting Officer, subject to Rules in GEN section 11.6.
              2. A Relevant Person other than an Authorised Firm should make adequate arrangements to ensure that it remains in compliance with this module in the event that its MLRO is absent. Adequate arrangements would include appointing a temporary MLRO for the period of the MLRO's absence or making sure that the Relevant Person's AML systems and controls allow it to continue to comply with these Rules when the MLRO is absent.
              Derived from RM117/2013 [VER9/07-13]

          • AML 11.2.5

            A Relevant Person may outsource the role of MLRO to an individual outside the Relevant Person provided that the relevant individual under the outsourcing agreement is and remains suitable to perform the MLRO role.

            Derived from RM117/2013 [VER9/07-13]

            • AML 11.2.5 Guidance

              Where a Relevant Person outsources specific AML tasks of its MLRO to another individual or a third party provider, including within a corporate Group, the Relevant Person remains responsible for ensuring compliance with the responsibilities of the MLRO. The Relevant Person should satisfy itself of the suitability of anyone who acts for it.

              Derived from RM117/2013 [VER9/07-13]

        • AML 11.3 Qualities of a MLRO

          • AML 11.3.1

            A Relevant Person must ensure that its MLRO has:

            (a) direct access to its senior management;
            (b) sufficient resources including, if necessary, an appropriate number of appropriately trained Employees to assist in the performance of his duties in an effective, objective and independent manner;
            (c) a level of seniority and independence within the Relevant Person to enable him to act on his own authority; and
            (d) timely and unrestricted access to information sufficient to enable him to carry out his responsibilities in Rule 11.4.1.
            Derived from RM117/2013 [VER9/07-13]

            • AML 11.3.1 Guidance

              The DFSA considers that a Relevant Person will need to consider this Rule when appointing an outsourced MLRO. Any external MLRO that is appointed will need to have the actual or effective level of seniority that the role requires.

              Derived from RM117/2013 [VER9/07-13]

        • AML 11.4 Responsibilities of a MLRO

          • AML 11.4.1

            A Relevant Person must ensure that its MLRO implements and has oversight of and is responsible for the following matters:

            (a) the day-to-day operations for compliance by the Relevant Person with its AML policies, procedures, systems and controls;
            (b) acting as the point of contact to receive notifications from the Relevant Person's Employees under AML Rule 13.2.2;
            (c) taking appropriate action under AML Rule 13.3.1 following the receipt of a notification from an Employee ;
            (d) making Suspicious Activity Reports in accordance with Federal AML legislation;
            (e) acting as the point of contact within the Relevant Person for competent U.A.E. authorities and the DFSA regarding money laundering issues;
            (f) responding promptly to any request for information made by competent U.A.E. authorities or the DFSA;
            (g) receiving and acting upon any relevant findings, recommendations, guidance, directives, resolutions, sanctions, notices or other conclusions described in chapter 10; and
            (h) establishing and maintaining an appropriate money laundering training programme and adequate awareness arrangements under chapter 12.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

      • AML 12 AML Training and Awareness

        • AML 12.1 Training and awareness

          • AML 12.1.1

            A Relevant Person must

            (a) provide AML training to all relevant Employees at appropriate and regular intervals;
            (b) ensure that its AML training enables its Employees to:
            (i) understand the relevant legislation relating to money laundering, including Federal AML legislation;
            (ii) understand its policies, procedures, systems and controls related to money laundering and any changes to these;
            (iii) recognise and deal with transactions and other activities which may be related to money laundering;
            (iv) understand the types of activity that may constitute suspicious activity in the context of the business in which an Employee is engaged and that may warrant a notification to the MLRO under AML Rule 13.2.2;
            (v) understand its arrangements regarding the making of a notification to the MLRO under AML Rule 13.2.2;
            (vi) be aware of the prevailing techniques, methods and trends in money laundering relevant to the business of the Relevant Person;
            (vii) understand the roles and responsibilities of Employees in combating money laundering, including the identity and responsibility of the Relevant Person's MLRO and deputy, where applicable; and
            (viii) understand the relevant findings, recommendations, guidance, directives, resolutions, sanctions, notices or other conclusions described in chapter 10; and
            (c) ensure that its AML training:
            (i) is appropriately tailored to the Relevant Person's activities, including its products, services, customers, distribution channels, business partners, level and complexity of its transactions; and
            (ii) indicates the different levels of money laundering risk and vulnerabilities associated with the matters in (c)(i).
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

            • AML 12.1.1 Guidance

              1. The DFSA considers it appropriate that all new relevant Employees of a Relevant Person be given appropriate AML training as soon as reasonably practicable after commencing employment with the Relevant Person.
              2. Relevant Persons should take a risk-based approach to AML training. The DFSA considers that AML training should be provided by a Relevant Person to each of its relevant Employees at intervals appropriate to the role and responsibilities of the Employee. In the case of an Authorised Firm the DFSA expects that training should be provided to each relevant Employee at least annually.
              3. The manner in which AML training is provided by a Relevant Person need not be in a formal classroom setting, rather it may be via an online course or any other similarly appropriate manner.
              4. A relevant Employee would include a member of the senior management or operational staff, any Employee with customer contact or which handles or may handle customer monies or assets, and any other Employee who might otherwise encounter money laundering in the business.
              5. Relevant Persons should be aware of their duty under Cabinet Resolution No. 38 of 2014 to establish and provide AML training programmes in co-ordination with the FID.
              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
              [Amended] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

      • AML 13 Suspicious Activity Reports

        • AML 13.1 Application and Definitions

          • AML 13.1.1 [Deleted]

            [deleted]

            Deleted by DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

          • AML 13.1.2

            In this chapter, "money laundering" and "terrorist financing" mean the criminal offences defined in the Federal AML legislation.

            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

        • AML 13.2 Internal Reporting Requirements

          • AML 13.2.1

            A Relevant Person must establish and maintain policies, procedures, systems and controls in order to monitor and detect suspicious activity or transactions in relation to potential money laundering or terrorist financing.

            Derived from RM117/2013 [VER9/07-13]

          • AML 13.2.2

            A Relevant Person must have policies, procedures, systems and controls to ensure that whenever any Employee, acting in the ordinary course of his employment, either:

            (a) knows;
            (b) suspects; or
            (c) has reasonable grounds for knowing or suspecting;

            that a person is engaged in or attempting money laundering or terrorist financing, that Employee promptly notifies the Relevant Person's MLRO and provides the MLRO with all relevant details.

            Derived from RM117/2013 [VER9/07-13]

            • AML 13.2.2 Guidance

              1. Circumstances that might give rise to suspicion or reasonable grounds for suspicion include:
              a. Transactions which have no apparent purpose, which make no obvious economic sense, or which are designed or structured to avoid detection;
              b. Transactions requested by a person without reasonable explanation, which are out of the ordinary range of services normally requested or are outside the experience of a Relevant Person in relation to a particular customer;
              c. where the size or pattern of transactions, without reasonable explanation, is out of line with any pattern that has previously emerged or are deliberately structured to avoid detection;
              d. where a customer refuses to provide the information requested without reasonable explanation;
              e. where a customer who has just entered into a business relationship uses the relationship for a single transaction or for only a very short period of time;
              f. an extensive use of offshore accounts, companies or structures in circumstances where the customer's economic needs do not support such requirements;
              g. unnecessary routing of funds through third party accounts; or
              h. unusual transactions without an apparently profitable motive.
              2. The requirement for Employees to notify the Relevant Person's MLRO should include situations when no business relationship was developed because the circumstances were suspicious.
              3. A Relevant Person may allow its Employees to consult with their line managers before sending a report to the MLRO. The DFSA would expect that such consultation does not prevent making a report whenever an Employee has stated that he has knowledge, suspicion or reasonable grounds for knowing or suspecting that a person may be involved in money laundering. Whether or not an Employee consults with his line manager or other Employees, the responsibility remains with the Employee to decide for himself whether a notification to the MLRO should be made.
              4. An Employee, including the MLRO, who considers that a person is engaged in or engaging in activity that he knows or suspects to be suspicious would not be expected to know the exact nature of the criminal offence or that the particular funds were definitely those arising from the crime of money laundering or terrorist financing.
              5. CDD measures form the basis for recognising suspicious activity. Sufficient guidance must therefore be given to the Relevant Person's Employees to enable them to form a suspicion or to recognise when they have reasonable grounds to suspect that money laundering or terrorist financing is taking place. This should involve training that will enable relevant Employees to seek and assess the information that is required for them to judge whether a person is involved in suspicious activity related to money laundering or terrorist financing.
              6. A transaction that appears unusual is not necessarily suspicious. Even customers with a stable and predictable transaction profile will have periodic transactions that are unusual for them. Many customers will, for perfectly good reasons, have an erratic pattern of transactions or account activity. So the unusual is, in the first instance, only a basis for further inquiry, which may in turn require judgement as to whether it is suspicious. A transaction or activity may not be suspicious at the time, but if suspicions are raised later, an obligation to report then arises.
              7. Effective CDD measures may provide the basis for recognising unusual and suspicious activity. Where there is a customer relationship, suspicious activity will often be one that is inconsistent with a customer's known legitimate activity, or with the normal business activities for that type of account or customer. Therefore, the key to recognising 'suspicious activity' is knowing enough about the customer and the customer's normal expected activities to recognise when their activity is abnormal.
              8. A Relevant Personmay consider implementing policies and procedures whereby disciplinary action is taken against an Employee who fails to notify the Relevant Person's MLRO.
              Derived from RM117/2013 [VER9/07-13]
              [Amended] RM196/2016 (Made 7th December 2016). [VER13/02-17]

        • AML 13.3 Suspicious Activity Report

          • AML 13.3.1

            A Relevant Person must ensure that where the Relevant Person's MLRO receives a notification under AML Rule 13.2.2, the MLRO, without delay:

            (a) inquires into and documents the circumstances in relation to which the notification made under AML Rule 13.2.2 was made;
            (b) determines whether in accordance with Federal AML legislation a Suspicious Activity Report must be made to the FID and documents such determination;
            (c) if required, makes a Suspicious Activity Report to the FID as soon as practicable; and
            (d) notifies the DFSA of the making of such Suspicious Activity Report immediately following its submission to the FID.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
            [Amended] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

          • AML 13.3.2

            Where, following a notification to the MLRO under 13.2.2, no Suspicious Activity Report is made, a Relevant Person must record the reasons for not making a Suspicious Activity Report.

            Derived from RM117/2013 [VER9/07-13]

          • AML 13.3.3

            A Relevant Person must ensure that if the MLRO decides to make a Suspicious Activity Report, his decision is made independently and is not subject to the consent or approval of any other person.

            Derived from RM117/2013 [VER9/07-13]

            • AML 13.3.3 Guidance

              1. Relevant Persons are reminded that the failure to report suspicions of money laundering or terrorist financing may constitute a criminal offence that is punishable under the laws of the State.
              2. SARs under Federal AML legislation should be emailed or faxed to the FID. The dedicated email address and fax numbers, and the template for making a SAR are available on the DFSA website.
              3. In the preparation of a SAR, if a Relevant Person knows or assumes that the funds which form the subject of the report do not belong to a customer but to a third party, this fact and the details of the Relevant Person's proposed course of further action in relation to the case should be included in the report.
              4. If a Relevant Person has reported a suspicion to the FID, the FID may instruct the Relevant Person on how to continue its business relationship, including effecting any transaction with a person. If the customer in question expresses his wish to move the funds before the Relevant Person receives instruction from the FID on how to proceed, the Relevant Person should immediately contact the FID for further instructions.
              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
              [Amended] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

          • AML 13.3.4 [Deleted]

            Deleted by DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

        • AML 13.4 Tipping-off

          • AML 13.4 Guidance

            1. Relevant Persons are reminded that in accordance with Federal AML legisaltion, Relevant Persons or any of their Employees must not tip-off any person, that is, inform any person that he is being scrutinised for possible involvement in suspicious activity related to money laundering, or that any other competent authority is investigating his possible involvement in suspicious activity relating to money laundering.
            2. If a Relevant Person reasonably believes that performing CDD measures will tip-off a customer or potential customer, it may choose not to pursue that process and should file a SAR. Relevant Persons should ensure that their Employees are aware of and sensitive to these issues when considering the CDD measures.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

        • AML 13.5 Freezing assets

          • AML 13.5 Guidance

            The DFSA has power under the Regulatory Law to restrict an Authorised Person from disposing of or transferring property including, for example, assets or other funds suspected of relating to money laundering. It may also apply to the Court for an order restraining a person from transferring or disposing of any assets suspected of relating to money laundering. In cases involving suspected money laundering, the DFSA will usually take such action in co-ordination with the FID.

            Derived from DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
            [Amended] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

      • AML 14 General Obligations

        • AML 14.1 Groups, branches and subsidiaries

          • AML 14.1.1

            (1) A Relevant Person which is a DIFC entity must ensure that its policies, procedures, systems and controls required by Rule 5.2.1 apply to:
            (a) any of its branches or Subsidiaries; and
            (b) any of its Group entities in the DIFC.
            (2) Where the anti-money laundering requirements in another jurisdiction differ from those in the DIFC, the Relevant Person must require its branch or Subsidiary in that jurisdiction to apply the higher of the two standards, to the extent permitted by the law of that jurisdiction.
            (3) Where the law of another jurisdiction does not permit the implementation of policies, procedures, systems and controls that are equivalent to or higher than those that apply to the Relevant Person in the DIFC, the Relevant Person must:
            (a) inform the DFSA in writing; and
            (b) apply appropriate additional measures to manage the money laundering risks posed by the relevant branch or Subsidiary.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 14.1.1 Guidance

              A Relevant Person which is a DIFC entity should conduct a periodic review to verify that any branch or Subsidiary operating in another jurisdiction is in compliance with the obligations imposed under these Rules.

              Derived from RM117/2013 [VER9/07-13]

          • AML 14.1.2

            A Relevant Person must:

            (a) communicate the policies and procedures which it establishes and maintains in accordance with these Rules to its Group entities, branches and Subsidiaries; and
            (b) document the basis for its satisfaction that the requirement in Rule 14.1.1(2) is met.
            Derived from RM117/2013 [VER9/07-13]

            • AML 14.1.2 Guidance

              In relation to an Authorised Firm, if the DFSA is not satisfied in respect of AML compliance of its branches and Subsidiaries in a particular jurisdiction, it may take action, including making it a condition on the Authorised Firm's Licence that it must not operate a branch or Subsidiary in that jurisdiction.

              Derived from RM117/2013 [VER9/07-13]

        • AML 14.2 Group policies

          • AML 14.2.1

            A Relevant Person which is part of a Group must ensure that it:

            (a) has developed and implemented policies and procedures for the sharing of information between Group entities, including the sharing of information relating to Customer Due Diligence and money laundering risks;
            (b) has in place adequate safeguards on the confidentiality and use of information exchanged between Group entities, including consideration of relevant data protection legislation;
            (c) remains aware of the money laundering risks of the Group as a whole and of its exposure to the Group and takes active steps to mitigate such risks;
            (d) contributes to a Group-wide risk assessment to identify and assess money laundering risks for the Group; and
            (e) provides its Group-wide compliance, audit and AML functions with customer account and transaction information from branches and subsidiaries when necessary for AML purposes.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

        • AML 14.3 Notifications

          • AML 14.3.1

            A Relevant Person must inform the DFSA in writing as soon as possible if, in relation to its activities carried on in or from the DIFC or in relation to any of its branches or Subsidiaries, it:

            (a) receives a request for information from a regulator or agency responsible for AML, counter-terrorism financing, or sanctions regarding enquiries into potential money laundering or terrorist financing or sanctions breaches;
            (b) becomes aware, or has reasonable grounds to believe, that a money laundering event has occurred or may have occurred in or through its business;
            (c) becomes aware of any money laundering or sanctions matter in relation to the Relevant Person or a member of its Group which could result in adverse reputational consequences to the Relevant Person; or
            (d) becomes aware of a significant breach of a Rule in this module or a breach of Federal AML legislation by the Relevant Person or any of its Employees.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

        • AML 14.4 Record keeping

          • AML 14.4.1

            A Relevant Person must maintain the following records:

            (a) a copy of all documents and information obtained in undertaking initial and ongoing Customer Due Diligence;
            (b) records (consisting of the original documents or certified copies) in respect of the customer business relationship, including:
            (i) business correspondence and other information relating to a customer's account;
            (ii) sufficient records of transactions to enable individual transactions to be reconstructed; and
            (iii) internal findings and analysis relating to a transaction or any business, such as if the transaction or business is unusual or suspicious, whether or not it results in a Suspicious Activity Report;
            (c) notifications made under AML Rule 13.2.2};
            (d) Suspicious Activity Reports and any relevant supporting documents and information, including internal findings and analysis;
            (e) any relevant communications with the FID;
            (f) the documents in AML Rule 14.4.2; and
            (g) any other matter that the Relevant Person is expressly required to record under these Rules,

            for at least six years from the date on which the notification or report was made, the business relationship ends or the transaction is completed, whichever occurs last.

            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
            [Amended] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • AML 14.4.1A

            A Relevant Person must provide to the DFSA or a law enforcement agency immediately on request a copy of a record referred to in AML Rule 14.4.1.

            Derived from DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • AML 14.4.2

            A Relevant Person must document, and provide to the DFSA immediately on request, any of the following:

            (a) the risk assessment of its business undertaken under Rule 5.1.1;
            (b) how the assessment in (a) was used for the purposes of complying with Rule 6.1.1(1);
            (c) the risk assessment of the customer undertaken under Rule 6.1.1(1)(a); and
            (d) the determination made under Rule 6.1.1(1)(b).
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

            • AML 14.4.2 Guidance

              1. The records required to be kept under AML Rule 14.4.1 may be kept in electronic format, provided that such records are readily accessible and available to respond promptly to any DFSA requests for information. Authorised Persons are reminded of their obligations in GEN Rule 5.3.24.
              2. If the date on which the business relationship with a customer has ended remains unclear, it may be taken to have ended on the date of the completion of the last transaction.
              3. The records maintained by a Relevant Person should be kept in such a manner that:
              a. the DFSA or another competent authority is able to assess the Relevant Person's compliance with legislation applicable in the DIFC;
              b. any transaction which was processed by or through the Relevant Person on behalf of a customer or other third party can be reconstructed;
              c. any customer or third party can be identified; and
              d. the Relevant Person can satisfy without delay any regulatory enquiry or court order to disclose information.
              4. The DFSA would ordinarily expect a Relevant Person to be able to provide a copy of a record or assessment referred to in AML Rule 14.4.1 or AML Rule 14.4.2 within 24 hours of a request by the DFSA. However, if a request is complex or if records are kept outside the DIFC as set out in AML Rule 14.4.3, the DFSA may allow further time to comply with the request.
              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • AML 14.4.3

            Where the records referred to in Rule 14.4.1 are kept by the Relevant Person outside the DIFC, a Relevant Person must:

            (a) take reasonable steps to ensure that the records are held in a manner consistent with these Rules;
            (b) ensure that the records are easily accessible to the Relevant Person; and
            (c) upon request by the DFSA, ensure that the records are immediately available for inspection.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM231/2018 (Made 6th June 2018) [VER15/07-18]

          • AML 14.4.4

            A Relevant Person must:

            (a) verify if there is secrecy or data protection legislation that would restrict access without delay to the records referred to in Rule 14.4.1 by the Relevant Person, the DFSA or the law enforcement agencies of the U.A.E.; and
            (b) where such legislation exists, obtain without delay certified copies of the relevant records and keep such copies in a jurisdiction which allows access by those persons in (a).
            Derived from RM117/2013 [VER9/07-13]

          • AML 14.4.5

            A Relevant Person must be able to demonstrate that it has complied with the training and awareness requirements in chapter 12 through appropriate measures, including the maintenance of relevant training records.

            Derived from RM117/2013 [VER9/07-13]

            • AML 14.4.5 Guidance

              1. In complying with Rule 14.4.3, Authorised Persons are reminded of their obligations in GEN Rule 5.3.24.
              2. The DFSA considers that "appropriate measures" in Rule 14.4.5 may include the maintenance of a training log setting out details of:
              a. the dates when the training was given;
              b. the nature of the training; and
              c. the names of Employees who received the training.
              Derived from RM117/2013 [VER9/07-13]

        • AML 14.5 Annual AML Return

          • AML 14.5.1

            A Relevant Person must complete the AML Return form in AFN and submit it to the DFSA by the end of September each year. The annual AML Return must cover the period from 1 August of the previous year to 31 July of the reporting year.

            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM132/2014 (Made 21st August 2014). [VER10/06-14]
            [Amended] DFSA RM177/2016 (Made 19th June 2016) [VER12/08-16]
            [Amended] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

            • AML 14.5.1 Guidance

              Relevant Persons should be aware of their obligation under Cabinet Resolution No. 38 of 2014 to prepare AML reports and copy them to the FID.

              Derived from DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
              [Amended] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

          • Transitional

            • AML 14.5.2

              A Relevant Person must:

              (a) for its financial year ending in 2016, complete and submit the AML Return form under AML Rule 14.5.1 within four months of its financial year end and the return must cover that financial year; and
              (b) for the 2017 calendar year, complete and submit the AML Return form by the end of September 2017 and the return must cover the period from 1 August 2016 until 31 July 2017.
              Derived from DFSA RM177/2016 (Made 19th June 2016) [VER12/08-16]

              • AML 14.5.2 Guidance

                In respect of a financial year ending in 2016, a Relevant Person must submit its AML Return four months after its financial year end. For the 2017 calendar year, it must report for the period 1 August 2016 to 31 July 2017. For some Relevant Persons, this may result in an overlap of periods covered by each return.

                Derived from DFSA RM177/2016 (Made 19th June 2016) [VER12/08-16]

        • AML 14.6 Communication with the DFSA

          • AML 14.6.1

            A Relevant Person must:

            (a) be open and cooperative in all its dealings with the DFSA; and
            (b) ensure that any communication with the DFSA is conducted in the English language.
            Derived from RM117/2013 [VER9/07-13]

        • AML 14.7 Employee Disclosures

          • AML 14.7.1

            A Relevant Person must ensure that it does not prejudice an Employee who discloses any information regarding money laundering to the DFSA or to any other relevant body involved in the prevention of money laundering.

            Derived from RM117/2013 [VER9/07-13]

            • AML 14.7.1 Guidance

              The DFSA considers that "relevant body" in Rule 14.7.1 would include the FID or another financial intelligence unit, the police, or a Dubai or Federal ministry.

              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

      • AML 15 DNFBP Registration and Supervision

        • AML 15 Guidance

          1. A DNFBP should ensure that it complies with and has regard to relevant provisions of the Regulatory Law. The Regulatory Law gives the DFSA a power to supervise DNFBPs' compliance with relevant AML laws in the State. The Regulatory Law requires a DNFBP to be registered by the DFSA to conduct its activities in the DIFC. AML Rule 15.1.2 sets out the criteria a DNFBP must meet to be registered. The Regulatory Law also gives the DFSA a number of other important powers in relation to DNFBPs, including powers of enforcement. This includes a power to obtain information and to conduct investigations into possible breaches of the Regulatory Law. The DFSA may also impose fines for breaches of the Regulatory Law or the Rules. It may also suspend or withdraw the registration of a DNFBP in various circumstances.
          2. The DFSA takes a risk-based approach to regulation of persons which it supervises. Generally, the DFSA will work with DNFBPs to identify, assess, mitigate and control relevant risks where appropriate. RPP describes the DFSA's enforcement powers under the Regulatory Law and outlines its policy for using these powers.
          3. AML Rule 3.2.1 defines a DNFBP by setting out a list of businesses or professions which, if carried on in or from the DIFC, constitute a DNFBP.
          4. In determining if a person is carrying on a business or profession in the DIFC that falls within the DNFBP definition, the DFSA will adopt a 'substance over form' approach. That is, it will consider what business or profession is in fact being carried on, and its main characteristics, and not just what business or profession the person purports, or is licensed, to carry on in the DIFC.
          5. The DFSA considers that "a law firm, notary firm or other independent legal business" in paragraph (1)(d) of the DNFBP definition, includes any business or profession that involves a legal service, including advice or services related to laws in the State or other jurisdictions. The DFSA does not consider it necessary for the purposes of the definition that:
          a. the relevant person is licensed to provide legal services in the State; or
          b. the individuals or employees providing the legal service are qualified or authorised to do so, whether in the State or in any other jurisdiction.
          6. The DFSA considers that "an accounting firm, audit firm or insolvency firm" in paragraph (1)(e) of the DNFBP definition, includes forensic accounting services that use accounting skills, principles and techniques to investigate suspected illegal activity or to analyse financial information for use in legal proceedings.
          7. The DFSA would also consider a tax advisory business carried on in or from the DIFC to be a DNFBP as it is likely to involve elements of both legal and accounting services i.e. advice on taxation law and the use of accounting skills to analyse financial records, and so fall within either paragraph (1)(d) or (e) of the DNFBP definition.
          Derived from RM117/2013 [VER9/07-13]
          [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
          [Amended] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

        • AML 15.1 Registration and Notifications

          • AML 15.1.1

            An applicant for registration as a DNFBP must apply to the DFSA by completing and submitting the appropriate form in the AFN Sourcebook.

            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

          • AML 15.1.2

            (1) To be registered as a DNFBP, an applicant must demonstrate to the DFSA's satisfaction that:

            (a) it is fit and proper to perform anti-money laundering functions; and
            (b) it has adequate resources and systems and controls, including policies and procedures, to comply with applicable anti-money laundering requirements under Federal AML legislation, the Regulatory Law and these Rules.

            (2) In assessing if an applicant is fit and proper under (1)(a), the DFSA may, without limiting the matters it may take into account under that paragraph, consider the applicant, its senior management, its beneficial owners, other entities in its Group and any other person with whom it has a relationship.

            (3) The DFSA will in assessing if an applicant is fit and proper, consider the cumulative effect of matters that, if taken individually, may be regarded as insufficient to give reasonable cause to doubt the fitness and propriety of the applicant.

            Derived from DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

          • Annual Information Return

            Derived from DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

            • AML 15.1.3

              A DNFBP must complete the annual information return in AFN for each calendar year and submit the return to the DFSA by 31 January of the following year.

              Derived from DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

          • Notification of changes

            Derived from DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

            • AML 15.1.4

              A DNFBP must promptly notify the DFSA of any change in its:

              (a) name;
              (b) legal status;
              (c) address;
              (d) MLRO; or
              (e) senior management; or.
              (f) beneficial ownership.
              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]
              [Amended] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

        • AML 15.2 Request to withdraw registration

          Derived from DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

          • AML 15.2.1

            (1) A DNFBP must notify the DFSA in writing 14 days in advance of it ceasing to carry on its DNFBP business activities in or from the DIFC.

            (2) The notice must include a request to cancel its registration, an explanation of the reason for it ceasing business, and attached copies of any relevant documents.

            Derived from DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

            • AML 15.2.5 Guidance

              1. A DNFBP may request the withdrawal of its registration because, for example, it no longer meets the definition of a DNFBP, becomes insolvent or enters into administration, or proposes to leave the DIFC.
              2. In addition to being able to withdraw registration at a DNFBP's request, the DFSA may suspend or withdraw the registration of a DNFBP on its own initiative in various circumstances (see Article 71F of the Regulatory Law).
              Derived from RM117/2013 [VER9/07-13]
              [Amended] DFSA RM132/2014 (Made 21st August 2014). [VER10/06-14]
              [Amended] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

          • AML 15.2.2 [Deleted]

            [Deleted] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

          • AML 15.2.3 [Deleted]

            [Deleted] DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

          • AML 15.2.4 [Deleted]

            [Deleted] DFSA RM132/2014 (Made 21st August 2014). [VER10/06-14]

          • AML 15.2.5 [Deleted]

            [Deleted] DFSA RM132/2014 (Made 21st August 2014). [VER10/06-14]

        • AML 15.3 Disclosure of regulatory status

          • AML 15.3.1

            A DNFBP must not:

            (a) misrepresent its regulatory status with respect to the DFSA expressly or by implication; or
            (b) use or reproduce the DFSA logo without express written permission from the DFSA and in accordance with any conditions for use.
            Derived from RM117/2013 [VER9/07-13]

        • AML 15.4 Transitional

          Derived from DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

          • AML 15.4.1

            (1) This Rule applies to a Person who, immediately before the commencement date, was registered as a DNFBP, other than a Person who was registered as a DNFBP by reason only of being a dealer in any saleable item of a price equal to or greater than $15,000. (2) The Person is on the commencement date taken to continue to be registered by the DFSA as a DNFBP. (3) The Person must, by no later than the end of the transitional period, certify in writing to the DFSA:

            (a) that it continues to carry on its DNFBP business or profession in or from the DIFC;
            (b) the names of the individuals who comprise its senior management;
            (c) details of its beneficial owners;
            (d) the name of the individual it has appointed as MLRO; and
            (e) that it has in place adequate resources and systems and controls to comply with applicable anti-money laundering requirements under the Law, these Rules and Federal AML legislation.

            (4) The DFSA may require the certification in (3) to be in such form and verified in such manner as it thinks fit.

            (5) In this Rule:

            (a) "commencement date" means the day on which the Regulatory Law Amendment Law 2018 comes into force; and
            (b) "transitional period" means the period starting on the commencement date and ending three months after that date.
            Derived from DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

            • AML 15.4.1 Guidance

              If a DNFBP fails to provide the duly completed certification to the DFSA by the end of the transitional period, it will contravene these Rules. The DFSA may because of that failure take steps to suspend or withdraw the DNFBP's registration.

              Derived from DFSA RM223/2018 (Made 18th April 2018). [VER14/07-18]

      • AML 16 Transitional Rules

        • AML 16.1 Application

          • AML 16.1.1

            This chapter applies to every person to whom a provision of the Previous Regime applied.

            Derived from RM117/2013 [VER9/07-13]

          • AML 16.1.2

            For the purposes of this chapter:

            (a) "Ancillary Service Provider" has the meaning that it had under the Previous Regime;
            (b) "Commencement Date" means 14 July 2013;
            (c) "Current Regime" means the Rules in force on the Commencement Date;
            (d) "DNFBP" has the meaning that it had in DNF chapter 2 under the Previous Regime; and
            (e) "Previous Regime" means the Rules that were in force immediately prior to the Commencement Date.
            Derived from RM117/2013 [VER9/07-13]
            [Amended] DFSA RM196/2016 (Made 7th December 2016). [VER13/02-17]

        • AML 16.2 General

          • AML 16.2.1

            A Relevant Person must continue to maintain any records required to be maintained under the Previous Regime until such time as the requirement to hold such record would have expired had the Previous Regime still been in force.

            Derived from RM117/2013 [VER9/07-13]

        • AML 16.3 Specific relief — Ancillary Service Provider and DNFBPs

          • AML 16.3.1

            A person who, immediately prior to the Commencement Date, was an Ancillary Service Provider or was registered as a DNFBP is deemed, on the Commencement Date, to be registered as a DNFBP for the purposes of the Current Regime.

            Derived from RM117/2013 [VER9/07-13]

    • Authorised Market Institutions (AMI) [VER18/02-17]

      • Part 1 Introduction

        • AMI 1 Application, Interpretation and Overview

          • AMI 1.1 Application

            • AMI 1.1.1

              (1) This module applies to:
              (a) every Person who carries on, or intends to carry on, either or both of the Financial Services of Operating an Exchange or Operating a Clearing House in or from the DIFC;
              (b) a Key Individual, or a Person intending to be a Key Individual, of a Person referred to in (a); and
              (c) a Controller, or a Person intending to be a Controller, of a Person referred to in (a).
              (2) This module also applies to an Authorised Market Institution where it:
              (a) carries on, or intends to carry on, the Financial Service of Operating an Alternative Trading System to the extent that such activities constitute operating a Multilateral Trading Facility; or
              (b) acts as a Trade Repository.
              (3) This module does not apply to a Recognised Body.
              Derived from RM118/2013 [VER15/07-13]

          • AMI 1.2 Overview of the Module

            • AMI 1.2 Guidance

              The regulatory framework

              1. The Regulatory Law 2004 ("the Regulatory Law") and the Markets Law 2012 ("the Markets Law ") provide the framework for the licensing and supervision of Authorised Market Institutions and for taking regulatory action against those licensed institutions.
              2. In particular, while Article 41 of the Regulatory Law prohibits a Person from carrying on Financial Services in or from the DIFC, Article 42 of that Law permits Persons duly authorised and Licensed to conduct Financial Services in providing their services.
              3. The Markets Law establishes a framework in relation to how an Official List of Securities is maintained and administered by the Listing Authority. Either the DFSA, or an Authorised Market Institution where it has been granted an endorsement on its Licence to do so, may maintain an Official List of Securities.
              4. The GEN module prescribes the Financial Services which may be carried on by an Authorised Firm or Authorised Market Institution and the detailed requirements that must be met by such firms. In addition, the GEN module also sets out the circumstances under which an Authorised Market Institution may be authorised to carry out certain functions by way of an endorsement on its Licence.
              5. The RPP Sourcebook contains, amongst other things, the detailed policies and procedures relating to how the DFSA exercises its licensing and supervisory functions relating to Authorised Market Institutions.

              The AMI module

              6. The AMI Module is comprised of four Parts containing 12 chapters and three Appendices.
              7. Part 1 contains chapter 1, which sets out the application provisions and the overview of the AMI module.
              8. Part 2 contains chapters 2 and 3. Chapter 2 sets out the requirements relating to application for a Licence to Operate an Exchange or Clearing House (or both) and an endorsement to operate a Multilateral Trading Facility or to maintain an Official List of Securities. Chapter 3 sets out the assessment of application related requirements, including application to obtain Key Individual status of an Authorised Market Institution.
              9. Part 3 contains chapters 4, 5, 6 and 7. These chapters set out the substantive requirements (called the "Licensing Requirements") that must be met by a Person at the point of grant of a Licence to be an Authorised Market Institution and thereafter on an on-going basis. Chapter 4 contains the provisions which prescribe what the Licensing Requirements are, and the procedures an Authorised Market Institution must follow in order to make any material changes to the arrangements it has in place to meet the Licensing Requirements. Chapter 5 contains the Licensing Requirements that are common to both Exchanges and Clearing Houses. Chapter 6 contains the additional Licensing Requirements that are specific to Exchanges and chapter 7 contains the additional Licensing Requirements that are specific to Clearing Houses.
              10. Part 4 contains chapters 8, 9, 10, 11 and 12. These chapters set out a range of miscellaneous provisions covering the requirements relating to the approval of Controllers of Authorised Market Institutions (chapter 8), the provisions governing the supervision of Authorised Market Institutions (chapter 9), the procedures for withdrawal of a Licence or endorsement (chapter 10), appeal procedures from the decisions of the DFSA (chapter 11) and the transitional provisions (chapter 12).
              11. There are three Appendices, Appendix 1 contains the requirements relevant to testing of technology systems, Appendix 2 contains the requirements relating to the use of price information providers and Appendix 3 contains the contract delivery specifications applicable to Derivative contracts which require physical delivery.
              Derived from RM118/2013 [VER15/07-13]

      • Part 2 Application and Authorisation

        • AMI 2 Application for a Licence or Endorsement

          • AMI 2.1 Application

            • AMI 2.1.1

              (1) This chapter applies to a Person who intends to carry on either or both of the Financial Services of Operating an Exchange or Operating a Clearing House in or from the DIFC.
              (2) This chapter also applies to a Person referred to in (1), who intends to obtain an endorsement on its Licence to:
              (a) carry on the Financial Service of Operating an Alternative Trading System to the extent that such activities constitute operating a Multilateral Trading Facility; or
              (b) act as a Trade Repository.
              (3) A Person who intends to carry on the Financial Services and activities referred to in (1) and (2) is referred to in this chapter as an "applicant" unless the context otherwise provides.
              (4) This chapter also applies to an Authorised Market Institution applying to change the scope of its Licence, or where a condition or restriction has previously been imposed on its Licence, to have such a condition or restriction varied or withdrawn. Such an Authorised Market Institution may be referred to as an "applicant" in this chapter.
              Derived from RM118/2013 [VER15/07-13]

              • AMI 2.1.1 Guidance

                1. The activity of operating a Multilateral Trading Facility ("MTF") is an activity that falls within the definition of the Financial Service of Operating an Alternative Trading System (see GEN Rule 2.22.1). A Person needs to be Licensed as an Authorised Firm to carry on that Financial Service. However, pursuant to GEN Rule 2.2.12, a holder of a Licence to Operate an Exchange may also operate an MTF if it has obtained an endorsement on its Licence permitting it to do so.
                2. Acting as a Trade Repository is not a Financial Service, and may be carried on by an Authorised Firm or Authorised Market Institution with an endorsement on its Licence permitting it to do so (see GEN Rule 2.2.13).
                3. A new applicant for a Licence or an existing holder of a Licence may apply to have an endorsement on its Licence to operate a Multilateral Trading Facility or to maintain a Trade Repository.
                Derived from RM118/2013 [VER15/07-13]

          • AMI 2.2 Application for a Licence

            • AMI 2.2.1

              An applicant who intends to carry on either or both of the Financial Services of Operating an Exchange or Operating a Clearing House must apply to the DFSA for a Licence in accordance with the Rules in this section and chapter 3.

              Derived from RM118/2013 [VER15/07-13]

            • AMI 2.2.2

              The DFSA will only consider an application for a Licence to Operate an Exchange or Operate a Clearing House from a Person:

              (a) who is a Body Corporate; and
              (b) who is not an Authorised Firm or an applicant to be an Authorised Firm.
              Derived from RM118/2013 [VER15/07-13]

            • AMI 2.2.3

              A Person applying for a Licence must submit a written application to the DFSA:

              (a) demonstrating how the applicant intends to satisfy the Licensing Requirements specified in Part 3 and any other applicable requirements; and
              (b) with copies of any relevant agreements or other information in relation to the application.
              Derived from RM118/2013' [VER15/07-13]

          • AMI 2.3 Application for an Endorsement

            • AMI 2.3.1

              The following requirements must be met by an applicant for the grant of an endorsement to operate a Multilateral Trading Facility:

              (a) it must hold a Licence with an authorisation to Operate an Exchange; and
              (b) it must be able to demonstrate that it can satisfy the requirement in Rule 4.2.1(3).
              Derived from RM118/2013 [VER15/07-13]
              [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

              • AMI 2.3.1 Guidance

                1. Under GEN Rule 2.2.11(c) and GEN Rule 2.2.12, an Authorised Market Institution Licensed to Operate an Exchange may obtain an endorsement to carry on the activity of operating a Multilateral Trading Facility.
                2. An Exchange with an endorsement to operate an MTF needs to meet, on an on-going basis, the applicable Licensing Requirements under Rule 4.2.1(3). Accordingly, when an Exchange wishes to obtain such an endorsement, it needs to be able to demonstrate to the DFSA that it can meet each of the Licensing Requirements with respect to the proposed MTF. For example, it should demonstrate how the IT systems and human resources available to it would be utilised for the purposes of operating the MTF.
                [Added] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

            • AMI 2.3.2

              The requirements in App 5 to GEN must be met by an Authorised Market Institution for the grant of an endorsement to act as a Trade Repository.

              Derived from RM118/2013 [VER15/07-13]
              [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

              • AMI 2.3.2 Guidance [Deleted]

                [Deleted] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

            • AMI 2.3.3 [Deleted]

              [Deleted] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

            • AMI 2.3.4 [Deleted]

              [Deleted] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

          • AMI 2.4 Application for a Change of Scope of a Licence

            • AMI 2.4.1

              An Authorised Market Institution applying to change the scope of its Licence, or to have a condition or restriction varied or withdrawn, must provide the DFSA with written details of the proposed changes including an assessment of how it intends to satisfy the Licensing Requirements in relation to the new Licence scope.

              Derived from RM118/2013 [VER15/07-13]

              • AMI 2.4.1 Guidance

                1. Where an Authorised Market Institution applies to change the scope of its Licence, it should provide at least the following information:
                a. particulars of the new activities requiring a variation to the scope of Licence, and the date of the proposed commencement of such activities;
                b. a revised business plan as appropriate, describing the basis of, and rationale for, the proposed change;
                c. details of the extent to which existing documentation, procedures, systems and controls will be amended to take into account any additional activities, and how the Authorised Market Institution will be able to comply with any additional regulatory requirements including the applicable Licensing Requirements; and
                d. if the Authorised Market Institution is reducing its activities and it has existing Members who may be affected by the cessation of a Financial Service, details of any transitional arrangements.
                2. If an application for a change of scope of Licence involves carrying on a new Financial Service, the application will be assessed against all the requirements applicable to the relevant Financial Service.
                Derived from RM118/2013 [VER15/07-13]

        • AMI 3 Authorisation

          • AMI 3.1 Application

            • AMI 3.1.1

              This chapter applies to every Person who is an applicant for:

              (a) a Licence to be an Authorised Market Institution;
              (b) an endorsement to:
              (i) maintain an Official List of Securities;
              (ii) operate a Multilateral Trading Facility; or
              (iii) act as a Trade Repository; or
              (c) Key Individual status.
              Derived from RM118/2013 [VER15/07-13]

              • AMI 3.1.1 Guidance

                1. This chapter outlines the DFSA's authorisation requirements for an Authorised Market Institution and its Key Individuals, as well as the process for an Authorised Market Institution to obtain an endorsement on its Licence to maintain an Official List of Securities, operate a Multilateral Trading Facility or act as a Trade Repository.
                2. This chapter should be read in conjunction with the RPP Sourcebook, which sets out the DFSA's general regulatory policy and processes. See chapter 2 of the RPP sourcebook.
                Derived from RM118/2013 [VER15/07-13]

          • AMI 3.2 Assessment

            • AMI 3.2.1

              (1) In order to become authorised to carry on one or both of the Financial Services of Operating an Exchange or Operating a Clearing House, the applicant must demonstrate to the satisfaction of the DFSA that it can meet the relevant Licensing Requirements specified in chapters 5, 6 and 7, as appropriate to the Financial Services it proposes to carry on, both at the point of the grant of the Licence and thereafter on an on-going basis.
              (2) In order to obtain an endorsement on its Licence to:
              (a) maintain an Official List of Securities;
              (b) operate a Multilateral Trading Facility; or
              (c) act as a Trade Repository,
              the applicant must demonstrate to the satisfaction of the DFSA that it can meet the requirements applicable to Persons undertaking the relevant activities, both at the point of the grant of the endorsement and thereafter on an on-going basis.
              Derived from RM118/2013 [VER15/07-13]

              • AMI 3.2.1 Guidance

                1. The Licensing Requirements are specified in chapters 5, 6 and 7 of Part 3 of this module. These include the general requirements applicable to all Authorised Market Institutions (chapter 5), and the additional requirements applicable to specific types of activities of Authorised Market Institutions (chapters 6 and 7).
                2. Where an Authorised Market Institution (or an applicant for a Licence) seeks to obtain an endorsement on its Licence, additional requirements relevant to the type of endorsement need to be satisfied (see, for example, App 5 of GEN for the requirements relating to Trade Repositories).
                3. Currently, the function of maintaining an Official List of Securities is performed by the DFSA. However, the DFSA has the power, pursuant to Article 29 of the Markets Law, to grant an Authorised Market Institution an endorsement on its Licence permitting it to maintain an Official List of Securities.
                4. Section 3.6 of the RPP Sourcebook sets out the matters which the DFSA takes into consideration when making an assessment under Rule 3.2.1.
                Derived from RM118/2013 [VER15/07-13]

            • Inquiries and Information

              • AMI 3.2.2

                In assessing an application for a Licence or an endorsement on a Licence, the DFSA may:

                (a) make any enquiries which it considers appropriate, including enquiries independent of the applicant;
                (b) require the applicant to provide additional information;
                (c) require the applicant to have information on how it intends to ensure compliance with a particular requirement;
                (d) require any information provided by the applicant to be verified in any way that the DFSA specifies; and
                (e) take into account any information which it considers relevant.
                Derived from RM118/2013 [VER15/07-13]

              • AMI 3.2.3

                (1) In assessing an application for a Licence, the DFSA may, by means of written notice, indicate the legal form that the applicant may adopt to enable authorisation to be granted.
                (2) Where the DFSA thinks it appropriate, it may treat an application made by one legal form or Person as having been made by the new legal form or Person.
                Derived from RM118/2013 [VER15/07-13]

          • AMI 3.3 Obtaining Key Individual Status

            • AMI 3.3 Guidance

              Under Article 43 of the Regulatory Law, every Authorised Market Institution must have Key Individuals appointed to perform Licensed Functions. Key Individuals appointed by an Authorised Market Institution to perform Licensed Functions must be approved by the DFSA before they are permitted to carry on such functions. This section sets out the matters that will be considered by the DFSA in approving such Key Individuals. The list of Licensed Functions for an Authorised Market Institution is in section 5.3 of this module.

              Derived from RM118/2013 [VER15/07-13]
              [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

            • AMI 3.3.1

              (1) In regard to an application for approval for an individual to be granted Key Individual status, both the Authorised Market Institution and the individual must complete the appropriate form in AFN.
              (2) An Authorised Market Institution must be satisfied that the individual with respect to whom an application is submitted:
              (a) is competent in his proposed role;
              (b) has kept abreast of relevant market, product, technology, legislative and regulatory developments; and
              (c) is able to apply his knowledge.
              Derived from RM118/2013 [VER15/07-13]

              • AMI 3.3.1 Guidance

                See paragraph 2.2.16(j) and section 2-3 of the RPP sourcebook for the details of the assessment which an Authorised Market Institution is expected to undertake.

                Derived from RM118/2013 [VER15/07-13]

            • AMI 3.3.2 [Deleted]

              [Deleted] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

              • AMI 3.3.2 Guidance [Deleted]

                [Deleted] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

            • Requirements for Key Individuals

              • AMI 3.3.2

                (1) To be authorised as a Key Individual an individual must demonstrate that he is fit and proper to perform the Licensed Function.
                (2) In assessing whether an individual is fit and proper to perform a Licensed Function under (1) the DFSA will consider:
                (a) the individual's integrity;
                (b) the individual's competence and capability;
                (c) the individual's financial soundness;
                (d) the individual's proposed role within the Authorised Market Institution; and
                (e) any other relevant matters.
                [Added] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

              • AMI 3.3.3

                Without limiting Rule 3.3.2, an individual shall not be considered fit and proper for the the purposes of that Rule if he:

                (a) is bankrupt;
                (b) has been convicted of a serious criminal offence; or
                (c) is incapable, through mental or physical incapacity, of managing his affairs.
                [Added] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

              • AMI 3.3.4

                In assessing whether an individual is fit and proper to be granted Key Individual Status to carry out a Licensed Function, the DFSA may:

                (a) make any enquiries which it considers appropriate, including enquiries independent of the applicant;
                (b) require the Authorised Market Institution or the individual to provide additional information;
                (c) require any information provided by the Authorised Market Institution or the individual to be verified in any way specified by the DFSA; and
                (d) take into account any information which it considers appropriate.
                [Added] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

                • AMI 3.3.4 Guidance

                  Section 2.3 of the RPP Sourcebook sets out the matters which the DFSA takes into consideration when making an assessment referred to in this section.

                  [Added] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

      • Part 3 Licensing Requirements

        • AMI 4 General

          • AMI 4.1 Application

            • AMI 4.1.1

              This chapter applies to a Person who is an Authorised Market Institution or an applicant for such a Licence.

              Derived from RM118/2013 [VER15/07-13]

          • AMI 4.2 Licensing Requirements

            • AMI 4.2.1

              (1) An Authorised Market Institution must have adequate arrangements both at the time a Licence is granted and at all times thereafter to meet the applicable Licensing Requirements as specified in (2).
              (2) The Licensing Requirements are:
              (a) the general requirements specified in chapter 5, which are applicable to all Authorised Market Institutions;
              (b) the additional requirements specified in chapter 6, which are applicable to an Authorised Market Institution Operating an Exchange; and
              (c) the additional requirements specified in chapter 7, which are applicable to an Authorised Market Institution Operating a Clearing House.
              (3) Where an Authorised Market Institution operates a Multilateral Trading Facility pursuant to an endorsement on its Licence, the Licensing Requirements specified in (2)(a) and (b) apply with respect to the operation of such a facility as if that facility is an Exchange.
              Derived from RM118/2013 [VER15/07-13]

          • AMI 4.3 Approval of Material Changes

            • AMI 4.3.1

              (1) An Authorised Market Institution may, subject to (2), only make material changes to its existing arrangements to meet the Licensing Requirements where it has obtained the DFSA's prior approval to do so in accordance with the requirements in this section.
              (2) In the case of any changes to the Business Rules of an Authorised Market Institution, such changes must be made in accordance with the requirements in section 5.6.
              Derived from RM118/2013 [VER15/07-13]

              • AMI 4.3.1 Guidance

                1. Existing arrangements to meet the Licensing Requirements are those arrangements which an Authorised Market Institution has in place at the time it is initially granted a Licence, and includes any subsequent changes made to such arrangements in accordance with the requirements in this Rule.
                2. If an Authorised Market Institution is unsure, it may seek the DFSA views on whether a proposed change to its existing arrangements constitutes a material change. Such clarification should be sought as soon as possible when it becomes reasonably apparent to the Authorised Market Institution that some changes to its existing arrangements are needed.
                Derived from RM118/2013 [VER15/07-13]

            • AMI 4.3.2

              (1) An Authorised Market Institution proposing to make material changes to its existing arrangements to meet the Licensing Requirements must provide to the DFSA a notice setting out:
              (a) the proposed change;
              (b) the reasons for the proposed change; and
              (c) what impact the proposed change might have on its ability to discharge its Regulatory Functions.
              (2) The notice referred to in (1) must, subject to (3), be submitted to the DFSA at least 30 days before the proposed change is expected to come into effect.
              (3) The DFSA may, in circumstances where a material change to existing arrangements is shown on reasonable grounds to be urgently needed, accept an application for approval of such a change on shorter notice than the 30 days referred to in (2).
              Derived from RM118/2013 [VER15/07-13]

            • AMI 4.3.3

              The DFSA must, upon receipt of a notice referred to in Rule 4.3.2, approve or reject the proposed change as soon as practicable and in any event within 30 days of the receipt of the notice, unless that period has been extended by notification to the applicant.

              Derived from RM118/2013 [VER15/07-13]
              [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

            • AMI 4.3.4

              (1) The procedures in Schedule 3 to the Regulatory Law apply to a decision of the DFSA under Rule 4.3.3 to reject a proposed change.
              (2) If the DFSA decides to exercise its power under Rule 4.3.3 to reject a proposed change, the Authorised Market Institution may refer the matter to the FMT for review.
              Derived from RM118/2013
              [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14] [VER15/07-13]

              • AMI 4.3.4 Guidance

                1. The period of 30 days will commence from the time the DFSA has received all the relevant information to assess the application.
                2. An Authorised Market Institution should consider submitting its application for DFSA approval well in advance of the date on which the proposed change is expected to come into effect, especially in the case of significant material changes to its existing arrangements, to allow the DFSA sufficient time to consider the application. Such timely submission would generally tend to avoid any extension of time being sought by the DFSA to assess properly the impact of a proposed change, due to its nature, scale and complexity. Such an extension would be made in consultation with the applicant.
                3. If a proposed material change is not approved by the DFSA within the 30 day period and the DFSA has not expressly extended the period beyond 30 days, an Authorised Market Institution may treat the proposed change as being rejected by the DFSA, and on that basis, may refer the decision to the FMT.
                4. An Authorised Market Institution may use the results of consultation with its user committees to identify the impact the proposed change would have on its ability to meet the Licensing Requirements, including any impact such a change would have on its Members and other stakeholders. See GEN App 3 — Guidance No. 9–12 for best practice relating to user committees.
                Derived from RM118/2013 [VER15/07-13]
                [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

          • AMI 4.4 Definition of Regulatory Functions

            • AMI 4.4.1

              Pursuant to Article 23(2)(f)(ii) and (iii) of the Regulatory Law, the DFSA prescribes the Regulatory Functions of an Authorised Market Institution as those functions which directly contribute to the satisfaction by the Authorised Market Institution of its Licensing Requirements.

              [Added] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

        • AMI 5 General Licensing Requirements Applicable to all Authorised Market Institutions

          • AMI 5.1 Application

            • AMI 5.1.1

              This chapter applies to an Authorised Market Institution and its Key Individuals.

              Derived from RM118/2013 [VER15/07-13]

          • AMI 5.2 Organisational Requirements

            • AMI 5.2 Guidance

              Every Authorised Market Institution must comply with the requirements in GEN chapter 5, which relate to the management and systems and controls, which form an essential part of the organisational requirements of an Authorised Market Institution. The requirements set out below augment the organisational requirements applicable to an Authorised Market Institution set out in GEN chapter 5.

              Derived from RM118/2013 [VER15/07-13]

            • Fitness and Propriety

              • AMI 5.2.1

                An Authorised Market Institution must:

                (a) be fit and proper;
                (b) be appropriately constituted; and
                (c) take appropriate measures to:
                (i) satisfy the Licensing Requirements; and
                (ii) perform its Regulatory Functions.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.2.1 Guidance

                  See Chapter 5 of GEN and paragraphs 2-2-16 to 2-2-18 of the RPP Sourcebook which set out matters which the DFSA takes into consideration when making an assessment under Rule 5.2.1.

                  Derived from RM118/2013 [VER15/07-13]

            • Human Resources

              • AMI 5.2.2

                (1) An Authorised Market Institution must have and maintain sufficient human resources to operate and supervise its facilities.
                (2) An Authorised Market Institution must ensure, as far as reasonably practicable, that its Employees are:
                (a) fit and proper;
                (b) appropriately trained for the duties they perform; and
                (c) trained in the requirements of the legislation applicable in the DIFC.
                (3) An Authorised Market Institution must:
                (a) have appropriate arrangements in place to ensure that its Employees maintain their fitness and propriety; and
                (b) keep records of the assessment process undertaken for each Employee for a minimum of six years from the date on which an individual ceases to be an Employee.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.2.2 Guidance

                  1. In assessing whether an Authorised Market Institution's systems and controls are adequate to ensure the on-going maintenance of fitness and propriety of its Employees, the DFSA will take into account:
                  a. the distribution of duties and responsibilities among its Key Individuals and the departments of the Authorised Market Institution responsible for performing its Regulatory Functions;
                  b. the staffing and resources of the departments of the Authorised Market Institution responsible for performing its Regulatory Functions;
                  c. the arrangements made to enable Key Individuals to supervise the departments for which they are responsible;
                  d. the arrangements for supervising the performance of Key Individuals and their departments; and
                  e. the arrangements by which the Governing Body is able to keep the allocation of responsibilities between, and the appointment, supervision and remuneration of, Key Individuals under review.
                  2. See also GEN Rule 5.3.18 which sets out the requirements relating to the suitability of Employees and section 2.3 of the RPP Sourcebook which sets out in more detail the matters which the DFSA takes into consideration when making its assessment under GEN Rule 5.3.18 and Rule 5.2.2 above.
                  Derived from RM118/2013 [VER15/07-13]

            • Governance

              • AMI 5.2.3

                (1) An Authorised Market Institution must have:
                (a) a corporate governance framework appropriate to the nature, scale and complexity of its business and structure, which is adequate to promote the sound and prudent management and oversight of the Authorised Market Institution's business and to protect the interests of its stakeholders; and
                (b) a remuneration structure and strategies which are well aligned with the long term interests of the Authorised Market Institution, and appropriate to the nature, scale and complexity of its business.
                (2) Without limiting the generality of the requirements in GEN chapter 5, an Authorised Market Institution must ensure that its Governing Body has a sufficient number of independent members at all times.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.2.3 Guidance

                  1. Detailed corporate governance and remuneration related requirements applicable to an Authorised Market Institution are contained in GEN Rules 5.3.30 and 5.3.31. See the best practice standards relating to corporate governance and remuneration set out under those Rules and App 3 of GEN. These are designed to promote sound governance and remuneration practices whilst providing flexibility for application taking into account the nature, scale and complexity of operations of an Authorised Market Institution.
                  2. The independence criteria for the members of the Governing Body are set out in paragraphs 2.2.16 to 2.2.18 of the RPP sourcebook.
                  Derived from RM118/2013 [VER15/07-13]

          • AMI 5.3 Licensed Functions and Key Individuals

            • Licensed Functions and Key Individuals

              • AMI 5.3.1

                (1) An Authorised Market Institution must, for the purpose of proper discharge of its Regulatory Functions, have at all times individuals appointed to carry out the functions of the:
                (a) Governing Body;
                (b) Senior Executive Officer;
                (c) Finance Officer;
                (d) Compliance Officer;
                (e) Risk Officer;
                (f) Money Laundering Reporting Officer; and
                (g) Internal Auditor.
                (2) Each of the functions of an Authorised Market Institution specified in (1)(a) to (g) are Licensed Functions for the purposes of Article 43(1) of the Regulatory Law.
                Derived from RM118/2013 [VER15/07-13]
                [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

              • AMI 5.3.2

                (1) An Authorised Market Institution must not permit a Key Individual to carry on any Licensed Function for or on behalf of the Authorised Market Institution unless the particular individual has been assessed by the Authorised Market Institution to be competent to perform the relevant Licensed Function.
                (2) The Licensed Functions specified in Rule 5.3.1 do not include a function performed by a registered insolvency practitioner (subject to the restrictions in Article 88 of the Insolvency Law 2009) if the practitioner is:
                (a) acting as a nominee in relation to a company voluntary arrangement within the meaning of Article 8 of the Insolvency Law 2009;
                (b) appointed as a receiver or administrative receiver within the meaning of Article 14 of the Insolvency Law 2009;
                (c) appointed as a liquidator in relation to a members' voluntary winding up within the meaning of Article 32 of the Insolvency Law 2009;
                (d) appointed as a liquidator in relation to a creditors' voluntary winding up within the meaning of Article 32 of the Insolvency Law 2009; or
                (e) appointed as a liquidator or provisional liquidator in relation to a compulsory winding up within the meanings of Articles 58 and 59 of the Insolvency Law 2009.
                (3) The Licensed Functions specified in Rule 5.3.1 do not include a function performed by an insolvency practitioner in accordance with the applicable requirements equivalent to those specified in (2)(a)–(e) in another jurisdiction.
                (4) The Licensed Functions specified in Rule 5.3.1 do not include a function of an individual appointed to act as a manager of the business of an Authorised Market Institution as directed by the DFSA under Article 88 of the Regulatory Law.
                Derived from RM118/2013 [VER15/07-13]
                [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

                • AMI 5.3.2 Guidance

                  1. See section 2.3 of the RPP sourcebook for details of the assessment that the Authorised Market Institution and the DFSA undertake to assess whether an individual is fit and proper to undertake Key Individual functions.
                  2. An Authorised Market Institution may apply for the DFSA's in-principle approval of an individual as soon as the individual is identified as a potential appointee to avoid any delays in formalising the appointment. However, an Authorised Market Institution should submit to the DFSA, as far as reasonably practicable, all the relevant information, including the results of its own assessment, when seeking such in-principle approval.
                  Derived from RM118/2013 [VER15/07-13]

            • Members of the Governing Body

              • AMI 5.3.3

                Every member of the Governing Body of an Authorised Market Institution carries on the function of a Key Individual.

                Derived from RM118/2013 [VER15/07-13]

            • Senior Executive Officer

              • AMI 5.3.4

                The Senior Executive Officer function is carried out by an individual who:

                (a) has, either alone or jointly with the other Key Individuals, the ultimate responsibility for the day-to-day management, supervision and control of one or more (or all) parts of an Authorised Market Institution's Financial Services carried on in or from the DIFC; and
                (b) is either a member of the Governing Body or a Senior Manager of the Authorised Market Institution.
                Derived from RM118/2013 [VER15/07-13]
                [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

            • Finance Officer

              • AMI 5.3.5

                The Finance Officer function is carried out by an individual who:

                (a) has the overall responsibility for the Authorised Market Institution's compliance with the financial resources requirements in Rule 5.5.4; and
                (b) is either a Member of the Governing Body or a Senior Manager of the Authorised Market Institution.
                Derived from RM118/2013 [VER15/07-13]

            • Compliance Officer

              • AMI 5.3.6

                The Compliance Officer function is carried out by an individual who:

                (a) has the overall responsibility for the Authorised Market Institution's compliance with the Licensing Requirements and other applicable requirements in carrying out Financial Services; and
                (b) is either a Member of the Governing Body or a Senior Manager of the Authorised Market Institution.
                Derived from RM118/2013 [VER15/07-13]

            • Risk Officer

              • AMI 5.3.7

                The Risk Officer function is carried out by an individual who:

                (a) has the overall responsibility for the risk management function in relation to the Financial Services carried on by the Authorised Market Institution; and
                (b) is a member of the Governing Body or a Senior Manager of the Authorised Market Institution.
                Derived from RM118/2013 [VER15/07-13]

            • Money Laundering Reporting Officer

              • AMI 5.3.8

                The Money Laundering Reporting Officer function is carried out by an individual who:

                (a) has the overall responsibility for the Authorised Market Institution's compliance with the requirements in Rule 5.11.2, AML and any other relevant anti money laundering legislation applicable in the DIFC; and
                (b) is either a member of the Governing Body or a Senior Manager of the Authorised Market Institution.
                Derived from RM118/2013 [VER15/07-13]

            • Internal Auditor

              • AMI 5.3.9

                The Internal Auditor function is carried out by an individual who is responsible for the internal audit matters in relation to the Financial Services carried on by the Authorised Market Institution.

                Derived from RM118/2013 [VER15/07-13]

            • Residency of Key Individuals

              • AMI 5.3.10

                The Key Individual functions of a Senior Executive Officer, Compliance Officer and Money Laundering Reporting Officer must be carried out by an individual resident in the U.A.E.

                Derived from RM118/2013 [VER15/07-13]

            • Combining Roles

              • AMI 5.3.11

                (1) To the extent practicable, an Authorised Market Institution must not assign to its Key Individuals any commercial functions which conflict with their Key Individual functions or which impair, or are likely to impair, their ability to perform the relevant functions.
                (2) Before an Authorised Market Institution assigns to a Key Individual any commercial functions, the Authorised Market Institution must:
                (a) form a view on a reasonable basis that the commercial functions to be assigned to any Key Individual do not, as far as reasonably practicable, conflict with the relevant Key Individual functions or impair his ability to discharge those functions effectively; and
                (b) to the extent there are such conflicts inherent in the relevant functions, there are adequate procedures and controls to mitigate such conflicts.
                (3) The Authorised Market Institution must maintain records of its decisions and procedures as applicable under (2) above.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.3.11 Guidance

                  The DFSA does not expect Key Individuals who are Persons undertaking control functions such as those relating to risk, compliance and audit to be assigned any functions or roles which are to further the Authorised Market Institution's commercial interests or objectives (such as business promotional activities) .

                  Derived from RM118/2013 [VER15/07-13]

          • AMI 5.4 Conflicts of Interests

            • AMI 5.4.1

              Without limiting the generality of the obligations under section 5.2 of GEN, an Authorised Market Institution must take all reasonable steps to ensure that any conflicts of interest, including those:

              (a) between itself and its shareholders, Members or other users of its facilities; and
              (b) between its Members and other users of its facilities, and, among themselves,

              are promptly identified and then prevented or managed, or disclosed, in a manner that does not adversely affect the sound functioning and operation of the Authorised Market Institution.

              Derived from RM118/2013 [VER15/07-13]

            • AMI 5.4.2

              Without limiting the generality of the requirement in Rule 5.4.1, an Authorised Market Institution must establish and maintain adequate policies and procedures to ensure that its Employees do not undertake personal account transactions in Investments in a manner that creates or has the potential to create conflicts of interest.

              Derived from RM118/2013 [VER15/07-13]

            • AMI 5.4.3

              An Authorised Market Institution must establish a code of conduct that sets out the expected standards of behaviour for its Employees, including clear procedures for addressing conflicts of interest. Such a code must be:

              (a) binding on Employees; and
              (b) to the extent appropriate and practicable, made publicly available.
              Derived from RM118/2013 [VER15/07-13]

              • AMI 5.4.3 Guidance

                1. In assessing whether an Authorised Market Institution's policies and procedures are adequate to address conflicts of interests, the DFSA will consider whether those include:
                a. policies on the use of confidential information received in carrying out its Regulatory Functions to ensure it is only used for proper purposes;
                b. arrangements for transferring decisions or responsibilities to alternates in individual cases;
                c. arrangements made to ensure that individuals who may have a permanent conflict of interest in certain circumstances are excluded from the process of taking decisions (or receiving information) about matters to which the conflict is relevant; and
                d. requirements and procedures included in contracts of employment, staff rules, letters of appointment for members of the Governing Body and other Key Individuals and other guidance given to individuals on handling conflicts of interest relating to:
                i. the need for prompt disclosure of a conflict of interest to enable others who are not affected by the conflict to assist in deciding how it may need to be addressed;
                ii. the circumstances in which a general disclosure of a conflict of interest in advance may be sufficient;
                iii. the circumstances in which a general advance disclosure may not be adequate;
                iv. the circumstances in which it would be appropriate for a conflicted individual to withdraw from any involvement in the matter concerned, without disclosing the interests; and
                v. the circumstances in which safeguards in addition to disclosure would be required, such as the withdrawal of the individual from the decision-making process or from access to relevant information.
                2. See also the best practice standards relating to corporate governance and remuneration standards set out under in GEN Rules 5.3.30 and 5.3.31 and GEN App 3, which cover conflicts of interest issues that need to be addressed in order to promote sound governance and remuneration practices within an Authorised Market Institution.
                Derived from RM118/2013 [VER15/07-13]

            • Performance of Regulatory Functions

              • AMI 5.4.4

                An Authorised Market Institution must take all reasonable steps to ensure that the performance of its Regulatory Functions is not adversely affected by its commercial interests.

                Derived from RM118/2013 [VER15/07-13]

              • AMI 5.4.5

                For the purposes of the requirement in Rule 5.4.4, an Authorised Market Institution must have adequate systems and controls, including policies and procedures, to ensure that the pursuit of its commercial interests (including its profitability) does not adversely impact on the performance of its Regulatory Functions.

                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.4.5 Guidance

                  An Authorised Market Institution should have systems for identifying, and drawing to the attention of its senior management, situations where its commercial interests conflict, or may potentially conflict, with the proper performance of its Regulatory Functions. This would enable its senior management to take appropriate steps to ensure that such conflicts do not adversely affect the proper performance by the Authorised Market Institution of its Regulatory Functions. In particular, senior management should ensure that adequate human, financial and other resources (both in quantity and quality) are provided for risk management, regulatory, compliance and other similar functions.

                  Derived from RM118/2013 [VER15/07-13]

          • AMI 5.5 Operational Efficiency and Resilience

            • Systems and Controls

              • AMI 5.5.1

                (1) Without limiting the generality of the obligations relating to systems and controls in section 5.3 of GEN, an Authorised Market Institution must ensure that its systems and controls are:
                (a) adequate to ensure that its operations are conducted at all times in accordance with the applicable requirements, including legislation;
                (b) sufficiently flexible and robust to ensure continuity and regularity in the performance of its functions relating to the operation of its facilities; and
                (c) appropriate to the nature, scale and complexity of its operations.
                (2) For the purposes of (1), the systems and controls of an Authorised Market Institution must be adequate to enable it to meet the Licensing Requirements on an on-going basis. In particular, they must include adequate arrangements in relation to:
                (a) the assessment and management of all risks;
                (b) financial and technology resources;
                (c) the fitness and propriety of its Employees;
                (d) the operation of its functions;
                (e) outsourcing;
                (f) the safeguarding and administration of assets belonging to its Members and other participants on its facilities;
                (g) the transmission of information to Members and other participants on its facilities; and
                (h) the supervision and monitoring of transactions on its facilities.
                (3) An Authorised Market Institution must undertake regular reviews of its systems and controls to ensure that they remain adequate and operate as intended.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.5.1 Guidance

                  The systems and controls requirements in Rule 5.5.1 augment the systems and controls requirements in GEN chapter 5.

                  Derived from RM118/2013 [VER15/07-13]

            • AMI 5.5.2 Risk Management

              • AMI 5.5.2 Guidance

                1. An Authorised Market Institution is subject to the risk management requirements in GEN Rules 5.3.5 — 5.3.7. Additional risk management requirements are prescribed for Authorised Market Institution Operating a Clearing House in sections 7.2 and 7.3.
                2. The individual appointed pursuant to GEN Rule 5.3.7(1) to advise the Governing Body and the senior management of the Authorised Market Institution relating to risks and management of such risks is the Key Individual performing the function of the Risk Officer pursuant to Rule 5.3.7; Key Individuals.
                3. In assessing the adequacy of an Authorised Market Institution's systems and controls for identifying, assessing and managing risks, the DFSA may also have regard to the extent to which such systems and controls enable the Authorised Market Institution to:
                a. identify all the general, operational, legal and market risks wherever they arise in its activities;
                b. measure and control the different types of risk;
                c. allocate responsibility for risk management to persons with appropriate levels of knowledge and expertise; and
                d. provide sufficient and reliable information to Key Individuals and, where relevant, the Governing Body of the Authorised Market Institution.
                4. As part of assessing the adequacy of risk controls, the DFSA will also consider how internal and external audits operate in the context of systems and controls. In doing so the following factors may be considered:
                a. the size, composition and terms of reference of any audit committee of the Authorised Market Institution;
                b. the frequency and scope of external audit;
                c. the provision and scope of internal audit;
                d. the staffing and resources of the Authorised Market Institution's internal audit department;
                e. the internal audit department's access to the Authorised Market Institution's records and other relevant information; and
                f. the position, responsibilities and reporting lines of the internal audit department and its relationship with other departments of the Authorised Market Institution.
                5. In addition, the DFSA will also consider the adequacy of the risk management function, in particular:
                a. the access which the individuals performing risk management function have to the Authorised Market Institution's records and other relevant information; and
                b. the position, responsibilities and reporting lines of the risk management department and its relationship with other departments of the Authorised Market Institution.
                Derived from RM118/2013 [VER15/07-13]

            • Outsourcing

              • AMI 5.5.3

                (1) Without limiting the generality of the requirements in GEN Rules 5.3.21 and 5.3.22, an Authorised Market Institution must, before entering into any material outsourcing arrangements with a service provider, obtain the DFSA's prior approval to do so.
                (2) For avoidance of doubt, the requirement in (1) applies to any outsourcing arrangements which were not in existence at the time the Authorised Market Institution was granted its Licence.
                (3) In order to obtain the DFSA's prior approval for outsourcing arrangements referred to in (1), an Authorised Market Institution must follow those procedures for obtaining the DFSA's prior approval for material changes specified in Rule 4.3.1(1).
                (4) The procedures in Schedule 3 to the Regulatory Law apply to a decision of the DFSA under this Rule to refuse to approve an outsourcing arrangement.
                (5) If the DFSA decides to exercise its power under this Rule to refuse to approve an outsourcing arrangement, the Authorised Market Institution may refer the matter to the FMT for review.
                Derived from RM118/2013 [VER15/07-13]
                [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

                • AMI 5.5.3 Guidance

                  1. The requirements in GEN Rules 5.3.22 and 5.3.23 set out the requirements applicable when an Authorised Market Institution outsources its functions and activities.
                  2. In assessing the adequacy of an Authorised Market Institution's systems and controls for identifying, assessing, and managing risks arising from functions which are outsourced, the DFSA will have regard to:
                  a. due diligence procedures for selecting service providers and monitoring the performance of the relevant functions by them;
                  b. whether the Authorised Market Institution has in place legally binding contracts with its service providers;
                  c. the business continuity and disaster recovery arrangements of the Authorised Market Institution's service provider;
                  d. whether the security and confidentiality of information provided to the service provider of the Authorised Market Institution is guaranteed in accordance with the applicable legislation;
                  e. the concentration of outsourcing functions with one or more service providers;
                  f. the agreed procedures for terminating the outsourcing arrangements; and
                  g. whether the access to books and records of the service providers is granted to the Authorised Market Institution and the DFSA, including rights of inspection.
                  3. If an Authorised Market Institution wishes to make any material changes to its outsourcing arrangements which were in existence at the time of the grant of its Licence, or any subsequent outsourcing arrangements made in accordance with the requirements in Rule 5.5.3, such changes require the DFSA's prior written approval pursuant to Rule 4.3.1(1).
                  Derived from RM118/2013 [VER15/07-13]

            • Financial Resources

              • AMI 5.5.4

                (1) An Authorised Market Institution must, subject to (3) and (4), have and maintain at all times:
                (a) the minimum financial resource requirement in (2); and
                (b) additional financial resources of a type acceptable to the DFSA which are adequate in relation to the nature, size and complexity of its business to ensure that there is no significant risk that liabilities cannot be met as they fall due.
                (2) The minimum financial resource requirement referred to in (1)(a) is:
                (a) an amount equal to one half of the estimated gross operating costs of the Authorised Market Institution for the next twelvemonth period; or
                (b) such other capital amount as may be specified by the DFSA.
                (3) The assets held by an Authorised Market Institution for the purposes of meeting the financial resources requirements in (1):
                (a) must be of high quality and sufficiently liquid in order to allow the Authorised Market Institution to meet its current and projected operating expenses under a range of adverse scenarios, including in adverse market conditions; and
                (b) must be held, where it comprises cash, by an entity which is a Bank, or a financial institution authorised and supervised by a Financial Services Regulator acceptable to the DFSA with respect to the activity of deposit taking.
                (4) An Authorised Market Institution must have systems and controls to enable it to determine and monitor whether its financial resources are sufficient for the purposes of the requirement in (1). For this purpose, the systems and controls of an Authorised Market Institution must address the following factors, with any other factors that are relevant and appropriate to its operations model:
                (a) the nature, scale, and complexity of the activities and risks associated with its operations;
                (b) the operational, counterparty, market and settlement risks to which it is exposed;
                (c) the amount, composition and legal position of its available financial resources; and
                (d) its ability to access additional financial resources if required.
                (5) An Authorised Market Institution must monitor and manage the concentration of credit and liquidity exposures to commercial banks and clearing Members.
                (6) The procedures in Schedule 3 to the Regulatory Law apply to a decision of the DFSA under (2)(b) to specify a capital amount after a Licence has been granted.
                (7) If the DFSA decides to exercise its power under (2)(b) to specify a capital amount after a Licence has been granted, the Authorised Market Institution may refer the matter to the FMT for review.
                Derived from RM118/2013 [VER15/07-13]
                [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

                • AMI 5.5.4 Guidance

                  1. The minimum financial resource requirement under Rule 5.5.4(1) is designed to ensure that an Authorised Market Institution not only has sufficient financial resources to meet its liabilities as they fall due, but also to allow, if circumstances require, for the orderly wind-down of the Authorised Market Institution's business, while still allowing the institution to meet the applicable requirements, including conditions on its Licence.
                  2. The systems and controls should enable the Authorised Market Institution to assess whether the financial resources required for it to conduct its affairs are in place at all times. Such assessments should be made periodically or after any significant change or event, whether internal or external, that would have an impact on the operations of the Authorised Market Institution. These assessments are necessary to demonstrate to the DFSA that the Licensing Requirements are being satisfied on an on-going basis.
                  3. In determining whether to set a minimum capital amount pursuant to Rule 5.5.4(2)(b), the DFSA will take into account the risks that the Authorised Market Institution poses to the DIFC market and the products which are, or are intended to be, traded, cleared or settled.
                  Derived from RM118/2013 [VER15/07-13]

            • Technology Resources

              • AMI 5.5.5

                (1) An Authorised Market Institution must have sufficient technology resources to operate, maintain and supervise its facilities.
                (2) The Authorised Market Institution must be able to satisfy the DFSA that its technology resources are established and maintained in such a way as to ensure that they are secure and maintain the confidentiality of the data they contain.
                (3) An Authorised Market Institution must ensure that its Members and other participants on its facilities have sufficient technology resources which are compatible with its own.
                (4) For the purposes of meeting the requirement in (1), an Authorised Market Institution must have adequate procedures and arrangements for the evaluation, selection and on-going monitoring of information technology systems. Such procedures and arrangements must, at a minimum, provide for:
                (a) problem management and system change;
                (b) testing information technology systems before live operations in accordance with the requirements in Rule 5.5.6;
                (c) monitoring and reporting on system performance, availability and integrity; and
                (d) adequate measures to ensure:
                (i) the information technology systems are resilient and not prone to failure;
                (ii). business continuity in the event that an information technology system fails;
                (iii) protection of the information technology systems from damage, tampering, misuse or unauthorised access; and
                (iv) the integrity of data forming part of, or being processed through, information technology systems.
                (5) An Authorised Market Institution must meet the applicable requirements in App 1 for the purposes of:
                (a) testing the adequacy and effectiveness of its own information technology systems; and
                (b) assessing the adequacy and effectiveness of information technology systems of its Members.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.5.5 Guidance

                  1. In assessing an Authorised Market Institution's systems and controls used to operate and carry on its functions, the DFSA recognises that an Authorised Market Institution is likely to have significant reliance on its information technology systems. In assessing the adequacy of these systems, the DFSA will consider:
                  a. the organisation, management and resources of the information technology department of the Authorised Market Institution;
                  b. the arrangements for controlling and documenting the design, development, implementation and use of technology systems; and
                  c. the performance, capacity and reliability of information technology systems.
                  2. In particular, when assessing whether an Authorised Market Institution has adequate information technology resourcing, the DFSA will consider:
                  a. whether its systems have sufficient electronic capacity to accommodate reasonably foreseeable volumes of messaging and orders, and
                  b. whether such systems are adequately scalable in emergency conditions that might threaten the orderly and proper operations of its facility.
                  Derived from RM118/2013 [VER15/07-13]

            • Regular Review of Systems and Controls

              • AMI 5.5.6

                (1) An Authorised Market Institution must undertake regular review and updates of its information technology systems and controls as appropriate to the nature, scale and complexity of its operations.
                (2) For the purposes of (1), an Authorised Market Institution must adopt well defined and clearly documented development and testing methodologies which are in line with internationally accepted testing standards.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.5.6 Guidance

                  Through the use of such testing methodologies, the Authorised Market Institution should be able to ensure, amongst other things, that:

                  a. its systems and controls are compatible with its operations and functions;
                  b. compliance and risk management controls embedded in its system operate as intended (for example, by generating error reports automatically); and
                  c. it can continue to work effectively in stressed market conditions.
                  Derived from RM118/2013 [VER15/07-13]

          • AMI 5.6 Business Rules

            • Content of Business Rules

              • AMI 5.6.1

                (1) An Authorised Market Institution must establish and maintain Business Rules in accordance with the requirements in this section. Such rules must include:
                (a) criteria governing the admission of Members and any other Persons to whom access to its facilities is provided;
                (b) criteria governing the admission of Investments to trading, or clearing and settlement, as appropriate to its facilities;
                (c) Default Rules; and
                (d) any other matters necessary for the proper functioning of the Authorised Market Institution and the facilities operated by it.
                (2) An Authorised Market Institution's Business Rules must:
                (a) be based on objective criteria and non-discriminatory;
                (b) be clear and fair;
                (c) set out the Members' and other participants' obligations:
                (i) arising from the Authorised Market Institution's constitution and other administrative arrangements;
                (ii) when undertaking transactions on its facilities; and
                (iii) relating to professional standards that must be imposed on staff and agents of the Members and other participants when undertaking transactions on its facilities;
                (d) be legally binding and enforceable against the Members and other participants;
                (e) be made publicly available free of charge;
                (f) contain provisions for the resolution of Members' and other participants' disputes and an appeal process from the decisions of the Authorised Market Institution; and
                (g) contain disciplinary proceedings, including any sanctions that may be imposed by the Authorised Market Institution against its Members and other participants.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.6.1 Guidance

                  1. The DFSA assesses, at the point of grant of a Licence to an Authorised Market Institution, the adequacy of its Business Rules and its systems and controls to ensure effective monitoring of compliance with such rules. Thereafter, any amendment to the Business Rules can only be made in accordance with the requirements set out in Rules 5.6.4 to 5.6.7 in this section.
                  2. Persons other than Members may have access to an Authorised Market Institution's facilities. See Rule 6.9.1(1)(a)(ii).
                  Derived from RM118/2013 [VER15/07-13]

            • Default Rules

              • AMI 5.6.2

                An Authorised Market Institution must have Default Rules which, in the event of a Member or other participant on its facilities being, or appearing to be, unable to meet its obligations in respect of one or more contracts, enable action to be taken in respect of unsettled market contracts to which the Member or that other participant is a party.

                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.6.2 Guidance

                  The DFSA requires all Authorised Market Institution to have Default Rules under Article 28 of the Markets Law. Default Rules allow an Authorised Market Institution to close-out open positions by discharging the appropriate rights and liabilities of transactions which a Member or any other Person granted access to its facilities cannot, or may not be able to, fulfil.

                  Derived from RM118/2013 [VER15/07-13]

            • Monitoring Compliance with Business Rules

              • AMI 5.6.3

                An Authorised Market Institution must have adequate compliance procedures in place to ensure that:

                (a) its Business Rules are monitored and enforced;
                (b) any complaints relating to its operations or regarding Members and other participants on its facilities are promptly investigated;
                (c) where appropriate, disciplinary action resulting in financial and other types of penalties can be taken;
                (d) appeal procedures are in place; and
                (e) referrals can be made to the DFSA in appropriate circumstances.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.6.3 Guidance

                  1. In determining whether an Authorised Market Institution can effectively monitor its Business Rules, the DFSA will consider:
                  a. the oversight of activity conducted on its facilities;
                  b. the range of powers it retains over Members and other Persons granted access to its facilities, which should include the ability to modify, revoke or suspend access; and
                  c. the disciplinary procedures which have been established to take disciplinary action, including a fair and clear policy on any financial penalties which may be imposed, and the appeal processes.
                  2. In determining whether an Authorised Market Institution can effectively oversee the activities conducted on its facilities, the DFSA will consider how non-compliance is identified and how the significance of any non-compliance is assessed.
                  Derived from RM118/2013 [VER15/07-13]

            • Amendments to Business Rules

              • AMI 5.6.4

                (1) An Authorised Market Institution may only adopt new Business Rules or make any amendments to existing Business Rules in accordance with the requirements in Rules 5.6.5, 5.6.6 and 5.6.7.
                (2) A reference to an amendment in Rules 5.6.5, 5.6.6 and 5.6.7 includes the introduction of a new Business Rule or a change to an existing Business Rule or a proposal to do so.
                Derived from RM118/2013 [VER15/07-13]

            • Public Consultation

              • AMI 5.6.5

                (1) An Authorised Market Institution must, subject to Rule 5.6.6, before making any amendment to its Business Rules, undertake public consultation on the proposed amendment in accordance with the requirements in this Rule.
                (2) For the purposes of (1), an Authorised Market Institution must:
                (a) publish a consultation paper setting out:
                (i) the text of both the proposed amendment and the Business Rules that are to be amended;
                (ii) the reasons for proposing the amendment; and
                (iii) a reasonable consultation period, which must not be less than 30 days from the date of publication, within which Members and other stakeholders may provide comments; and
                (b) lodge with the DFSA the consultation paper referred to in (a) no later than the time at which it is released for public comment.
                (3) The DFSA may, where it considers on reasonable grounds that it is appropriate to do so, require the Authorised Market Institution to extend its proposed period of public consultation specified in the consultation paper. An Authorised Market Institution must comply with such a requirement.
                (4) An Authorised Market Institution must:
                (a) facilitate, as appropriate, informal discussions on the proposed amendment with Members and other stakeholders including any appropriate representative bodies of such Persons;
                (b) consider the impact the proposed amendment has on the interests of its Members and other stakeholders;
                (c) have proper regard to any public comments received.
                (5) Following public consultation, an Authorised Market Institution must, before the date on which the proposed amendment comes into effect, lodge with the DFSA:
                (a) a summary of any public comments received, and how any issues raised by those comments have been addressed; and
                (b) any changes made to the initial proposals as a result of the public comments, and if no changes have been made, a statement to that effect.
                Derived from RM118/2013 [VER15/07-13]

            • Dispensation of Public Consultation

              • AMI 5.6.6

                (1) The DFSA may, on written application by an Authorised Market Institution, dispense with the requirement in Rule 5.6.5 for public consultation where:
                (a) any delay resulting from public consultation is likely to be detrimental to the interests of the DIFC markets; or
                (b) either the proposed amendment:
                (i) is purely administrative or immaterial; or
                (ii) the Authorised Market Institution can demonstrate to the satisfaction of the DFSA that it had taken into account the views and interests of its Members and other stakeholders as appropriate in developing the proposed amendment; and
                (c) the Authorised Market Institution complies with the requirements in (2) or (3) as applicable.
                (2) An Authorised Market Institution which seeks to dispense with public consultation on the ground referred to in (1)(a) must lodge with the DFSA a statement setting out:
                (a) the text of both the proposed amendment and the Business Rules that are to be amended:
                (b) the reasons for proposing the amendment;
                (c) the grounds on which it believes that a delay resulting from public consultation is likely to be detrimental to the DIFC markets; and
                (d) whether any rights or obligations of any Members of the Authorised Market Institution or other participants on its facilities are to be materially adversely affected by the proposed amendment, and if so, what measures are proposed to address such concerns.
                (3) An Authorised Market Institution which seeks to dispense with public consultation on the ground referred to in (1)(b) must lodge with the DFSA a statement setting out:
                (a) the text of both the proposed amendment and the Business Rules that are to be amended; and
                (b) either:
                (i) the reasons it believes that the proposed amendment is purely administrative or immaterial; or.
                (ii) that it had taken into account the views and interests of its Members and other stakeholders as appropriate in developing the proposed amendment.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.6.6 Guidance

                  For the purposes of demonstrating to the DFSA that the Authorised Market Institution had taken into account the views and interests of its Members and other relevant stakeholders, an Authorised Market Institution may rely on the input provided by its user committees where the user committees meet best practice set out in GEN App3, Guidance No. 9–12.

                  Derived from RM118/2013 [VER15/07-13]

            • DFSA Approval

              • AMI 5.6.7

                (1) An Authorised Market Institution must seek the DFSA's approval of any proposed amendment to the Business Rules before the rules are to come into effect.
                (2) The DFSA will approve the proposed amendment to the Business Rules unless it has reasonable grounds to believe that the proposed amendment is reasonably likely to be detrimental to the interests of the DIFC markets.
                (3) Where the DFSA has any concerns about the proposed amendment, it may:
                (a) either reject the proposed amendment or request the Authorised Market Institution to withdraw the proposed amendments; or
                (b) require the Authorised Market Institution to make appropriate changes to the proposed amendment, with or without public consultation.
                (4) The DFSA must give to the Authorised Market Institution reasons for its decisions under (3)(a) or (b) as applicable.
                (5) An Authorised Market Institution must, as soon as practicable after receiving the DFSA approval, notify the Members and the public of the amendment to its Business Rules and the date on which the amendment becomes effective.
                (6) If the DFSA decides to exercise its power under (3)(a) or (b), the Authorised Market Institution may refer the matter to the FMT for review.
                Derived from RM118/2013 [VER15/07-13]
                [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

                • AMI 5.6.7 Guidance

                  1. The DFSA does not formally approve the proposed amendments at the point of release of the proposed amendment for public consultation; instead that approval occurs at the end of the public consultation period because the DFSA can properly take into account any public comments and changes resulting from public comments only at the end of the public consultation period.
                  2. However, the DFSA may, upon receipt of the proposed amendment, request an extension of the public consultation period if it considers on reasonable grounds that such an extension is appropriate. The circumstances in which the DFSA may require an extended period of public consultation beyond 30 days include where the proposed amendment is likely to have a significant adverse impact on the Members' rights and obligations or the interests of other participants in the DIFC markets. An Authorised Market Institution may rely on the results of soft consultation with Members and other stakeholders, or with any user committees it has established, to demonstrate that the proposed amendment does not warrant public consultation.
                  3. Generally, the DFSA expects to have a quick turnaround time in granting formal approval where no public comments have been received on public consultation or the proposed amendment are not extensive.
                  Derived from RM118/2013 [VER15/07-13]

          • AMI 5.7 Access to Facilities

            • Member Criteria

              • AMI 5.7.1

                (1) An Authorised Market Institution must not grant access to its facilities to a Person except in accordance with the requirements in this module and its Business Rules.
                (2) A Person who has been granted access to the facilities of an Authorised Market Institution pursuant to its Business Rules is a Member of the Authorised Market Institution, except where otherwise provided.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.7.1 Guidance

                  1. Generally only Persons admitted as Members in accordance with the Business Rules will have access to the facilities of an Authorised Market Institution.
                  2. However, in certain circumstances, an Authorised Market Institution may permit access to its facilities to Persons other than Members (see Rules 5.7.3). Such access would generally be provided through a Member and subject to adequate controls put into place by the Member.
                  Derived from RM118/2013 [VER15/07-13]

                • AMI 5.7.2

                  (1) An Authorised Market Institution may only, subject to (2) and (3), admit as a Member a Person which is:
                  (a) an Authorised Person;
                  (b) a Person who is admitted to the list of Recognised Persons pursuant to Article 37 of the Markets Law 2012; or
                  (c) a Person who meets the criteria in GEN Rule 2.3.2(2).
                  (2) An Authorised Market Institution must not admit as a Member a Person referred to in (1)(c) unless such Person:
                  (a) agrees in writing to submit unconditionally to the jurisdiction of the DFSA in relation to any matters which arise out of or which relate to its use of the facilities of the Authorised Market Institution;
                  (b) agrees in writing to submit unconditionally to the jurisdiction of the DIFC Courts in relation to any proceedings in the DIFC, which arise out of or relate to its use of the facilities of the Authorised Market Institution;
                  (c) agrees in writing to subject itself to the DIFC laws and the jurisdiction of the DIFC Courts in relation to its use of the facilities of the Authorised Market Institution; and
                  (d) appoints and maintains at all times, an agent for service of process in the DIFC and requires such agent to accept its appointment for service of process.
                  (3) Prior to admitting a Person referred to in (1) as a Member, an Authorised Market Institution must undertake due diligence to ensure that such a Person:
                  (a) is of sufficient good repute;
                  (b) has a sufficient level of competence and experience, including appropriate standards of conduct for its staff who will be permitted to use its order entry system; and
                  (c) has organisational arrangements, including financial and technological resources, which are no less than those of an Authorised Firm carrying out similar Financial Services.
                  Derived from RM118/2013 [VER15/07-13]

                  • AMI 5.7.2 Guidance

                    1. A Person who can be admitted under the criterion in Rule 5.7.2(1)(c) (i.e. a Person referred to in GEN Rule 2.3.2(2)) is a Person undertaking Commodity Derivative transactions on the relevant Authorised Market Institution only on its own behalf or on behalf of a wholly owned holding company or subsidiary of such company.
                    2. In assessing the membership criteria used by an Authorised Market Institution to permit access to its facilities, the DFSA will consider:
                    a. whether the Business Rules can be enforced contractually against Members;
                    b. whether the criteria are objective and applied in a non-discriminatory manner; and
                    c. the financial resource requirements for those not authorised by the DFSA.
                    3. Pursuant to Rule 5.7.2(3)(c), an Authorised Market Institution is required to assess the adequacy of the organisational arrangements of a candidate to become a Member, if it is not an Authorised Firm, against the organisational requirements that would apply to such a Person had it been an Authorised Firm undertaking similar activities. For example, a Person which is not an Authorised Firm should have organisational resources that are equivalent to a firm Licensed to carry on the Financial Service of Dealing as Agent and/or Dealing as Principal.
                    Derived from RM118/2013 [VER15/07-13]

            • Direct Electronic Access

              • AMI 5.7.3

                (1) An Authorised Market Institution may only permit a Member to provide its clients Direct Electronic Access to the Authorised Market Institution's trading facilities where:
                (a) the clients meet the suitability criteria established by the Member in order to meet the requirements in (2):
                (b) the Member retains responsibility for the orders and trades executed by the clients who are using Direct Electronic Access; and
                (c) the Member has adequate mechanisms to prevent the clients placing or executing orders using Direct Electronic Access in a manner that would result in the Member exceeding its position or margin limits.
                (2) An Authorised Market Institution which permits its Members to allow their clients to have Direct Electronic Access to its trading facilities must:
                (a) set appropriate standards regarding risk controls and thresholds on trading through Direct Electronic Access;
                (b) be able to identify orders and trades made through Direct Electronic Access; and
                (c) if necessary, be able to stop orders or trades made by a client using Direct Electronic Access provided by the Member without affecting the other orders or trades made or executed by that Member.
                (3) For the purposes of this Rule and elsewhere in the Rulebook, Direct Electronic Access means any arrangement, such as the use of the Member's trading code, through which a Member or the clients of that Member are able to transmit orders relating to Investments directly to the facility provided by the Authorised Market Institution.
                (4) For avoidance of doubt, a Person who is permitted to have Direct Electronic Access to an Authorised Market Institution's facilities through a Member is not, by virtue of such permission, a Member of the Authorised Market Institution.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.7.3 Guidance

                  In assessing the adequacy of the criteria used by an Authorised Market Institution to permit its Members to allow their clients to have Direct Electronic Access to Authorised Market Institution's facilities, the DFSA will consider:

                  a. whether such criteria include contractually binding arrangements between the Member and the clients;
                  b. whether such clients are subject to adequate training, competence and experience requirements and checks;
                  c. how electronic access is approved and secured and the measures taken to prevent or resolve problems which would arise from the failure of such access;
                  d. the rules and guidance governing the Person's, procedures, controls and security arrangements for inputting instructions into the system;
                  e. the rules and guidance governing facilities offered to Person's permitted for inputting instructions into the system and restrictions placed on the use of those systems;
                  f. the rules and practices to detect, identify and halt or remove instructions breaching any relevant instructions;
                  g. the quality and completeness of the audit trail of any transaction processed through an electronic connection system; and
                  h the procedures to determine whether to suspend trading by those systems or access to them by or through individual Members.
                  Derived from RM118/2013 [VER15/07-13]

          • AMI 5.8 Admission of Investments to Trading or Clearing

            • Investment Criteria

              • AMI 5.8.1

                (1) An Authorised Market Institution must have clear and objective criteria ("investment criteria") included in its Business Rules according to which Investments can be admitted to trading, or traded, on its facilities, or cleared and settled on its facilities, or both, as relevant to its operations. The investment criteria must include the requirements in (2) and (3) as relevant.
                (2) An Authorised Market Institution must ensure that Investments are admitted to trading or traded on an Exchange it operates only if:
                (a) in the case of Securities, the Securities are admitted to the Official List of Securities; and
                (b) in the case of Derivative contracts, the contracts meet the contract design specifications in Rule 6.3.2.
                (3) An Authorised Market Institution must ensure that Investments are traded on an MTF it operates only if:
                (a) in the case of Securities, the Securities are admitted to trading on a Regulated Exchange in a jurisdiction acceptable to the DFSA; and
                (b) in the case of Derivative contracts, the contracts meet the contract design specifications in Rule 6.3.2.
                (4) Where an Authorised Market Institution admits to trading or clearing or trades on its facilities Investments the value of which is determined by reference to an underlying benchmark or index provided by a Price Information Provider, it must only do so in accordance with the requirements in App 2.
                Derived from RM118/2013 [VER15/07-13]
                [Amended] DFSA RM170/2016 (Made 10th February 2016). [VER17/04-16]

                • AMI 5.8.1 Guidance

                  1. Investment criteria are only one aspect of requirements applicable to an Authorised Market Institution when trading or clearing and settling Investments on its facilities. There are other requirements applicable to such activities, which are contained in this module.
                  2. Any Securities that are admitted to the Official List of Securities maintained by the DFSA meet the requirement in Rule 5.8.1(2)(a).
                  Derived from RM118/2013 [VER15/07-13]
                  [Amended] DFSA RM170/2016 (Made 10th February 2016). [VER17/04-16]

          • AMI 5.9 Integrity and Transparency

            • Integrity and Fair Dealing

              • AMI 5.9.1

                An Authorised Market Institution must be able and willing to:

                (a) promote and maintain high standards of integrity and fair dealing in the carrying on of business on or through its facilities; and
                (b) co-operate with the DFSA or other appropriate regulatory authorities with regard to regulatory matters when required.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.9.1 Guidance

                  1. In determining whether an Authorised Market Institution is able and willing to promote high standards of integrity and fair dealing, the DFSA will consider:
                  a. the extent to which an Authorised Market Institution seeks to promote and encourage such standards through its rules, policies, procedures and practices;
                  b. the extent to which Members are required to, and do, adhere to such standards; and
                  c. any other Rules and principles which apply to the carrying on of business on or through its facilities.
                  2. In assessing the ability and willingness of an Authorised Market Institution to cooperate with the DFSA and other regulatory authorities, the DFSA will consider:
                  a. the agreements in place, including those between Members and other participants granted access to the facilities and the relevant Authorised Market Institution, for sharing information, such as information regarding large open positions; and
                  b. how diligently the Authorised Market Institution responds to enquiries from the DFSA or other regulatory authorities.
                  Derived from RM118/2013 [VER15/07-13]

            • Transparency

              • AMI 5.9.2

                (1) An Authorised Market Institution must have clear and comprehensive policies and procedures for providing sufficient information to enable Members and other participants on its facilities to have an accurate understanding of the risks, fees, and other material costs of using its facilities.
                (2) An Authorised Market Institution must make the policies and procedures referred to in (1) publicly available.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.9.2 Guidance

                  In assessing whether an Authorised Market Institution has adequate policies and procedures for disclosing sufficient information to enable its Members and other participants to fully understand the risks, fees and other material costs in using its facilities, the DFSA will consider whether such information:

                  a. includes explanatory material relating to the system's design and operations, to the rights and obligations of Members and other participants, and to any risks in participating in such facilities;
                  b. includes its fees at the level of individual services it offers as well as its policies on any available discounts;
                  c. is provided in a clear and easy to understand manner and is accurate, up-to-date, and readily available to all current and prospective Members and other participants on its facilities; and
                  d. is made public, through placing such information on its website and other appropriate means.
                  Derived from RM118/2013 [VER15/07-13]

            • Transaction Recording

              • AMI 5.9.3

                Without limiting the requirements in GEN Rules 5.3.24 to 5.3.27, an Authorised Market Institution must ensure that satisfactory arrangements are made for:

                (a) recording the activities and transactions, including orders and order audit trails, effected on or through its facilities;
                (b) maintaining the activity and transaction records for at least 6 years from the date of the transaction or order entry;
                (c) providing the DFSA with these records in a timely manner if required by the DFSA; and
                (d) due observance of the applicable data protection and associated requirements.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.9.3 Guidance

                  1. The type of information that requires recording will vary according to the activity and type of transactions conducted on or through the facilities of the Authorised Market Institution.
                  2. In general, for an Authorised Market Institution Licensed to Operate an Exchange, the type of information which should be recorded will include:
                  a. the name of the relevant Investment and the price, quantity and date of the transaction, including the order audit trail (i.e. orders entered into the system and subsequently amended or cancelled);
                  b. the order type, time of instruction and expiry date;
                  c. the identities and, where appropriate, the roles of the counterparties to the transaction;
                  d. the facilities on which the transaction was effected and is to be cleared and settled; and
                  e. the date and manner of settlement of the transaction.
                  3. In general, for an Authorised Market Institution Licensed to Operate a Clearing House, the type of information which should be recorded will include:
                  a. the name of the relevant Investment and the price, quantity and date of the transaction;
                  b. the identities and, where appropriate, the roles of the counterparties to the transaction;
                  c. the facilities on which the transaction was effected and is to be cleared;
                  d. where applicable, the time novation takes place; and
                  e. the date and manner of settlement of the transaction.
                  4. In addition to the DFSA requirements in this module and in GEN, the requirements in the Data Protection Law 2007, DIFC Law No 1 of 2007, apply to an Authorised Market Institution. Therefore, in complying with the DFSA requirements relating to record keeping, an Authorised Market Institution should consider its obligations under the Data Protection Law 2007.
                  Derived from RM118/2013 [VER15/07-13]

          • AMI 5.10 Safeguarding and Administration of Assets

            • AMI 5.10.1

              An Authorised Market Institution must ensure that, where its obligations include making provision for the safeguarding and administration of assets belonging to Members and other participants on its facilities:

              (a) satisfactory arrangements ("safe custody arrangements") are made for that purpose in accordance with Rules 5.10.2 and 5.10.3; and
              (b) are provided on clear terms of agreement between the Members and other participants on the facility and the Authorised Market Institution.
              Derived from RM118/2013 [VER15/07-13]

              • AMI 5.10.1 Guidance

                1. In determining whether an Authorised Market Institution has satisfactory arrangements for safeguarding and administering assets, the DFSA will consider:
                a. the terms of the agreement under which safe custody arrangements are made and whether they adequately provide for the matters specified in Rule 5.10.2;
                b. the level of protection provided to Members and other participants on its facilities against the risk of theft, fraud, defalcation or other types of loss through such arrangements; and
                c. the degree of monitoring the Authorised Market Institution would be undertaking relating to custodians, and if relevant, sub-custodians.
                2. At the point of granting a Licence to an Authorised Market Institution, the DFSA assesses the adequacy of an applicant's safe custody arrangements. Any subsequent changes to the safe custody arrangements that have been in place at the time of granting the Licence, where they are material changes, would require the DFSA's prior approval in accordance with the requirements in Rule 4.3.2.
                Derived from RM118/2013 [VER15/07-13]

            • AMI 5.10.2

              An Authorised Market Institution must ensure that the safe custody arrangements, at a minimum, provide for:

              (a) the segregation of assets belonging to every Member and other participant on its facilities from the assets belonging to the Authorised Market Institution and the other Members and participants on its facilities;
              (b) the prompt access by the Authorised Market Institution to the assets held under the safe custody arrangements;
              (c) the use or transfer of asset belonging to the Members and other participants on its facilities to be made only in accordance with the instructions of the relevant owners of those assets or in accordance with the terms of the agreement referred to in Rule 5.10.1(b) and any applicable legislation;
              (d) the reconciliation at appropriate intervals and frequency between the assets and accounts held under the safe custody arrangements; and
              (e) accurate records relating to the assets held under the safe custody arrangements to be kept, including:
              (i) the identity of the legal and beneficial owners of the relevant assets, and where appropriate, any Persons who have charges over, or other interests in, those assets;
              (ii) records of any additions, reductions and transfers in each individual account of assets; and
              (iii) the identity of the assets owned by (or where appropriate on behalf of) different Persons, including, where appropriate, the assets owned by Members and other participants on its facilities.
              Derived from RM118/2013 [VER15/07-13]

              • AMI 5.10.2 Guidance

                In assessing whether an Authorised Market Institution's safe custody arrangements meet the requirements in Rule 5.10.2, the DFSA would particularly look at:

                a. the frequency with which statements of the holdings are provided to the Members and other participants on its facilities whose assets are held under the safe custody arrangements;
                b. the records of the assets held and the identity of the beneficial and legal owners and any other persons with rights over such assets, and whether the Authorised Market Institution maintains a register of charges over Investments traded or cleared on its facility;
                c. the records of any instructions given in relation to those assets;
                d. the records of the carrying out of those instructions;
                e. the records of any movements in those assets (or any corporate actions or other events in relation to those assets); and
                f. how the Authorised Market Institution reconciles its records of assets held with the records of any custodian or sub-custodian used to hold those assets, and with the record of beneficial or legal ownership of those assets.
                Derived from RM118/2013 [VER15/07-13]

            • AMI 5.10.3

              An Authorised Market Institution must not appoint any Person as a third party custodian unless that Person:

              (a) is appropriately authorised under its Licence or subject to regulation and supervision by a Financial Services Regulator acceptable to the DFSA for the activity of deposit taking or providing custody and depository services; and
              (b) is prohibited from appointing sub-custodians except where the subcustodians meet the requirements in (a).
              Derived from RM118/2013 [VER15/07-13]

              • AMI 5.10.3 Guidance

                1. An Authorised Market Institution should undertake due diligence to ensure, in the case of any custodians or sub-custodians which are not regulated by the DFSA, that they are appropriately licensed and supervised for the activity of deposit taking or custody and depository services by a Financial Services Regulator in their home jurisdiction.
                2. In order to meet the requirements relating to sub-custody arrangements, an Authorised Market Institution should include clear provisions in the contract with its appointed custodians whether or not sub-custodians may be appointed and if so, the procedures for appointing the sub-custodians, in accordance with the requirements in Rule 5.10.3(b). There should also be contractual requirements for advance notification to the Authorised Market Institution of any changes to the sub-custodians.
                3. If an Authorised Market Institution proposes to make new custody arrangements or make any material changes to its existing custody arrangements, such changes trigger the prior DFSA approval requirements in Rule 4.3.2. This requirement would be triggered, for example, if the appointed custodians at the time of the grant of the Licence had not used sub-custodians but subsequently propose to do so.
                Derived from RM118/2013 [VER15/07-13]

          • AMI 5.11 Promotion and Maintenance of Standards

            • Orderly conduct on facilities

              • AMI 5.11.1

                An Authorised Market Institution must have an effective market surveillance program to:

                (a) ensure that business conducted on or through its facilities is conducted in an orderly manner and in accordance with the applicable Business Rules and other applicable requirements so as to afford proper protection to investors; and
                (b) monitor for conduct which may amount to Market Abuse, financial crime or money laundering.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.11.1 Guidance

                  1. To satisfy the DFSA that Rule 5.11.1(a) is met, an Authorised Market Institution should have rules and procedures in place for:
                  a. preventing and detecting the use of its facilities for abusive, improper or fraudulent purposes; and
                  b. preventing the improper, reckless or negligent use of its facilities.
                  2. In determining whether an Authorised Market Institution is ensuring that business conducted on its facilities is conducted in an orderly manner, the DFSA will consider:
                  a. arrangements for pre and post trade transparency, taking into account the nature and liquidity of the Investments traded; and
                  b. the need to provide anonymity for trading participants.
                  3. An Authorised Market Institution Operating an Exchange will also have appropriate procedures allowing it to influence trading conditions, impose a trading halt promptly when required, and to support or encourage liquidity when necessary to maintain an orderly market. The DFSA will consider the transparency of such procedures and the fairness of their application and potential application.
                  4. In addition, Members who are Authorised Firms should be able to satisfy any other legal obligations they may have, including those to Clients that may exist under COB.
                  5. AML module contains AML obligations of an Authorised Market Institution.
                  Derived from RM118/2013 [VER15/07-13]

            • Prevention of Market Abuse, Money Laundering and Financial Crime

              • AMI 5.11.2

                (1) Without limiting the generality of Rule 5.11.1, an Authorised Market Institution must:
                (a) operate appropriate measures to identify, deter and prevent Market Abuse, money laundering and financial crime on and through the Authorised Market Institution's facilities; and
                (b) report promptly to the DFSA any Market Abuse, money laundering and financial crime, as required.
                (2) For the purposes of (1)(a), an Authorised Market Institution must:
                (a) include in its Business Rules a regime to prevent Market Abuse, money laundering and financial crime that meets the requirements in (3), which is applicable to its Members; and
                (b) implement adequate measures to ensure that its Members comply with that regime.
                (3) The regime referred to in (2)(a) must, at a minimum, include rules and procedures in relation to:
                (a) compliance arrangements to prevent Market Abuse, money laundering and financial crime;
                (b) transaction monitoring;
                (c) risk assessment; and
                (d) training.
                Derived from RM118/2013 [VER15/07-13]
                [Amended] RM193/2016 (Made 7th December 2016). [VER18/02-17]

                • AMI 5.11.2 Guidance

                  1. Abusive, improper and fraudulent purposes include:
                  a. trades intended to create a false appearance of trading activity;
                  b trades which one party does not intend to close out or settle;
                  c. conduct which is likely to result in disorderly trading in the market; and
                  d. any contravention of the provisions in Part 6: Prevention of Market Abuse in the Markets Law.
                  2. An Authorised Market Institution must have an effective surveillance system in place for:
                  a. the coordinated surveillance of all activity on or through its facilities and activity in related Investments conducted elsewhere; and
                  b. communicating information about Market Abuse and financial crime to the DFSA or appropriate regulatory authorities.
                  Derived from RM118/2013 [VER15/07-13]
                  [Amended] RM193/2016 (Made 7th December 2016). [VER18/02-17]

              • AMI 5.11.3

                (1) An Authorised Market Institution must:
                (a) before accepting a prospective Member, ensure that the applicant has in place adequate arrangements including systems and controls to comply with the Authorised Market Institution's regime for preventing Market Abuse, money laundering and financial crime referred to in Rule 5.11.2(2)(a);
                (b) monitor and regularly review compliance by its Members with that regime; and
                (c) take appropriate measures to ensure that its Members rectify any contraventions without delay.
                (2) An Authorised Market Institution must promptly notify the DFSA of any:
                (a) material breach of its regime by a Member; and
                (b) circumstances in which a Member will not or cannot rectify a breach of its regime.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.11.3 Guidance

                  1. An Authorised Market Institution is subject to the requirements in the DFSA's AML module. Members of an Authorised Market Institution which are Authorised Firms are also subject, by virtue of being Authorised Firms, to the requirements in the DFSA's AML module.
                  2. In determining whether an Authorised Market Institution's measures are adequate and appropriate to reduce the extent to which its facilities can be used for Market Abuse, money laundering and financial crime, the DFSA will consider:
                  a. whether the Authorised Market Institution has appropriate staff, surveillance systems, resources and procedures for this purpose;
                  b. the monitoring conducted for possible patterns of normal, abnormal or improper use of those facilities;
                  c. how promptly and accurately information is communicated about Market Abuse, financial crime and money laundering to the DFSA and other appropriate organisations; and
                  d. how the Authorised Market Institution co-operates with relevant bodies in the prevention, investigation and pursuit of Market Abuse, money laundering and financial crime.
                  3. An Authorised Market Institution shall have regard to Part 8 of the Markets Law in relation to Market Abuse and the relevant provisions of the Regulatory Law. Examples of practices that amount to market manipulation (which is one form of Market Abuse) in an automated trading environment that should be identified and prevented by an Authorised Market Institution to promote Proper Markets include the following:
                  a. entering small orders in order to ascertain the level of hidden orders, particularly used to assess what is resting on a dark platform, known as Ping Orders;
                  b. entering large numbers of orders and/or cancellations/updates to orders to create uncertainty for other market participants, slowing down their process and to camouflage its own strategy, known as Quote Stuffing;
                  c. entry of orders or a series of orders intended to start or exacerbate a trend, and to encourage other participants to accelerate or extend the trend in order to create an opportunity to unwind/open a position at a favourable price, known as Moment Ignition; and
                  d. submitting multiple orders often away from one side of the order book with the intention of executing a trade on the other side of the order book, where once that trade has taken place, the manipulative orders will be removed, known as Layering and Spoofing.
                  Derived from RM118/2013 [VER15/07-13]

          • AMI 5.12 Miscellaneous Requirements

            • Whistleblowing

              • AMI 5.12.1

                An Authorised Market Institution must have appropriate procedures and protections for enabling Employees to disclose any information to the DFSA or to other appropriate bodies involved in the prevention of Market Abuse, money laundering or other financial crime or any other breaches of relevant legislation.

                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.12.1 Guidance

                  An Authorised Market Institution's policies and procedures should enable Employees to make protected disclosures, in good faith, of information which, in the reasonable belief of the Employee making the disclosure, tends to show that one or more of the following has been, is being, or is likely to be, committed:

                  a. a criminal offence;
                  b. a failure to comply with any legal obligation;
                  c. a miscarriage of justice;
                  d. the putting of the health and safety of any individual in danger; or
                  e. a deliberate concealment relating to any of (a) to (d),

                  irrespective of whether the relevant conduct or failure occurred, occurs or would occur.

                  Derived from RM118/2013 [VER15/07-13]

            • Handling of Complaints

              • AMI 5.12.2

                (1) An Authorised Market Institution must have effective arrangements in place for the investigation and resolution of complaints made against it.
                (2) An Authorised Market Institution must establish and maintain a register of complaints made against it and their resolution. Records of the complaints must be maintained for a minimum of six years.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 5.12.2 Guidance

                  1. Procedures should be in place to acknowledge a complaint promptly, for making an objective consideration of the complaint and for a timely response to be sent to the complainant. The response should inform the complainant that, if he is not satisfied with the response, he should contact the DFSA.
                  2. Complaints should be fairly and impartially investigated by a person not involved in the conduct about which the complaint has been made. At the conclusion of the investigation, a report should be prepared and provided to the relevant Key Individuals.
                  Derived from RM118/2013 [VER15/07-13]

        • AMI 6 Additional Licensing Requirements for Operating an Exchange

          • AMI 6.1 Application

            • AMI 6.1.1

              (1) This chapter applies to an Authorised Market Institution Operating an Exchange or an applicant for such a Licence.
              (2) In this chapter, a reference to an "Exchange" is a reference to a Person referred to in (1).
              Derived from RM118/2013 [VER15/07-13]

          • AMI 6.2 Proper Markets

            • AMI 6.2.1

              (1) An Exchange must have rules and procedures for fair, orderly and efficient operation of trading of Investments on its facilities. For this purpose, an Exchange must ensure that only Investments in which there is a Proper Market are traded on its facilities.
              (2) For a Proper Market to exist in Investments:
              (a) Derivatives traded on its facilities must meet the contract design specifications in Rule 6.3.2;
              (b) relevant market information must be made available to Persons engaged in dealing on an equitable basis, including pre-trade and post-trade disclosure of orders, in accordance with the requirements in section 6.4.
              (c) there must be adequate mechanisms to discontinue, suspend or remove from trading on its facilities any Investments in circumstances where the requirements relating to Proper Markets are not met;
              (d) there must be in place controls to prevent volatility in the markets that is not the result of market forces, in accordance with the requirements in section 6.5;
              (e) error trades must be managed, in accordance with the requirements in section 6.6;
              (f) short selling and position concentration must be monitored and managed, in accordance with the requirements in section 6.7;
              (g) there must be a fair and non-discretionary algorithm operating in respect of the matching of orders on its facilities;
              (h) there must be in place adequate controls, to monitor and manage any foreign ownership restrictions applying to Investments traded on its facilities, in accordance with the requirements in section 6.8; and
              (i) any liquidity incentive schemes must be offered only in accordance with the requirements in section 6.9.
              Derived from RM118/2013 [VER15/07-13]

              • AMI 6.2.1 Guidance

                Rules and procedures referred to in Rule 6.2.1(2) should generally form part of the Business Rules of an Authorised Market Institution (see the content of Business Rules in Rule 5.6.1).

                Derived from RM118/2013 [VER15/07-13]

          • AMI 6.3 Specifications Relating to Design and Trading of Derivatives

            • AMI 6.3.1

              (1) An Exchange which trades Derivative contracts on its facilities must:
              (a) have clear and transparent rules and procedures for the trading of Derivative contracts, which are made publicly available; and
              (b) ensure that the trading in Derivative contracts on its facilities is undertaken in a fair, orderly and efficient manner.
              (2) The rules and procedures must promote transparency by ensuring that there is sufficient information made available to the markets relating to the terms and conditions of the Derivative contracts traded on its facilities. Such information must include, where relevant, information relating to delivery and pricing of Derivative contracts.
              Derived from RM118/2013 [VER15/07-13]

            • Contract Design Specifications

              • AMI 6.3.2

                (1) An Exchange must ensure that the Derivative contracts traded on its facilities:
                (a) have a design that enables the orderly pricing and effective settlement of the obligations arising under the contract; and
                (b) where they are Commodity Derivative contracts which require physical delivery, have terms and conditions which:
                (i) promote price discovery of the underlying commodity;
                (ii) ensure, to the extent possible, that there is a correlation to the operation of the physical market in the underlying commodity;
                (iii) include contract delivery specifications which address matters specified in App 3; and
                (iv) provide for legally enforceable settlement and delivery procedures.
                (2) For the purposes of meeting the requirement in (1)(a), an Exchange must include in its Business Rules contract design specifications relating to Derivative contracts traded on its facilities which, at a minimum, include:
                (a) minimum price fluctuations (price ticks);
                (b) maximum price fluctuations (daily price limits), if any;
                (c) last trading day;
                (d) settlement or delivery procedures as applicable;
                (e) trading months;
                (f) position limits, if any;
                (g) reportable levels; and
                (h) trading hours.
                Derived from RM118/2013 [VER15/07-13]

            • On-going Review

              • AMI 6.3.3

                An Exchange must:

                (a) establish and implement clear procedures relating to the development and review of contract design for Derivative contracts traded on its facilities;
                (b) have adequate process through which the views of potential users of Derivative contracts can be taken into account when developing and reviewing contract design for Derivative contracts;
                (c) have adequate powers which enable it to eliminate contractual terms which produce, or are likely to produce, manipulative or disorderly conditions in the markets generally, or in relation to the particular class or type of Derivative contracts; and
                (d) have adequate mechanisms to monitor and evaluate whether the settlement and delivery procedures reflect the underlying physical market and promote reliable pricing relationship between the two markets.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 6.3.3 Guidance

                  1. When assessing whether an Exchange's rules and procedures are adequate, the DFSA will consider, among other things:
                  a. the criteria adopted by the Exchange for Derivative contracts to be traded on its facilities;
                  b. what powers the Exchange has in order to eliminate manipulative or disorderly conduct, including powers to vary, remove or rescind conditions of any Derivative contracts already traded where these are found to cause manipulative or disorderly conditions; and
                  c. what mechanisms are established by the Exchange to monitor and review market activities relating to Derivative contracts traded on its facilities.
                  2. When designing and reviewing the design of Commodity Derivative contracts, an Exchange should consider the following physical market characteristics, including differences within a commodity market with regard to the commodity in question:
                  a. size and structure of the physical market;
                  b. commodity characteristics (such as grade, quality, weight, class, growth, origin, source etc.);
                  c. historical patterns of production, consumption and supply, including seasonality, growth, market concentration in the production chain, domestic or international export focus and logistics;
                  d. extent of distribution or dispersal of production and consumption of the underlying physical commodity among producers, merchants and consumers;
                  e. accepted market practice at the physical commodity market in question, including loading tolerances and delivery of alternative supply under the contract terms;
                  f. adequacy, nature and availability of supply of the underlying physical commodity, including an estimate of the deliverable supplies for the delivery month specified in the relevant commodity contract;
                  g. movement or flow of the underlying physical commodity;
                  h. the liquidity of the underlying physical market;
                  i. the spot market pricing system including transparency, availability, reliability and frequency of cash pricing;
                  j. price volatility; and
                  k. the existence of price controls, embargoes, export restrictions or other regulation or controls affecting the price or supply of the underlying physical commodity.
                  Derived from RM118/2013 [VER15/07-13]

          • AMI 6.4 Transparency and Disclosure

            • AMI 6.4.1

              An Exchange must have adequate arrangements for providing to the markets adequate information about Investments traded on its facilities, and its trading activities, for the purposes of promoting:

              (a) pre-trade transparency; and
              (b) post-trade transparency.
              Derived from RM118/2013 [VER15/07-13]

            • Pre-trade Transparency

              • AMI 6.4.2

                (1) An Exchange must disclose the information specified in (2) relating to trading of Investments on its facilities in the manner specified in (3).
                (2) The information required to be disclosed pursuant to (1) is:
                (a) the current bid and offer prices and volume;
                (b) the depth of trading interest shown at the prices and volumes advertised through its systems for the Investments; and
                (c) any other information relating to Investments which would promote transparency relating to trading.
                (3) The information referred to in (2) must be made available to the public on a continuous basis during normal trading.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 6.4.2 Guidance

                  1. When making disclosure, an Exchange should adopt a technical mechanism by which the public can differentiate between transactions that have been transacted in the central order book and transactions that have been reported to the Exchange as off-order book transactions. Any transactions that have been cancelled pursuant to its rules should also be identifiable.
                  2. The reference to trading interest in Rule 6.4.2(2)(b) includes any actionable indications of interests. Actionable interests are messages from one Member to another in a trading system about available trading interest that contains all necessary information to agree on a trade.
                  3. An Exchange should use adequate mechanisms so that pre-trade information is available to the public in an easy to access and uninterrupted manner at least during business hours. An Exchange may charge a reasonable fee for the information which it makes available to the public.
                  4. An Exchange will be able to withhold pre-trade disclosure only if it has obtained a waiver or modification to Rule 6.4.2. An Exchange may seek a waiver or modification from the disclosure requirement in Rule 6.4.2(1) in relation to certain transaction orders where:
                  a. the order size is pre-determined and exceeds a pre-set and published threshold level; and
                  b. the details of the exemption are included in its Business Rules.
                  5. In assessing whether an exemption from pre-trade disclosure should be allowed, the DFSA will take into account factors such as:
                  a. the level of order threshold compared with normal market size for the Investment;
                  b. the impact such an exemption would have on price discovery, fragmentation, fairness and overall market quality;
                  c. whether there is sufficient transparency relating to trades executed without pre-trade disclosure as a result of dark orders whether or not they are entered in transparent markets;
                  d. whether the Exchange supports transparent orders by giving priority to transparent orders over dark orders, for example, by executing such orders at the same price as transparent orders; and
                  e. whether there is adequate disclosure of details relating to dark orders available to Members and other participants on the facilities of the Exchange to enable them to understand the manner in which their orders will be handled and executed on those facilities.
                  6. Dark orders are orders executed on execution platforms without pre-trade transparency.
                  Derived from RM118/2013 [VER15/07-13]

            • Post-trade Transparency

              • AMI 6.4.3

                (1) An Exchange must disclose the post-trade information specified in (2) relating to trading of Investments on its facilities in the manner specified in (3).
                (2) The post-trade information required to be disclosed pursuant to (1) is the price, volume and time of the transactions executed in respect of the Investments traded on its facilities.
                (3) The information referred to in (2) must be:
                (a) made available in real-time on reasonable commercial terms and on a non-discriminatory basis; and
                (b) made available, as soon as practicable thereafter, to the public.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 6.4.3 Guidance

                  An Exchange should use appropriate mechanisms to enable post-trade information to be made available to the public in an easy to access and uninterrupted manner at least during business hours. An Exchange may charge a reasonable fee for the information which it makes available to the public.

                  Derived from RM118/2013 [VER15/07-13]

          • AMI 6.5 Volatility Controls

            • AMI 6.5.1

              (1) An Exchange must have in place effective systems, controls and procedures to ensure that its trading systems:
              (a) are resilient;
              (b) have adequate capacity to deal with peak orders and message volumes; and
              (c) are able to operate in an orderly manner under conditions of market stress.
              (2) Without limiting the generality of its obligations arising under (1) or any other Rule, an Exchange's rules, systems, controls and procedures must enable it to:
              (a) reject orders that exceed its pre-determined volume and price thresholds, or that are clearly erroneous;
              (b) temporarily halt trading of Investments traded on its facility if there is a significant price movement in relation to those Investments on its facility or a related market during a short period; and
              (c) where appropriate, cancel, vary or correct any transaction.
              Derived from RM118/2013 [VER15/07-13]

              • AMI 6.5.1 Guidance

                An Exchange should test its trading systems to ensure that they are resilient and capable of operating orderly trading under conditions of market stress and other contingencies.

                Derived from RM118/2013 [VER15/07-13]

            • AMI 6.5.2

              (1) An Exchange must have adequate arrangements, including technology, which:
              (a) are capable of preventing capacity limits relating to messaging being breached;
              (b) require its Members to apply pre-trade controls to their clients; and
              (c) permit only its Members to modify the parameters of any pre-trade controls.
              (2) An Exchange must make publicly available the details of arrangements it has in place in order to meet the requirement in (1).
              Derived from RM118/2013 [VER15/07-13]

              • AMI 6.5.2 Guidance

                1. In order to meet the requirements in Rule 6.5.2(1), an Exchange may, within its arrangements:
                a. include a mechanism for "throttling" orders to prevent breaches of its capacity;
                b. prohibit "naked" or "unfiltered" access to its facilities by Members' clients where the client orders do not pass through pre-trade controls; and
                c. include requirements for Members to have appropriate pre-trade controls on the orders of their clients, which include in-built and automatic rejection of orders outside of certain pre-set parameters.
                2. Pre-trade controls which an Authorised Market Institution requires from its Members should contain:
                a. price or size parameters: Members should be able to automatically block or cancel orders that do not meet the set price or size parameters either or both on an order-by-order basis or over a specified period of time;
                b. controls around permission to trade: Members should be able to block or cancel orders immediately as soon as they are made aware that trade permissions of a trader have been breached;
                c. effective risk management: Members should be able to block or cancel orders automatically where the trades pose risks that compromise the Member's own risk management thresholds. Such controls should be applied as necessary and appropriate to exposures to individual clients or financial instruments or groups of clients or financial instruments, exposures of individual traders, trading desks or the Member as a whole;
                d. reporting obligations: Members should be obliged to notify the Exchange about significant risks that may affect fair and orderly trading and major incidents as soon as they become aware of such risks or incidents;
                e. overriding of pre-trade controls: Members should have procedures and arrangements for dealing with orders which have been automatically blocked by the Member's pre-trade controls but which the Member may re-submit. Such procedures and arrangements should serve to alert compliance and risk management staff of the Member that controls have been overridden and require their approval for the overriding of these controls;
                f. training on order entry procedures: Members should ensure that employees using the order entry system have adequate training on order entry procedures before they are allowed to use Members' order entry systems;
                g. monitoring and accessibility of knowledgeable and mandated staff: Members should monitor their orders to the Exchange in as close to real time as possible, including from a cross-market perspective, for potential signs of disorderly trading. Such monitoring should be conducted by Member's staff who understand its trading flow. They should be accessible to the Exchange and have necessary authority to take necessary and appropriate remedial action. Members should ensure that compliance staff are able to follow closely the Member's electronic trading activity so that they can quickly respond to and correct any failures or regulatory infractions that may take place; and
                h. control of messaging traffic: Members should have control of messaging traffic to the Exchange particularly to ensure any messaging limits imposed by the Exchange on the Members are not exceeded. Messaging limits are limits imposed by an Exchange on its Members for the transmission of orders such as buy or sell to ensure that the Exchange's capacity to deal with such orders is not exceeded.
                Derived from RM118/2013 [VER15/07-13]

          • AMI 6.6 Error Trade Policy

            • AMI 6.6.1

              (1) An Exchange must be able to cancel, amend or correct any Error Trades.
              (2) An Error Trade is the execution of an order resulting from:
              (a) an erroneous order entry;
              (b) malfunctioning of the system of a Member or of the Authorised Market Institution; or
              (c) a combination of (a) and (b).
              (3) For the purposes of (1), an Exchange's Business Rules must include a comprehensive Error Trade policy which sets out clearly the extent to which transactions can be cancelled by the Exchange at its sole discretion, at the request of a Member or by mutual consent of the Members involved.
              (4) An Exchange must have adequate systems and controls to:
              (a) prevent or minimise Error Trades;
              (b) promptly identify and rectify Error Trades where they occur; and
              (c) identify whether Error Trades are related to disorderly market activity.
              Derived from RM118/2013 [VER15/07-13]

              • AMI 6.6.1 Guidance

                When assessing whether an Exchange has an appropriate and adequate Error Trade policy, the DFSA will consider whether the rules and procedures included in the Business Rules:

                a. are adequate and, where prevention is not possible, minimise the impact of Error Trades;
                b. are sufficiently flexible in the design to address varying scenarios;
                c. establish a predictable and timely process for dealing with Error Trades, including measures specifically designed to detect and identify Error Trade messages to market users;
                d. promote transparency to market users with regard to any cancellation decisions involving material transactions resulting from the invocation of the Error Trade policy;
                e. include adequate surveillance conducted in the markets to detect Error Trades;
                f. promote predictability, fairness and consistency of actions taken under the Error Trade policy; and
                g. enable sharing of information with other markets, when possible, concerning the cancellation of trades.
                Derived from RM118/2013 [VER15/07-13]

          • AMI 6.7 Short Selling and Position Management

            • AMI 6.7.1

              (1) An Exchange must have in place effective systems, controls and procedures to monitor and manage:
              (a) Short Selling in Securities; and
              (b) risks arising from position concentrations.
              (2) For the purposes of (1), an Exchange must have adequate powers over its Members to address risks to an orderly functioning of its facilities arising from unsettled positions in Investments.
              (3) Short Selling for the purposes of this Rule constitutes the sale of a Security by a Person who does not own the Security at the point of entering into the contract to sell.
              Derived from RM118/2013 [VER15/07-13]

              • AMI 6.7.1 Guidance

                1. An Exchange should, when developing its controls and procedures with regard to Short Selling and position management, have regard to:
                a. its own settlement cycle, in order to ensure that any Short Selling activities on its facilities do not result in any delay or prevent effective settlement within such cycle; and
                b. orderly functioning of its facilities, to ensure that any long or short position concentration on Investments that remain unsettled does not interrupt such functioning.
                2. Examples of circumstances that would not be treated as short selling in Rule 6.7.1(3) include where the seller:
                a. has entered into an unconditional contract to purchase the relevant Securities but has not received their delivery at the time of the sale;
                b. has title to other securities which are convertible or exchangeable for the Securities to which the sale contract relates;
                c. has exercised an option to acquire the Securities to which the sale contract relates;
                d. has rights or warrants to subscribe and receive Securities to which the sale contract relates; and
                e. is making a sale of Securities that trades on a "when issued" basis and has entered into a binding contract to purchase such Securities, subject only to the condition of issuance of the relevant Securities.
                Derived from RM118/2013 [VER15/07-13]

          • AMI 6.8 Foreign Ownership Restrictions

            • AMI 6.8.1

              (1) An Exchange may admit to trading on its facilities Investments which are subject to foreign ownership restrictions where it has in place adequate and effective arrangements to:
              (a) monitor applicable foreign ownership restrictions; and
              (b) promptly identify and take appropriate action where any breaches, or likely breaches, of such restrictions occur or are about to occur, so as to ensure that there is no undue interruption or negative impact on its trading activities.
              (2) For the purposes of (1), the arrangements of an Exchange must include:
              (a) requirements applicable to issuers and other Persons responsible for the relevant Investments to:
              (i) make available to the Exchange information relating to any ownership restrictions applicable to the Investments; and
              (ii) take such action as appropriate to remedy any breaches as soon as practicable;
              (b) mechanisms to access current information relating to ownership of the relevant Investments, including any beneficial owners;
              (c) appropriate public disclosure of information where ownership restrictions are, or are about to be, breached;
              (d) mechanisms to suspend trading in the relevant Investments where the ownership restrictions are, or are about to be, breached; and
              (e) mechanisms to reinstate trading where ownership restrictions are no longer in breach.
              Derived from RM118/2013 [VER15/07-13]

              • AMI 6.8.1 Guidance

                1. An Exchange is required, as part of information to be provided to the DFSA, to promptly inform the DFSA where breaches of the ownership restrictions occur. See section 9.8.
                2. An Exchange should establish appropriate thresholds at which an early warning system and subsequent public disclosure is triggered relating to foreign ownership restrictions. Such thresholds should be set at intervals/levels, taking into account the patterns of trading in the relevant Investments and other factors which enable the Exchange to take preventative measures before the breaches occur.
                Derived from RM118/2013 [VER15/07-13]

          • AMI 6.9 Liquidity Incentive Schemes

            • AMI 6.9.1

              (1) An Exchange must not introduce a liquidity incentive scheme unless:
              (a) participation in such a scheme is limited to:
              (i) a Member of the Exchange; or
              (ii) any other Person where:
              (A) the Exchange has undertaken due diligence to ensure that the Person is of sufficient good repute and has adequate competencies and organisational arrangements; and
              (B) the Person has agreed in writing to comply with the Business Rules of the Exchange so far as those rules are applicable to that Person's activities; and
              (b) it has obtained the DFSA's prior written approval for the scheme.
              (2) For the purposes of this section, a liquidity incentive scheme means an arrangement designed to provide liquidity in the market or in relation to a particular Investment or class of Investments.
              (3) An Exchange must, at least 10 business days prior to the introduction of a liquidity incentive scheme referred to in (1), lodge with the DFSA a notification containing:
              (a) the details of the relevant scheme;
              (b) the benefits to the Exchange and its Members and other users resulting from the scheme;
              (c) a certification by it that the requirements in (1)(a) have been fully met; and
              (d) the date on which the scheme is intended to become operative.
              (4) The DFSA will, within 10 business days of receiving the notification referred to in (3), approve the proposed liquidity incentive scheme unless it has reasonable grounds to believe that the introduction of the scheme is reasonably likely to be detrimental to the existence of Proper Markets. Where the DFSA does not approve the proposed liquidity incentive scheme, it will notify the Exchange of its objections to the introduction of the proposed liquidity incentive scheme, and its reasons for that decision.
              (5) If the DFSA decides to exercise its power under (4) not to approve a proposed liquidity incentive scheme, the Exchange may refer the matter to the FMT for review.
              (6) An Exchange must, as soon as practicable, announce the introduction of the liquidity incentive scheme, including the date on which it becomes operative and any other relevant information.
              Derived from RM118/2013 [VER15/07-13]
              [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

              • AMI 6.9.1 Guidance

                1. Examples of liquidity incentive schemes are arrangements under which an Exchange offers to market makers rebates, stipends, waivers of membership or transaction fees and other financial incentives, including payments for routing order flows or other forms of soft dollar benefits.
                2. The period of 10 business days referred to in Rule 6.9.1(4) will commence to run from the date on which all the information relating to the liquidity incentive scheme as specified in Rule 6.9.1(3) has been provided to the DFSA.
                3. For the purposes of certifying that a Person meets the criteria set out in Rule 6.9.1(a)(ii), an Exchange should undertake:
                a. a verification of the identity of the relevant Person and its beneficial owners and directors for the purposes of applicable AML requirements;
                b. an assessment of the character and good standing, as well as the knowledge, experience and skills, of the Person and its directors and relevant Employees; and
                c. the adequacy of the control framework created by the Person in respect of the liquidity incentive scheme to ensure that trading occurs in accordance with the Business Rules of the Exchange.
                4. An Exchange is not required, pursuant to Rule 6.9.1(6), to make public disclosure of any details about the liquidity incentive scheme where such information is reasonably regarded as commercially sensitive information. However, is should make such disclosure as it deems appropriate to keep its market well informed about the introduction of the scheme.
                Derived from RM118/2013 [VER15/07-13]

          • AMI 6.10 Clearing and Settlement Arrangements

            • AMI 6.10.1

              An Exchange must:

              (a) ensure that there are satisfactory arrangements in place for securing the timely discharge of the rights and liabilities of the parties to transactions conducted on or through its facilities; and
              (b) inform its Members and other participants of the arrangements referred to in (a).
              Derived from RM118/2013 [VER15/07-13]

          • AMI 6.11 Listing Rules

            • Application

              • AMI 6.11.1

                (1) The requirements in this section apply, subject to (2), to an Exchange which maintains or proposes to maintain its own Official List of Securities.
                (2) The requirement in Rule 6.11.8(1) applies to a Person who wishes to have Securities included in an Official List of Securities.
                Derived from RM118/2013 [VER15/07-13]

            • General Requirements Relating to Listing Rules

              • AMI 6.11.2

                (1) An Exchange wishing to admit Securities to its own Official List of Securities must:
                (a) have listing rules which meet the requirements in Rule 6.11.3; and
                (b) ensure that its listing rules are approved by the DFSA.
                (2) Any amendment to an Exchange's listing rules must, prior to the amendment becoming effective, have been:
                (a) made available for a reasonable period of time to the market for consultation; and
                (b) approved by the DFSA.
                (3) In urgent cases, the DFSA may, on written application by the Authorised Market Institution, dispense with requirement in (2)(a).
                (4) The procedures in Schedule 3 to the Regulatory Law apply to a decision of the DFSA under this Rule not to approve a proposed listing rule or an amendment to a listing rule.
                (5) If the DFSA decides to exercise the power under this Rule not to approve a proposed listing rule or an amendment to a listing rule, the Authorised Market Institution may refer the matter to the FMT for review.
                Derived from RM118/2013 [VER15/07-13]
                [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

            • Publication of Listing Rules

              • AMI 6.11.3

                (1) An Exchange must publish, and make freely available, its listing rules.
                (2) Where an Exchange has made any amendments to its listing rules, it must have adequate procedures for notifying users of such amendments.
                Derived from RM118/2013 [VER15/07-13]

            • Content of Listing Rules

              • AMI 6.11.4

                (1) The listing rules of an Exchange must be clear, fair and legally enforceable and contain provisions dealing with:
                (a) procedures for admission of Securities to its Official List of Securities including;
                (i) requirements to be met before Securities may be granted admission to its Official List of Securities; and
                (ii) agreements in connection with admitting Securities to its Official List of Securities;
                (b) effective enforcement of the agreements referred to in (a)(ii);
                (c) procedures for suspension and delisting of Securities from its Official List of Securities;
                (d) the imposition on any Person of obligations to observe specific standards of conduct or to perform, or refrain from performing, specified acts, reasonably imposed in connection with the admission of Securities to its Official List of Securities or continued admission of Securities to its Official List of Securities;
                (e) penalties or sanctions which may be imposed by an Exchange or the DFSA for a breach of the listing rules;
                (f) procedures or conditions which may be imposed, or circumstances which are required to exist, in relation to matters which are provided for in the listing rules;
                (g) actual or potential conflicts of interest that have arisen or might arise when a Person seeks to have Securities admitted to its Official List of Securities; and
                (h) such other matters as are necessary or desirable for the proper operation of the listing rules and process.
                (2) Without prejudice to the requirements in (1), the listing rules of the Exchange must also include, where appropriate to the type the Securities being admitted to its Official List of Securities, requirements in respect of:
                (a) an issuer's financial reporting and, in particular how regular reports are made and the international accounting standards to which they comply;
                (b) auditing standards;
                (c) an issuer's track record in terms of profit or operating history;
                (d) the percentage of Securities in a class of Securities which can be considered as in free float;
                (e) any restrictions that may exist on transferability; and
                (f) any other matter deemed necessary by the DFSA.
                Derived from RM118/2013 [VER15/07-13]

              • AMI 6.11.5

                An Exchange must have adequate systems and controls to comply with the requirements that are applicable to it in respect of an Official List of Securities maintained by itself or by the DFSA for the purposes of trading of Securities using its facilities.

                Derived from RM118/2013 [VER15/07-13]

            • Compliance with Listing Rules

              • AMI 6.11.6

                (1) An Exchange which has an endorsement on its Licence authorising it to maintain an Official List of Securities must ensure the function is properly and independently operated.
                (2) An Exchange must have procedures in place to ensure that:
                (a) its listing rules are monitored and enforced; and
                (b) complaints regarding Persons subject to the listing rules are investigated.
                Derived from RM118/2013 [VER15/07-13]

              • AMI 6.11.7

                An Exchange must ensure that:

                (a) where appropriate, disciplinary action can be carried out and financial and other types of penalties can be imposed on Persons subject to the listing rules; and
                (b) adequate appeal procedures are in place.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 6.11.7 Guidance

                  In determining whether an Exchange can effectively monitor its listing rules, the DFSA will consider amongst other things:

                  a. the oversight of the Official List of Securities;
                  b. the range of powers the Exchange retains over Persons with Securities admitted to its Official List of Securities which should include the ability to suspend, restore from suspension and de-list Securities from the Official List of Securities in accordance with this module; and
                  c. the disciplinary procedures which have been established to take disciplinary action, including a fair and clear policy on any financial penalties which may be imposed, and the appeal processes.
                  Derived from RM118/2013 [VER15/07-13]

                • AMI 6.11.7 Admission to an Official List of Securities

                  • AMI 6.11.7 Guidance

                    1. The DFSA has powers under Article 34 of the Markets Law in relation to the admission of Securities to an Official List of Securities maintained by an Authorised Market Institution. Under that Article the DFSA may:
                    a. object to an admission of Securities to an Official List of Securities; or
                    b. impose conditions or restrictions on an admission of Securities to an Official List of Securities.
                    2. Where the DFSA objects to an application for an admission of Securities to an Official List of Securities, the Exchange is prohibited from admitting Securities to its Official List of Securities by virtue of Article 34 of the Markets Law.
                    3. Pursuant to Article 34(7) of the Markets Law, the FMT may hear and determine any reference in relation to a decision by the DFSA to object or impose conditions or restrictions upon an admittance of Securities to an Official List of Securities.
                    4. The DFSA expects to exercise these powers rarely. An Exchange is responsible for assessing applications to its Official List of Securities. This section sets out the process for dealing with applications for admission.
                    Derived from RM118/2013 [VER15/07-13]
                    [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

              • Application for Admission of Securities to an Official List of Securities

                • AMI 6.11.8

                  (1) Applications for the admission of Securities to an Official List of Securities must be made by the issuer of the Securities, or by a third party on behalf of and with the consent of the issuer of the Securities.
                  (2) An Exchange must, before granting admission of any Securities to an Official List of Securities maintained by it:
                  (a) be satisfied that the applicable requirements, including those in its listing rules, have been or will be fully complied with in respect of those Securities; and
                  (b) comply with the requirements relating to notification to the DFSA in Rule 6.11.9(1).
                  (3) An Exchange must notify an applicant in writing of its decision in relation to the application for admission of Securities to its Official List of Securities.
                  Derived from RM118/2013 [VER15/07-13]

                • AMI 6.11.9

                  (1) Subject to (2), at least 5 business days prior to an admission of Securities to its Official List of Securities, an Exchange must provide the DFSA with notice of the decision and include the following information in the notification:
                  (a) a copy of the listing application;
                  (b) a copy of the assessment of the listing application carried out by the Exchange; and
                  (c) any information requested by the DFSA.
                  (2) An Exchange must immediately notify the DFSA of any decision to suspend, restore from suspension or de-list any Securities from its Official List of Securities and the reasons for the decision.
                  Derived from RM118/2013 [VER15/07-13]

        • AMI 7 Additional Licensing Requirements for Operating a Clearing House

          • AMI 7.1 Application

            • AMI 7.1.1

              (1) This chapter applies, subject to (3), to an Authorised Market Institution Operating a Clearing House and an applicant for such a Licence.
              (2) In this chapter, a reference to a "Clearing House" is a reference to a Person in (1), except where specific reference is made to:
              (a) a Central Counterparty (CCP);
              (b) a Securities Settlement System (SSS); or
              (c) a Central Securities Depository (CSD).
              (3) Specific references in this chapter to a Clearing House undertaking any of the functions specified in (2)(a) to (c) apply only in respect of that function.
              Derived from RM118/2013 [VER15/07-13]

              • AMI 7.1.1 Guidance

                1. The Financial Service of Operating a Clearing House is defined in GEN Rule 2.18.1(1). This definition provides that Operating a Clearing House can be carried on by either the operator becoming a Central Counterparty (CCP) or by operating a Securities Settlement System (SSS) (i.e. a system that enables Investments to be transferred and settled by book entry), regardless of whether or not such a Person also acts as a Central Securities Depository (CSD) in respect of Securities cleared or settled on its facility and similar facilities.
                2. Where a Clearing House undertakes the function of acting as a CSD under its own Licence, the additional requirements in section 7.4 apply to it. The function of CSD may also be carried out by an Authorised Firm licensed to carry on the Financial Service of Providing Custody. See GEN definition in Rule 2.13.1(3). Such a firm is subject to similar requirements as in section 7.4, which are set out in COB section 10.2.
                3. Where a Clearing House which did not at the time of licensing carry on CSD functions wishes to do so subsequently, it needs to apply to the DFSA for approval under Rule 4.3.1, as it is a material change to its current arrangements.
                Derived from RM118/2013 [VER15/07-13]

          • AMI 7.2 Risk Management

            • AMI 7.2 Guidance

              1. An Authorised Market Institution which operates a Clearing House is subject to the management, systems and controls requirements in GEN chapter 5. These provisions require such an Authorised Market Institution to establish and maintain risk management systems and controls to enable it to identify, assess, mitigate, control and monitor the risks to which it is exposed and to develop and implement policies and procedures to manage the risks to which it and the users of its facilities are exposed.
              2. The requirements set out below augment the GEN obligations referred to in 1.
              Derived from RM118/2013 [VER15/07-13]

            • Risk Management Framework

              • AMI 7.2.1.

                (1) A Clearing House must have a comprehensive risk management framework (i.e. detailed policies, procedures and systems) capable of managing legal, credit, liquidity, operational and other risks to which it is exposed.
                (2) The risk management framework in (1) must:
                (a) encompass a regular review of material risks to which the Clearing House is exposed and the risks posed to other market participants resulting from its operations; and
                (b) be subject to periodic review as appropriate to ensure that it is effective and operating as intended.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 7.2.1 Guidance

                  1. The risk management framework should, for the purposes of Rule 7.2.1(2)(a), identify scenarios that may potentially prevent a Clearing House from being able to provide its critical operations and services as a going concern and assess the effectiveness of a full range of options for recovery or orderly wind-down.
                  2. A Clearing House should prepare appropriate plans for resumption of its operations in such scenarios and, where it is not possible to do so, for an orderly wind-down of the operations of the Clearing House premised on the results of such assessments.
                  3. Such procedures should also include appropriate early notification to the DFSA and other regulators as appropriate. See also the requirements in section 9.8 relating to disclosure to the DFSA.
                  4. A Clearing House should also, to the extent possible, provide incentives to Members and other market participants to manage and contain the risks they pose to the orderly and efficient operations of the Clearing House. Those may include financial penalties to Members and other participants that fail to settle Investments in a timely manner or to repay intraday credit by the end of the operating day.
                  Derived from RM118/2013 [VER15/07-13]

            • Legal Risk

              • AMI 7.2.2

                (1) A Clearing House must have a well-founded, clear, transparent, and enforceable legal basis for each material aspect of its activities in all relevant jurisdictions.
                (2) A Clearing House must have adequate rules and procedures, including contractual arrangements, which are legally enforceable.
                (3) A Clearing House that operates in multiple jurisdictions must:
                (a) identify and mitigate the risks arising from doing business in the relevant jurisdictions, including those arising from conflicting laws applicable in such jurisdictions; and
                (b) ensure the arrangements referred to in (2) provide a high degree of certainty that actions taken by the Clearing House under its rules and procedures will not be reversed, stayed or rendered void.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 7.2.2 Guidance

                  1. This Rule is designed to address legal risks faced by a Clearing House, particularly where it operates in multiple jurisdictions. For example, an unexpected application of a law or regulation may render a contract between itself and a counterparty void or unenforceable, thereby leading to a loss.
                  2. A Clearing House should be able to demonstrate to the DFSA that the legal basis on which it operates, including in multiple jurisdictions, is well founded. A well founded legal basis would generally include well defined rights and obligations of the Clearing House, its Members and other users, including its service providers such as custodians and settlement banks, or would provide a mechanism by which such rights and obligations can be ascertained. This would enable the Clearing House to identify and address risks that arise from its operations involving such parties.
                  3. A Clearing House should, in order to form clear views about the legally binding nature of its contractual arrangements in the relevant jurisdictions, obtain independent legal opinions as appropriate to its activities. Such legal opinions should, to the extent practicable, confirm the enforceability of the rules and procedures of the Clearing House in the relevant jurisdictions and be made available to the DFSA upon request.
                  4. A Clearing House may be conducting its activities in multiple jurisdictions in circumstances such as:
                  a. where it operates through linked CCPs, SSSs or CSDs;
                  b. where its Members and other participants are incorporated, located, or otherwise conducting business in jurisdictions outside the DIFC; or
                  c. where any collateral provided is located or held in a jurisdiction outside the DIFC.
                  Derived from RM118/2013 [VER15/07-13]

            • Liquidity Risk

              • AMI 7.2.3

                (1) A Clearing House must:
                (a) determine the amount of its minimum liquid resources;
                (b) maintain sufficient liquid resources to be able to effect same-day, intra-day or multi-day settlement, as applicable, of its payment obligations with a high degree of confidence under a wide range of potential stress scenarios;
                (c) ensure that all resources held for the purposes of meeting its minimum liquid resource requirement are available when needed;
                (d) have a well-documented rationale to support the amount and form of total liquid resources it maintains for the purposes of (b) and (c); and
                (e) have appropriate arrangements in order to be able to maintain, on an on-going basis, such amount and form of its total liquid resources.
                (2) A Clearing House must have a robust framework for managing its liquidity risks. Such a framework must enable it to manage liquidity risks arising from its Members and other participants on its facilities, and any other involved parties, such as settlement banks, custodian banks, liquidity providers ("Members and other involved parties"). For that purpose, the framework must, at a minimum, include:
                (a) rules and procedures that:
                (i) enable it to meet its payment obligations on time following any individual or combined default of its Members and other involved parties; and
                (ii) address unforeseen and potentially uncovered liquidity shortfalls to avoid unwinding, revoking, or delaying the settlement of its payment obligations arising under the same-day, intraday or multiday settlement obligations, as applicable;
                (b) effective operational and analytical tools to identify, measure and monitor its settlement and funding flows on an on-going and timely basis; and
                (c) rigorous due diligence procedures relating to its liquidity providers to obtain a high degree of confidence that each provider (whether the provider is a Member or other participant using its facilities or an external party) has:
                (i) sufficient information to assess, understand and manage its own liquidity risks; and
                (ii) the capacity to perform as required under their commitment.
                (3) A Clearing House must regularly:
                (a) review the adequacy of the amount of its minimum liquid resources as determined in accordance with (1);
                (b) test the sufficiency of its liquid resources maintained to meet the relevant amount through rigorous stress testing; and
                (c) test its procedures for accessing its liquid resources at a liquidity provider.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 7.2.3 Guidance

                  1. A Clearing House should be able to effectively measure, monitor, and manage its liquidity risk. Some of the systems, controls and procedures set out under Rule 7.2.3 above to address liquidity risk are also commonly used to address credit risks, and therefore, the same procedures, adjusted as appropriate, can be used for both purposes.

                  Acceptable types of liquid resources

                  2. For the purposes of meeting its minimum liquid resource requirement referred to above, a Clearing House's qualifying liquid assets/resources may include cash held in appropriate currencies at a central bank in its or other relevant jurisdiction, or at creditworthy commercial banks, committed lines of credit, committed foreign exchange swaps and repos, as well as highly marketable collateral held in custody and investments that are readily available and convertible into cash with prearranged and highly reliable funding arrangements, even in extreme but plausible market conditions.
                  3. If a Clearing House has access to a routine line of credit made available by a central bank in its or other relevant jurisdiction, it may count such access as part of its liquid resources to the extent it has collateral that is eligible for pledging to (or for conducting other appropriate forms of transactions with) the relevant central bank. Even if it does not have access to a routine line of credit made available by a central bank, it should still take account of what collateral is typically accepted by the relevant central bank as such assets may be more likely to be liquid in stressed circumstances. However, a Clearing House should not assume the availability of emergency central bank credit as a part of its liquidity plan.
                  4. A Clearing House may supplement its qualifying liquid resources with other forms of liquid resources. If it does so, then such liquid resources should be in the form of assets that are likely to be saleable, or acceptable as collateral, for lines of credit, swaps, or repos on an ad hoc basis following a default, even if this cannot be reliably prearranged or guaranteed in extreme market conditions.
                  5. Where a Clearing House has access to a central bank lines of credit or accounts, payment services, or securities services, it should use those services as far as practicable, as such use is likely to enhance its ability to manage liquidity risk more effectively.

                  Review

                  6. A Clearing House should have clear procedures to report the results of its stress tests undertaken for the purposes of this Rule to its Governing Body and senior management as appropriate. It should use the results of stress testing to evaluate the adequacy of its liquidity risk-management framework and make any appropriate adjustments as needed.
                  7. In conducting stress testing, a Clearing House should consider a wide range of relevant scenarios. Scenarios should include relevant peak historic price volatilities, shifts in other market factors such as price determinants and yield curves, multiple defaults over various time horizons, simultaneous pressures in funding and asset markets, and a spectrum of forward-looking stress scenarios in a variety of extreme but plausible market conditions. Scenarios should also take into account the design and operation of the Clearing House, and include all entities that may pose material liquidity risks to the Clearing House (such as settlement banks, custodian banks, liquidity providers, and other involved entities), and where appropriate, cover a multi-day period.
                  8. A Clearing House should record the results of such stress testing and the rationale for any adjustments made to the amount and form of total liquid resources it maintains.

                  Participant default

                  9. A Clearing House's rules and procedures should also indicate any liquidity resources it may deploy, in the event of default by a Member or other involved parties, during a stress event to replenish the available liquid resources and the associated process, so that it can continue to operate in a safe and sound manner.
                  Derived from RM118/2013 [VER15/07-13]

            • Custody and Investment Risk

              • AMI 7.2.4

                (1) A Clearing House must have effective means to address risks relating to:
                (a) custody of its own assets, in accordance with (2); and
                (b) investments, in accordance with (3).
                (2) For the purposes of (1)(a), a Clearing House must:
                (a) hold its own assets with entities which are Licensed by the DFSA or a Financial Services Regulator for holding deposits or providing custody, as appropriate;
                (b) be able to have prompt access to its assets when required; and
                (c) regularly evaluate and understand its exposures to entities which hold its assets.
                (3) For the purposes of (1)(b), a Clearing House must ensure that:
                (i) it has an investment strategy which is consistent with its overall risk-management strategy and is fully disclosed to its Members and other participants using its facilities; and
                (ii) its investments comprise instruments with minimal credit, market, and liquidity risks. For this purpose, the investments must be secured by, or be claims on, high-quality obligors, allowing for quick liquidation with little, if any, adverse price effect.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 7.2.4 Guidance

                  A Clearing House which holds assets for its Members and other participants is subject to the "safe custody" requirements in section 5.10. In addition to those requirements, a Clearing House is required to manage risks associated with custody of its own assets (which may comprise cash) under Rule 7.2.4.

                  Derived from RM118/2013 [VER15/07-13]

            • Money Settlement

              • AMI 7.2.5

                (1) Where a Clearing House conducts its money settlements using commercial bank money, it must adopt appropriate measures to minimise and strictly control the credit and liquidity risk arising from such use.
                (2) For the purposes of (1), a Clearing House must:
                (a) conduct its money settlements using only such settlement assets with little or no credit or liquidity risk;
                (b) monitor, manage, and limit its credit and liquidity risks arising from commercial settlement banks. In particular, it must establish and monitor adherence to strict criteria for the use of settlement banks, which take into account, among other things, the regulation and supervision, creditworthiness, capitalisation, access to liquidity, and operational reliability of the relevant settlement banks;
                (c) monitor and manage the concentration of credit and liquidity exposures to its commercial settlement banks; and
                (d) ensure that its legal agreements with any settlement banks, at a minimum:
                (i) specify clearly when transfers on the books of individual settlement banks are expected to occur and when they are final; and
                (ii) ensure that funds received are transferable as soon as possible, if not intra-day, at least by the end of the day to enable it and its Members and other participants on its facilities to manage their credit and liquidity risks.
                Derived from RM118/2013 [VER15/07-13]

            • Physical Delivery

              • AMI 7.2.6

                (1) A Clearing House incurring obligations that require physical delivery of commodities must:
                (a) provide adequate information to its Members and other participants using its facilities relating to its obligations with respect to physical delivery of commodities. Such information must also be made publicly available;
                (b) identify, monitor, and manage the risks associated with such physical deliveries; and
                (c) identify, monitor, and manage the risks and costs associated with the storage and delivery of commodities.
                (2) A Clearing House must have adequate arrangements, including service agreements, which enable it to meet its physical delivery obligations.
                Derived from RM118/2013 [VER15/07-13]

            • Collateral

              • AMI 7.2.7

                (1) A Clearing House which requires collateral to manage its own, its Members' or other participants' credit risks arising in the course of or for the purposes of its payment, clearing, and settlement processes must:
                (a) only accept collateral with low credit, liquidity, and market risks; and
                (b) set and enforce appropriately conservative haircuts and concentration limits.
                (2) A Clearing House must, for the purposes of meeting the requirement in (1), establish and implement a collateral management system that is well designed and operationally flexible. Such a system must, at a minimum:
                (a) limit the assets it accepts as collateral to those with low credit, liquidity, and market risks;
                (b) establish prudent valuation practices and develop haircuts that are regularly tested and take into account stressed market conditions;
                (c) to reduce the need for procyclical adjustments, establish, to the extent practicable and prudent, stable and conservative haircuts that are calibrated to include periods of stressed market conditions;
                (d) avoid concentrated holdings of certain assets where that would significantly impair the ability to liquidate such assets quickly without significant adverse price effects; and
                (e) mitigate, if it accepts cross-border collateral, the risks associated with such use. Such measures must ensure that the collateral can be used in a timely manner.
                Derived from RM118/2013 [VER15/07-13]

            • Settlement Finality

              • AMI 7.2.8

                (1) A Clearing House must have adequate arrangements to ensure clear and certain final settlement of payments, transfer instructions or other obligations of Members and other participants using its facilities and where relevant, its own obligations.
                (2) For the purposes of (1), a Clearing House's arrangements for final settlement must:
                (a) ensure that, if intra-day or real-time settlement is not feasible, settlement occurs at least by the end of the value date of the relevant transaction; and
                (b) clearly define:
                (i) the point at which the final settlement occurs; and
                (ii) the point after which unsettled payments, transfer instructions, or other obligations may not be revoked by the parties to the underlying contract.
                (3) For the purposes of this Rule:
                (a) "final settlement" is the irrevocable and unconditional transfer of an asset or financial instrument, or the discharge of obligations arising under the underlying contract by the parties to the contract; and
                (b) "value date" is the day on which the payment, transfer instruction, or other obligation arising under the underlying contract is due and, accordingly, the associated funds or Investments are available to the respective parties under the contract.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 7.2.8 Guidance

                  1. Final settlement is usually dependent on the legal environment of where the settlement occurs. Generally, in the case of certain assets, final settlement includes the transfer of title.
                  2. Completing final settlement by the end of the value date is important because deferring final settlement to the next-business day can create both credit and liquidity pressures for a Clearing House's Members and other participants on its facilities and stakeholders. This may also be a potential source of systemic risk. Therefore, where possible, a Clearing House should provide intra-day or real-time settlement finality to reduce settlement risk.
                  Derived from RM118/2013 [VER15/07-13]

          • AMI 7.3 Additional Requirements for a CCP

            • Credit Risk

              • AMI 7.3.1

                (1) A Clearing House acting as a CCP must establish and implement a robust process to manage:
                (a) its current and potential future credit and market risk exposures to market counterparties, including Members and other participants on its facilities; and
                (b) credit risks arising from its payment, clearing, and settlement processes.
                (2) For the purposes of (1), a CCP must, on a regular basis as appropriate to the nature, scale and complexity of its operations:
                (a) perform stress tests using models containing standards and predetermined parameters and assumptions; and
                (b) carry out comprehensive and thorough analysis of stress testing models, scenarios, and underlying parameters and assumptions used to ensure that they are appropriate for determining the required level of default protection in light of current and evolving market conditions.
                (3) A CCP must:
                (a) undertake the analysis referred to in (2)(b) at least on a two-month basis, unless more frequent analysis is warranted because the Investments cleared or markets served display high volatility, become less liquid, or when the size or concentration of positions held by its participants increase significantly; and
                (b) perform a full validation of its risk-management models at least annually.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 7.3.1 Guidance

                  1. A robust assessment process should enable a CCP to effectively measure, monitor, and manage its risks and exposures effectively. In particular, it should be able to identify sources of credit risk and routinely measure and monitor its credit exposures. Generally, a CCP should have daily stress testing to measure and monitor its risk exposures, especially if its operations are complex or widely spread over multiple jurisdictions. It should use appropriate risk management tools to control the identified credit risks. A CCP should use margin and other prefunded financial resources in order to do so.
                  2. In particular, a CCP should establish explicit rules and procedures that address fully any credit losses it may face as a result of any individual or combined default among its Members and other participants with respect to any of their obligations to the CCP. Such rules and procedures should address how any potentially uncovered credit losses would be allocated, including the repayment of any funds the CCP may borrow from its liquidity providers. They should also indicate the CCP's process to replenish any financial resources that it may employ during a stress event, so that it can continue to operate in a safe and sound manner.
                  3. A CCP should document its supporting rationale for, and should have appropriate governance arrangements relating to, the amount of total financial resources it maintains. It should also have clear procedures to report the results of its stress tests to its Governing Body and senior management as appropriate, and use those results to evaluate the adequacy of its total financial resources and make any adjustments as appropriate.
                  Derived from RM118/2013 [VER15/07-13]

            • Margin Requirements

              • AMI 7.3.2

                (1) Without limiting the generality of Rule 7.3.1, a Clearing House operating as a CCP must, for the purposes of managing its credit and market risk:
                (a) have a margin system which meets the requirements in (2) and (3);
                (b) mark participant positions to market and collect variation margin at least daily to limit the build-up of current exposures;
                (c) have necessary authority and operational capacity to make intra-day margin calls and payments, both scheduled and unscheduled, to participants; and
                (d) regularly review and validate its margin system to ensure that it operates effectively and as intended.
                (2) The margin system of a CCP must, at a minimum:
                (a) establish margin levels which are commensurate with the risks and particular attributes of each product, portfolio, and market it serves;
                (b) use a reliable source of timely price data for its margin system, and also procedures and sound valuation models for addressing circumstances in which pricing data is not readily available or reliable; and
                (c) adopt initial margin models and parameters that are risk-based and generate margin requirements sufficient to cover its potential future exposure to Members and other participants using its facilities in the interval between the last margin collection and the close-out of positions following a participant default.
                (3) The initial margins established pursuant to (2)(c) must:
                (a) if the CCP calculates margins:
                (i) at the Member's portfolio level, be applied in respect of each portfolio's distribution of future exposure; and
                (ii) at more granular levels, meet the corresponding distribution of future exposures; and
                (b) use models which, among other things:
                (i) rely on conservative estimates of the time horizons for the effective hedging or close out of the particular types of products cleared by the CCP, including in stressed market conditions; and
                (ii) have an appropriate method for measuring credit exposure that accounts for relevant product risk factors and portfolio effects across products, and, to the extent practicable and prudent, limit the need for destabilising procyclical changes.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 7.3.2 Guidance

                  1. A CCP should adopt comprehensive and stringent measures to ensure that it has adequate total financial resources to effectively manage its credit risk and exposures.
                  2. A CCP should determine the amount of the total financial resources available to it and regularly test the sufficiency of such amount, particularly in the event of a default or multiple defaults in extreme but plausible market conditions through rigorous stress testing.
                  3. In conducting stress testing, a CCP should consider the effect of a wide range of relevant stress scenarios in terms of both defaulters' positions and possible price changes in liquidation periods. Scenarios should include relevant peak historic price volatilities, shifts in other market factors such as price determinants and yield curves, multiple defaults over various time horizons, simultaneous pressures in funding and asset markets, and a spectrum of forward-looking stress scenarios in a variety of extreme but plausible market conditions.
                  4. A CCP which is involved in activities with a more-complex risk profile, or is systemically important in multiple jurisdictions, should maintain additional financial resources to cover a wide range of potential stress scenarios. These should include the default of the two of its market counterparties (including their affiliates) that would potentially cause the largest aggregate credit exposure for the CCP in extreme but plausible market conditions. In all other cases, a CCP should maintain additional financial resources sufficient to cover a wide range of potential stress scenarios, which include the default of the market counterparty (including its affiliates) that would potentially cause the largest aggregate credit exposure for the CCP in extreme but plausible market conditions.
                  5. An effective margining system is a key risk-management tool for an Authorised Market Institution operating as a CCP to manage the credit exposures posed by open positions of its Members or other participants using its facilities. Therefore, it should adopt and implement an effective margin system, which is risk-based and regularly reviewed, in order to cover its credit exposures to its Members and other participants in respect of all Investments and other products.
                  6. In calculating margin requirements, a CCP may allow offsets or reductions in required margin across products that it clears or between products that it and another CCP clear, if the risk of one product is significantly and reliably correlated with the risk of the other product. Where two or more CCPs are authorised to offer cross-margining, they must have appropriate safeguards and harmonised overall risk-management systems.
                  7. A CCP should analyse and monitor its model performance and overall margin coverage by conducting rigorous back testing regularly, and sensitivity analysis at least monthly and, where appropriate, more frequently. A CCP should regularly conduct an assessment of the theoretical and empirical properties of its margin model for all products it clears. In conducting sensitivity analysis of the model's coverage, a CCP should take into account a wide range of parameters and assumptions that reflect possible market conditions, including the most-volatile periods that have been experienced by the markets it serves and extreme changes in the correlations between prices.
                  Derived from RM118/2013 [VER15/07-13]

            • Segregation and Portability

              • AMI 7.3.3

                (1) A Clearing House acting as a CCP must have systems and procedures to enable segregation and portability of positions of the customers of its Members and other participants on its facilities, and any collateral provided to it with respect to those positions.
                (2) For the purposes of (1), a CCP's systems and controls must, at a minimum, provide for the following:
                (a) the segregation and portability arrangements that effectively protect the positions and related collateral of the customers of the Members or other participants on its facilities from the default or insolvency of the relevant Member or other participants;
                (b) if the CCP offers additional protection of the customer positions and related collateral against the concurrent default of both the relevant Member or other participants or other customers, the adoption of necessary measures to ensure that the additional protection offered is effective; and
                (c) the use of account structures that enable the CCP to readily identify positions of the customers of the relevant Member or other participant, and to segregate their related collateral.
                (3) A CCP must make available to its Members and other participants using its facilities, its rules, policies and procedures relating to the segregation and portability of the positions and related collateral of the customers of its Members and other participants using its facilities.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 7.3.3 Guidance

                  1. A CCP should:
                  a. maintain the customer positions and any related collateral referred to in Rule 7.3.3 in individual customer accounts or in omnibus customer accounts; and
                  b. structure its portability arrangements so that the positions and collateral of a defaulting Member's or other participant's customers can be transferred to one or more other Members or participants.
                  2. A CCP should also disclose whether the customers' collateral is protected on an individual or omnibus basis. In addition, it should disclose any constraints, such as legal or operational, that may impair its ability to segregate or transfer a Member's or other participant's customers' positions and related collateral.
                  Derived from RM118/2013 [VER15/07-13]

          • AMI 7.4 Additional Requirements for a CSD

            • AMI 7.4.1

              (1) Where a Clearing House operates a Central Securities Depository (CSD), it must have rules and procedures, including robust accounting practices and controls to:
              (a) ensure the integrity of securities issues; and
              (b) minimise and manage risks associated with the safekeeping and transfer of securities.
              (2) A CSD must ensure that securities referred to in (1)(a) are recorded in book-entry form prior to the trade date.
              (3) For the purposes of (1)(a), a CSD's systems and controls must ensure that:
              (a) the unauthorised creation or deletion of securities is prevented;
              (b) appropriate intra-day reconciliation is conducted to verify that the number of securities making up a securities issue or part of a securities issue submitted to the CSD is equal to the sum of securities recorded on the securities accounts of the Members and other participants of the CSD;
              (c) where entities other than the CSD are involved in the reconciliation process for a securities issue, such as the issuer, registrars, issuance agents, transfer agents or other CSDs, the CSD has adequate arrangements for cooperation and information exchange between all involved parties so that the integrity of the issue is maintained; and
              (d) there are no securities overdrafts or debit balances in securities accounts .
              Derived from RM118/2013 [VER15/07-13]

            • CSD Links

              • AMI 7.4.2

                (1) A CSD must not establish any link with another CSD (CSD link) unless:
                (a) it has:
                (i) prior to establishing the CSD link, identified and assessed potential risks, for itself and its Members and other participants using its facilities, arising from establishing such a link;
                (ii) adequate systems and controls to effectively monitor and manage, on an on-going basis, risks identified under (a) above; and
                (iii) complied with the requirement in (2); and
                (b) it is satisfied, on reasonable grounds, that the contractual arrangement establishing the CSD link:
                (i) provides to the CSD and its Members and other participants using its facilities adequate protection relating to possible risks arising from using the other CSDs to which it is linked (linked CSDs);
                (ii) in the case of a provisional transfer of securities between the CSD and linked CSDs, ensure intra-day finality by prohibiting the retransfer of securities before the first transfer of securities becomes final;
                (iii) sets out the respective rights and obligations of the CSD and linked CSDs and their respective Members and other participants using their facilities; and
                (iv) in the case of a linked CSD outside the DIFC, sets out clearly the applicable laws that govern each aspect of the CSD's and the linked CSD's operations.
                (2) The CSD must be able to demonstrate to the DFSA, prior to the establishment of any CSD link, that:
                (a) the link arrangement between the CSD and all linked CSDs, contains adequate mitigants against possible risks taken by the relevant CSDs, including credit, concentration and liquidity risks, as a result of the link arrangement;
                (b) each linked CSD has robust daily reconciliation procedures to ensure that its records are accurate;
                (c) if it or another linked CSD uses an intermediary to operate a link with another CSD, the CSD or the linked CSD has adequate systems and controls to measure, monitor, and manage the additional risks arising from the use of the intermediary;
                (d) to the extent practicable and feasible, linked CSDs provide for Delivery Versus Payment (DVP) settlement of transactions between participants in linked CSDs, and where such settlement is not practicable or feasible, reasons for non-DVP settlement is notified to the DFSA; and
                (e) where interoperable securities settlement systems and CSDs use a common settlement infrastructure, there are:
                (i) identical moments established for the entry of transfer orders into the system;
                (ii) irrevocable transfer orders; and
                (iii) finality of transfers of securities and cash.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 7.4.2 Guidance

                  A CSD should include in its notification to the DFSA relating to the establishment of CSD links the results of due diligence undertaken in respect of the matters specified in Rule 7.4.2(2) to demonstrate that those requirements are met. Where a CSD changes any existing CSD arrangements, fresh notification relating to such changes, along with its due diligence relating to the new CSD link, should be provided to the DFSA in advance of the proposed change.

                  Derived from RM118/2013 [VER15/07-13]

      • Part 4 Other Requirements

        • AMI 8 Controllers

          • AMI 8.1 Application

            • AMI 8.1.1

              This chapter applies to:

              (a) an Authorised Market Institution; or
              (b) a Person who is a Controller as defined in Rule 8.1.2.
              Derived from RM118/2013 [VER15/07-13]

            • Definition of a Controller

              • AMI 8.1.2

                (1) A Controller is a Person who, either alone or with any Associate:
                (a) holds 10% or more of the shares in either the Authorised Market Institution or a Holding Company of that institution;
                (b) is entitled to exercise, or control the exercise of, 10% or more of the voting rights in either the Authorised Market Institution or a Holding Company of that institution; or
                (c) is able to exercise significant influence over the management of the Authorised Market Institution as a result of holding shares or being able to exercise voting rights in the Authorised Market Institution or a Holding Company of that institution or having a current exercisable right to acquire such shares or voting rights.
                (2) A reference in this chapter to:
                (a) a share means:
                (i) in the case of an Authorised Market Institution or a Holding Company of an Authorised Market Institution which has a share capital, its allotted shares;
                (ii) in the case of an Authorised Market Institution or a Holding Company of an Authorised Market Institution with capital but no share capital, rights to a share in its capital; and
                (iii) in the case of an Authorised Market Institution or a Holding Company of an Authorised Market Institution without capital, any interest conferring a right to share in its profits or losses or any obligation to contribute to a share of its debt or expenses in the event of its winding up.
                (b) "a holding" means, in respect of a Person, shares, voting rights or a right to acquire shares or voting rights in an Authorised Market Institution or a Holding Company of that institution held by that Person either alone or with any Associate.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 8.1.2 Guidance

                  1. For the purposes of these Rules, the relevant definition of a Holding Company is found in the DIFC Companies Law. That definition provides when one body corporate is considered to be a holding company or a subsidiary of another body corporate and extends that concept to the ultimate holding company of the body corporate.
                  2. Pursuant to Rule 8.1.2(1)(c), a Person becomes a Controller if that Person can exert significant management influence over an Authorised Market Institution. The ability to exert significant management influence can arise even where a Person, alone or with Associates, controls less than 10% of the shares or voting rights of the Authorised Market Institution or a Holding Company of that institution. Similarly, a Person may be able to exert significant management influence where such Person does not hold shares or voting rights but has exercisable rights to acquire shares or voting rights, such as under Options.
                  Derived from RM118/2013 [VER15/07-13]

            • Disregarded Holdings

              • AMI 8.1.3

                For the purposes of determining whether a Person is a Controller, shares, voting rights or rights to acquire shares or voting rights that a Person holds, either alone or with an Associate, in an Authorised Market Institution or a Holding Company of that institution are disregarded if:

                (a) the shares are held for the sole purpose of clearing and settling within a short settlement cycle;
                (b) the shares are held in a custodial or nominee capacity and the voting rights attached to the shares are exercised only in accordance with written instructions given to that Person by another Person; or
                (c) the Person is an Authorised Firm or a Regulated Financial Institution and it:
                (i) acquires a holding of shares as a result of an underwriting of a share issue or a placement of shares on a firm commitment basis;
                (ii) does not exercise the voting rights attaching to the shares or otherwise intervene in the management of the issuer; and
                (iii) retains the holding for a period less than one year.
                Derived from RM118/2013 [VER15/07-13]

          • AMI 8.2 Changes Relating to Control

            • Requirement for Prior Approval of Controllers of an Authorised Market Institution incorporated under DIFC law

              • AMI 8.2.1

                (1) In the case of an Authorised Market Institution which is incorporated under DIFC law, a Person must not:
                (a) become a Controller of the Authorised Market Institution; or
                (b) increase the level of control which that Person has in the Authorised Market Institution beyond a threshold specified in (2), unless that Person has obtained the prior written approval of the DFSA to do so.
                (2) For the purposes of (1)(b), the thresholds at which the prior written approval of the DFSA is required are when the relevant holding is increased:
                (a) from below 30% to 30% or more; or
                (b) from below 50% to 50% or more.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 8.2.1 Guidance

                  See Rule 8.1.2 for the circumstances in which a Person becomes a Controller of an Authorised Market Institution.

                  Derived from RM118/2013 [VER15/07-13]

            • Approval Process

              • AMI 8.2.2

                (1) A Person who is required to obtain the prior written approval of the DFSA pursuant to Rule 8.2.1(1) must make an application to the DFSA using the appropriate form in AFN.
                (2) Where the DFSA receives an application under (1), it may:
                (a) approve the proposed acquisition or increase in the level of control;
                (b) approve the proposed acquisition or increase in the level of control subject to such conditions as it considers appropriate; or
                (c) object to the proposed acquisition or increase in the level of control.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 8.2.2 Guidance

                  1. A Person intending to acquire or increase control in an Authorised Market Institution should submit an application for approval in the appropriate form in AFN sufficiently in advance of the proposed acquisition to be able to obtain the DFSA approval in time for the proposed acquisition.
                  2. Paragraph 3.6.7 of the RPP Sourcebook sets out the matters which the DFSA takes into consideration when exercising its powers under Rule 8.2.2 to approve, object to or impose conditions of approval relating to a proposed Controller or an increase in the level of control of an existing Controller.
                  Derived from RM118/2013 [VER15/07-13]

              • AMI 8.2.3

                (1) Where the DFSA proposes to approve a proposed acquisition of or an increase in the level of control in an Authorised Market Institution pursuant to Rule 8.2.2(2)(a), it must:
                (a) do so as soon as practicable and in any event within 90 days of the receipt of a duly completed application, unless a different period is considered appropriate by the DFSA and notified to the applicant in writing; and
                (b) issue to the applicant, and where appropriate to the Authorised Market Institution, an approval notice as soon as practicable after making that decision.
                (2) An approval, including a conditional approval granted by the DFSA pursuant to Rule 8.2.2(2)(a) or (b), is valid for a period of one year from the date of the approval, unless an extension is granted by the DFSA in writing.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 8.2.3 Guidance

                  1. If the application for approval lodged with the DFSA does not contain all the required information, then the 90 day period runs from the date on which all the relevant information is provided to the DFSA.
                  2. If a Person who has obtained prior DFSA approval for an acquisition of or an increase in the control in an Authorised Market Institution is unable to effect the acquisition before the end of the period referred to in Rule 8.2.3(2), it will need to obtain fresh approval from the DFSA.
                  Derived from RM118/2013 [VER15/07-13]

            • Objection or Conditional Approval Process

              • AMI 8.2.4

                (1) Where the DFSA proposes to exercise its objection or conditional approval power pursuant to Rule 8.2.4(2)(b) or (c) in respect of a proposed acquisition or an increase in the level of control in an Authorised Market Institution, it must, as soon as practicable and in any event within 90 days of the receipt of the duly completed application form, provide to the applicant:
                (a) a written notice stating;
                (i) the DFSA's reasons for objecting to that Person as a Controller or to the Person's proposed increase in control; and
                (ii) any proposed conditions subject to which that Person may be approved by the DFSA; and
                (b) an opportunity to make representations within 14 days of the receipt of such objections notice or such other longer period as agreed to by the DFSA.
                (2) The DFSA must, as soon as practicable after receiving representations or, if no representations are received, after the expiry of the period for making representations referred to in (1)(b), issue a final notice stating that:
                (a) the proposed objections and any conditions are withdrawn and the Person is an approved Controller;
                (b) the Person is approved as a Controller subject to conditions specified in the notice; or
                (c) the Person is not approved and therefore is an unacceptable Controller with respect to that Person becoming a Controller of, or increasing the level of control in, the Authorised Firm.
                (3) If the DFSA decides to exercise its power under this Rule not to approve a Person as a Controller or to impose conditions on an approval, the Person may refer the matter to the FMT for review.
                Derived from RM118/2013 [VER15/07-13]
                [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

                • AMI 8.2.4 Guidance [Deleted]

                  [Deleted] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

              • AMI 8.2.5

                (1) A Person who has been approved by the DFSA as a Controller of an Authorised Market Institution subject to any conditions must comply with the relevant conditions of approval.
                (2) A Person who has been notified by the DFSA pursuant to Rule 8.2.4(2)(c) as an unacceptable Controller must not proceed with the proposed acquisition of control of the Authorised Market Institution.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 8.2.5 Guidance

                  A Person who acquires control of or increases the level of control in an Authorised Market Institution without the prior DFSA approval or breaches a condition of approval is in breach of the Rules. See Rule 8.2.10 for the actions that the DFSA may take in such circumstances.

                  Derived from RM118/2013 [VER15/07-13]

            • Notification for Decrease in the Level of Control of an AMI Incorporated under DIFC law

              • AMI 8.2.6

                A Controller of an Authorised Market Institution which is incorporated under DIFC law must submit, using the appropriate form in AFN, a written notification to the DFSA where that Person:

                (a) proposes to cease being a Controller; or
                (b) proposes to decrease the existing holding from more than 50% to 50% or less.
                Derived from RM118/2013 [VER15/07-13]

            • Notification for Changes in Control Relating to an Authorised Market Institution Incorporated Under Non-DIFC Law

              • AMI 8.2.7

                (1) In the case of an Authorised Market Institution which is incorporated other than under DIFC law, a written notification to the DFSA must be submitted by a Controller or a Person proposing to become a Controller in accordance with (3) in respect of any one of the events specified in (2).
                (2) For the purposes of (1), a notification to the DFSA is required when:
                (a) a Person becomes a Controller;
                (b) an existing Controller proposes to cease being a Controller; or
                (c) an existing Controller's holding is:
                (i) increased from below 30% to 30% or more;
                (ii) increased from below 50% to 50% or more; or
                (iii) decreased from more than 50% to 50% or less.
                (3) The notification required under (1) must be made using the appropriate form in AFN as soon as possible, and in any event, before making the relevant acquisition or disposition.
                Derived from RM118/2013 [VER15/07-13]

            • Obligations of an Authorised Market Institution Relating to its Controllers

              • AMI 8.2.8

                (1) An Authorised Market Institution must have adequate systems and controls to monitor:
                (a) any change or proposed change of its Controllers; and
                (b) any significant changes in the conduct or circumstances of existing Controllers which might reasonably be considered to impact the fitness and propriety of the Authorised Market Institution or its ability to conduct business soundly and prudently.
                (2) An Authorised Market Institution must, subject to (3), notify the DFSA in writing of any event specified in (1) as soon as possible after becoming aware of that event.
                (3) An Authorised Market Institution need not comply with the requirement in (2) if it is satisfied on reasonable grounds that a proposed or existing Controller has either already obtained the prior approval of the DFSA or notified the event to the DFSA as applicable.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 8.2.8 Guidance

                  Steps which an Authorised Market Institution may take in order to monitor changes relating to its Controllers include the monitoring of any relevant regulatory disclosures, press reports, public announcements, share registers and entitlements to vote, or the control of voting rights, at general meetings.

                  Derived from RM118/2013 [VER15/07-13]

              • AMI 8.2.9

                (1) An Authorised Market Institution must submit to the DFSA an annual report on its Controllers within four months of its financial year end.
                (2) The Authorised Market Institution's annual report on its Controllers must include:
                (a) the name of each Controller; and
                (b) the current holding of each Controller, expressed as a percentage.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 8.2.9 Guidance

                  1. An Authorised Market Institution may satisfy the requirements of Rule 8.2.9 by submitting a corporate structure diagram containing the relevant information.
                  2. An Authorised Market Institution must take account of the holdings which the Controller, either alone or with an Associate, has in the Authorised Market Institution or any Holding Company of that institution (see the definition of a Controller in Rule 8.1.2).
                  Derived from RM118/2013 [VER15/07-13]

            • Other Powers Relating to Controllers

              • AMI 8.2.10

                (1) Without limiting the generality of its other powers, the DFSA may, subject only to (2), object to a Person as a Controller of an Authorised Market Institution where such a Person:
                (a) has acquired or increased the level of control that Person has in an Authorised Market Institution without the prior written approval of the DFSA as required under Rule 8.2.1;
                (b) has breached the requirement in Rule 8.2.5 to comply with conditions of approval applicable to that Person; or
                (c) is no longer acceptable to the DFSA as a Controller.
                (2) Where the DFSA proposes to object to a Person as a Controller of an Authorised Market Institution, the DFSA must provide such a Person with:
                (a) a written notice stating:
                (i) the DFSA's reasons for objecting to that Person as a Controller; and
                (ii) any proposed conditions subject to which that Person may be approved by the DFSA; and
                (b) an opportunity to make representations within 14 days of the receipt of such notice or such other longer period as agreed to by the DFSA.
                (3) The DFSA must, as soon as practicable after receiving representations, or if no representations are made, after the expiry of the period for making representations referred to in (2)(b), issue a final notice stating that:
                (a) the proposed objections and any conditions are withdrawn and the Person is an approved Controller; or
                (b) the Person is approved as a Controller subject to conditions specified in the notice; or
                (c) the Person is an unacceptable Controller and accordingly, must dispose of that Person's holdings.
                (4) Where the DFSA has issued a final notice imposing any conditions subject to which a Person is approved as a Controller, that Person must comply with those conditions.
                (5) Where the DFSA has issued a final notice declaring a Person to be an unacceptable Controller that Person must dispose of the relevant holdings within such period as specified in the final notice.
                (6) If the DFSA decides to exercise its power under this Rule to object to a Person as a Controller, to impose conditions on an approval or to require a Person to dispose of their holdings, the Person may refer the matter to the FMT for review.
                Derived from RM118/2013 [VER15/07-13]
                [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

                • AMI 8.2.10 Guidance [Deleted]

                  [Deleted] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

        • AMI 9 Supervision of Authorised Market Institutions

          • AMI 9.1 Application

            • AMI 9.1.1

              This chapter applies to every Authorised Market Institution.

              Derived from RM118/2013 [VER15/07-13]

          • AMI 9.2 Relations with Regulators and the Risk Based Approach

            • AMI 9.2.1

              An Authorised Market Institution must deal with regulatory authorities in an open and co-operative manner and keep the DFSA promptly informed of significant events or activities, wherever they are carried on, relating to the Authorised Market Institution, of which the DFSA would reasonably expect to be notified.

              Derived from RM118/2013 [VER15/07-13]

            • AMI 9.2.2

              An Authorised Market Institution must advise the DFSA immediately if it becomes aware, or has reasonable grounds to believe, that a significant breach of a Rule or Licensing Requirement by the Authorised Market Institution or any of its Employees may have occurred or may be about to occur.

              Derived from RM118/2013 [VER15/07-13]

          • AMI 9.3 Notifications

            • AMI 9.3.1

              Unless otherwise provided, notifications in this section may be made orally or in writing, whichever is more appropriate in the circumstances, but where the Authorised Market Institution gives notice or information orally, it must confirm that notice or information in writing without delay.

              Derived from RM118/2013 [VER15/07-13]

          • AMI 9.4 Key Individuals

            • Notifications

              • AMI 9.4.1

                An Authorised Market Institution must, where an individual ceases or is reasonably likely to cease to be a Key Individual of the Authorised Market Institution, give written notice to the DFSA of that event and take prompt action to replace the Key Individual who has ceased to perform the relevant functions.

                Derived from RM118/2013 [VER15/07-13]

                • AMI 9.4.1 Guidance

                  1. An Authorised Market Institution must lodge with the DFSA the relevant applications for the approval of the proposed Key Individual in accordance with the requirements in section 3.3.
                  2. An Authorised Market Institution should ensure that functions that are assigned to Key Individuals as per the definitions of those functions are carried out by the relevant Key Individuals or other individuals subject to appropriate oversight and control of the relevant Key Individuals.
                  3. The DFSA does not need to be notified where minor changes are made to the responsibilities of a Key Individual, but where major changes in responsibilities are made, such as a significant re-alignment of responsibilities, then the DFSA should be notified with the appropriate information. Such changes may also require the DFSA prior approval if they are material changes. See section 4.3.
                  Derived from RM118/2013 [VER15/07-13]

            • Disciplinary Action and Events Relating to Key Individuals

              • AMI 9.4.2

                Where any Key Individual of an Authorised Market Institution:

                (a) is the subject of any:
                (i) disciplinary action arising out of alleged misconduct; or
                (ii) criminal prosecution arising out of alleged misconduct involving fraud or dishonesty;
                (b) resigns as a result of an investigation into alleged misconduct; or
                (c) is dismissed for misconduct;

                the Authorised Market Institution must immediately give the DFSA notice of that event and give the following information:
                (d) the name of the Key Individual and his responsibilities within the Authorised Market Institution;
                (e) details of the alleged acts of misconduct by that Key Individual; and
                (f) details of any disciplinary action which has been imposed or is proposed to be taken by that body in relation to that Key Individual.
                Derived from RM118/2013 [VER15/07-13]

              • AMI 9.4.3

                Where an Authorised Market Institution becomes aware that any of the following events have occurred in relation to a Key Individual, it must immediately give the DFSA notice of that event:

                (a) a petition of bankruptcy is presented against a Key Individual;
                (b) a bankruptcy order is made against a Key Individual; or
                (c) a Key Individual entering into a voluntary arrangement with his creditors.
                Derived from RM118/2013 [VER15/07-13]

          • AMI 9.5 Constitution and Governance

            • AMI 9.5.1

              Where an Authorised Market Institution is to circulate any notice or other document proposing any amendment to its memorandum or articles of association, or other document relating to its constitution, to:

              (a) its shareholders or any group or class of them;
              (b) persons granted access to its facilities or any group or class of them; or
              (c) any other group or class of persons which has the power to make that amendment or whole consent or approval is required before it may be made:

              that Authorised Market Institution must give notice of that proposed amendment to the DFSA setting out the following information:

              (d) the proposed amendment;
              (e) the reasons for the proposal; and
              (f) a description of the group or class of persons to whom the proposal is to be circulated.
              Derived from RM118/2013 [VER15/07-13]

            • AMI 9.5.2

              Where an Authorised Market Institution makes an amendment to its memorandum or articles of association, or other document relating to its constitution, that Authorised Market Institution must immediately give the DFSA notice of that event, setting out written particulars of that amendment and of the date on which it is to become or became effective.

              Derived from RM118/2013 [VER15/07-13]

            • AMI 9.5.3

              (1) Where any significant change is made to an agreement which relates to the constitution, or to the corporate governance framework or the remuneration structure or strategy, of an Authorised Market Institution, that Authorised Market Institution must give the DFSA a notice as provided in (2).
              (2) Where any significant change is made to:
              (a) an agreement which relates to the constitution of an Authorised Market Institution, the Authorised Market Institution must give the DFSA notice of that change as soon as it becomes aware of it, and the date on which it is to become or became effective; or
              (b) the corporate governance framework or the remuneration structure or strategy of an Authorised Market Institution, the Authorised Market Institution must give the DFSA notice of that change as soon as practicable before making such a change.
              Derived from RM118/2013 [VER15/07-13]

              • AMI 9.5.3 Guidance

                1. Key aspects of the corporate governance framework of an Authorised Market Institution encompass a range of matters. These include the composition of its Governing Body, any committees of the Governing Body, the senior management and the Persons Undertaking Key Control Functions, the reporting lines between the Governing Body, senior management and the Persons Undertaking Key Control Functions and any key policies and practices relating to the internal governance of the firm, such as codes of ethics or its remuneration practices. Significant changes relating to such arrangements and policies need to be notified to the DFSA pursuant to Rule 9.5.3(2)(b) before making any changes.
                3. Notification relating to proposed changes to corporate governance and remuneration referred to in Rule 9.5.3(2)(b) must be given sufficiently in advance of effecting the proposed change. If there are any concerns that an Authorised Market Institution may not be able to meet the applicable requirements relating to corporate governance and remuneration set out in GEN Rules 5.3.30 and 5.3.31 as a result of a proposed change, the DFSA may require the Authorised Market Institution to address those concerns effectively before implementing such a change.
                Derived from RM118/2013 [VER15/07-13]

          • AMI 9.6 Financial and Other Information

            • AMI 9.6.1

              An Authorised Market Institution must give the DFSA:

              (a) a copy of its annual report and accounts; and
              (b) a copy of any consolidated annual report and accounts of any group of which the Authorised Market Institution is a member;

              no later than when the first of the following events occurs:
              (c) three months after the end of the financial year to which the document relates;
              (d) the time when the documents are sent to Persons granted access to the facilities or shareholders of the Authorised Market Institution; or
              (e) the time when the document is sent to a Holding Company of the Authorised Market Institution.
              Derived from RM118/2013 [VER15/07-13]

            • AMI 9.6.2

              Where an audit committee of an Authorised Market Institution has received a report in relation to any period or any matter relating to any Regulatory Functions of that Authorised Market Institution, the Authorised Market Institution must immediately give the DFSA a copy of that report.

              Derived from RM118/2013 [VER15/07-13]

            • AMI 9.6.3

              An Authorised Market Institution must give the DFSA a copy of its quarterly management accounts within one month of the end of the period to which they relate.

              Derived from RM118/2013 [VER15/07-13]

            • AMI 9.6.4

              An Authorised Market Institution must give the DFSA:

              (a) a statement of its anticipated income, expenditure and cash flow for each financial year; and
              (b) an estimated balance sheet showing its position as it is anticipated at the end of each financial year;

              at least 15 days before the beginning of that financial year.

              Derived from RM118/2013 [VER15/07-13]

              • AMI 9.6.4 Guidance

                An Authorised Market Institution is subject to GEN 8 and the requirements imposed by those Rules.

                Derived from RM118/2013 [VER15/07-13]

            • Fees and Charges

              • AMI 9.6.5

                An Authorised Market Institution must give the DFSA a summary of:

                (a) any proposal for changes to the fees or charges levied on users of its facilities, or any group or class of them, at the same time as the proposal is communicated to the relevant users; and
                (b) any such change, no later than the date when it is published and notified to relevant parties.
                Derived from RM118/2013 [VER15/07-13]

          • AMI 9.7 Complaints

            • AMI 9.7.1

              Where an Authorised Market Institution has investigated a complaint arising in connection with the performance of, or failure to perform, any of its Regulatory Functions, and the conclusion is, that the Authorised Market Institution should:

              (a) make a compensatory payment to any person; or
              (b) remedy the matter which was the subject of that complaint,

              the Authorised Market Institution must immediately notify the DFSA of that event and give the DFSA a copy of the report and particulars of the recommendation as soon as that report or those recommendations are available to it.

              Derived from RM118/2013 [VER15/07-13]

          • AMI 9.8 Notification

            • Notification in Respect of Trading

              • AMI 9.8.1

                Where an Authorised Market Institution proposes to remove from trading or admit to trading, by means of its facilities, a class of Investment which it has not previously traded, but is licensed to do so, it must give the DFSA notice of that event, at the same time as the proposal is communicated to persons granted access to its facilities or shareholders, with the following information;

                (a) a description of the Investment to which the proposal relates;
                (b) where that Investment is a derivative product, the proposed terms of that derivative; and
                (c) the name of any clearing or settlement facility in respect of that Investment.
                Derived from RM118/2013 [VER15/07-13]

              • AMI 9.8.2

                Where an Authorised Market Institution decides to suspend, restore from suspension or cease trading any Investment, it must immediately notify the DFSA and any person granted access to its facilities of the decision.

                Derived from RM118/2013 [VER15/07-13]

              • AMI 9.8.3

                Where a Clearing House proposes to cease clearing or settling, or to commence clearing or settling, by means of its facilities, a class of Investment which it has not previously cleared or settled, but is licensed to do so, it must give the DFSA notice of that event, at the same time as the proposal is communicated to persons granted access to its facilities or shareholders, with the following information;

                (a) a description of the Investment to which the proposal relates;
                (b) where that Investment is a derivative product, the proposed terms of that derivative; and
                (c) the name of any trading facility in respect of that Investment.
                Derived from RM118/2013 [VER15/07-13]

                • AMI 9.8.3 Delisting or Suspension of Securities from an Official List of Securities

                  • AMI 9.8.3 Guidance

                    An Authorised Market Institution which maintains an Official List of Securities has the power under Article 35(1) of the Markets Law 2012 to delist or suspend Securities from its Official List of Securities.

                    Derived from RM118/2013 [VER15/07-13]

              • AMI 9.8.4

                Where an Authorised Market Institution suspends, restores or delists from suspension any Securities from an Official List of Securities it maintains under an endorsement on its Licence, it must immediately notify the DFSA of its decision and the reasons for the decision.

                Derived from RM118/2013 [VER15/07-13]

          • AMI 9.9 Information Technology Systems

            • AMI 9.9.1

              Where an Authorised Market Institution changes any of its plans for action in response to a failure of any of its information technology systems resulting in disruption to the operation of its facilities, it must immediately give the DFSA notice of that event, and a copy of the revised or new plan.

              Derived from RM118/2013 [VER15/07-13]

            • AMI 9.9.2

              Where any reserve information technology system of an Authorised Market Institution fails in such a way that, if the main information technology system of that body were also to fail, it would be unable to operate any of its facilities during its normal hours of operation, that body must immediately give the DFSA notice of that event, and inform the DFSA of:

              (a) what action that Authorised Market Institution is taking to restore the operation of the reserve information technology system; and
              (b) when it is expected that the operation of that system will be restored.
              Derived from RM118/2013 [VER15/07-13]

            • Inability to Discharge Regulatory Functions

              • AMI 9.9.3

                Where, because of the occurrence of any event or circumstances, an Authorised Market Institution is unable to discharge any Regulatory Function, it must immediately give the DFSA written notice of its inability to discharge that function, and inform the DFSA of:

                (a) what event or circumstance has caused it to become unable to do so;
                (b) which of its Regulatory Functions it is unable to discharge; and
                (c) what action, if any, it is taking or proposes to take to deal with the situation and, in particular, to enable it to recommence discharging that Regulatory Function.
                Derived from RM118/2013 [VER15/07-13]

          • AMI 9.10 Investigations and Disciplinary Action

            • AMI 9.10.1

              Where an Authorised Market Institution becomes aware that a person other than the DFSA has been appointed by any regulatory authority to investigate:

              (a) any business transacted on or through its facilities; or
              (b) any aspect of the clearing or settlement services which it provides,

              it must immediately give the DFSA notice of that event.

              Derived from RM118/2013 [VER15/07-13]

              • AMI 9.10.1 Guidance

                An Authorised Market Institution need not give the DFSA notice of:

                a. routine inspections or visits undertaken in the course of regular monitoring, complaints handling or as part of a series of theme visits;
                b. routine requests for information; or
                c. investigations into the conduct of Persons granted access to the facilities of an Authorised Market Institution where the use of its facilities is a small or incidental part of the subject matter of the investigation.
                Derived from RM118/2013 [VER15/07-13]

            • Disciplinary Action Relating to Persons Granted Access to its Facilities

              • AMI 9.10.2

                Where an Authorised Market Institution has taken disciplinary action against a Member or any other Person granted access to its facilities, or any Employee of such Person, in respect of a breach of its Business Rules, trading rules or Listing Rules, the Authorised Market Institution must immediately notify the DFSA of that event, and give:

                (a) the name of the Person concerned;
                (b) details of the disciplinary action taken by the Authorised Market Institution; and
                (c) the Authorised Market Institution's reasons for taking that disciplinary action.
                Derived from RM118/2013 [VER15/07-13]

              • AMI 9.10.3

                Where an appeal is lodged against any disciplinary action referred to in Rule 9.10.2, the Authorised Market Institution must immediately give the DFSA notice of that event and:

                (a) the name of the appellant and the grounds on which the appeal is based, immediately; and
                (b) the outcome of the appeal, when known.
                Derived from RM118/2013 [VER15/07-13]

            • Criminal Offences and Civil Prohibition

              • AMI 9.10.4

                Where an Authorised Market Institution has information tending to suggest that any person has:

                (a) been carrying on Financial Services in the DIFC in contravention of the general prohibition;
                (b) engaged in Market Abuse; or
                (c) engaged in financial crime or money laundering;

                it must immediately give the DFSA notice of that event, along with full details of that information in writing. In regard to (c) the AMI must immediately inform the appropriate authorities in the U.A.E.

                Derived from RM118/2013 [VER15/07-13]
                [Amended] RM193/2016 (Made 7th December 2016). [VER18/02-17]

            • Directions by an Authorised Market Institution

              • AMI 9.10.5

                Where an Authorised Market Institution:

                (a) decides to limit the open position of any Person in Investments; or
                (b) issues directions to any Person to close out his position in any Investment;

                that Authorised Market Institution must immediately give the DFSA notice of that event, and the Person's name, the Investment and size of any position to be limited or closed-out and the reasons for the Authorised Market Institution's decision.

                Derived from RM118/2013 [VER15/07-13]

          • AMI 9.11 Supervisory Directions

            • AMI 9.11 Guidance

              1. Article 26 of the Markets Law provides as follows:
              "(1) Without limiting the application of the Regulatory Law 2004, the DFSA may direct an Authorised Market Institution to do or not do specified things that the DFSA considers are necessary or desirable or ensure the integrity of the financial services industry in the DIFC, including but not limited to, directions:
              (a) requiring compliance with any duty, requirement, prohibition, obligation or responsibility applicable to an Authorised Market Institution;
              (b) requiring an Authorised Market Institution to act in a specified manner in relation to transactions conducted on or through the facilities operated by an Authorised Market Institution, or in relation to a specified class of transactions; or
              (c) requiring an Authorised Market Institution to act in a specified manner or to exercise its powers under any rules that the Authorised Market Institution has made.
              (2) Without limiting the application of Article 75 of the Regulatory Law 2004, the DFSA may direct an Authorised Market Institution to:
              (a) close the market or facilities operated by an Authorised Market Institution in a particular manner or for a specified period;
              (b) suspend transactions on the market or through the facilities operated by an Authorised Market Institution;
              (c) suspend transactions in Investments conducted on the market or through the facilities operated by an Authorised Market Institution;
              (d) prohibit trading in Investments conducted on the market or through the facilities operated by an Authorised Market Institution;
              (e) defer for a specified period the completion date of transactions conducted on the market or through the facilities operated by an Authorised Market Institution;
              (f) prohibit a specified person from undertaking any transactions on the facilities operated by the Authorised Market Institution; or
              (g) do any act or thing, or not do any act or thing, in order to ensure an orderly market, or reduce risk to the DFSA's objectives."
              2. The DFSA expects to use these powers only in exceptional circumstances. Factors the DFSA will consider in exercising these powers include:
              a. what steps the Authorised Market Institution has taken or is taking in respect of the issue being addressed in the planned direction;
              b. the impact on the DFSA's objectives if a direction were not issued; or
              c. whether it is in the interests of the DIFC.
              3. The Decision Notice given by the DFSA will specify what an Authorised Market Institution is required to do under the exercise of such powers.
              Derived from RM118/2013 [VER15/07-13]
              [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

          • AMI 9.12 Reports

            • AMI 9.12.1

              For the purposes of Article 74(2) of the Regulatory Law 2004, an Authorised Market Institution must deliver to the DFSA a report in writing at such times as the DFSA may direct addressing those matters contained in Article 74(2)(a)-(d) of the Regulatory Law and such other matters as the DFSA may reasonably require.

              Derived from RM118/2013 [VER15/07-13]

          • AMI 9.13 Listing Directions

            Derived from RM118/2013 [VER15/07-13]

            • AMI 9.13 Guidance

              Article 35(2) of the Markets Law 2012 allows the DFSA to direct an Authorised Market Institution to suspend or restore from suspension or delist Securities from its Official List of Securities. Such directions may take immediate effect or from a date and time as may be specified in the directive.

              Derived from RM118/2013 [VER15/07-13]

          • AMI 9.14 Public Disclosures of Decisions in Relation to an Official List of Securities of an Authorised Market Institution

            • AMI 9.14.1

              (1) An Authorised Market Institution must make a market disclosure:
              (a) on the website of the Authorised Market Institution; and
              (b) to the DFSA,
              of decisions in relation to the following events:
              (c) an admission of Securities to its Official List of Securities;
              (d) a suspension of Securities from its Official List of Securities;
              (e) a restoration from suspension of Securities from its Official List of Securities;
              (f) a delisting of Securities from its Official List of Securities; and
              (g) a suspension, restoration from suspension or decision to cease trading of any Investment.
              (2) The disclosure made in accordance with (1) should also indicate whether the event was made under a direction made to the Authorised Market Institution by the DFSA.
              Derived from RM118/2013 [VER15/07-13]

              • AMI 9.14.1 Guidance

                Disclosures made in accordance with Rule 9.14.1 are designed to help ensure that an orderly market exists in relation to Securities admitted to an Official List of Securities of an Authorised Market Institution.

                Derived from RM118/2013 [VER15/07-13]

        • AMI 10 Withdrawal of a Licence

          • AMI 10.1 Application

            • AMI 10.1.1

              This chapter applies to an Authorised Market Institution.

              Derived from RM118/2013 [VER15/07-13]

          • AMI 10.2 Withdrawal of a Licence at an Authorised Market Institution's request

            • AMI 10.2.1

              (1) An Authorised Market Institution must continue to carry on every Financial Service it is authorised to conduct under its Licence until its Licence is withdrawn or the DFSA consents in writing.
              (2) An Authorised Market Institution seeking to have its Licence withdrawn must submit a request in writing stating:
              (a) the reasons for the request;
              (b) the date on which it will cease to carry on Financial Services in or from the DIFC;
              (c) how Persons using facilities maintained by it for trading, clearing or settlement, as applicable, are affected and any alternative arrangements made for the trading, clearing or settlement;
              (d) where applicable, how persons with Securities admitted to an Official List of Securities maintained by it are affected and any alternative arrangements made for the listing and trading of the relevant Securities; and
              (e) that it has discharged, or will discharge, all obligations owed to its users in respect of whom the Authorised Market Institution has carried on Financial Services in or from the DIFC.
              Derived from RM118/2013 [VER15/07-13]

              • AMI 10.2.1 Guidance

                1. The DFSA will need to be satisfied when considering requests under Rule 10.2.1, that an Authorised Market Institution has made appropriate arrangements with respect to its existing users (including the receipt of consent where required) and, in particular:
                a. whether there may be a long period in which the business will be wound down or transferred;
                b. whether money and other assets belonging to users must be returned to them; and
                c. whether there is any other matter which the DFSA would reasonably expect to be resolved before granting a request for the withdrawal of a Licence.
                2. In determining a request for the withdrawal of a Licence, the DFSA may require additional procedures or information as appropriate including evidence that the Authorised Market Institution has ceased to carry on Financial Services.
                3. Detailed plans should be submitted where there may be an extensive period of wind-down. It may not be appropriate for an Authorised Market Institution to immediately request a withdrawal of its Licence in all circumstances, although it may wish to consider reducing the scope of its Licence during this period. Authorised Market Institution should discuss these arrangements with the DFSA.
                4. The DFSA may refuse a request for the withdrawal of a Licence where it appears that users and customers may be adversely affected.
                5. The DFSA may also refuse a request for the withdrawal of a Licence where:
                a. the Authorised Market Institution has failed to settle its debts to the DFSA; or
                b. it is in the interests of a current or pending investigation by the DFSA, or by another regulatory body or Financial Services Regulator.
                6. Under Article 63 where the DFSA grants a request for the withdrawal of a Licence, the DFSA may continue to exercise any power under the Regulatory Law, the Markets Law or Rules in relation to an Authorised Market Institution for a period of three years from the date on which it became aware of the matter giving rise to the right to exercise the power.
                Derived from RM118/2013 [VER15/07-13]
                [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

          • AMI 10.3 Withdrawal of a Licence on the DFSA's Initiative

            • AMI 10.3 Guidance

              In section 10.2 above, an application to withdraw a Licence will be at the Authorised Market Institution's request. Under Article 51 of the Regulatory Law, the DFSA may act on its own initiative to withdraw an Authorised Market Institution's Licence in cases when the Authorised Market Institution no longer has authority to carry on any Financial Service, is no longer meeting the conditions of its Licence or has failed to remove a Controller in the circumstances described in Article 64 of the Regulatory Law.

              Derived from RM118/2013 [VER15/07-13]

        • AMI 11 Appeals from Authorised Market Institution Decisions

          • AMI 11.1 Application

            • AMI 11.1.1

              (1) Pursuant to Article 30 of the Regulatory Law, any Person who:
              (a) is aggrieved by a decision of the Authorised Market Institution;
              (b) has a right to a further appeal of the Authorised Market Institution decision to a tribunal under the Business Rules of that Authorised Market Institution; and
              (c) has exhausted the internal appeal process of that Authorised Market Institution;
              may appeal the Authorised Market Institution decision by commencing a regulatory proceeding before the FMT.
              (2) The grounds on which an appeal may lie under this Rule are limited to the following:
              (a) an error of law or jurisdiction;
              (b) a breach of the rules of natural justice; or
              (c) the decision is manifestly unreasonable.
              Derived from RM118/2013 [VER15/07-13]
              [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

        • AMI 12 Transition and Saving

          • AMI 12.1 Transitional Rule for Key Individuals

            • AMI 12.1.1

              (1) In this Rule:
              (a) "Commencement Date" means the date on which the DIFC Law Amendment Law No. 1 of 2014 comes into force;
              (b) "Current Regime" means the provisions in the Regulatory Law and AMI module as in force on the Commencement Date; and
              (c) "Previous Regime" means the provisions in the Regulatory Law and AMI module as in force immediately before the Commencement Date.
              (2) A Person who was authorised as a Key Individual by the DFSA under the Previous Regime is on the Commencement Date deemed to be authorised as a Key Individual by the DFSA under the Current Regime.
              Derived from RM118/2013 [VER15/07-13]
              [Amended] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

            • AMI 12.1.2 [Deleted]

              [Deleted] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

          • AMI 12.2 [Deleted]

            • AMI 12.2.1 [Deleted]

              [Deleted] DFSA RM133/2014 (Made 21st August 2014). [VER16/06-14]

          • AMI 12.3 Saving Rules

            • AMI 12.3.1

              (1) Save as provided in Rule 12.2.1, anything done or omitted to be done pursuant to or for the purposes of the Previous Regime is deemed to be done or omitted to be done pursuant to or for the purposes of the Current Regime.
              (2) Without prejudice to (1):
              (a) any right, privilege, remedy, obligation or liability accrued to or incurred by any Person; and
              (b) any investigation or legal or administrative proceeding commenced or to be commenced in respect of any right, privilege, remedy, obligation or liability,
              under the Previous Regime continues and is enforceable under the Current Regime.
              Derived from RM118/2013 [VER15/07-13]

      • AMI App 1 Testing of Technology Systems

        • AMI A1.1 Application

          • AMI A1.1.1 Application

            An Authorised Market Institution must, for the purposes of meeting the requirements in Rule 5.5.5 relating to the testing of its information technology systems, comply with the requirements in this Appendix.

            Derived from RM118/2013 [VER15/07-13]

        • AMI A1.2 Testing of Technology Systems

          • AMI A1.2.1

            An Authorised Market Institution must, before commencing live operation of its information technology systems or any updates thereto, use development and testing methodologies in line with internationally accepted testing standards in order to test the viability and effectiveness of such systems. For this purpose, the testing must be adequate for the Authorised Market Institution to obtain reasonable assurances that the systems, among other things:

            (a) enable it to comply with all the applicable requirements, including legislation, on an on-going basis;
            (b) can continue to operate effectively in stressed market conditions; and
            (c) any risk management controls embedded within the systems, such as generating automatic error reports, work as intended.
            Derived from RM118/2013 [VER15/07-13]

            • AMI A1.2.1 Guidance

              In assessing whether an Authorised Market Institution has adequate information technology resourcing, the DFSA will consider:

              a. whether its systems have sufficient electronic capacity to accommodate reasonably foreseeable volumes of messaging and orders, and
              b. whether such systems are adequately scalable in emergency conditions that might threaten the orderly and proper operations of its facility.
              Derived from RM118/2013 [VER15/07-13]

        • AMI A1.3 Testing Relating to Members' Technology Systems

          • AMI A1.3.1

            (1) An Authorised Market Institution must implement standardised conformance testing procedures to ensure that the systems which its Members are using to access facilities operated by it have a minimum level of functionality that is compatible with the Authorised Market Institution's information technology systems and will not pose any threat to fair and orderly conduct of its facilities.
            (2) An Authorised Market Institution must also require its Members, before commencing live operation of any electronic trading system, user interface or a trading algorithm, including any updates to such arrangements, to use adequate development and testing methodologies to test the viability and effectiveness of their systems.
            (3) For the purposes of (2), an Authorised Market Institution must require its Members:
            (a) to adopt trading algorithm tests, including tests in a simulation environment which are commensurate with the risks that such a strategy may pose to itself and to the fair and orderly functioning of the facility operated by the Authorised Market Institution; and
            (b) not to deploy trading algorithms in a live environment except in a controlled and cautious manner.
            Derived from RM118/2013 [VER15/07-13]

            • AMI A1.3.1 Guidance

              When assessing whether the trading algorithm testing plan of its Members is adequate and appropriate and implemented effectively, an Authorised Market Institution should consider whether:

              a. it includes testing where the markets in which the algorithm is to be used change in structure;
              b. the Member has taken into account any limits that are being placed on the number of Investments to be traded on, and the value and number of orders to be sent to, the facility operated by the Authorised Market Institution;
              c. the algorithm works effectively in stressed market conditions, including whether it can be switched off in appropriate circumstances; and
              d. it includes adequate independent auditing of the Member's testing procedures.
              Derived from RM118/2013 [VER15/07-13]

      • AMI App 2 Use of Price Information Providers

        • AMI A2.1 Application

          • AMI A2.1.1

            This Appendix applies to an Authorised Market Institution referred to in Rule 5.8.1(3).

            Derived from RM118/2013 [VER15/07-13]

          • Use of Price Information Providers

            • AMI A2.1.2

              (1) An Authorised Market Institution may only admit to trading or clearing or trade on its facilities Investments that reference to an underlying benchmark or index provided by a Price Information Provider where it has undertaken appropriate due diligence to ensure that the Price Information Provider, on an on-going basis, meets the requirements set out in (3).
              (2) A Price Information Provider is a price reporting agency or an index provider which constructs, compiles, assesses or reports, on a regular and systematic basis, prices of Investments, rates, indices, commodities or figures, which are made available to users.
              (3) For the purposes of (1), the Price Information Provider must:
              (a) have fair and non-discriminatory procedures for establishing prices of Investments which are made public.
              (b) demonstrate adequate and appropriate transparency over the methodology, calculation and inputs to allow users to understand how the benchmark or index is derived and its potential limitations;
              (c) where appropriate, give priority to concluded transactions in making assessments and adopt measures to minimise selective reporting;
              (d) be of good standing and repute as an independent and objective price reporting agency or index provider;
              (e) have a sound corporate governance framework;
              (f) have adequate arrangements to avoid its staff having any conflicts of interest where such conflicts are, or are likely to have, a material adverse impact on price establishment process; and
              (g) adequate complaint resolution mechanisms to resolve any complaints about the Price Information Provider's assessment process and methodology.
              Derived from RM118/2013 [VER15/07-13]

              • AMI A2.1 Guidance

                An Authorised Market Institution, when assessing the suitability of a Price Information Provider (the provider), should take into account factors such as:

                a. the provider's standing and reliability in the relevant physical or derivatives markets as a credible price reporting agency;
                b. the quality of corporate governance adopted, covering areas such as independent members of the board, independence of its internal audit and risk management function;
                c. whether the methodologies and processes (including any material changes to such methodologies and processes) adopted by the provider for the purposes of pricing are made publicly available;
                d. whether there are adequate procedures adopted to ensure that conflicts of interests between the provider's commercial interests and that of users of its services, including that of its Employees involved in pricing process, are adequately addressed, including through codes of ethics;
                e. whether there is a clear conveyance to its users of the economic realities of the underlying interest the Price Information Provider seeks to measure; and,
                f. the degree to which the Price Information Provider has given consideration to the characteristics of underlying interests measured, such as:
                •   the size and liquidity: Whether the size of the market informs the selection of an appropriate compilation mechanism and governance processes. For example, a benchmark or index that measures a smaller market may be impacted by single trades and therefore be more prone to potential manipulation, whereas a benchmark for a larger market may not be well represented by a small sample of participants;
                •   the relative market size. Where the size of a market referencing a benchmark is significantly larger than the volume of the underlying market, the potential incentive for benchmark manipulation to increase; and
                •   Transparency: Where there are varying levels of transparency regarding trading volumes and positions of market participants, particularly in non-regulated markets and instruments, whether the benchmark represents the full breadth of the market, the role of specialist participants who might be in a position to give an overview of the market, and the feasibility, costs and benefits of providing additional transparency in the underlying markets.
                Derived from RM118/2013 [VER15/07-13]

      • AMI App 3 Contract Delivery Specifications

        • AMI A3.1 Application

          • AMI A3.1.1

            This Appendix applies to an Authorised Market Institution which trades, or clears or settles, on its facilities Commodity Derivative contracts which require physical delivery of the underlying commodity.

            Derived from RM118/2013 [VER15/07-13]

        • AMI A3.2 Deliverability of the Underlying Commodity

          • AMI A3.2.1

            An Authorised Market Institution referred to in A3.1.1 must, for the purposes of meeting the requirement in Rule 6.3.2(1)(b), ensure that the terms and conditions of the Commodity Derivative contracts which are to be traded, or cleared or settled, on its facilities, are designed to include the matters specified in Rules A3.2.2–A3.2.9.

          • Quality or Deliverable Grade

            • AMI A3.2.2

              A Commodity Derivative contract must include specifications of commodity characteristics for par delivery, including those relating to grade, class, and weight. The quality or grade specified must conform to the prevailing practices in the underlying physical market relating to the relevant commodity.

              Derived from RM118/2013 [VER15/07-13]

              • AMI A3.2.2 Guidance

                1. Par delivery envisages delivery of commodities which are of a comparable quality or grade as specified in the contract. Contracts that call for delivery of a specific quality of commodity may provide commercial participants with a clearer, more efficient hedging and price-basing contracts than a contract that permits delivery of a broad range of commodity grades or classes.
                2. However, as contracts that permit delivery of only a specific grade of commodity may be susceptible to manipulation if that grade of the commodity is in short supply or controlled by a limited number of sellers, an Authorised Market Institution should require appropriate measures to mitigate such risks.
                Derived from RM118/2013 [VER15/07-13]

          • Size of Delivery Unit

            • AMI A3.2.3

              A Commodity Derivative contract must contain provisions relating to size or composition of delivery units which conform to the prevailing market practice in the underlying physical market to ensure that it does not constitute a barrier to delivery or otherwise impede the performance of the contract.

              Derived from RM118/2013 [VER15/07-13]

              • AMI A3.2.3 Guidance

                An Authorised Market Institution should, where the provisions relating to size and delivery units of the Commodity Derivatives contract deviate from the underlying physical market, examine the reasons for such deviation and ensure that the risks arising from such deviation can be effectively addressed by the contract parties.

                Derived from RM118/2013 [VER15/07-13]

          • Delivery Instruments

            • AMI A3.2.4

              A Commodity Derivative contract must specify the acceptable form or type of delivery instruments, and whether such instruments are negotiable or assignable and, if so, on what conditions.

              Derived from RM118/2013 [VER15/07-13]

              • AMI A3.2.4 Guidance

                Acceptable delivery instruments include warehouse receipts, bills of lading, shipping certificates, demand certificates, or collateralized depository receipts.

                Derived from RM118/2013 [VER15/07-13]

          • The Delivery Process and Facilities

            • AMI A3.2.5

              A Commodity Derivative contract must specify:

              (a) the delivery process, including timing, location, manner and form of delivery, and
              (b) the delivery and/or storage facilities available,

              which conform to the prevailing practices in the underlying physical market to permit effective monitoring and to reduce the likelihood of disruption.

              Derived from RM118/2013 [VER15/07-13]

              • AMI A3.2.5 Guidance

                1. An Authorised Market Institution should consider issues associated with the delivery process, including those relating to acceptable delivery locations. Such issues include:
                a. the level of deliverable supplies normally available, including the seasonal distribution of such supplies;
                b. the nature of the physical market at the delivery point (e.g., auction market, buying station or export terminal);
                c. the number of major buyers and sellers; and
                d. normal commercial practices in establishing cash commodity values.
                2. The delivery months specified in the Commodity Derivative contract should take into account cyclical production and demand and accord with when sufficient deliverable supplies are expected to exist in the underlying physical market. Seasonality of a commodity should also be taken into account in relation to transport and storage, as it may affect the availability of warehouse space and transportation facilities.
                3. Consistent with the grade differentials noted above, Commodity Derivative contracts that permit delivery in more than one location should set delivery premiums or discounts consistent with those observed in the underlying physical market. The adequacy of transportation links to and from the delivery point should also be taken into account when setting delivery premiums.
                4. The delivery facilities available can include oil or gas storage facilities, warehouses or elevators for agricultural commodities and bank or vault depositories for precious metals.
                5. An Authorised Market Institution should consider issues relating to the selection of delivery facilities under the contract which include:
                a. the number and total capacity of facilities meeting contract requirements;
                b. the proportion of such capacity expected to be available for short traders who may wish to make delivery against Commodity Derivative contracts and seasonal changes in such proportions;
                c. the extent to which ownership and control of such facilities is dispersed or concentrated; and
                d. its ability to access necessary information from such facility.
                Derived from RM118/2013 [VER15/07-13]

          • Inspection and Certification Procedures

            • AMI A3.2.6

              A Commodity Derivative contract must specify applicable inspection or certification procedures for verifying that the delivered commodity meets the quality or grade specified in the contract, which conform to the prevailing practices in the underlying physical market.

              Derived from RM118/2013 [VER15/07-13]

              • AMI A3.2.6 Guidance

                If the commodity is perishable, the Commodity Derivative contract should specify if there are any limits on the duration of the inspection certificate and the existence of any discounts applicable to deliveries of a given age.

                Derived from RM118/2013 [VER15/07-13]

          • Payment for Transportation or Storage

            • AMI A3.2.7

              A Commodity Derivative contract must specify:

              (a) the respective responsibilities of the parties to the contract regarding costs associated with transporting the commodity to and from the designated delivery point and any applicable storage costs; and
              (b) how and when title to the commodity transfers, including from any short to long position holder.
              Derived from RM118/2013 [VER15/07-13]

          • Legal Enforceability

            • AMI A3.2.8

              A Commodity Derivative contract must, where any one or more of the activities of trading, clearing or settlement under the contract take place in different jurisdictions, contain adequate arrangements to mitigate risks arising from any disparity between governing laws applicable in the relevant jurisdictions.

              Derived from RM118/2013 [VER15/07-13]

              • AMI A3.2.8 Guidance

                An Authorised Market Institution should, when assessing whether the contractual terms adequately provide for addressing jurisdictional risks, take into account whether the contract:

                a. clearly identifies the different legal requirements applicable in the relevant jurisdictions and any differences, including those relating to the manner in which standard clauses are interpreted; and
                b. the impact such differences may have in dealing with matters such as delivery disputes, and determination of rights in insolvency proceedings; and
                c. contains effective measures to address risk of unenforceability of the contractual terms, particularly those relating to cargos and storage where jurisdictional differences could have a significant impact on the deliverability.
                Derived from RM118/2013 [VER15/07-13]

          • Default Provisions and Force Majeure

            • AMI A3.2.9

              A Commodity Derivative contract must specify:

              (a) the rights and obligations of the parties to the contract in the event of default by the parties, or in the event of frustration of the contract due to force majeure or other specified event; and
              (b) whether any Clearing House or Exchange guarantees the settlement of the transaction in an event specified in (a), and if so, the manner in which such settlement will occur.
              Derived from RM118/2013 [VER15/07-13]

              • AMI A3.2.9 Guidance

                1. An Authorised Market Institution when considering whether a Commodities Derivative contract adequately provides for contract certainty in the event of default or force majeure, should take into account:
                a. whether any collateral provided by the contracting parties would be sufficient to address the replacement risk in the performance of the contract; and
                b. whether there are any monetary consequences attaching to defaulting parties that would act as a disincentive against default.
                2. The contract terms should clearly specify which jurisdictional laws are applicable to the governing law, including where there are any significant variations in the rights and liabilities attaching to the contracting parties for the event that occur in the relevant jurisdiction.
                Derived from RM118/2013 [VER15/07-13]

    • Auditor Module (AUD) [VER3/02-17]

      • Part 1 Introduction

        • AUD 1 Application and Definitions

          • AUD 1.1 Application and definitions

            • AUD 1.1.1

              This module (AUD) applies to every:

              (a) applicant for registration as a Registered Auditor;
              (b) Auditor;
              (c) individual applying for registration as an Audit Principal; and
              (d) Audit Principal.
              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

              • AUD 1.1.1 Guidance

                A Registered Auditor will need to comply with all chapters in AUD. An Auditor which is not a Registered Auditor will need to comply with chapters 5 and 6 in AUD as those chapters apply to an Auditor whether or not it is registered with the DFSA.

                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • AUD 1.1.2

              In these Rules, a Relevant Person means a:

              (a) Domestic Firm;
              (b) Public Listed Company; or
              (c) Domestic Fund.
              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

      • Part 2 Registered Auditors and Audit Principals

        • AUD 2 Registration

          • AUD 2.1 Application

            • AUD 2.1.1

              This chapter applies to every:

              (a) applicant for registration as a Registered Auditor;
              (b) Registered Auditor;
              (c) individual applying for registration as an Audit Principal; and
              (d) Audit Principal.
              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 2.2 Registration of Registered Auditors

            • Application for registration

              • AUD 2.2.1

                An applicant for registration as a Registered Auditor must complete and submit the appropriate form in AFN to the DFSA, supported by such additional material as may be required by the DFSA.

                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

                • AUD 2.2.1 Guidance

                  1. A Person who may apply to be a Registered Auditor includes a natural person.
                  2. Applicants for registration as a Registered Auditor are required to pay fees as prescribed in FER.
                  Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • Criteria for registration

              • AUD 2.2.2

                In assessing an application for registration, the DFSA may:

                (a) make any enquiries which it considers appropriate, including enquiries independent of the applicant;
                (b) require the applicant to provide additional information;
                (c) require the applicant to provide information on how it intends to ensure compliance with a particular requirement in a Rule or the Regulatory Law;
                (d) require any information provided by the applicant to be verified in any way that the DFSA specifies; and
                (e) take into account any information which it considers relevant.
                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

              • AUD 2.2.3

                (1) An applicant for registration as a Registered Auditor must be able to demonstrate to the DFSA's satisfaction that it:
                (a) is fit and proper;
                (b) has professional indemnity insurance as required under section 4.3;
                (c) has adequate systems, procedures and controls to ensure due compliance with:
                (i) the International Standards on Auditing;
                (ii) the International Standards on Quality Control; and
                (iii) the Code of Ethics for Professional Accountants;
                (d) has clear and comprehensive policies and procedures relating to compliance with all applicable legal requirements, including those in the Regulatory Law, AUD, AML and other relevant modules of the Rulebook, when providing audit services to a Domestic Firm, Public Listed Company or Domestic Fund;
                (e) has adequate means to implement those policies and procedures and monitor that they are operating effectively and as intended;
                (f) is controlled by a majority of individuals who hold Recognised Professional Qualifications;
                (g) has identified at least one or more appropriate individuals, who will be appointed by it to undertake the responsibilities of an Audit Principal; and
                (h) has complied with any other requirement specified by the DFSA.
                (2) For the purposes of (1)(f) "majority" means:
                (a) where under the Registered Auditor's constitution matters are decided on by the exercise of voting rights, a majority of the rights to vote on all, or substantially all, matters; or
                (b) in any other case a majority of the Persons having rights under the constitution of the Registered Auditor to enable them to direct its overall policy or alter its constitution.
                (3) For the purposes of assessing whether an applicant for registration meets the fit and proper requirement under (1)(a), the DFSA may consider:
                (a) the application and submissions;
                (b) its background and history;
                (c) its ownership and Group structure;
                (d) its resources, including human and technological;
                (e) whether the applicant's affairs are likely to be conducted and managed in a sound and prudent manner; and
                (f) any other matter considered relevant by the DFSA.
                (4) The DFSA will in assessing the matters in (1) and (3) consider the cumulative effect of factors which, if taken individually, may be regarded as insufficient to give reasonable cause to doubt the fitness and propriety of an applicant.
                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

                • AUD 2.2.3 Guidance

                  Under Article 98 of the Regulatory Law, the DFSA may grant or refuse to grant registration and impose restrictions and conditions upon the registration.

                  Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 2.3 Continuing obligations of Registered Auditors

            • AUD 2.3.1

              To remain registered, a Registered Auditor must comply on a continuing basis with:

              (a) the International Standards on Auditing, International Standards on Quality Control and the Code of Ethics for Professional Accountants;
              (b) the registration criteria in Rule 2.2.3(1); and
              (c) the Rules in chapter 6 regarding the conduct of audits and the preparation of audit reports.
              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • AUD 2.3.2

              A Registered Auditor must at all times have at least one individual appointed by it to undertake the responsibilities of an Audit Principal.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • AUD 2.3.3

              The DFSA may require a Registered Auditor which has not recently conducted any audit work under its registration to provide other examples of audit work it has carried out in order to demonstrate to the DFSA that it is still able to meet its continuing obligations.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

              • AUD 2.3.3 Guidance

                The DFSA may issue guidelines in the form of Practice Notes to assist Registered Auditors in applying the standards set out in Rule 2.3.1(a). These Practice Notes will highlight new emerging or otherwise relevant circumstances to assist a Registered Auditor in applying the relevant standard. Practice Notes will be published on the DFSA website.

                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 2.4 Registration of Audit Principals

            • AUD 2.4 Guidance

              The general responsibilities of an Audit Principal are defined in Article 97(c) of the Regulatory Law.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • Application for registration

              • AUD 2.4.1

                When applying for registration as an Audit Principal, both the relevant individual and the Registered Auditor must complete and submit the appropriate form in AFN, supported by such additional materials as may be required by the DFSA.

                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • Criteria for registration

              • AUD 2.4.2

                An individual applying for registration as an Audit Principal must be able to demonstrate to the DFSA's satisfaction that he:

                (a) holds a Recognised Professional Qualification;
                (b) is a member in good standing of a Recognised Professional Body;
                (c) has at least 5 years of relevant post qualification audit experience in the past 7 years, including at least one year of experience in a managerial role supervising and finalising audits; and
                (d) is fit and proper to conduct audit work.
                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 2.5 Continuing obligations of Audit Principals

            • AUD 2.5.1

              To remain registered, an Audit Principal must comply on a continuing basis with:

              (a) the registration criteria in Rule 2.4.2; and
              (b) the Principles in section 2.6.
              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 2.6 Principles for Audit Principals

            • AUD 2.6.1

              The five Principles set out in this section apply to every Audit Principal.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

              • AUD 2.6.1 Guidance

                1. These Principles are derived from the fundamental principles published in the Code of Ethics for Professional Accountants.
                2. If an Audit Principal breaches a Principle, the DFSA may consider suspending or withdrawing the registration of the Audit Principal on that basis.
                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • Principle 1 — Integrity

              • AUD 2.6.2

                An Audit Principal must be straightforward and honest in all professional and business relationships.

                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • Principle 2 — Objectivity

              • AUD 2.6.3

                An Audit Principal must not allow bias, conflict of interest or the undue influence of others to override professional or business judgements.

                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • Principle 3 — Professional competence and due care

              • AUD 2.6.4

                An Audit Principal must maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional services based on current developments in practice, legislation and techniques and must act diligently and in accordance with applicable technical and professional standards.

                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • Principle 4 — Confidentiality

              • AUD 2.6.5

                An Audit Principal must respect the confidentiality of information acquired as a result of professional and business relationships and, therefore, not disclose any such information to third parties without proper and specific authority, unless there is a legal or professional right or duty to disclose, nor use the information for the personal advantage of the Audit Principal or third parties.

                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • Principle 5 — Relations with the DFSA

              • AUD 2.6.6

                An Audit Principal must deal with the DFSA in an open and co-operative manner and must promptly disclose to the DFSA any information of which the DFSA would reasonably expect to be notified.

                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 2.7 Transitional and Saving Provisions

            • AUD 2.7.1

              In this section:

              (a) "previous Law" means the Regulatory Law as it was in force immediately before the commencement of the DIFC Laws Amendment Law No. 1 of 2014;
              (b) "current Law" means the provisions of the Regulatory Law that came into force under the DIFC Laws Amendment Law No. 1 of 2014; and
              (c) "the commencement" means the commencement of the current Law.
              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • AUD 2.7.2

              A Person who immediately before the commencement was registered as an Auditor by the DFSA under the previous Law is deemed on the commencement to be registered as a Registered Auditor under the current Law.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • AUD 2.7.3

              A Person who immediately before the commencement was appointed as an Audit Principal by a Registered Auditor under the previous Law is deemed on the commencement to be registered as an Audit Principal under the current Law.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • AUD 2.7.4

              An Audit Principal referred to in Rule 2.7.3 must submit the appropriate form in AFN (notification of intention to continue to undertake the responsibilities of an Audit Principal for a Registered Auditor) within 60 days of the commencement.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • AUD 2.7.5

              A Registered Auditor and an Audit Principal referred to in this section must continue to maintain any records which were required to be maintained under the previous Law for the period of time required under the previous Law.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

        • AUD 3 Suspension and Withdrawal of Registration

          • AUD 3.1 Application

            • AUD 3.1.1

              This chapter applies to every:

              (a) Registered Auditor; and
              (b) Audit Principal.
              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 3.2 Suspension and withdrawal of registration of a Registered Auditor

            • AUD 3.2 Guidance

              1. Under Article 98A(1) of the Regulatory Law the DFSA may suspend or withdraw the registration of a Registered Auditor or Audit Principal on its own initiative or at the request of the Registered Auditor or Audit Principal.
              2. Article 98A(2) of the Regulatory Law sets out the circumstances in which the DFSA may suspend or withdraw the registration of a Registered Auditor or Audit Principal.
              3. Under Article 98A(5) of the Regulatory Law, the DFSA may temporarily suspend the registration of a Registered Auditor or Audit Principal pending completion of an investigation against the Auditor or Audit Principal. The DFSA may only exercise this power where, arising from the investigation, it reasonably believes that the Person has engaged in serious misconduct that may form grounds for withdrawal of the Person's registration. This might be, for example, where there is evidence of fraud, theft or other dishonest conduct or a risk to Client Assets. As the investigation is ongoing, the DFSA would ordinarily expect not to publicise a temporary suspension under this power. But the DFSA retains discretion to publicise such a suspension in an individual case if it is appropriate to do so given the particular circumstances.
              4. Under Article 98A(7) of the Regulatory Law, a Registered Auditor or Audit Principal may refer a decision of the DFSA to suspend or withdraw its registration to the FMT. The DFSA decision to suspend or withdraw registration remains in force until the review is concluded and the FMT makes a further order, unless the FMT has made an interim order to stay the decision.
              5. Under Article 98A(3) of the Regulatory Law the DFSA may make Rules containing requirements a Registered Auditor or Audit Principal must meet before the DFSA will grant a request by the Registered Auditor or Audit Principal to withdraw registration.
              6. An application by a Registered Auditor or Audit Principal to withdraw their registration does not in itself result in a withdrawal of the registration. Until the DFSA withdraws the registration, the Registered Auditor or Audit Principal remains subject to, and must comply with, the Regulatory Law, Rules and any other relevant legislation administered by the DFSA.
              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • Suspension or withdrawal of registration on the DFSA's initiative

              • AUD 3.2.1

                A Registered Auditor that has had its registration suspended by the DFSA, must not:

                (a) accept any new audit client who is a Relevant Person;
                (b) agree to being re-appointed by an existing audit client who is a Relevant Person; or
                (c) issue an audit report relating to a Relevant Person without the prior written consent of the DFSA.
                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

              • AUD 3.2.2

                If the DFSA suspends the registration of a Registered Auditor, it may impose such:

                (a) conditions on the Registered Auditor as it sees fit during the period of the suspension; and
                (b) requirements on the procedure for lifting the suspension as it considers appropriate.
                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • Requirements for withdrawal of registration at the request of the Registered Auditor

              • AUD 3.2.3

                (1) A request for withdrawal of registration by a Registered Auditor must be made by completing and submitting the appropriate form in AFN.
                (2) Before granting a request for withdrawal the DFSA must first be satisfied that:
                (a) the Registered Auditor has made appropriate arrangements with respect to its existing audit clients who are Relevant Persons; and
                (b) any other matter which the DFSA would reasonably expect to be resolved has been resolved.
                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

              • AUD 3.2.4

                Once a Registered Auditor has filed a request to withdraw its registration, it must not accept any appointment or re-appointment as a Registered Auditor or issue any audit reports in relation to a Relevant Person without obtaining the prior written consent of the DFSA.

                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 3.3 Suspension or withdrawal of an Audit Principal

            • Suspension or withdrawal of registration on the DFSA's initiative

              • AUD 3.3.1

                An Audit Principal that has had his registration suspended by the DFSA must not in respect of a Relevant Person:

                (a) manage the conduct of any audit work undertaken by a Registered Auditor; or
                (b) sign any audit report, or other report required by the DFSA, on behalf of the Registered Auditor.
                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

              • AUD 3.3.2

                If the DFSA suspends the registration of an Audit Principal, it may impose such:

                (a) conditions on the Audit Principal and Registered Auditor as it sees fit during the period of the suspension; and
                (b) requirements on the procedure for lifting the suspension as it considers appropriate.
                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • Requirements for withdrawal of registration at the request of the Audit Principal or their Registered Auditor

              • AUD 3.3.3

                (1) A request for withdrawal of an Audit Principal's registration by the relevant Registered Auditor or Audit Principal must be made by completing and submitting the appropriate form in AFN.
                (2) Before granting a request for withdrawal the DFSA must first be satisfied that:
                (a) the Registered Auditor is able to continue to comply with Rule 2.3.2;
                (b) the Registered Auditor has made appropriate arrangements with respect to its existing audit clients who are Relevant Persons; and
                (c) any other matter which the DFSA would reasonably expect to be resolved has been resolved.
                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

        • AUD 4 General Obligations

          • AUD 4.1 Application

            • AUD 4.1.1

              This chapter applies to every Registered Auditor.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 4.2 Employees' suitability and continuing professional development

            • AUD 4.2.1

              (1) A Registered Auditor must ensure that all Employees, including its Audit Principals, engaged in audit work for Relevant Persons:
              (a) remain fit and proper to carry out their role; and
              (b) undertake continuing professional development in accordance with the requirements of:
              (i) the Recognised Professional Body of which the Employee is a member;
              (ii) any applicable internal standards of the Registered Auditor; and
              (iii) any direction given by the DFSA.
              (2) A Registered Auditor must maintain records of continuing professional development undertaken by Employees, including its Audit Principals.
              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 4.3 Professional indemnity insurance

            • AUD 4.3.1

              (1) A Registered Auditor must at all times hold adequate and appropriate professional indemnity insurance which covers all types of civil liability arising in connection with the conduct of the Registered Auditor's business by Employees, including its Audit Principals.
              (2) A Registered Auditor must arrange to hold appropriate run off cover that covers a period of 2 years after its registration as a Registered Auditor is withdrawn.
              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • AUD 4.3.2

              A Registered Auditor must, annually, provide to the DFSA information relating to the Registered Auditor's professional indemnity insurance policy, including the terms and duration of, and any claims made under, the policy.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • AUD 4.3.3

              A Registered Auditor must maintain proper records and all relevant information relating to:

              (a) its professional indemnity insurance, including the terms of cover and its duration;
              (b) how it established the adequacy and appropriateness of the cover for the purposes of Rule 4.3.1(1); and
              (c) insurance claims made under its professional indemnity insurance policy.
              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • AUD 4.3.4

              A Registered Auditor must, upon a request by the DFSA, provide to the DFSA promptly the information referred to in Rule 4.3.3.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 4.4 Working Papers

            • AUD 4.4.1

              A Registered Auditor must, subject to Rule 4.4.2, maintain sufficient Working Papers to:

              (a) facilitate the proper performance of its functions and duties under these Rules; and
              (b) be able to demonstrate to the DFSA that it properly performed its functions and duties under these Rules.
              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • AUD 4.4.2

              If a Registered Auditor:

              (a) provides Audit Services to a Relevant Person which is part of a Group; and
              (b) in providing those Audit Services, relies on Working Papers relating to the Group or to another member of the Group, including Working Papers prepared by another auditor,

              it is not required to maintain a copy of the Working Papers referred to in (b) but must ensure that a copy of those Working Papers is readily accessible to it.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

              • AUD 4.4.2 Guidance

                A Registered Auditor should be aware that the requirement in Rule 4.4.2 extends to a Group or member of a Group, whether inside or outside the DIFC.

                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • AUD 4.4.3

              A Registered Auditor must, upon request by the DFSA, provide to the DFSA promptly copies of Working Papers referred to in Rule 4.4.1 and Rule 4.4.2.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 4.5 Records

            • AUD 4.5.1

              (1) A Registered Auditor must maintain the records referred to in this chapter for a period of at least 6 years. In the case of the Working Papers referred to in Rule 4.4.1 or 4.4.2, those records must be kept or be accessible (as the case may be) for a period of 6 years from the date of completion of each audit carried out.
              (2) The records, however stored, must be capable of production in English on paper and within a reasonable period not exceeding 3 business days if requested by the DFSA.
              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 4.6 Notification of changes and events

            • AUD 4.6 Guidance

              1. This section sets out Rules on specific events, changes or circumstances that require notification to the DFSA and outlines the process and requirements for notifications.
              2. A Registered Auditor should be aware that it will breach Article 66 of the Regulatory Law if it provides information to the DFSA which is false, misleading or deceptive, or conceals information where the concealment of such information is likely to mislead or deceive the DFSA.
              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • Changes in core information

              • AUD 4.6.1

                A Registered Auditor must provide the DFSA with reasonable advance notice of any change in:

                (a) the Registered Auditor's name;
                (b) any business or trading name under which the Registered Auditor carries on its business;
                (c) the legal nature of the Registered Auditor;
                (d) the address of the Registered Auditor's principal place of business in the DIFC, where applicable;
                (e) (in the case of a Branch) its registered office or head office address;
                (f) the details of any other branches or offices of the Registered Auditor;
                (g) the details of any affiliated offices, associations or networks; and
                (h) its Audit Principals.
                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • Events having a regulatory impact

              • AUD 4.6.2

                A Registered Auditor must notify the DFSA immediately if it becomes aware, or has reasonable grounds to believe, that any of the following matters may have occurred or may be about to occur:

                (a) the Registered Auditor fails to satisfy the fit and proper requirements in Rule 2.2.3 or its continuing obligations in section 2.3;
                (b) any of its Audit Principals no longer meets the registration criteria in Rule 2.4.2;
                (c) any of its Audit Principals fails to comply with his obligations under DFSA administered legislation;
                (d) any claim is made against the Registered Auditor relating to the provision of Audit Services, including but not limited to, a claim lodged against the Registered Auditor's professional indemnity insurance policy;
                (e) the Registered Auditor or any of its Employees, including its Audit Principals, breaches a Rule;
                (f) the Registered Auditor or any of its Employees, including its Audit Principals, breaches any requirement imposed by any applicable law relating to the provision of Audit Services; or
                (g) there is a significant failure in the Registered Auditor's systems or controls.
                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • Action by other regulators

              • AUD 4.6.3

                A Registered Auditor must notify the DFSA immediately of:

                (a) the grant or refusal of any application for, or revocation of, authorisation of the Registered Auditor to carry on audit services in any jurisdiction outside the DIFC;
                (b) the Registered Auditor becoming aware that a government or other regulatory body (including a self-regulatory body) exercising powers and performing functions related to the regulation of auditors has started an investigation into the conduct of the Registered Auditor or of any of its Audit Principals;
                (c) the appointment of inspectors, however named, by a governmental or other regulatory body (including a self-regulatory body) exercising powers and performing functions related to the regulation of auditors, to investigate the affairs of the Registered Auditor or any of its Audit Principals; or
                (d) the imposition of disciplinary measures or sanctions on the Registered Auditor or any of its Audit Principals in relation to its conduct of audit work by a government or other regulatory body exercising powers and performing functions related to the regulation of auditors.
                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

                • AUD 4.6.3 Guidance

                  The notification requirement in Rule 4.6.3(b) extends to investigations relating to any Employee provided the conduct investigated relates to or impacts on the affairs of the Registered Auditor.

                  Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 4.7 Communication with the DFSA

            • AUD 4.7.1

              A Registered Auditor must ensure that any communication with the DFSA is conducted in the English language.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]
              [Amended] DFSA RM181/2016 (Made 19 June 2016). [VER2/08-16]

              • AUD 4.7.1 Guidance

                GEN section 6.10 sets out Rules about how information is to be provided to the DFSA.

                Derived from DFSA RM181/2016 (Made 19 June 2016). [VER2/08-16]

          • AUD 4.8 Annual information return

            • AUD 4.8.1

              A Registered Auditor must complete the Annual Information Return form in AFN for each calendar year and submit the form to the DFSA by 31 January of the following year.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 4.9 Anti-Money Laundering

            • AUD 4.9 Guidance

              A Registered Auditor should be aware of, and comply at all times with, its AML obligations which are contained in the AML module of the DFSA Rulebook.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 4.10 Disclosure of regulatory status

            • AUD 4.10.1

              A Registered Auditor must not:

              (a) misrepresent its regulatory status with respect to the DFSA expressly or by implication; or
              (b) use or reproduce the DFSA logo without express written permission from the DFSA and in accordance with any conditions for use imposed by the DFSA.
              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

      • Part 3 Appointment and Resignation of Auditor and Conduct of Audits

        • AUD 5 Appointment and Resignation of Auditor

          • AUD 5.1 Application

            • AUD 5.1.1

              This chapter applies to every Auditor.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 5.2 Consent to appointment as an Auditor

            • Prescribed non-audit services

              • AUD 5.2.1

                The following services are prescribed non-audit services for the purposes of Article 99A(2)(c) of the Regulatory Law:

                (a) the Compliance Officer function;
                (b) the internal audit function; and
                (c) the preparation of accounting records or financial statements.
                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

                • AUD 5.2.1 Guidance

                  An Auditor is prohibited from acting as an Auditor for an Authorised Person, Public Listed Company or Domestic Fund if it is providing any of the services set out in Rule 5.2.1 to the Authorised Person, Public Listed Company or the Fund Manager, Trustee or member of a Governing Body of the Domestic Fund. This is because the provision of such non-audit services creates a risk of a fundamental conflict of interest that would potentially prevent the Auditor from carrying out Audit Services properly. However, Auditors should be aware that there may also be other types of non-audit services which can create a conflict of interest and that may need to be considered on a case by case basis under Article 99A(2)(a) and (b) of the Regulatory Law to determine whether such other non-audit services create a conflict of interest or lack of independence that affect its ability to provide Audit Services to the Authorised Person, Public Listed Company or Domestic Fund.

                  Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • Rotation of an Audit Principal of a Public Listed Company

              • AUD 5.2.2

                (1) A Registered Auditor must not consent to an appointment or continue to act as the Auditor of a Public Listed Company if the Audit Principal who has responsibility for the conduct of the audit of the Public Listed Company has acted as Audit Principal in relation to that Company for a period exceeding the maximum period permitted under the Code of Ethics for Professional Accountants and has not been rotated as required under that Code.
                (2) The period referred to in (1) is prescribed for the purposes of Article 99A(2)(d) of the Regulatory Law.
                Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 5.3 Resignation of Auditor

            • AUD 5.3.1

              (1) An Auditor must notify the DFSA in writing if it resigns due to the failure by an Authorised Person, Public Listed Company or Domestic Fund to address significant concerns which have previously been raised by the Auditor with the senior management of that Person.
              (2) The notification under (1) must include sufficient details of the Person concerned, the concerns raised and the failure by that Person to address the concerns.
              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

        • AUD 6 Conduct of Audits and Preparation of Audit Reports

          • AUD 6.1 Application

            • AUD 6.1.1

              This chapter applies to every Auditor.

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD 6.2 Conduct of audits and contents of audit reports

            • AUD 6.2.1

              An Auditor must conduct an audit, and prepare the contents of any relevant audit report, referred to in Rules in accordance with the standards in the following table:

              Type of Report Relevant Standards Report Contents
              Financial Statements Auditor's Report International Standards on Auditing ISA 700
              Regulatory Return Auditor's Report for a Domestic Firm International Standards on Assurance Engagement (ISAE) or International Standards on Related Services (ISRS) A1.1.1
              Regulatory Return Auditor's Report for a Branch A1.1.2
              Client Money Auditor's Report A2.1.1
              Insurance Monies Auditor's Report A3.1.1
              Safe Custody Auditor's Report A4.1.1
              Fund Auditor's Report In accordance with Chapter 9 of the Collective Investment Rules module of the DFSA Rulebook A5.1.1
              Public Listed Company Auditor's Report In accordance with Chapter 5 of the MKT module of the DFSA Rulebook A6.1.1

              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

            • AUD 6.2.2

              (1) An Auditor must ensure that every audit report produced by it includes the name of:
              (a) the Audit Principal, if it is a Registered Auditor; or
              (b) the relevant individual responsible for managing the audit work relating to the relevant audit report, if it is not a Registered Auditor.
              (2) An individual referred to in (1)(a) or (b) is not by reason of being named in an audit report in accordance with (1), subject to any civil liability to which he would not otherwise be subject.
              Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

      • AUD App 1 Regulatory Returns Auditors Report

        • AUD A1.1.1

          In producing a Regulatory Returns Auditor's Report for a Domestic Firm, an Auditor must state whether:

          (a) it has received all the necessary information and explanations for the purposes of preparing the report to the DFSA;
          (b) the Authorised Person's regulatory returns, specified in PIB, PIN or AMI, to the DFSA have been properly reconciled with the appropriate audited financial statements;
          (c) the Authorised Person's regulatory returns, specified in PIB, PIN or AMI, submitted to the DFSA on a quarterly basis have been properly reconciled with the appropriate annual returns;
          (d) the Authorised Person's financial resources as at its financial year end have been properly calculated in accordance with the applicable Rules in PIB, PIN or AMI (as the case may be) and are sufficient to meet the relevant requirements;
          (e) (in the case of an Authorised Firm other than an Insurer) the Capital Resources have been calculated in accordance with the applicable Rules in PIB;
          (f) (in the case of an Authorised Firm other than an Insurer) the Capital Resources maintained exceed the Capital Requirement in accordance with the applicable Rules in PIB;
          (g) (in the case of an Authorised Firm) the regulatory returns specified in PIB or PIN have been properly prepared by the Authorised Firm in accordance with the applicable rules in PIB or PIN;
          (h) (in the case of an Authorised Firm) the Authorised Firm has kept proper Accounting Records in accordance with the applicable Rules in PIB or PIN;
          (i) (in the case of an Authorised Firm which is subject to Expenditure Based Capital Minimum) the Expenditure Based Capital Minimum has been calculated in accordance with the applicable Rules in PIB; and
          (j) (in the case of an Authorised Firm in Category 3B, 3C or 4, and which is subject to Expenditure Based Capital Minimum) the Capital Requirement maintained exceeds its Expenditure Based Capital Minimum and has been maintained in the form of liquid assets in accordance with the applicable Rules in PIB.
          Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

        • AUD A1.1.2

          In producing a Regulatory Returns Auditor's Report for a Branch, an Auditor must state whether;

          (a) the Authorised Person's regulatory returns have been properly reconciled with the Branch's financial statements; and
          (b) in the case of an Authorised Firm;
          (i) the regulatory returns specified in PIN or PIB have been properly prepared by the Authorised Firm in accordance with the applicable rules in PIB or PIN; and
          (ii) the Authorised Firm has kept proper Accounting Records in accordance with the applicable Rules in PIB or PIN.
          Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

      • AUD App 2 Client Money Auditor's Report

        • AUD A2.1.1

          In producing a Client Money Auditor's Report, an Auditor must state as at the date on which the Authorised Firm's audited statement of financial position was prepared:

          (a) the amount of Client Money an Authorised Firm was holding and controlling in accordance with COB chapter 6 and with the Client Money Provisions; and
          (b) whether:
          (i) the Authorised Firm has maintained throughout the year systems and controls to enable it to comply with the relevant provisions of COB chapter 6 and, if applicable, COB App5;
          (ii) the Authorised Firm's controls are such as to ensure that Client Money is identifiable and secure at all times;
          (iii) any of the requirements in COB chapter 6 and the Client Money Provisions have not been met;
          (iv) if applicable, Client Money belonging to Segregated Clients has been segregated in accordance with the Client Money Provisions;
          (v) if applicable, the Authorised Firm was holding and controlling the appropriate amount of Client Money in accordance with COB chapter 6 and with the Client Money Provisions as at the date on which the Authorised Firm's audited statement of financial position was prepared;
          (vi) the Auditor has received all necessary information and explanations for the purposes of preparing the report to the DFSA; and
          (vii) if applicable, there have been any material discrepancies in the reconciliation of Client Money.
          Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD A2.1.1 Guidance

            Where an Authorised Firm does not hold or control any Client Money as at the date on which the Authorised Firm's audited statement of financial position was prepared, the DFSA expects that a nil balance be stated to comply with Rule A2.1.1 (a) in this Appendix.

            Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

      • AUD App 3 Insurance Monies Auditor's Report

        • AUD A3.1.1

          In producing an Insurance Monies Auditor's Report, an Auditor must state as at the date on which the Authorised Firm's audited statement of financial position was prepared:

          (a) the amount of Insurance Monies an Authorised Firm was holding and controlling in accordance with COB section 7.12; and
          (b) whether:
          (i) the Authorised Firm has maintained throughout the year systems and controls to enable it to comply with the relevant provisions of COB section 7.12;
          (ii) the Authorised Firm's controls are such as to ensure that Insurance Monies are identifiable and secure at all times;
          (iii) any of the requirements in COB section 7.12 have not been met;
          (iv) if applicable, the Authorised Firm was holding and controlling an appropriate amount of Insurance Monies in accordance with COB section 7.12 as at the date on which the Authorised Firm's audited statement of financial position was prepared;
          (v) the Auditor has received all necessary information and explanations for the purposes of preparing the report to the DFSA; and
          (vi) if applicable, there have been any material discrepancies in the reconciliation of Insurance Monies.
          Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

          • AUD A3.1.1 Guidance

            Where an Authorised Firm does not hold or control any Insurance Monies as at the date on which the Authorised Firm's audited statement of financial position was prepared, the DFSA expects that a nil balance be stated to comply with Rule A3.1.1 (a) in this Appendix.

            Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

      • AUD App 4 Safe Custody Auditor's Report

        • AUD A4.1.1

          In producing a Safe Custody Auditor's Report, an Auditor must state as at the date on which the Authorised Firm's audited statement of financial position was prepared:

          (a) the extent to which the Authorised Firm was holding and controlling Client Investments or Providing Custody; and
          (b) whether:
          (i) the Authorised Firm has, throughout the year, maintained systems and controls to enable it to comply with the Safe Custody Provisions in COB App6;
          (ii) the Safe Custody Investments are registered, recorded or held in accordance with the Safe Custody Provisions;
          (iii) there have been any material discrepancies in the reconciliation of Safe Custody Investments;
          (iv) the Auditor has received all necessary information and explanations for the purposes of preparing this report to the DFSA; and
          (v) any of the requirements of the Safe Custody Provisions have not been met.
          Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]
          [Amended] RM189/2016 (Made 7th December 2016). [VER03/02-17]

          • AUD A4.1.1 Guidance

            1. Where an Authorised Firm does not hold or control any Client Investments, Arrange Custody or Provide Custody as at the date on which the Authorised Firm's audited statement of financial position was prepared, the DFSA expects that such fact be stated to comply with Rule A4.1.1 (a) in this Appendix.
            2. In producing a Safe Custody Auditor's Report an Auditor will need to consider which parts of COB App 6 are relevant to the Authorised Firm and only include an opinion to the extent relevant to the Authorised Firm's activity.
            Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]
            [Amended] RM189/2016 (Made 7th December 2016). [VER03/02-17]

      • AUD App 5 Fund Auditor's Report

        • AUD A5.1.1

          In producing a Fund Auditor's Report, an Auditor must state:

          (a) whether the financial statements have been properly prepared in accordance with the financial reporting standards adopted by the Fund in accordance with the Collective Investment Rules in the Rulebook and the Constitution;
          (b) whether the financial statements give a true and fair view of the financial position of the Fund, including the net income and the net gains or losses of the Fund Property, or, as the case may be, the Fund Property attributable to the Sub-Fund for the annual accounting period in question and the financial position of the Fund or Sub-Fund as at the end of the annual accounting period;
          (c) whether proper accounting records for the Fund, or as the case may be, Sub-Fund have not been kept, or that the financial statements are not in agreement with the accounting records and returns, or that the financial statements do not comply with the applicable financial reporting standards;
          (d) whether it has been given all the information and explanations which, to the best of its knowledge and belief, are necessary for the purposes of its audit;
          (e) whether the information given in the report of the directors or in the report of the Fund Manager for that period is consistent with the financial statements; and
          (f) any other matter or opinion required by the Regulatory Law or the Rules.
          Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

      • AUD App 6 Public Listed Company Auditor's Report

        • AUD A6.1.1

          In producing a Public Listed Company Auditor's Report, an Auditor must state whether the financial statements have been properly prepared in accordance with the Rules in MKT.

          Derived from DFSA RM130/2014 (Made 21st August 2014). [VER1/06-14]

    • Conduct of Business Module (COB) [VER32/02-19]

      • COB 1 Introduction

        • COB 1.1 Application

          • COB 1.1.1

            This module (COB) applies to every Authorised Firm with respect to the carrying on, in or from the DIFC, of any:

            (a) Financial Service; or
            (b) activity which is carried on, or held out as being carried on, in connection with or for the purposes of such a Financial Service;

            except to the extent that a provision of COB provides for a narrower application.

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

            • COB 1.1.1 Guidance

              An Authorised Firm may be able to rely on the Transitional Rules in section 2.6 for the purposes of meeting the client classification requirements in chapter 2.

              [Added] DFSA RM58/2008 (Made 1st July 2008). [VER14/07-08]
              [Amended] DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]
              [Amended] DSFA RM185/2016 (Made 7th December 2016). [VER28/02-17]

          • COB 1.1.2

            COB does not apply to a Representative Office.

            Derived from DFSA RM68/2009 (Made 3rd January 2010). [VER17/01-10]

      • 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 Firm, which carries on, or intends to carry on, any Financial Service with or for a Person.
            (2) For the purposes of this chapter, a Person includes a Fund, 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 Agency in so far as it carries on, or intends to carry on, the Financial Service of Operating a Credit Rating Agency.
              (2) This chapter does not apply to an Authorised Firm in so far as it carries on the activity described in GEN Rule 2.26.1, provided that no other Financial Service is carried on.
              (3) This chapter does not apply to an Authorised ISPV.
              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 DIFC. Such marketing activities can be conducted by an Authorised Firm, which holds a Representative Office Licence, provided the financial services or financial products marketed by it are those offered by its head office or a member of its Group.
                2. As a Representative Office 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 Firms 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 Firm is required to classify its Clients, as well as good practice it may follow. The scope of application of the Rulebook modules will vary depending on whether the Person with or for whom an Authorised Firm is carrying on Financial Services is classified as a Retail Client, Professional Client or Market Counterparty.

            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 Service (see Rule 2.3.5);
            c. take into account the type of Persons to whom a Financial Service is usually provided (see Rules 2.3.6, 2.3.7 and 2.3.8);
            d. provide flexibility for an Authorised Firm to rely on a client classification made by its head office or a Group 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 Services 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 Client, such as at its Holding Company or controller level (see Rule 2.3.8(2)).

            Types of clients

            3. There are three types of Clients:
            a. a Retail Client;
            b. a Professional Client; or
            c. a Market Counterparty.
            However, a Person may be classified as a Professional Client in relation to one Financial Service or financial product, but a Retail Client in relation to another. Similarly, a Person classified as a Professional Client may be classified as a Market Counterparty in relation to some Financial Services or financial products but not others (see paragraphs 8 and 9 below).

            Retail clients

            4. A Person who cannot be classified as a Professional Client or Market Counterparty in accordance with the Rules is required to be classified as a Retail Client (see Rule 2.3.2). If an Authorised Firm chooses to provide Financial Services to a Person as a Retail Client, it may do so by simply classifying that Person as a Retail Client without having to follow any further procedures as required for classifying Persons as Professional Clients or Market Counterparties.

            Professional Clients

            5. There are three routes through which a Person may be classified as a Professional Client:
            a. 'deemed' Professional Clients under Rule 2.3.4. As these Persons 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 Clients without having to meet any additional net asset and expertise criteria;
            b. 'service-based' Professional Clients under Rule 2.3.5, Rule 2.3.6 or Rule 2.3.6A. Due to their inherent nature, certain Financial Services activities such as credit provided to an Undertaking for business purposes ('commercial credit'),. . . advisory and arranging activities relating to corporate structuring and financing and crowdfunding services provided to a Body Corporate that is a borrower or an Issuer, are generally provided to Persons with sufficient expertise to obtain such services or are of relatively low risk to the Client. Therefore, a Person to whom such a Financial Service is provided can be classified as a 'service-based' Professional Client; and
            c. 'assessed' Professional Clients under Rules 2.3.7 and 2.3.8. These Persons are either individuals or Undertakings which can be classified as a Professional Client 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 Clients can also be classified as Professional Clients where certain conditions are met — see Rule 2.3.7(2) and (3).

            Market Counterparties

            6. A 'deemed' Professional Client under Rule 2.3.4 may be classified as a Market Counterparty provided the Authorised Firm has complied with the procedures set out in Rule 2.3.9(2). When an Authorised Firm carries on Financial Services with a Market Counterparty, only a limited number of requirements in the Rulebook modules apply to such firms. This is because an Authorised Firm transacts with a Market Counterparty 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 Firm carries on Financial Services with another Authorised Firm or a Regulated Financial Institution, such services would generally qualify as Financial Services that can be carried on with a Market Counterparty (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 Firm may provide a Financial Service to a Person who qualifies under more than one category of Professional Client. For example, a Client to whom an Authorised Firm 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 Client under Rule 2.3.4. In such circumstances, an Authorised Firm can classify such a Person as a 'deemed' Professional Client, in which case the firm may also be able to classify that Client as a Market Counterparty following the procedures in Rule 2.3.9(2).
            9. It is also possible that an Authorised Firm may provide a range of Financial Services to a single Client. If the Client can be classified as a Professional Client with regard to certain Financial Services (such as Providing Credit 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 Services, an Authorised Firm needs to take care that the Client is appropriately and correctly classified with respect to each Financial Service. This may mean that the same Client may receive both Professional Client treatment with regard to some Financial Services and Retail Client treatment with regard to other Financial Services. Where a Client cannot be classified as a Professional Client with regard to some Financial Services, the Authorised Firm can only provide such services to the Client if it has a Retail Endorsement on its Licence.

            Client classifications and Client Agreements

            10. Rule 2.4.4 provides a degree of flexibility for an Authorised Firm which is a Branch 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 Group. Where such reliance is placed, the Authorised Firm should be able to demonstrate to the satisfaction of the DFSA 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 Firm which is a member of a Group may have some Clients to whom it provides Financial Services as a Retail Client, whilst other Group members may provide Financial Services to the same Client as a Professional Client. While an Authorised Firm may rely on the client classifications made by a Group 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 Services it provides to the Client (see Rule 2.4.4). See also Rule 3.3.4, which provides a degree of flexibility for an Authorised Firm which is a Branch to rely on a Client Agreement made by its head office or any other branch of the same legal entity, or by a member of the Group, 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 Firm providing Financial Services to a Client in a Group context, where more than one member of the Group may be providing Financial Services which form a bundle of services. Each Group may have different arrangements to provide a number of services to a Client. Depending on the nature of the arrangement the Group adopts, and the Financial Services 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 Firm where it participates in a Group arrangement under which a bundle of Financial Services is provided to a Client by different members within its Group. See also Rule 3.3.4, which provides a degree of flexibility for an Authorised Firm participating in an arrangement under which a bundle of Financial Services is provided to a Client where reliance can be made on a Client Agreement executed by a Group member, provided the requirements in that Rule are met.

            Transitional Rules

            13. Section 2.6 contains provisions designed to enable Authorised Firms 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 Services that were provided to those Clients 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 Firm must, before carrying on a Financial Service with or for a Person, classify that Person as a:
            (a) Retail Client;
            (b) Professional Client; or
            (c) Market Counterparty,
            in accordance with the requirements in this chapter.
            (2) An Authorised Firm may classify a Person as a different type of a Client for different Financial Services or financial products that are to be provided to such a Client.
            (3) If an Authorised Firm is aware that a Person ('the agent'), with or for whom it is intending to carry on a Financial Service is acting as an agent for another Person ('the principal') in relation to the service then, unless the agent is another Authorised Firm or a Regulated Financial Institution, the Authorised Firm must treat the principal as its Client in relation to that service.
            (4) If an Authorised Firm intends to provide any Financial Service 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 Client.
            Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

            • COB 2.3.1 Guidance

              1. When a Person becomes a Client of an Authorised Firm is a question of fact that needs to be addressed by the firm in light of the nature of the relevant Financial Service (or financial product) involved, and the relations and interactions which the firm has with that Person. For instance, in certain types of Financial Services (such as corporate advisory services), a number of conversations (such as marketing and promotional activities) may occur between an Authorised Firm and a potential client before it may appear to the firm on a reasonable basis that the Person is likely to obtain a Financial Service 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 Firm 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 Service to a Person — see Rule 2.3.1(1). This provides an Authorised Firm flexibility to determine when exactly it would be appropriate for the firm to undertake client classification.
              3. The DFSA expects Authorised Firms to adopt practices which are consistent with the underlying intent of the client classification provisions, which is to provide Clients 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 Service 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 Client for the purposes of the Rules — see Rule 2.3.2).
              4. For example, an Authorised Firmis not expected to undertake advising or arranging activities relating to a Financial Service or financial product which is suited to Professional Clients (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 Services or financial products (such as investments in a Qualified Investor Fund) which are intended for Professional Clients.
              5. Rule 2.3.1(2) allows an Authorised Firm to classify a Client as a Retail Client in respect of some Financial Services and a Professional Client in respect of other Financial Services. For example, a Client classified as a 'service-based' Professional Client under Rule 2.3.5 for the Financial Service of Providing Credit may not necessarily meet the criteria to be classified as an 'assessed' Professional Client under Rule 2.3.7 or Rule 2.3.8 in respect of any other Financial Service to be provided to that Client. Therefore, such a Client would need to be classified as a Retail Client with respect to Financial Services other than Providing Credit.
              Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

          • Retail Clients

            • COB 2.3.2

              An Authorised Firm must classify as a Retail Client any Person who is not classified as a Professional Client or a Market Counterparty.

              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 Firm may classify a Person as a Professional Client if that Person:
              (a) meets the requirements to be:
              (i) a "deemed" Professional Client pursuant to Rule 2.3.4;
              (ii) a "service-based" Professional Client pursuant to Rule 2.3.5, Rule 2.3.6 or Rule 2.3.6A; or
              (iii) an "assessed" Professional Client pursuant to either Rule 2.3.7 or Rule 2.3.8; and
              (b) has not opted-in to be classified as a Retail Client in accordance with the requirements in Rule 2.4.1.
              (2) If an Authorised Firm becomes aware that a Professional Client no longer fulfils the requirements to remain classified as a Professional Client, the Authorised Firm must, as soon as possible, inform the Client that this is the case and the measures that are available to the firm and the Client 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 Client as a Retail Client with respect to any future Financial Services to be provided to that Client or, if the firm does not have a Retail Endorsement, discontinuing the provision of Financial Servicesto that Client.

                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 Person is a 'deemed' Professional Client if that Person 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 Institution, Regulated Exchange or regulated clearing house;
              (e) an Authorised Firm, a Regulated Financial Institution or the management company of a regulated pension fund;
              (f) a Collective Investment Fund or a regulated pension fund;
              (g) a Large Undertaking as specified in (2);
              (h) a Body Corporate 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 Office 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 Office.
              (2) A Person 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 Firm is not required to undertake a detailed assessment of a 'deemed' Professional Client's expertise or net assets (as is required in the case of an 'assessed' Professional Client), a firm still needs to have a reasonable basis for classifying a Person as falling within the list of 'deemed' Professional Clients 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 Client under Rule 2.3.4(1)(j), an Authorised Firm 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 Client 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 Person can be classified as a 'service-based' Professional Client. The professional status allowed under these three 'service-based' Professional Client categories can only be used for those three Financial Services and not for any other Financial Service provided to the same Client. If such a Client also obtains other Financial Services from the same firm, unless the Client can qualify either as a 'deemed' or 'assessed' Professional Client, that Client will need to be classified as a Retail Client for those other Financial Services.

              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 Person is a 'service-based' Professional Client if:
              (a) the Financial Service provided to that Person is Providing Credit;
              (b) the Person is an Undertaking; and
              (c) the Credit Facility in question is provided for use in the business activities of:
              (i) the Person;
              (ii) a controller of the Person;
              (iii) any member of the Group to which the Person belongs; or
              (iv) a joint venture of a Person 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 Undertaking;
              (b) is able to appoint or remove a majority of the board members of the Undertaking; or
              (c) controls a majority of the voting rights of the Undertaking (or that of a Holding Company of the Undertaking).
              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 Firm to classify an Undertaking as a Professional Client for the purposes of Providing Credit for businesses purposes, not only for the Undertaking itself, but also for its related entities (such as a controller or member of its Group) as specified in that Rule, provided that the Undertaking has not opted-in to be classified as a Retail Client.
                2. It is possible that an Undertaking obtaining credit may also fall within the category of a 'deemed' Professional Client under Rule 2.3.4 — see, for example, a Large Undertaking under Rule 2.3.4(2). An Authorised Firm may Provide Credit to such a Person 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 Undertaking 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 Undertaking under Rule 2.3.5.
                4. While an Authorised Firm 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 Client), a firm still needs to have a reasonable basis for classifying a Person as falling within the circumstances specified in this Rule (or Rule 2.3.6). For example, to verify that an Undertaking is obtaining credit for use in the business of its Holding Company or another member of its Group, a firm would need some documentation to demonstrate the Group member relationship. Such documents may include a diagram of the Group 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 Person is a 'service-based' Professional Client if:
              (a) the Financial Service provided to that Person is "Advising on Financial Products", "Arranging Deals in Investments", or "Arranging Credit and Advising on Credit"; 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 Products, Arranging Deals in Investments or Arranging Credit and Advising on Credit, 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 Rule, a Person is a 'service-based' Professional Client if:

                (a) the Financial Service being provided to the Person is Loan Crowdfunding or Investment Crowdfunding; and
                (b) the Person is a Body Corporate 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 Firm to classify a Person obtaining advice or arranging credit for the purposes of corporate structuring and financing as a Professional Client based on the nature of such activities, which are generally sought by Persons with greater expertise and resources than Retail Clients. Such advice and arranging occurs in the context of takeovers and merger activities and capital raising activities of companies, including any Initial Public Offerings or other offers of securities for capital raising purposes.
                  2. If a Client seeking corporate structuring and financing services is also a Person who falls within the category of a 'deemed' Professional Client under Rule 2.3.4, an Authorised Firm may provide to such a Person 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 Client for the purposes of their investment activities or portfolio management are excluded because such Clients are not necessarily Professional Clients. Therefore, for such a Client to qualify as a Professional Client, he would need to be an 'assessed' Professional Client, 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 Undertaking is an 'assessed' Professional Client if the Undertaking:
                (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 Firm may also classify an Undertaking as a Professional Client if the Undertaking has:
                (a) a controller;
                (b) a Holding Company;
                (c) a Subsidiary; or
                (d) a joint venture partner,
                who meets the requirements to be classified as an 'assessed' Professional Client pursuant to either Rule 2.3.7(1)(a) and (b)(ii) or Rule 2.3.8(1) as applicable, or a 'deemed' Professional Client 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 Firm proposes to classify an Undertaking as a Professional Client under (2), the firm must assess whether the Person on whom reliance is placed, i.e. a Person referred to in (2)(a) to (d) as is relevant, meets the Professional Client criteria, unless that Person falls within a category of 'deemed' Professional Client.
                  3. Where an Undertaking is set up by partners in a joint venture for the purposes of their joint venture, the Undertaking itself can be treated as a Professional Client provided a joint venture partner meets the Professional Client 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 Client 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 Client 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 Employee in a relevant professional position of an Authorised Firm or a Regulated Financial Institution; 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 Firm may classify any legal structure or vehicle, such as an Undertaking, 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 Client.
                (3) An Authorised Firm may also classify as a Professional Client 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 Client if he meets the requirements in Rule 2.3.7(1) or (3). This is because all the other criteria relevant to Professional Clients 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 Client 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 Clients.
                  4. A legal structure or vehicle of a Professional Client, which is itself classified as a Professional Client under Rule 2.3.7(2), does not have a right to opt-in as a Retail Client, as that right belongs to the Professional Client for whose purposes the vehicle is set up.
                  5. A family member of a Professional Client classified as a Professional Client under Rule 2.3.7(3) also does not per se have a right to opt-in to be classified as a Retail Client 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 Client who is the primary account holder of the joint account. An Authorised Firm must ensure that once such a withdrawal is made, the withdrawing individual is no longer classified as a Professional Client. 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 Firm may classify a Person as a Market Counterparty if:
                (a) that Person is:
                (i) a 'deemed' Professional Client pursuant to COB Rule 2.3.4;
                (ii) an 'assessed' Professional Client pursuant to COB Rule 2.3.8(2)(b) which is wholly owned by a Holding Company that is a 'deemed' Professional Client pursuant to COB Rule 2.3.4(1)(g) or (h); or
                (iii) a 'deemed' Market Counterparty pursuant to Rule (1A); and
                (b) in the case of Persons referred to in (a)(i) and (ii), the requirements in (2) have been met.
                (1A) An Insurer, Insurance Intermediary or Insurance Manager may 'deem' any one or more of the following Persons to be a Market Counterparty:
                (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 Firm must, before classifying a Person as a Market Counterparty, ensure that:
                (a) the Person has been given a prior written notification of the classification as a Market Counterparty; and
                (b) that Person 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 Services or Transactions or in respect of all Financial Services and Transactions.
                (4) The notification in (2)(a) need only be given:
                (a) in the case of a Fund, either to the Fund or its Fund Manager; 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 Firm carries on, or provides or obtains, Financial Services with or from another Authorised Firm or a Regulated Financial Institution, as those entities are 'deemed' Professional Clients under Rule 2.3.4(1), they could be classified as Market Counterparties, provided the procedures set out in Rule 2.3.9(2) are complied with. For example, such services may include providing the Financial Services of custody, managing assets, or fund administration services to a Fund Manager of a Collective Investment Fund 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 Firm must, subject to (4), when first establishing a relationship with a Person as a Professional Client, inform that Person in writing of:
              (a) that Person's right to be classified as a Retail Client;
              (b) the higher level of protection available to Retail Clients; and
              (c) the time within which the Person may elect to be classified as a Retail Client.
              (2) If the Person does not expressly elect to be classified as a Retail Client within the time specified by the Authorised Firm, the Authorised Firm may classify that Person as a Professional Client.
              (3) If a Person already classified as a Professional Client by an Authorised Firm expressly requests the Authorised Firm to be re-classified as a Retail Client, the Authorised Firm must, subject to (4), re-classify such a Person as a Retail Client.
              (4) If an Authorised Firm does not provide Financial Services to Retail Clients, it must inform the Person 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 Firm when it first provides, or intends to provide, a Financial Service to a Professional Client.
                2. Once an Authorised Firm has first classified a Person as a Professional Client, under the procedures in Rule 2.3.3(1), that Professional Client has a right at any subsequent time to ask, under Rule 2.4.1(3), to be re-classified as a Retail Client to obtain a higher level of protection. Although the right to ask the firm to be re-classified as a Retail Client is available to the Professional Client, as a matter of good practice:
                a. the firm should also periodically review whether the circumstances relating to the particular Client remain the same; and
                b. if the firm becomes aware of any circumstances which would warrant a re-classification of the Client, initiate the process with the Clientto give that Clienta more appropriate classification.
                3. Where an existing Professional Client is offered a new Financial Service or new financial product, a re-classification might be appropriate if:
                a. the new Financial Service or financial product is substantially different to those previously offered to that Client; and
                b. the Client's experience and understanding appears not to extend to the new Financial Service or financial product.
                4. An Authorised Firm cannot provide Financial Services to a Retail Client unless it has a Retail Endorsement on its Licence. However, such a firm may refer to another appropriately licensed firm any Person who elects to opt-in as a Retail Client.
                Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

          • Assessment of net assets

            • COB 2.4.2

              An Authorised Firm, 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 Person; and
              (b) may include any assets held directly or indirectly by that Person.
              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 Client, 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 Firm 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 Firm must include, where applicable, consideration of the following matters:
              (a) the Person's 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 Transaction;
              (b) the length of time the Person has participated in relevant financial markets, the frequency of dealings and the extent to which the Person has relied on professional financial advice;
              (c) the size and nature of transactions that have been undertaken by, or on behalf of, the Person in relevant financial markets;
              (d) the Person's relevant qualifications relating to financial markets;
              (e) the composition and size of the Person's 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 Firm considers relevant.
              (2) Where the analysis is being carried out in respect of an Undertaking, 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 Firm may consider a Person to have relevant experience and understanding where such a Person:

                a. has been involved in similar transactions in a professional or personal capacity sufficiently frequently to give the Authorised Firm reasonable assurance that the Person 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 Firm or Regulated Financial Institution.
                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 Firm which is a Branch or is a member of a Group.
              (2) An Authorised Firm may, subject to (3), rely on a client classification made, if it is a Branch, by its head office or any other branch of the same legal entity, or if it is a member of a Group, by any other member of its Group, 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 Firm under this chapter and the requirements under which the client classification is carried out by another entity referred to in (2), the Authorised Firm 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 Firm relying on this Rule should be able to demonstrate to the DFSA 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 Group 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 DFSA due compliance with this Rule.
                2. If an Authorised Firm 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 Group, such an arrangement is generally treated as an outsourcing arrangement. Therefore, the Authorised Firm 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 Firm which:
              (a) is a member of a Group; and
              (b) provides to a Client one or more Financial Services where the services provided by the firm form part of a bundle of financial services provided to that Client by it and its Group members.
              (2) An Authorised Firm referred to in (1) must ensure that:
              (a) the client classification it adopts for any Financial Service which it provides to the Client is both consistent with the requirements in this chapter and appropriate for the overall bundle of financial services provided to that Client;
              (b) the Client has a clear understanding of the arrangement under which Financial Services are provided to the Client by the Authorised Firmin conjunction with the other members of the Group; 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 Groups. The DFSA considers that the provision of a 'bundle' of financial services occurs where:
                a. several members of a Group 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 Group gives investment advice to the Client, another member of the Group executes the transaction (based on the advice) relating to a financial product and yet another member of the Group is the issuer of that financial product;
                b. several members of a Group 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 Group providing discrete aspects of expertise that go to facilitate a merger and acquisition project of a Client. In such a situation, different members of the Group 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 Firms which are members of a Group to provide such bundles of financial services to their Clients in a manner that suits the Client's 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 Group under Rule 2.4.4.
                4. Depending on the nature of the arrangement under which Group members choose to provide to the same Client a bundle of Financial Services, and the nature of the Financial Services 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 Services, particularly if the members of the Group are located in different jurisdictions; and
                b. a Client not being able to identify clearly the actual service provider or providers and resulting legal exposure to the Client that may arise for all members of the Group. To address this risk, it is good practice for each member of the Group 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 Firms. In order to meet those GEN requirements, an Authorised Firm relying on Rule 2.4.5 should consider, at a minimum, having the following:
                a. a clear description of the Group arrangement under which a bundle of financial services is provided – such as which member of the Group is responsible for which aspects of the bundle of Financial Service provided to the Client, or alternatively, that collective responsibility would be assumed by all or some members of the Group;
                b. how the Client is classified for the purposes of the relevant Financial Service provided by the firm;
                c. identification of where records relating to client classification and Financial Services provided to the Client 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 Group;
                e. a client agreement (whether entered into by the Authorised Firm or by a member of its Group under Rule 3.3.4) which adequately covers all the financial services provided to the Client, 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 DFSA 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 Group members providing a bundle of services when providing Financial Services to a Client 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 Client 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 Firm must keep records of:

            (1) the procedures which it has followed under the Rules in this chapter, including any documents which evidence the Client's classification; and
            (2) any notice sent to the Client 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 Firm for at least six years from the date on which the business relationship with a Client has ended.
            (2) In complying with (1), an Authorised Firm may, if the date on which the business relationship with the Client ended is unclear, treat the date of the completion of the last Transaction with the Client 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 Firm, an Authorised Firm 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 Firm 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 5.3.24 – 5.3.27 for the requirements relating to record keeping. These Rules require, among other things, that Authorised Firms be able to produce records, however kept, within a reasonable period not exceeding three business days.
            2. If an Authorised Firm 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 Firm may continue to treat a Person as a Retail Client, Professional Client, or Market Counterparty, as the case may be, without having to re-classify the Person under section 2.3:

            (a) where the Authorised Firm was treating that Person as such a Client (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 Client 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 Client, or Client Agreement entered into with a Client 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 Clients. However, with regard to an existing Client 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 Client grandfathered under Rule 2.6.1 subsequently requests to opt-in as a Retail Client under Rule 2.4.1(3), the Authorised Firm will need to re-classify that Client in accordance with the requirements in that Rule.
              3. Where a grandfathered Client wishes to obtain a new Financial Service after the new regime came into force, an Authorised Firm will not be able to rely on the existing client classification relating to that Client in respect of the new Financial Service. This is because Rule 2.6.1 only applies in respect of the Financial Services carried on with or for a Client before the new regime came into force. Therefore, the firm will need to make a new classification relating to such a Client in respect of the new Financial Service and do so under the new client classification regime.
              4. If an Authorised Firm becomes aware that a grandfathered professional client no longer fulfils the requirements to remain classified as a Professional Client, 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 Person as an 'assessed' Professional Client 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 Firm may continue to treat a Person as an 'assessed' Professional Client 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 Services carried on with or for the Client 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 Client.
            Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

      • COB 3 Core Rules — Investment Business, Accepting Deposits, Providing Credit, Providing Trust Services and Operating a Crowdfunding Platform

        • COB 3 Guidance

          1. The Rules in this chapter give support to the Principles in GEN section 4.2 and in particular Principles 1, 2, 6 and 7.
          2. There are additional Rules that apply to Authorised Firms in other chapters of this module, which are more specific to the nature of the Financial Service conducted by the Authorised Firm.
          Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

        • COB 3.1 Application

          • COB 3.1.1

            This chapter applies to an Authorised Firm which carries on or intends to carry on:

            (a) Investment Business;
            (b) Accepting Deposits;
            (c) Providing Credit;
            (d) Providing Trust Services; or
            (e) Operating a Crowdfunding Platform

            except where it is expressly provided otherwise.

            Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
            [Amended] DFSA RMI202/2017 (Made 14th June 2017). [VER29/08-17]

        • COB 3.2 Communication of Information and Marketing Material

          • General

            • COB 3.2.1

              When communicating information to a Person in relation to a financial product or financial service, an Authorised Firm must take reasonable steps to ensure that the communication is clear, fair and not misleading.

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

            • COB 3.2.2

              An Authorised Firm must not, in any form of communication with a Person, including an agreement, attempt to limit or avoid any duty or liability it may have to that Person or any other Person under legislation administered by the DFSA.

              Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
              [Amended] DFSA RM154/2015 (Made 9th December 2015) [VER25/02-16]

            • COB 3.2.3

              Where a Rule in COB requires information to be sent to a Client, the Authorised Firm must provide that information directly to the Client and not to another Person, unless it is on the written instructions of the Client.

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

            • Guidance

              In Rule 3.2.2, a communication would include a financial promotion, a client agreement, terms of business, financial product terms and conditions, a mandate, power of attorney entered into for the purposes of a financial service or product and any other communication which relates in whole or in part to the provision of a financial service or product.

              Derived from DFSA RM154/2015 (Made 9th December 2015) [VER25/02-16]

          • Marketing Material

            • COB 3.2.4

              (1) An Authorised Firm must ensure that any marketing material communicated to a Person contains the following information:
              (a) the name of the Authorised Firm communicating the marketing material or, on whose behalf the marketing material is being communicated;
              (b) the Authorised Firm's regulatory status as required under GEN section 6.4; and
              (c) if the marketing material is intended only for Professional Clients or Market Counterparties, a clear statement to that effect and that no other Person should act upon it.
              (2) In (1), marketing material includes any invitation or inducement to enter into an agreement:
              (a) in relation to a financial product or to engage in a Financial Service with the Authorised Firm; or
              (b) in relation to a financial product or financial service offered by a Person other than the Authorised Firm.
              (3) An Authorised Firm which communicates marketing material in (2)(b) must:
              (a) ensure that the marketing material complies with the applicable Rules and any legislation administered by the DFSA; and
              (b) not distribute such marketing material if it becomes aware that the Person offering the financial product or financial service to which the material relates is in breach of the regulatory requirements that apply to that Person in relation to that product or service.
              Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
              [Amended] DSFA RM185/2016 (Made 7th December 2016). [VER28/02-17]

            • COB 3.2.5

              An Authorised Firm must take reasonable steps to ensure that:

              (a) any marketing material intended for Professional Clients is not sent or directed to any Persons who are not Professional Clients; and
              (b) no Person communicates or otherwise uses the marketing material on behalf of the Authorised Firm in a manner that amounts to a breach of the requirements in this section.
              Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

          • Past Performance and Forecasts

            • COB 3.2.6

              An Authorised Firm must ensure that any information or representation relating to past performance, or any future forecast based on past performance or other assumptions, which is provided to or targeted at Retail Clients:

              (a) presents a fair and balanced view of the financial products or financial services to which the information or representation relates;
              (b) identifies, in an easy to understand manner, the source of information from which the past performance is derived and any key facts and assumptions used in that context are drawn; and
              (c) contains a prominent warning that past performance is not necessarily a reliable indicator of future results.
              Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

              • COB 3.2.6 Guidance

                In presenting information relating to past performance of a financial product or financial service, the Authorised Firm should follow, to the extent relevant, the Global Investment Performance Standards (GIPS) issued by Institute of Chartered Financial Analysts of the USA or a reputable independent actuarial, financial or statistical reporting service provider.

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

        • COB 3.3 Key Information and Client Agreement

          • Application

            • COB 3.3.1

              The Rules in this section do not apply to an Authorised Firm when it is:

              (a) carrying on a Financial Service with or for a Market Counterparty;
              (b) Accepting Deposits;
              (c) Providing Credit;
              (d) carrying on an activity of the kind described in GEN Rule 2.26.1 that constitutes marketing; or
              (e) a Fund Manager of a Fund Offering the Units of a Fund it manages.
              Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
              [Amended] DFSA RM68/2009 (Made 3rd January 2010). [VER17/01-10]
              [Amended] DFSA RM72/2010 (Made 11th July 2010) [VER19/07-10]

            • COB 3.3.2

              (1) Subject to (2), an Authorised Firm must not carry on a Financial Service with or for a Person unless:
              (a) there is a Client Agreement containing the key information specified in App2 which is either entered into:
              (i) between the Authorised Firm and that Person; or
              (ii) in accordance with the requirements in Rule 3.3.4; and
              (b) before entering into the Client Agreement with the Person, the Authorised Firm has provided to that Person the key information referred to in (a) in good time to enable him to make an informed decision relating to the relevant Financial Service.
              (2) An Authorised Firm may provide a Financial Service to a Client without having to comply with the requirement in (1);
              (a) subject to (3), where it is, on reasonable grounds, impracticable to comply; or
              (b) where the Client has expressly agreed to dispense with the requirement in regard to a personal investment vehicle.
              (3) When (2)(a) applies, an Authorised Firm providing the Financial Service must:
              (a) first explain to the Person why it is impracticable to comply; and
              (b) enter into a Client Agreement as soon as practicable thereafter.
              Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
              [Amended] DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

              • COB 3.3.2 Guidance

                1. App 2 sets out the core information that must be included in every Client Agreement and additional disclosure for certain types of activities to which this chapter applies. The information content for Client Agreements with Retail Clients is more detailed than for Professional Clients.
                2. For the purposes of COB Rule 3.3.2(1)(b), an Authorised Firm may either provide a Person with a copy of the proposed Client Agreement, or give that information in a separate form. If there are any changes to the terms and conditions of the proposed agreement, the Authorised Firm should ensure that the Client Agreement to be signed with the Person accurately incorporates those changes.
                3. For the purposes of COB Rule 3.3.2(2)(a), an Authorised Firm may consider it is reasonably impracticable to provide the key information to a Person if that Person requests the Authorised Firm to execute a Transaction on a time critical basis. Where an Authorised Firm has given the explanation referred to in COB Rule 3.3.2(3)(a) verbally, it should maintain records to demonstrate to the DFSA that it has provided that information to the Client.
                Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

          • Changes to the Client Agreement

            • COB 3.3.3

              If the Client Agreement provided to a Retail Client allows an Authorised Firm to amend the Client Agreement without the Client's prior written consent, the Authorised Firm must give at least 14 days notice to the Client before providing a Financial Service to that Client on any amended terms, unless it is impracticable to do so.

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

          • Reliance on a Client Agreement made by another entity

            • COB 3.3.4

              (1) An Authorised Firm may, for the purposes of Rule 3.3.2(1)(a)(ii), rely on a Client Agreement executed in accordance with the requirements in either (2) or (3).
              (2) For the purposes of (1), an Authorised Firm which is a Branch may rely on a Client Agreement, executed by its head office or any other branch of the same legal entity, if:
              (a) the Client Agreement adequately and clearly applies to the Financial Services provided by the Branch; and
              (b) the Authorised Firm ensures that the Client Agreement is available to the DFSA on request.
              (3) For the purposes of (1), an Authorised Firm may rely on a Client Agreement, executed by a member of its Group if:
              (a) it is providing a Financial Service pursuant to Rule 2.4.5;
              (b) the Client Agreement clearly sets out:
              (i) the Financial Service provided by the Authorised Firm and;
              (ii) that the Client's rights in respect of (i) are enforceable against the Authorised Firm; and
              (c) the Authorised Firm ensures that the Client Agreement is available to the DFSA on request.
              (4) An Authorised Firm must notify the DFSA immediately if, for any reason, it is no longer able to provide unrestricted access to a Client Agreement as required under (2) or (3).
              [Added] DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]

        • COB 3.4 Suitability

          • Application

            • COB 3.4.1

              The Rules in this section do not apply where the Authorised Firm:

              (a) undertakes a Transaction with a Market Counterparty;
              (b) undertakes an Execution-Only Transaction;
              (c) undertakes the activities of Accepting Deposits or Providing Credit;
              (d) carries on an activity of the kind described in GEN Rule 2.26.1 that constitutes marketing, or.
              (e) carries on the activity of operating an MTF.
              Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
              [Amended] DFSA RM68/2009 (Made 3rd January 2010). [VER17/01-10]
              [Amended] DFSA RM123/2013 (Made 13th June 2013). [VER22/07-13]

          • Suitability Assessment

            • COB 3.4.2

              (1) Subject to (2), an Authorised Firm must not recommend to a Client a financial product or financial service, or execute a Transaction on a discretionary basis for a Client, unless the Authorised Firm has a reasonable basis for considering the recommendation or Transaction to be suitable for that particular Client. For this purpose, the Authorised Firm must:
              (a) undertake an appropriate assessment of the particular Client's needs and objectives, and, financial situation, and also, to the extent relevant, risk tolerance, knowledge, experience and understanding of the risks involved; and
              (b) take into account any other relevant requirements and circumstances of the Client of which the Authorised Firm is, or ought reasonably to be aware.
              (2) An Authorised Firm may, subject to (3), limit the extent to which it will consider suitability when making a recommendation to, or undertaking a Transaction on a discretionary basis for or on behalf of, a Professional Client if, prior to carrying on that activity, the Authorised Firm:
              (a) has given a written warning to the Professional Client in the form of a notice clearly stating either that the Authorised Firm will not consider suitability, or will consider suitability only to the extent specified in the notice; and
              (b) the Professional Client has given his express consent, after a proper opportunity to consider the warning, by signing that notice.
              (3) Where an Authorised Firm manages a Discretionary Portfolio Management Account for a Professional Client, it must ensure that the account remains suitable for the Professional Client, having regard to the matters specified in (1) (a) and (b).
              Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

              • COB 3.4.2 Guidance

                1. An Authorised Firm Providing Trust Services does not have to undertake an assessment of the factors such as risk tolerance, knowledge and experience of a Client when assessing the suitability of the service to a particular Client. This is because those considerations are not relevant to the activity of Providing Trust Services.
                2. The extent to which an Authorised Firm needs to carry out a suitability assessment for a Professional Client depends on its agreement with such a Client. The agreement may limit the suitability assessment to a specified extent, or may dispense with the suitability assessment completely. To the extent a limited suitability assessment is agreed upon, the firm must carry out the suitability assessment as agreed. Limitations may, for example, relate to the objectives of the Client or the product range in respect of which the recommendations are to be made.
                Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

            • COB 3.4.3

              An Authorised Firm must take reasonable steps to ensure the information it holds about a Client is accurate, complete and up to date.

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

        • COB 3.5 Conflicts of Interest

          • Fair Treatment

            • COB 3.5.1

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

          • Attribution of Knowledge

            • COB 3.5.2

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

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

          • Inducements

            • COB 3.5.3

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

              • COB 3.5.3 Guidance

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

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

            • COB 3.5.4

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

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

              • COB 3.5.4 Guidance

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

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

            • COB 3.5.5

              An Authorised Firm must not Deal in Investments as Agent for a Client, either directly or indirectly, through any broker under a Soft Dollar Agreement, unless:

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

            • COB 3.5.6

              Before an Authorised Firm enters into a Transaction for or on behalf of a Retail Client or Professional Client, either directly or indirectly, with or through the agency of another Person, in relation to which there is a Soft Dollar Agreement which the Authorised Firm has, or knows that another member of its Group has, with that other Person, it must disclose to its Client:

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

            • COB 3.5.7

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

        • COB 3.6 Record Keeping

          • COB 3.6.1

            An Authorised Firm must, for a minimum of six years, maintain sufficient records in relation to each activity and function of the Authorised Firm. These must include, where applicable, the following:

            (a) any marketing material issued by, or on behalf of, the Authorised Firm;
            (b) any financial products or Financial Services provided to a Client and each advice or recommendation made to a Client,
            (c) a record of each Client Agreement including any subsequent amendments to it as agreed with the Client;
            (d) records relating to the suitability assessment undertaken by the Authorised Firm to demonstrate compliance with COB Rule 3.4.2;
            (e) records to demonstrate compliance with the requirements relating to inducements under COB section 3.5, including any disclosure made to Clients under that section and if any goods and services are received by the Authorised Firm under a Soft Dollar Agreement, the details relating to those agreements; and
            (f) any other disclosures made to Clients.
            Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

          • COB 3.6.2

            For the purposes of COB Rule 3.6.1, the six year period commences:

            (a) in the case of the requirement in COB Rule 3.6.1(a), from the date on which the marketing material was last provided to a Person;
            (b) in the case of the requirement in COB Rule 3.6.1(b) to (d), from the date the Client ceases to be a Client of the Authorised Firm; and
            (c) in the case of the requirement in COB Rule 3.6.1(e), from the date on which the relevant inducements were last received.
            Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

      • COB 4 Additional Rules — Accepting Deposits and Providing Credit

        • COB 4.1 Application

          • COB 4.1.1

            The Rules in this chapter apply to an Authorised Firm with respect to Accepting Deposits or Providing Credit through an establishment maintained by it in the DIFC.

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

        • COB 4.2 Accepting Deposits

          • COB 4.2.1

            A Bank, in the course of Accepting Deposits, must not:

            (a) Accept Deposits from the State's markets;
            (b) Accept Deposits in the U.A.E. Dirham;
            (c) undertake currency or foreign exchange transactions involving the U.A.E. Dirham; or
            (d) Accept Deposits from Retail Clients.
            Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

        • COB 4.3 Providing Credit

          • COB 4.3.1

            (1) An Authorised Firm may, subject to (2), Provide Credit to a:
            (a) Professional Client; and
            (b) Retail Client, but only where:
            (i) the Retail Client is an Undertaking; and
            (ii) the Credit Facility is provided to the Retail Client for a business purpose.
            (2) An Authorised Firm, in the course of Providing Credit, must not:
            (a) Provide Credit in the U.A.E. Dirham; or
            (b) undertake currency or foreign exchange transactions involving the U.A.E. Dirham.
            Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

          COB 4.4">
        • COB 4.4 Depositor protection

          • COB 4.4.1">
          • COB 4.4.1

            (1) Subject to (2), to the extent that the Rules in this section are inconsistent with the Insolvency Law 2009 and any regulations made for the purposes of that law the Rules in this section will prevail.
            (2) The following provisions of laws, Rules and Regulations prevail over the Rules in this section:
            (a) parts A5.13.2 (a), (b), (c) and (d)(ii) of the Client Money Distribution Rules;
            (b) Article 65 of the Insolvency Law 2009;
            (c) the DIFC Preferential Creditor Regulations; and
            (d) Regulations 5.45.4 and 5.52 of the DIFC Insolvency Regulations.
            [Added] DFSA RM144/2014 (Made 24th August 2014). [VER23/08-14]

            COB 4.4.2">
          • COB 4.4.2

            (1) In the event of:
            (a) the appointment of a provisional liquidator, liquidator, receiver or administrator, or trustee in bankruptcy, over a Bank which is a Domestic Firm; or
            (b) a direction by the DFSA to a Bank which is a Domestic Firm under Article 76 of the Regulatory Law 2004 to deal with all or substantially all its Deposits in a specified manner,
            eligible depositors of the Bank have priority over, and shall be paid in priority to, all other unsecured creditors of the Bank.
            (2) In (1), an “eligible depositor” means, subject to (3), a Person who, at the relevant time, is a creditor of a Bank referred to in (1) by virtue of being owed an amount of Money held by the Bank as a Deposit.
            (3) In (2), eligible depositor excludes any creditor which is:
            (i) a Market Counterparty; or
            (ii) a bank.
            [Added] DFSA RM144/2014 (Made 24th August 2014). [VER23/08-14]

          • COB 4.4 Guidance

            Article 101 of the DIFC Insolvency Law 2009 gives the DFSA a power to modify the application of provisions of that law and the Regulations made for the purposes of it in particular cases or classes of case. It permits the DFSA to make Rules which provide for the orderly conduct of affairs or winding up of an Authorised Firm and to prescribe procedures and priorities for dealing with assets of the Authorised Firm or other persons in the event of pending or actual insolvency or other default.

            [Added] DFSA RM144/2014 (Made 24th August 2014). [VER23/08-14]

      • COB 5 Additional Rules — Providing Trust Services

        • COB 5.1 Application

          • COB 5.1.1

            This chapter applies to a Trust Service Provider with respect to the conduct of Providing Trust Services.

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

            • COB 5.1.1 Guidance

              The requirements in COB chapter 3 also apply to Trust Service Providers.

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

        • COB 5.2 General

          • COB 5.2.1

            For the purposes of this chapter, a settlor, a trustee or a named beneficiary of a trust in respect of which the Trust Service Provider is engaged in Providing Trust Services may be treated as a Client of the Authorised Firm.

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

          • COB 5.2.2

            A Trust Service Provider must maintain adequate knowledge of, and comply with, all applicable DIFC laws, Rules and Regulations relevant to Providing Trust Services.

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

          • COB 5.2.3

            A Trust Service Provider must be able to demonstrate that it is in compliance with appropriate standards of corporate governance.

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

          • COB 5.2.4

            A Trust Service Provider must transact its business (including the establishing, transferring or closing of business relationships with its Clients) in an expeditious manner where appropriate unless there are reasonable grounds to do otherwise.

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

          • Exercise of Discretion

            • COB 5.2.5

              Where a Trust Service Provider is responsible for exercising discretion for, or in relation to, its Clients, it must take all reasonable steps to obtain sufficient information in order to exercise, subject to COB Rule 5.2.6, its discretion or other powers in a proper manner.

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

            • COB 5.2.6

              A Trust Service Provider must only exercise its power or discretion for a proper purpose.

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

            • COB 5.2.7

              The Trust Service Provider must ensure that its understanding of a Client's business is refreshed by means of regular reviews.

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

            • COB 5.2.8

              The Trust Service Provider must ensure that any trustee exercises his discretion in accordance with his fiduciary and other duties under the laws governing the trust of which he is a trustee.

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

          • Delegation of Duties or Powers

            • COB 5.2.9

              Any delegation of duties or powers by a Trust Service Provider, whether by Power of Attorney or otherwise, must only be entered into for a proper purpose, permissible by law and limited and monitored as appropriate.

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

        • COB 5.3 Reviews

          • COB 5.3.1

            A Trust Service Provider must ensure that adequate procedures are implemented to ensure that regular reviews at appropriate intervals are conducted in respect of Providing Trust Services to its Clients.

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

        • COB 5.4 Professional Indemnity Insurance Cover

          • COB 5.4.1

            A Trust Service Provider must maintain professional indemnity insurance cover appropriate to the nature and size of the Trust Service Provider's business.

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

          • COB 5.4.2

            A Trust Service Provider must:

            (a) provide the DFSA with a copy of its professional indemnity insurance cover; and
            (b) notify the DFSA of any changes to the cover including termination and renewal.
            Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

          • COB 5.4.3

            A Trust Service Provider must provide the DFSA on a yearly basis, with the details of the arrangements in force together with evidence of the cover. Any claims in excess of $10,000 or changes to the arrangements previously notified to the DFSA under this Rule must be notified to the DFSA as they arise.

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

        • COB 5.5 Dual Control

          • COB 5.5.1

            The Trust Service Provider must have adequate internal controls, including having two Persons with appropriate skills and experience managing the business.

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

          • COB 5.5.2

            While a Trust Service Provider may have a single Person with overall responsibility, at least another Person must have the skills and experience to be able to run the business of the Trust Service Provider in the absence of the senior Person and must be in a position to challenge the actions of the senior Person where they consider that those actions may be contrary to the provisions of DIFC Laws, Rules or Regulations or any other applicable legislation, may not be in the interests of the Client, or may be contrary to sound business principles.

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

        • COB 5.6 Internal Reporting

          • COB 5.6.1

            A Trust Service Provider must have arrangements for internal reporting to ensure that the directors or the partners can satisfy themselves that:

            (a) the requirements of the relevant legislation are being met on an on going basis;
            (b) the Trust Service Provider's business is being managed according to sound business principles and, in particular, that it can meet its financial commitments as they fall due;
            (c) the affairs of its Clients are being managed in accordance with the service agreements;
            (d) the trustees are acting in accordance with their fiduciary and other duties;
            (e) the affairs of its Clients are being properly monitored and in particular that the Client is not using the trust structure to hide assets from legitimate enquiry, to avoid proper obligations in other jurisdictions or to engage in illegal activities in other jurisdictions;
            (f) the assets of its Clients are properly managed and safeguarded; and
            (g) the recruitment, training and motivation of staff is sufficient to meet the obligations of the business.
            Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

        • COB 5.7 Recording of Selection Criteria

          • COB 5.7.1

            Where the Trust Service Provider seeks the advice of a third party in connection with a Client's affairs, for example to advise on or manage investments, the Trust Service Provider must record the criteria for selection of the adviser and the reasons for the selection made.

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

          • COB 5.7.2

            The Trust Service Provider must monitor the performance of the adviser and ensure that it is in a position to change advisers if it is in the interests of the Client.

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

        • COB 5.8 Qualification and Experience of Trust Service Provider Staff

          • COB 5.8.1

            Staff employed or Persons recommended by the Trust Service Provider must have appropriate qualifications and experience.

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

          • COB 5.8.2

            A Trust Service Provider must ensure that all transactions or decisions entered into, taken by or on behalf of Clients are properly authorised and handled by Persons with an appropriate level of knowledge, experience, qualifications and status according to the nature and status of the transactions or decisions involved (this applies also to decisions taken by trustees who are recommended by, but not employed by, a Trust Service Provider).

            Derived from DFS