Nouvelles du Nord
Dubai International Financial Centre
New Headquarters to Break Ground Soon
Dubai's plan to develop as a global finance centre received a boost today with the announcement by Deutsche Bank of its intention to be licensed by the Dubai International Financial Centre (DIFC)
Deutsche Bank to be licensed by DIFC
Dubai's plan to develop as a global finance centre received a boost with the announcement by Deutsche Bank of its intention to be licensed by the Dubai International Financial Centre, (DIFC).
New Headquarters to Break Ground Soon
The Dubai International Financial Centre
(DIFC) has appointed Gensler & Associates to design the "DIFC Gate" building, which will be the Headquarters for the DIFC and will symbolically serve as the gateway to the new Dubai Financial District.
According to Marwan Al Felasi, Projects Manager for DIFC Real Estate Development, while the competition was fierce, Gensler's design vision delivered a structure that is truly iconic, expressing the core values of the DIFC, while at the same time providing a practical and
state - of - the - art working environment.
A composition of solid stone and stainless steel will form the main arch, while transparent glazed elements will emphasis the open space created at the centre of the building.
The top of the arch will be expressed by open steel lattice to symbolize transparency, the cornerstone of the DIFC offering.
As well as accommodating the offices of the DIFC, the DIFC Gate will house the Regulatory Authority and Regional Financial Exchange, as well as offering office accommodation for other financial institutions and businesses.
Mr Al Felasi added that construction is expected to begin in December 2002 and is scheduled for completion by early 2004.
"We are very pleased to be given the opportunity to design this prestigious landmark building, the first in the new Dubai Financial District. This project has given us a fantastic opportunity to create cutting-edge, high quality architecture in a progressive and dynamic city that will lead the way for the new DIFC development."
LICENSING CRITERIA FOR DIFC
The Regulatory Authority of the DIFC issued an Information Paper on its proposed criteria for institutions and individuals wishing to operate in the DIFC. The full details of the Authority's licensing regime will be finalised later in 2002, but the Authority is now able to provide guidance on the main elements of the structure it expects to have in place.
Specific requirements on institutions will include the need to provide the Authority with information on its business plan, the key individuals employed and major shareholders and controllers of the institutions, the operating systems and controls for the institution, the compliance systems and internal audit functions, the anti-money laundering procedures, the financial position of the institution and the regulatory history of the institution, i.e. its regulatory 'track record'.
Those individuals will include the institution's managing director or branch manager, the individual responsible for compliance oversight, the individual responsible for systems and controls, the money-laundering reporting officer, or any officer undertaking a significant management function in respect of a regulated activity, a settlement function, the solvency aspect (for insurers) or in respect of customer relations.
As with firms, there will be high standards for these individuals relating to their honesty, integrity and reputation, their competence and capability, and their personal financial soundness.
Where the institution takes the latter route, the DIFC Regulatory Authority will expect to work closely with the institution's "home regulator" to ensure complete regulatory oversight of the institution and that full co-operation between the regulatory bodies occurs.
We are currently seeking comments from institutions and their advisers on the licensing criteria and will expect to issue further updates on licensing, and a related paper on the fee structure for the Regulatory Authority, in due course."
LICENSING CRITERIA FOR FINANCIAL INSTITUTIONS
1. INTRODUCTION - INFORMATION PAPERS PUBLISHED BY THE REGULATORY AUTHORITY
It is the intention of the Regulatory Authority of the DIFC to publish information papers from time to time to enable prospective participants in the DIFC to learn about and comment upon the Authority's regulatory proposals. These papers contain an explanation of the Authority's current thinking on the subject involved; the Authority may determine to adopt in whole or in part the proposals outlined in these papers or may amend the proposals in the light of comments received or developments in the marketplace. Comments on this paper, Information Paper No. 1, should be sent to the Regulatory Authority of the DIFC, marked to the attention of Mr Phillip Thorpe, Chief Commissioner of the Regulatory Authority.
3. THE APPROACH TO LICENSING
4. GENERAL LICENSING MATTERS
5. BRANCH LICENSING - BY PASSPORTING
6. ADDITIONAL REQUIREMENTS FOR BRANCH LICENSEES
6.1 As noted above, the Regulatory Authority will seek confirmation from a Tier 1 Regulator or from any other lead regulator that the regulator in question has consented to, or not proscribed, the DIFC applicant establishing a branch in the DIFC. This confirmation will need to identify the activities to which the consent relates, and contain information about the branch and the financial institution, including a statement confirming the activities that the financial institution carries on in its home state, the amount of its own funds (regulatory capital) and solvency ratio and the fact that the financial institution's business is being conducted in a prudent manner.
6.2 The Regulatory Authority will also have the discretion to impose additional capital adequacy and/or solvency requirements on branches as a pre-condition (and, for so long as is judged to be necessary, a continuing obligation) to being licensed, where it is considered to be appropriate. The Regulatory Authority may wish to exercise this discretion, for instance where the applicant is licensed as an advisor not able to hold client funds in its home jurisdiction, and where it is seeking to undertake a business where it will hold client funds in its DIFC branch. The Regulatory Authority may also impose conditions on branches relating to adequacy of day-to-day liquidity, but will consider whether a comfort letter from a branch's head office in relation to maintaining the branch's liquidity is adequate.
6.3 Whilst the applicant institutions' financial systems and controls may be subject to the regulatory oversight of the institution's home regulator, the Regulatory Authority may wish to impose conditions relating to the establishment of systems and controls appropriate to the activities carried out by the DIFC branch.
6.4 The Regulatory Authority will require branches of financial institutions to appoint individuals to carry out specified functions on the branches' behalf and those individuals will need to be individually licensed. The specified functions are likely to include:
(i) Branch manager function. A person will be carrying out this function if he or she has responsibility for all of the activities of the DIFC branch subject to regulatory oversight of the Regulatory Authority, and in carrying out this function exercises a significant influence over the branch. This may be a person located outside the DIFC if they have not delegated the responsibility to a senior manager based at the branch in the DIFC;
(ii) Compliance oversight function. This function must be carried out by a senior manager based at the branch having responsibility for oversight of the branches' compliance and reporting to the governing body of the financial institution;
(iv) Significant management function (regulated activity function). A person will be carrying out this function if a financial institution has apportioned significant responsibility to a senior manager of a significant business unit relevant to the activities carried on by the DIFC branch, and this function is not carried out by the person performing the branch manager function. This may be someone based outside the DIFC if the responsibility has not been delegated to someone based at the branch;
(v) Significant management function (settlements function). A person will be carrying out this function if they are acting in the capacity of a senior manager with significant responsibility for processing confirmations, payments, settlements, and other back office functions in relation to activities carried out by the DIFC branch;
(vi) Significant management function (solvency). A person will be carrying out this function if they are acting in the capacity of an actuary with responsibility for certifying the financial solvency of insurance or re-insurance activities underwritten by the DIFC branch.
(vii) Customer relation's function. These are functions where the persons concerned will be dealing with customers or customers' property when giving advice on policies, investments or other financial products, dealing and arranging deals in such products, and managing investments (a full explanation of the scope of the financial activities and products to be subject to Regulatory Authority oversight will be available in due course);
(viii) DIFC systems and controls oversight function. This is the function of an individual who is responsible for overseeing risk management, and the establishment and maintenance of systems and controls in relation to activities carried on from the DIFC branch.
6.5 When considering whether to grant a license to an individual to carry out a specified function, the Regulatory Authority will assess the fitness and propriety of an individual for that specified function. The Regulatory Authority will have regard to a number of factors when making this assessment, taking into account a range of factors, including the individual's:
(i) honesty, integrity and reputation (e.g. taking into account whether an individual has convictions for criminal offences, including offences relating to dishonesty, fraud or financial crime, or has been the subject of regulatory disciplinary action);
(ii) competence and capability (e.g. whether an individual has demonstrated by experience and training whether he/she will be able to perform the specified function)
(iii) financial soundness (e.g. whether the person has made any arrangements with his creditors, filed for bankruptcy, been adjudged bankrupt).
7. BRANCH LICENSING - BY ACCREDITATION
7.1 As discussed above, the passporting system is premised on the applicant being regulated by a Tier 1 Regulator. From the expressions of interest received by the DIFC to date it is likely to be the case that not all financial institutions will be lead regulated by a Tier 1 Regulator. However, it is possible that such an institution might have a branch that is regulated by a Tier 1 regulator. In its discretion, the Regulatory Authority may be prepared to treat such an institution as able to establish a branch in DIFC as well. The appropriate requirements set out in paragraph 3.1.2 above will apply.
7.2 The rationale behind the accreditation category is that if a Tier 1 Regulator has permitted a financial institution to establish a branch in its jurisdiction, then the Regulatory Authority should consider the extent to which it can give credit for this when considering licensing a similar business as a DIFC branch.
7.3 The extent to which the Regulatory Authority will be prepared to grant a license on this basis will need to be determined, on a case-by-case basis, and the Regulatory Authority will reserve the power to grant a license in the accreditation category on a purely discretionary basis only. In any event, the Regulatory Authority may be expected to publish some guidance on the factors it will take into account in determining whether to exercise its discretion. For example, factors of relevance might include the number of years it has operated a branch in a Tier 1 jurisdiction, its track record in that jurisdiction, and the level and type of regulatory oversight exercised by the applicant's home regulator.
7.4 In each case, the Regulatory Authority will need to understand the basis on which a Tier 1 Regulator licensed a branch of such a financial institution, to assess whether it is consistent with the Regulatory Authority requirements. The Regulatory Authority will therefore seek to obtain as much information as possible about the conditions (if any) that a Tier 1 Regulator has imposed, and the information that it took into account when licensing a branch of such a financial institution. Ideally, this information should include the terms of the MoU which the Tier 1 Regulator entered into (if any) with the home state regulator of the financial institution, as this may have had an effect on the licensing conditions imposed by the Tier 1 Regulator on the branch within its jurisdiction. Once the Regulatory Authority has gathered and considered such information, it will assess whether it can, in the circumstances, grant a license and the conditions that it wishes to impose. For example, the Regulatory Authority may decide that with a financial institution that is not lead regulated by a Tier 1 Regulator but is nevertheless satisfactorily lead regulated in its home state, and has one or more branches subject to oversight by one or more Tier 1 Regulators (e.g., it has branches in London and New York), it will grant a license to a DIFC branch of that institution on the same conditions as a passported branch of a Tier 1 lead regulated institution, but with some additional requirements as to capital and prudential supervision.
7.5 In any event, in addition to any particular conditions that the Regulatory Authority might impose on a DIFC branch as to the terms of its accreditation, such a branch will need to comply with the requirements described in sections 4 and 5 above.
8. BRANCH LICENSING -OTHER CIRCUMSTANCES
8.1 The Regulatory Authority recognises that there may be institutions that wish to establish a branch in the DIFC, but that do not qualify under either of the categories described above. For example, there may be no acceptable MoU or equivalent arrangement with a home state regulator, or the financial institution in question has not established a similar branch under the oversight of a Tier 1 Regulator.
8.2 In these circumstances, and in order to ensure effective regulatory oversight of the branch, the Regulatory Authority may contemplate, in its absolute discretion, nevertheless to license the institution, but it will seek to impose the full licensing conditions on the branch and the financial institution as if the Regulatory Authority were the institution's lead regulator. These conditions would include the conditions imposed on passported firms discussed above and in addition the full range of financial, prudential and other requirements described in respect of new DIFC businesses or subsidiaries
9. THE APPLICATION PROCESS
9.1 As noted above, it is expected that further and more specific information on the application process and requirements will be available in September, as will application forms. The Regulatory Authority expects to work towards achieving a rapid turnaround of applications, to allow the first licenses to be granted by January 2003. Experience elsewhere indicates that the principal causes of delay in the regulatory licensing process can often be traced to the applicant failing to provide required information, or the provision of information that requires clarification or additional explanatory material.
9.2 The DIFC and the Regulatory Authority will expect to work with applicants to ensure that any application delivered to the Authority is in a complete and processable form. Applicants should raise any questions they have with the DIFC or the Authority as soon as possible in the process to minimise the potential for delay. The Regulatory Authority expects applicants to be open and frank in its dealings with the Authority, and applicants should expect the same approach from the Authority in its dealings with them.
10. FURTHER PAPERS
10.1 The Regulatory Authority may determine to issue further versions of this Information Paper, as the legislation and regulations of the DIFC are developed. It is also expected that other papers on related matters will be issued in due course. A paper on the Authority's proposed fee structure will be issued in the last quarter of 2002.