Firms and individuals carrying on business for which they do not hold a licence or passing themselves off as being regulated when they are not is an issue in every jurisdiction, not just the DIFC. To address this, the DFSA has established a dedicated team responsible for monitoring unauthorised business activity in the DIFC to detect these rogue operators as early as possible.
Fraudsters and dishonest persons want to give the impression that they are regulated to help gain the trust of their victims. Establishing that trust, by appealing to authority or presenting a veneer of respectability is a key step in getting investors to part with their money.
Sometimes they will directly mislead potential clients and issue a verbal or written statement claiming or implying that they, or a partner firm, are regulated by the DFSA. They may also host events or meet clients in the DIFC or advertise in the DIFC in the hope that investors assume they are a regulated entity. Using images of the Gate Building or other DIFC landmarks on websites or in promotional material is also a popular technique to trick people into assuming a firm is regulated by the DFSA.
It can also be subtler, for example referring to a related firm that is incorporated in the DIFC, but which doesn’t hold any licence to provide financial services.
The DFSA now has a dedicated team tasked with investigating these types of firms and individuals trying to offer financial services or make financial promotions in of from the DIFC when they are not licensed by the DFSA to do so.
If you are aware of or come across this kind of activity, you can report it via the DFSA complaints portal. In addition to getting tip-offs from the investing public, we use our intelligence capability, including our rapidly growing arsenal of new tools and methods, to detect this conduct.
The Financial Services & Promotions Prohibitions
The law on this is very clear. It is set out in Article 41 (The Financial Services Prohibition) and Article 41A (the Financial Promotions Prohibition) of the Regulatory Law 2004. A person cannot carry on a Financial Service in or from the DIFC unless the person holds a licence from the DFSA that permits it to carry on the relevant Financial Services. It is also unlawful (except in some limited circumstances set out in the DFSA’s Rules) for an unauthorised person to make a Financial Promotion in or from the DIFC. A Financial Promotion is any communication, however made, which invites or induces a person to enter into, or offer to enter into, an agreement in relation to the provision of a financial service; or exercise any rights conferred by a financial product or acquire, dispose of, underwrite or convert a financial product. This applies to all forms of written, verbal and digital communication including advertisements, emailers, brochures, promotional videos, calls and meetings.
Trust, but verify
There are lots of resources to help people and business avoid doing business with unauthorised individuals or companies. The DFSA has a Public Register, which lists all Authorised Firms. The Public Register can tell you if a particular company or person is regulated, and equally importantly what Financial Services they are licensed to provide. Being regulated by the DFSA doesn’t mean a person or company can provide every type of Financial Service, they must hold the right licence for each type of Financial Service offered.
The DFSA’s Public Register also lists all of the individuals in DFSA-licensed firms that hold Authorised Individual status. These are people who hold key positions in the Financial Services firms we regulate, and who are held to a high standard of professionalism and integrity. On the register you can also check the list of Prohibited or Restricted Individuals.
The DFSA also publishes Alerts on a range of unauthorised businesses and other scams, as well as the details of enforcement actions taken against both authorised and unauthorised companies and individuals.
The DFSA app, available for iOS or Android, allows to receive alerts and news as they happen, and allows you to search the Public Register. To download the DFSA App and receive the latest updates click on Google Play Store or the Apple Store.
Other regulators in the UAE also have their own Public Registers that enable you to check claims that a firm or a person is regulated outside of the DIFC.
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