DFSA | THE INDEPENDENT REGULATOR OF FINANCIAL SERVICES

Authorisation Services

In order to conduct Financial Services in or from the Dubai International Financial Centre, entities need to seek authorisation from the DFSA. Authorisation is given in the form of a licence which is issued by the DFSA, and specifies the type of Financial Services that can be conducted.

Steps to Licensing

In the first instance, we strongly recommend that prospective applicants engage with members of the Business Development Team of The DIFC Authority who will help you understand the value proposition of the DIFC to assist your evaluation of whether a presence here will make business sense for your firm.

Some firms go straight to attempting to complete the application forms. This often results in a poor application and can lengthen the application process. Here are some recommended preparation steps:

  • Decide what type of business you want to carry out and check which Financial Services you will need to apply for.
  • Determine who will be part of the senior management and who will fulfil the mandatory positions. Prepare to complete the necessary individual application forms.
  • Develop a comprehensive Regulatory Business Plan that sets out your proposed activities, 3-year financial projections and budget, resources such as human, control systems, IT/cyber infrastructure and financial. This can be shared with the DFSA Authorisation Enquiries Team who will be happy to comment on your proposal.
  • Familiarise yourself with the applicable rules from the DFSA Rulebook and be prepared to show how you will comply with those rules. This will include providing a compliance manual, a compliance monitoring programme, and risk management policies.
  • Determine your minimum regulatory capital requirements, with which you will need to comply at all times. This should be included in your 3-year financial projections.

Completing the Application Forms

It is vital that you supply all relevant information. Openness and honesty are essential. Should we need to examine your application more closely because of any disclosures you make, this will not necessarily count against you. However, deliberately withholding information or providing false or misleading information will adversely impact the success of your application. If in doubt, disclose.

If the information you provide is inaccurate or incomplete, we may deem your application as materially incomplete, in which case it would not be accepted. Thus, missing information will lengthen the application process. Ensure that all relevant documents are also included with your completed application.

You should also start the registration process with the DIFC Registrar of Companies at the same time as you submit your DFSA application. This will help you to avoid delays at the end of the authorisation process.

Tips & Traps

  • Spend time preparing your application. Read the GEN Module of the DFSA Rulebook, the Regulatory Policy and Process Sourcebook, as well as the guidance notes to the application forms before you start your application.
  • Carefully identify which of your proposed business activities fall within the definition of Financial Services. Check whether there are any exemptions or prohibitions which may impact your application.
  • If you are a start-up firm, review our policy statement on start-ups. This can be found in the Regulatory Policy and Process Sourcebook.
  • Check you are submitting the most-up-to date version of our application form(s) and that you have used the right forms for the business activities you are proposing. Ensure your application specifies clearly the Financial Services you intend to carry out.
  • Some of the application forms are only available to submit electronically. Please contact the Authorisation Enquiries Team before making any submission.
  • Be as comprehensive as possible in providing the information required.  Make sure your forms are signed and that you have included the required attachments.
  • Review your application before submission, particularly when using consultants or legal advisers. You are the one who knows your business best and you are responsible for all information contained in the application.
  • Details of the fee schedule are set out in the Fees module of the DFSA Rulebook. We will provide a fee invoice on acceptance of the application.
  • Nominate a contact person within your firm to be responsible for managing the application process and to assist the DFSA with any enquiries.
  • You may consider the use of a third party compliance consultant to assist you. Typically applications supported by a consultancy demonstrate a quality leading to a more efficient licensing process.
  • Initiate the DIFCA Registrar of Companies process at the same time as lodging your application with the DFSA. This will save you time at the end of the process.

The Assessment

Before we can authorise a firm as an Authorised Firm, we need to be satisfied that the firm meets our Fit and Proper test, and is likely to do so on an ongoing basis. Generally, Fit and Proper means the ability to carry out a financial service competently, with honesty and integrity. 

The areas we look at include:

  • Legal status
    A firm must be a body corporate or partnership. It can be formed in the DIFC, or a firm can establish a branch of a legal entity based in another jurisdiction. In the latter instance, the DFSA would expect the outside jurisdiction to have internationally compliant regulatory and legal standards.
  • Location of offices
    A firm must carry on its activities from a place of business in the DIFC. Please discuss office requirements with the DIFC Authority Business Development Team.
  • Ownership and group structure
    The DFSA seeks to establish that it will be able to effectively supervise the firm. Therefore we need to be made aware of any Close Links (e.g. parent, subsidiary, sister company) which could hinder effective ongoing supervision.
  • Adequate resources
    A firm must have adequate resources to carry out the proposed Financial Services effecively including human, control systems, IT/cyber infrastructure and financial, A firm must have an internal audit function. 
  • Senior management
    A firm must appoint a Senior Executive Officer, a Compliance Officer, an Anti-Money Laundering Reporting Officer and a Finance Officer. The first three positions require the individuals responsible to be resident in the UAE. As part of our process, we will evaluate the competence and integrity of the proposed senior management team.

Fees

The application fee will vary according to the Financial Services to be provided. Comprehensive details of fees can be found in the Fees module (FER) of the DFSA Rulebook.

Timeline

Typically, the DFSA aims to process the majority of applications within 120 days. The time taken to process your application will depend on its nature, scale and complexity, as well as the timely submission of information and response to any requests for further clarification. The need to make the correct regulatory decision will always take precedence over meeting target timescales. 

A successful application will result in the DFSA issuing you with an in principle decision letter which will allow you to complete the DIFCA Registrar of Companies process. We will then issue you with your DFSA Licence once you can demonstrate that you have successfully registered with the Registrar of Companies, have sufficiently capitalised the firm and have met any other in principle conditions set out in the decision letter.

Islamic Finance

The DFSA’s regulatory framework is based on principles of transparency, integrity and efficiency. We have used these to create an enabling regulatory framework for Islamic Financial Services. With the advantage of being able to design our regime from inception using international standards, we have been able to create a cohesive and balanced regulatory framework.

Central to the DFSA’s approach to Islamic Finance is our belief in risk-based regulation. Many of the risks in Islamic Finance have their counterparts in conventional finance, and we believe they should be treated similarly. So our regime for Islamic Finance is integrated with that for conventional finance, but with explicit recognition of the structures and risks of Islamic Finance, where these are different.

We apply internationally accepted standards and principles; in Islamic Finance those of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB). A number of DFSA employees are actively involved in the working parties and committees of these bodies.

The DFSA’s Islamic Finance Regulatory Regime

The underpinning law is the Law Regulating Islamic Financial Business. Under this law, any firm that holds itself out as conducting Islamic financial business must have a special endorsement on its licence. This may allow the firm to operate as a wholly Islamic firm, or to operate an Islamic window.

Sharia Governance

The DFSA is a Sharia Systems Regulator not a Sharia Regulator. Any firm which conducts Islamic Financial Business must put systems in place to ensure that the business is conducted in accordance with Sharia. This includes the appointment of a Sharia Supervisory Board (SSB), of at least three competent scholars. The firm must have systems in place to disseminate the SSBs rulings, conduct regular Sharia reviews and also conduct an internal audit. (See the Islamic Finance Rules Module of the DFSA Rulebook – IFR - click here) These systems requirements provide the DFSA, and firms, with a clear measure against which to assess the firms performance.

Prudential Regulation

Firms who offer Profit Sharing Investment Accounts (PSIAs) are subject to special prudential requirements, which reflect the possibility of Displaced Commercial Risk (i.e. the fact that the firm may find itself under commercial pressure to pay PSIA holders a rate of return higher than that which would normally be payable under the contract). The relevant rules are contained in the DFSA Rulebook. The rulebook also deals with the capital treatment of various Islamic contracts. (See Chapter 5 of the IFR Module of the DFSA Rulebook - click here).

There are specific provisions relating to Takaful companies in the PIN Module (click here). Islamic firms must in general follow the AAOIFI accounting standards.

Disclosure

There are specific disclosure requirements for Islamic firms. The firm must disclose details of its Sharia Supervisory Board, as well as disclosures about the special characteristics of the products offered.

Islamic Funds

While DFSA’s Collective Investment Fund regime is substantially contained in the Collective Investment Law, the Investment Trust Law and the Collective Investment Rules (CIR) specific provisions relating to Islamic Funds are found in the Law Regulating Islamic Financial Business and Islamic Finance Rules (IFR) module. These are broadly similar to those for firms conducting Islamic Financial Business, and include the appointment of a Sharia Supervisory Board, and disclosures in the Fund prospectus.

Islamic Finance Tailored Handbooks

The DFSA's tailored handbooks for Islamic Finance are designed to help firms undertaking particular activities to locate the requirements in the DFSA Rulebook that apply to their activities.

Islamic Securities

Islamic Securities may be listed on an Exchange in the DIFC, and there are disclosure requirements mainly related to Sharia Board approval.

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