DFSA | THE INDEPENDENT REGULATOR OF FINANCIAL SERVICES

ABOUT ENFORCEMENT

The DFSA’s Enforcement function (Enforcement) supports the achievement of the DFSA’s objectives set out in Article 8(3) of the Regulatory Law 2004, particularly by preventing, detecting and restraining conduct that causes or may cause damage to the reputation of the DIFC or the financial services industry in the DIFC, and protecting direct and indirect users and prospective users of the financial services industry in the DIFC.

The general objective of Enforcement is to achieve “credible deterrence”.  That is to ensure that persons who commit, or are inclined to commit, misconduct in or from the DIFC are deterred from doing so because they perceive that the chances of getting caught and the consequences that follow exceed the benefits of committing such misconduct.

The specific objectives of Enforcement are to:

  • ensure that effective mechanisms are in place to detect misconduct, particularly serious misconduct, in a timely fashion;
  • identify appropriate matters for investigation;
  • conduct investigations fairly, efficiently and in a timely fashion;
  • work collaboratively with other regulatory authorities in the UAE and other jurisdictions; and
  • take appropriate action to address misconduct, which may include imposing sanctions, and, when doing so, ensuring that any penalty is sufficient to deter the perpetrator and others from engaging in similar misconduct.

Enforcement’s strategy is to act decisively and swiftly by taking action which achieves the following:

Stopping and fixing

This includes stopping misconduct, freezing assets to provide restitution to those harmed by the misconduct, and remediating systems and controls failings.  Remediation will often be done in conjunction with the supervision divisions and usually involves measures to assure the DFSA that the remediation has been completed and is effective.  Cease and desist orders, asset freezing and restitution are intended to limit the harm to users of DIFC financial services and, where possible, compensate them for any harm caused.

Punishing and deterring

This includes imposing penalties, such as fines or public censures, to punish firms and individuals who engage in misconduct, as well as to deter others from committing further or similar contraventions.  In deciding to impose appropriate sanctions, the DFSA aims to demonstrate that the probability of getting caught and the size of the penalty outweigh any potential benefits from the misconduct.  This will have the added benefit of reassuring users of DIFC financial services that misconduct will be detected and dealt with appropriately, and reassuring compliant individuals and businesses that there is no competitive advantage in being non-compliant.

Protecting and confidence-building

The DFSA, where appropriate, will take protective action to exclude those who lack fitness and propriety, often because they have demonstrated this by engaging in misconduct.  This may involve removing or restricting an individual or firm that poses an unacceptable risk to investors, DIFC markets or the DIFC’s reputation.  This is intended to safeguard the financial services industry in the DIFC and its users against those who have demonstrated that they do not meet the DFSA’s integrity and competence standards.  In addition, it will increase the investing public’s confidence in using DIFC financial services.

The DFSA strives to use its Enforcement resources as efficiently and effectively as possible.  It therefore aligns its priorities with those matters that the DFSA has determined to be the most unacceptable.  These priorities are set out in the DFSA Business Plan for 2019/2020 available on our website:

http://www.dfsa.ae/your-resources/publications-reports/business-plan

Enforcement focuses its resources on behaviour and risks that pose the greatest threat to the DFSA’s objectives.  These are the risks for which the DFSA has said it has the least amount of tolerance.  However, Enforcement retains the discretion to look into other matters as it considers appropriate in pursuit of the DFSA’s objectives.

Enforcement’s priorities are also aligned with those of the DFSA’s supervision divisions; namely, Supervision and Markets.  If either Supervision or Markets identifies an emerging risk or a prevalent form of misconduct which needs to be addressed, then this may result in Enforcement action

In the interests of transparency, credible deterrence and reassuring users of the DIFC financial services industry, the DFSA generally publicises its Enforcement actions.  Doing so also provides comfort to those Authorised Firms and individuals operating in the DIFC in a compliant manner.  The DFSA will also generally publicise Enforceable Undertakings, though there may be some (for example, those of a purely remedial nature) that the DFSA may not publish.

Enforcement also manages the DFSA’s Complaints function.  More information about the Complaints function can be found by going to the DFSA’s website:

http://dfsa.ae/your-resources/consumer/complaints

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