{"id":451,"date":"2023-12-15T05:40:03","date_gmt":"2023-12-15T05:40:03","guid":{"rendered":"https:\/\/www.claritysolutions.ae\/?p=451"},"modified":"2023-12-15T05:45:22","modified_gmt":"2023-12-15T05:45:22","slug":"webinar-qas-the-similarities-and-differences-between-fca-and-dfsa-regulation-for-investment-firms-looking-to-grow-hosted-by-thistle-initiatives-clarity-consulting","status":"publish","type":"post","link":"https:\/\/www.claritysolutions.ae\/webinar-qas-the-similarities-and-differences-between-fca-and-dfsa-regulation-for-investment-firms-looking-to-grow-hosted-by-thistle-initiatives-clarity-consulting\/","title":{"rendered":"Webinar Q&A’s – The similarities and differences between FCA and DFSA regulation for investment firms looking to grow hosted by Thistle Initiatives & Clarity Consulting"},"content":{"rendered":"

Thistle Initiatives<\/a>\u00a0and\u00a0Clarity Consulting Solutions<\/a>\u00a0recently partnered to conduct an insightful webinar. This virtual event delved into a comparative analysis of the regulatory landscapes of the\u00a0Financial Conduct Authority (FCA)<\/a>\u00a0in the UK and the\u00a0Dubai Financial Services Authority (DFSA)<\/a>\u00a0in the UAE. The primary goal was to aid firms aspiring to expand internationally by providing them with a comprehensive understanding of the regulatory requirements involved.<\/p>\n

The webinar featured a panel of distinguished experts, including\u00a0Adam Campbell<\/a>\u00a0from Thistle Initiatives,\u00a0Sarah Smith<\/a>\u00a0and\u00a0Barry Cotter<\/a>\u00a0from Clarity Consulting and\u00a0Ali Hassan<\/a>\u00a0from the\u00a0DIFC<\/a>,\u00a0who collectively discussed the intricate compliance demands faced by firms operating in both the UK and UAE.<\/p>\n

In particular, the discussion focused on shedding light on the specific nuances relevant to\u00a0investment<\/a>\u00a0firms and the essential steps they need to follow to attain authorisation.<\/p>\n

Take a read of the questions and answers raised during the session below:
\n 
\n1. Can advisers based in the UK service clients who are temporarily (e.g. whilst working on a contract) in the UAE without permission from the host state regulator?<\/b>
\n 
\nWhilst this is not technically a DIFC\/DFSA concern, unless the client is living inside the perimeter of the DIFC, state regulators would likely not look kindly upon continued advice being offered.<\/p>\n

If the client is in the UAE for a month or two, then we don\u2019t believe that the local regulator would object. However, a temporary contract in Dubai can be for three years, and in this case, the client would ordinarily be deemed a resident.<\/p>\n

In the latter scenario, this would constitute cross-border activity. Broadly speaking, the\u00a0FCA<\/a>\u00a0will be less focused on this, and whilst we cannot speak to the federal regulator\u2019s appetite for action on this in the wider UAE, the DFSA will have an interest, and it has recently set up a specialised Unauthorised Business Team within its Enforcement division.<\/p>\n

Some other thoughts to consider are – does the firm\u2019s professional indemnity cover extend to non-UK residents? Does a disclaimer about only advising on UK tax and legal implications cut it in the event of a future complaint?<\/p>\n

Conversely, the DFSA is also conscious of global firms with staff temporarily in the UAE. It issued a communication in 2022 on this topic and emphasised that no individual may carry on any financial services activity in or from the DIFC unless licensed by the DFSA to do so. Also, non DIFC based staff should not have access to a DFSA Authorised Firms\u2019 operational systems.
\n 
\n2. Can we legalise a UK license in the UAE?<\/b>
\n 
\nIf to \u201clegalise\u201d means that the current UK license can be recognised within the UAE, and continue to operate from the UK then – no. You will need a separate financial services license issued by the regulator to operate in this region.<\/p>\n

In terms of the DIFC, you need to meet \u201csubstance\u201d requirements and would need DFSA authorisation, and be physically present in the DIFC, providing your products or services to clients locally.<\/p>\n

Having said that, you can set up via a branch from the UK into the DIFC, so in this case the branch is the same legal entity as that of its parent entity in the UK. However, \u201csubstance\u201d requirements still apply i.e., office space and people. There are some advantages with respect to reduced local corporate governance requirements and capital requirements in this case. The FCA, as a home regulator of the head office, maintains an interest in the branch activities in the DIFC, as does the DFSA in regulating the branch directly.
\n 
\n3. Can UK investment firms be regulated in Dubai and not by the FCA?<\/b>
\n 
\nNo, if providing services to UK clients then you will need to become\u00a0FCA regulated.\u00a0You cannot passport financial services into the UK from Dubai.<\/p>\n

If you are based in the UK, then you must be\u00a0FCA-regulated\u00a0to conduct financial services in the UK. You must be regulated by the DFSA to conduct financial services in or from the DIFC. Further, there is no passporting regime and the usual cross-border rules apply.
\n 
\n4. How are Treating Customers Fairly (TCF) and Client’s Best Interests rules applied by the DFSA?<\/b>
\n 
\nThe DFSA rules are largely based on UK and Australian regulatory practice, but historically the DIFC was a wholesale centre so its rules on retail clients are still catching up.<\/p>\n

For example, there is nothing comparable in the DFSA rules to Treating Customers Fairly (TCF) or the relatively new FCA Consumer Duty requirements, and the complaints handling rules are generic rather than prescriptive. The DFSA has clear principles for firms and individuals as well as Conduct of Business (COB) rules designed to protect the interests of clients. Recently it has set out its intent to consider thematic reviews concerned with complaints handling and Continuing Professional Development requirements, to enhance retail client protection.<\/p>\n

A retail endorsement application would need to be made at the point of seeking authorisation and it is at this point that increased scrutiny is applied to the business.
\n 
\n5. How much additional work is required to be regulated by the DFSA and the FCA?<\/b>
\n 
\nFCA<\/u><\/p>\n

There may be synergies, but it is important to recognise that these are two different jurisdictions, with different regulatory bodies. Firms will need local legal\/compliance knowledge to be comfortable meeting their regulatory obligations.<\/p>\n

This will also depend on whether the firm operates via a branch or a subsidiary. For international firms operating a branch in the UK, the FCA states that it will consider all relevant information i.e. if the way a firm has conducted itself in relation to unregulated business calls into question its suitability to be authorised and to meet the threshold conditions.
\n 
\nDFSA<\/u>
\n 
\nIt depends on the nature of the entity coming into the DIFC, and whether it will be a branch or a subsidiary.<\/p>\n

There is comfort taken by the DFSA on entities already regulated by the FCA, given the FCA\u2019s robust regulatory regime. However, any firm wanting to operate in two jurisdictions will have to meet the regulatory requirements in each jurisdiction \u2013 that said, the DFSA rules will not look unfamiliar to existing UK firms.<\/p>\n

In terms of seeking a license to operate, generally speaking, the process is similar, the DFSA does however require an upfront Regulatory Business Plan ahead of formulating a formal application submission.
\n 
\n6. Would a UK firm be able to keep its UK-based custodian\/depository and be regulated in the DIFC?<\/b>
\n 
\nIt depends upon the financial service to be offered in the DIFC. Generally, yes, the DFSA needs comfort that the custodian is based in an equivalent jurisdiction, which the UK is. If you operate a money services firm, a crowdfunding operation, a DIFC domestic fund, or a new Fintech idea, then the DFSA may require a bespoke approach.
\n 
\n7. What are the common questions the FCA asks? And how should we be prepared?<\/b>
\n 
\nThis varies between applications, but some common examples are around how the firm has deemed the compliance officer competent and capable of performing the role, identifying conflicts of interest, and detailing how the firm identifies suspicious transactions.<\/p>\n

The FCA could also request the firm\u2019s internal compliance policies and\/or assessments, such as a target market or fair value assessment. So, it would be wise to have these documents prepared. We often assist firms in the preparation of these documents.
\n 
\n8. What are the common mistakes you see in applications? How can we best prepare to avoid these mistakes?<\/b>
\n 
\nFCA<\/u>
\n 
\nFrom recent experience reviewing applications pre-submission, we have seen the following mistakes:<\/p>\n