{"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: 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. 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. 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. 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. 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. 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. 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. The FCA will read all the documentation that you submit to it, so it is crucial that you are consistent throughout in describing the activities the firm will perform, the individuals within the firm holding responsibilities, any third parties involved in the provision of the service, and the systems and controls in place. The overall time will vary depending on the complexity of the business model and on the individual case officer. Our most recent authorisation took just under six months from submission. At the more complex end of the spectrum for example, in the case of a Credit Provider, the DFSA is expected to take approximately 180 days from the point of acceptance of an application to making an in-principle decision, bearing in mind that there is a scope of work that needs to be undertaken ahead of an application. The applicant will then have 6 months to meet the in-principle conditions.<\/p>\n Conversely, a lower-risk wealth management entity that advises and arranges deals in investments is expected to take 80 calendar days from the point of acceptance of the application to in-principle approval. The better the quality of the RBP and application are, the smoother and therefore faster the process will be. There is also an application fee that would need to be paid to the DFSA, and this varies depending upon the financial services activities you are applying for, and whether you will engage with retail clients or require any other endorsements such as holding or controlling client money. Complex applications may also incur an additional complexity fee.<\/p>\n As an example, a rather straightforward wealth management firm engaged in advising and arranging will need to pay USD 15,000 to the DFSA as an application fee. If it was to engage with retail clients, this would be another USD 20,000. Additionally, the fees could be doubled if the application is deemed \u201ccomplex\u201d i.e., involving multiple levels of shareholding, multiple jurisdictions, or a complex mix of activities. You will also need to consider other operational costs such as renting office premises and obtaining visas. You can re-watch the webinar recording here:\u00a0https:\/\/www.youtube.com\/watch?v=oYrPp-PX_NU<\/a> For more information about the event and how Thistle can help you become\u00a0FCA regulated, please contact our specialist team now to schedule a free consultation.<\/p>\n Get in touch with us by calling 020 7436 0630 or emailing\u00a0info@thistleinitiatives.co.uk<\/a>. <\/p>\n For\u00a0more information about how Clarity can help you, please contact our enquiries team at\u00a0+971 (0)4 439 6761<\/a>\u00a0or by email at\u00a0hello@claritysolutions.ae<\/a>, for a free consultation.<\/p>\n","protected":false},"excerpt":{"rendered":" Thistle Initiatives\u00a0and\u00a0Clarity Consulting Solutions\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)\u00a0in the UK and the\u00a0Dubai Financial Services Authority (DFSA)\u00a0in the UAE. The primary goal was to aid firms aspiring to expand internationally by providing them with a comprehensive understanding […]<\/p>\n","protected":false},"author":3,"featured_media":30,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1],"tags":[],"table_tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/www.claritysolutions.ae\/wp-json\/wp\/v2\/posts\/451"}],"collection":[{"href":"https:\/\/www.claritysolutions.ae\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.claritysolutions.ae\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.claritysolutions.ae\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.claritysolutions.ae\/wp-json\/wp\/v2\/comments?post=451"}],"version-history":[{"count":0,"href":"https:\/\/www.claritysolutions.ae\/wp-json\/wp\/v2\/posts\/451\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.claritysolutions.ae\/wp-json\/wp\/v2\/media\/30"}],"wp:attachment":[{"href":"https:\/\/www.claritysolutions.ae\/wp-json\/wp\/v2\/media?parent=451"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.claritysolutions.ae\/wp-json\/wp\/v2\/categories?post=451"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.claritysolutions.ae\/wp-json\/wp\/v2\/tags?post=451"},{"taxonomy":"table_tags","embeddable":true,"href":"https:\/\/www.claritysolutions.ae\/wp-json\/wp\/v2\/table_tags?post=451"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\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
\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
\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
\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
\n
\n5. How much additional work is required to be regulated by the DFSA and the FCA?<\/b>
\n
\nFCA<\/u><\/p>\n
\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
\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
\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\n
\n
\nDFSA<\/u>
\n
\nWe often see the following pitfalls:<\/p>\n\n
\n9. How long does it take to get a license in the UK?<\/b>
\n
\nThe FCA has a statutory deadline of six months from when the application is considered complete, or 12 months for incomplete applications. It may take a few rounds of FCA questions before it considers an application complete, meaning the six months will start from that point as opposed to when the application was submitted.<\/p>\n
\n
\n10. How long does it take to get a license in the DIFC?<\/b>
\n
\nIt is dependent upon the financial activities and the complexity of the business model and ownership structure.<\/p>\n
\n
\n11. How much does it cost to obtain a license?<\/b>
\n
\nFCA<\/u>
\n
\nFor the FCA it depends on the permissions sought. For a firm that only arranges\/ advises it could be \u00a32,500. If you add investment management or managing an Alternative Investment Fund, it increases to \u00a310,000.
\n
\nDFSA<\/u>
\n
\nThere is a DIFC incorporation fee of USD 8,000, a commercial licence fee of USD 12,000 and a data protection fee of USD 1,250.<\/p>\n
\n
\n12. Are the rules tougher in the DIFC as compared to the UK?<\/b>
\n
\nAlthough they differ, the rules are largely based on UK and Australian regulatory practice. Presently the DFSA is simplifying the capital requirements for lower-risk firms and ease entry so that authorised firms can do what they should be doing and focusing on business generation.
\n
\n13. We didn\u2019t use a 3rd<\/sup>\u00a0party to get an FCA license, so why use a consultancy in the DIFC to obtain a DFSA license?<\/b>
\n
\nYou don\u2019t have to. However, a lot of firms do use a consultancy provider to support them in this process, which does indeed speed up the process, in effect making it a cost-neutral option.<\/p>\n
\n <\/p>\nGet in touch<\/h2>\n
\nThistle Initiatives<\/b>
\n
\nThistle Initiatives has supported firms for over 10 years as a trusted compliance and regulatory advisor and has supported 1000+ firms to pre-empt the pitfalls and get their FCA authorisation application right, with our expert FCA authorisation service. In addition to assisting, you as-and-when, our team of specialists can serve as your right hand in meeting and complying with regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.<\/p>\n
\n
\nClarity<\/b>
\n
\nClarity was founded by two senior consultants in 2020, to fill the gap in the market for premium compliance services delivery, and is all about bringing passion and energy to an area that is frequently underestimated or ignored. Our team members have an exceptional track record in helping firms establish and operate in and from the DIFC, and we understand that appropriate compliance controls are fundamental to the smooth running of a company\u2019s entire operation. Holding respect for that fact at the heart of everything we do means your interests are protected. Trust us to help you lay the right foundation so your business can shine.<\/p>\n