Insight article Archives - Page 2 of 5

Initial Coin Offerings in the United Arab Emirates

Posted on May 30, 2018 - 9:16 am by riaabgmanager

Introduction

Initial Coin Offerings (“ICO”)[1] refers to the innovative mechanism by which start-up businesses and other companies can digitally raise funds from the public.

In 2017 alone, over US$3 billion was raised through ICOs globally. In April 2018, it has been reported that ICOs have now raised more capital in the first three months of 2018 than the total capital raised in 2017. The subject of ICOs has also sparked an interest in the United Arab Emirates (“UAE”) as exemplified by the recent launch of the mCoin ICO in Dubai in April 2018.

Despite the growing trend and interest surrounding ICOs, some countries across the globe have expressly banned ICOs; including the People’s Republic of China (“PRC”), where the main regulators jointly outlawed ICOs. In South Korea, the Financial Supervisory Board decided to ban all forms of virtual currencies. More recently, in April 2018, India’s Central Bank announced its ban on the sale and purchase of digital currencies[2].

The UAE’s position on the legal and regulatory treatment of raising capital through ICOs is still under-developed.

What is an ICO?

ICOs allow start-up businesses and other companies to digitally raise funds. The investor(s) are provided with the opportunity to participate in the ICO by exchanging fiat currencies such as the Euro or the USD for digital tokens in a business (“Digital Tokens”). The Digital Tokens issued to the investor(s) may represent for example: ownership in the business and/or rights over the business. ICOs have notably been classified as high-risk and speculative investments and various regulators such as the Financial Conduct Authority in the United Kingdom has issued warnings against their use.

The Digital Token(s) utilise the ‘decentralised’ blockchain technology to operate. The value of the Digital Token(s) can increase or fluctuate depending on the performance and growth of the issuing business.

The ICO Process and Legal Documentation

Before a business issues an ICO, it will market the ICO to potential investors though a white paper (“White Paper”).

Similar to a prospectus or information memorandum in initial public offerings, the White Paper in essence is a marketing tool which provides information on the issuing company, a description of its business, the proposed project for which it is raising funds for, and the rights and structure of the Digital Token(s) being issued. The White Paper is commonly available through the issuing company’s website or through an online platform.

The terms and conditions of the purchase of the Digital Token(s) is typically recorded in a digital token purchase agreement which sets out the rights of each party. The purchase agreement should comply with the specific rules and local legislation of the country in which the Digital Token(s) are being marketed. However, ICOs are a recent phenomenon and like many other countries, the UAE, has no specific statutory provisions or rules that an issuer should comply with when issuing ICOs.

The UAE’s Position on ICOs

UAE (Onshore, excluding the DIFC and ADGM)

In the UAE, the Securities and Commodities Authority (“SCA”), the governmental body that regulates the UAE’s financial and commodities markets issued a circular on 2 April 2018[3] (the “Circular”) in which it warned investors against digital, token-based fundraising activities which includes ICOs. The SCA reiterated that it does not recognise, regulate or supervise any ICOs, and by investing in any ICOs, the investors are doing so at their own risk.

Through the Circular, the SCA raised awareness surrounding the risks associated with ICOs. In particular, the SCA highlighted the following:

– that some ICOs are not subject to regulation and therefore may be subject to fraud risks;

– that ICOs may be issued abroad, and therefore are subject to foreign laws and regulations that can be difficult to verify, and therefore, tracking and recovering funds in cases where ICOs have collapsed may prove to be extremely difficult;

– that ICO trading on the secondary market is subject to opaque, volatile pricing and may possess insufficient liquidity;

– that investors, in particular retail investors may not be able to comprehend the risks, costs, and expected returns associated with ICOs; and

– that the information made available to potential investors through the White Paper or otherwise may be unaudited and/or incomplete and may present the relevant investment in an unbalanced and/or misleading manner.

The Dubai Financial Services Authority (the “DFSA”)

Similarly, the DFSA, the independent regulator of financial services conducted in or from the Dubai International Financial Centre (“DIFC”) issued a warning on 13 September 2017[1] to potential investors of ICOs.

In its warning, the DFSA made it clear that it does not regulate “these types of product offerings or licence firms in the DIFC to undertake such activities”. In addition, the DFSA urged potential investors to exercise caution and undertake its own due diligence to better understand the associated risks before engaging with firms offering such investments in the DIFC, and/or before making any financial contributions towards such investments.

The Abu Dhabi Global Markets (the “ADGM”)

The ADGM, through the Financial Services Regulatory Authority (“FRSA”) issued its own guidance to investors proposing to invest into ICOs. The guidance provided by the ADGM on 8 October 2017 (the “Guidelines”),[2] aims to inform investors on the legal and regulatory treatment of raising funds through ICOs in the ADGM.

The Guidelines should be read in conjunction with the Financial Services and Markets Regulations 2015 (“FSMR”). If tokens in an ICO are assessed to exhibit the characteristics of a ‘Security’ then such tokens can be classified as ‘Security Tokens’ and thus may be subject to the ADGM’s regulatory obligations/requirements.

Guidance Note 3.10 further clarifies that not all ICOs will constitute an Offer of Securities under the Market Rules or FSMR. If the tokens do not exemplify the features and characteristics of Securities, the offer of such tokens is not likely to be an Offer of Securities (each as defined in the FSMR and the ADGM Glossary) and neither is the trading of such tokens likely to constitute a Regulated Activity under the FSMR.

If an issuer is proposing an ICO in or from the ADGM then it should aim to approach the FSRA at the earliest opportunity to ensure it can rely on certain exemptions and avoid falling foul of the ADGM regulatory regime[3].

On 30 April 2018, the FSRA published a consultation paper on a proposed framework to administer spot crypto asset activities to be undertaken in the ADGM.[4] It is clearly evident that the FSRA is seeking to instill proper governance, transparency and oversight in and over crypto asset activities. The proposed crypto asset regulatory framework supplements the FSRA’s Guidance on Initial Coin/Token Offerings and Crypto Assets released in 2017. However, until the proposed framework comes into force, ICOs comprising tokens which exhibit the characteristics of securities will continue to be treated as such within the FSRA’s regulatory framework.

The information mentioned in this article is current at the date of publication of this article and available from public sources. Nothing in this article constitutes legal advice and should not be construed as any form of advice. For further information, please do not hesitate to contact us.

[1] https://www.dfsa.ae/MediaRelease/News/DFSA-Issues-General-Investor-Statement accessed on 29 April 2018 at 16:52 pm.

[2] https://www.adgm.com/media/192772/20171009-fsra-guidance-for-icos-and-virtual-currencies.pdf ADGM Guidance Note accessed on 29 April 2018 at 17:27 pm.

[3] Guidance Note 3.3 of the Guidelines.

[4] https://www.adgm.com/mediacentre/press-releases/abu-dhabi-global-market-proposes-a-regulatory-framework-for-spot-crypto-asset-markets/ accessed on 2.5.2018 at 13:00 pm.

[1] An ICO is also known as a “coin sale” or “token sale”.

[2] http://www.bbc.com/news/world-asia-india-43669730 accessed on 29 April 2018 at 15:10 pm.

[3] https://www.sca.gov.ae/English/News/Pages/Articles/2018/2018-2-4.aspx accessed on 29 April 2018 at 16:50 pm.

The DIFC’s New Private Wealth Management and Succession Planning Regime

Posted on April 30, 2018 - 12:52 pm by riaabgmanager

Introduction

The Dubai International Financial Centre (the “DIFC”) has recently enacted two new sets of laws with the aim of improving and expanding the existing private wealth management and succession planning platforms.

The Foundations Law DIFC Law No. 3 of 2018 (the “Foundations Law”); and the Trust Law DIFC Law No. 4 of 2018 (the “Trust Law”) both came into force on 21 March 2018 and are aimed at serving:

families in their wealth and succession planning; and/or
other entities such as family offices, entrepreneurs, and companies who may have a particular objective in respect of their charitable objectives.

Trust Law

The Trust Law repeals and replaces the Trust Law 2005 (DIFC Law No. 11 of 2005) and is an enhancement to the previous trust law in order to bring it in line with international best practice.

The new Trust Law provides the basic legal framework for the creation, administration and operation of trusts in the DIFC. In addition, and in particular it takes into account the requirements of families in respect of its succession plans.

The Foundations Law

The Foundations Law promotes the protection of creditors, succession planning, and lifetime private wealth planning solutions for family business and charitable entities. The Foundations Law is on par with international ‘best practice’ standards and provides for a regulated environment for the establishment of Foundations[1] in or from the DIFC.

The Establishment/Categories and Structure of Foundations

The Foundations Law provides that a Foundation may be established:

to serve objects which are exclusively charitable; and
one or more of the following:
objects which are not charitable; and
objects to benefit persons by name, category or class.[2]

Application

The founder of a Foundation may apply for the establishment of a Foundation by signing and filing with the DIFC Registrar of Companies (the “DIFC ROC”) the relevant application for its establishment.

This application will need to be signed by each

founder and is required to set out specific information in respect of the Foundation such as the name of the proposed Foundation and the full name, nationality and address of each founder.[1]

Appointment of a Council

A Foundation must have a council to administer its property and to carry out its objectives. The council is required to comprise of at least two members. There are various duties imposed on the council of a Foundation which include:

to act honestly and in good faith with a view to act in the best interests of the Foundation;
exercise the care, diligence and skill that a reasonable prudent person would exercise in similar circumstances; and
declare any interest in a transaction of the Foundation.

In addition, depending on the objects of the Foundation, the Foundations Law stipulates requirements for the appointment of a guardian, and a registered agent.

Types of Property of the Foundation

The Foundations Law specifies various types of property which the Foundation can hold, the circumstances in which it may hold that property and to whom it can be distributed.

Administration of the Foundation

A Foundation is required to have at all times, a registered office in the DIFC, and may carry out its activities in the DIFC and elsewhere as permitted by the laws of the DIFC. A Foundation is required to keep and maintain its accounts and accounting records. A Foundation which fails to adhere to this requirement will be liable to a fine.

A Foreign Foundation

A foreign foundation may (if it is not prohibited in its home jurisdiction under which it is organised) apply to the DIFC ROC for a certificate of continuance under the Foundations Law.

Dissolution of Foundations

A Foundation can be dissolved where:

the Foundation is established for a definitive period and that period has expired;
the objects of the Foundation have been fulfilled or become incapable of fulfillment and the council member unanimously decide to dissolve the Foundation;
the courts of the DIFC order the dissolution of the Foundation; or
the DIFC ROC strikes the Foundation off the Register.

Penalties

A Foundation which breaches the Foundations Law and/or other laws of the DIFC will be subject to a fine.

For further information and assistance with any aspect of the DIFC and DFSA regulatory framework and licensing process, please do not hesitate to contact us.

[1] Article 17 of the Foundations Law

[1] In essence a Foundation is an entity that will be established in the DIFC to undertake specific activities, i.e. their objectives. A Foundation is defined in the Foundations Law, as: (a) a foundation established in accordance with the Foundations Law; and (b) and foreign foundation which is established in another jurisdiction and which has transferred its registration to the DIFC in accordance with the Foundations Law.

[2] Article 12 of the Foundations Law

10 Key Changes Proposed in the New DIFC Employment Law

Posted on April 18, 2018 - 1:17 pm by riaabgmanager

Introduction

The Dubai International Financial Centre Authority (“DIFCA”) recently issued a consultation paper seeking comments on the proposed new Employment Law (the “Proposed Law”). The Proposed Law is intended to replace the current Employment Law, DIFC Law No. 4 of 2005 (the “Current Law”) applicable in the Dubai International Financial Centre (the “DIFC”).

Please access the link below to download article:

RIAABG Insight – Proposed DIFC Employment Law (18042018)

For further information and assistance with any aspect of the DIFC legal framework, please do not hesitate to contact us.

The DFSA’s Crowdfunding Regulations

Posted on April 2, 2018 - 1:24 pm by riaabgmanager

Introduction

The Dubai Financial Services Authority (the “DFSA”) recently introduced a new legal framework regarding crowdfunding (the “Regulations”): the aim of the Regulations is to drive growth in the financial technology (the “FinTech”) industry by ensuring clear governance and requisite protection for the parties involved. The development recognises the increasing significance of crowdfunding as a finance mechanism for small and medium sized enterprises, which are key contributors to the United Arab Emirates’ (the “UAE”) economy. Through the Regulations, the UAE is the first GCC country to undertake the initiative of regulating crowdfunding arrangements.

The Regulations are part of the DFSA Conduct of Business (COB) Module under section 11, and govern both a loan crowdfunding platform, where the person providing the funds enters into a loan agreement with the person to whom the funding is provided, and an investment crowdfunding platform, where the person providing the funding purchases an investment (share, debenture or sukuk) from the person to whom the funding is provided. Although, the Regulations mainly apply to both types of crowdfunding platforms, there are certain specific provisions, which apply to only one type of crowdfunding platform.

Risk Disclosure

One of the first general regulations set out by the DFSA is the obligation of the operator of a crowdfunding platform to disclose the risks that a lender or investor may be exposed to when engaged in funding. The DFSA sets out four express statements that need to be included on the operator’s website, these include:

1. The lender or investor may lose all or part of their money or may experience delays in being paid;

2. Borrowers or issuers on the platform may include new businesses and, as many new businesses fail, a loan to such a borrower or an investment with such an issuer may involve high risks;

3. The lender may not be able to transfer their loan, or the investor may not be able to sell their Investment, when they wish to, or at all; and

4. If for any reason the operator ceases to carry on its business, the lender or investor may lose their money, incur costs or experience delays in being paid.

Moreover, in order to allow potential lenders and investors to assess the risk with lending and investing using the platform, the DFSA requires operators to disclose default rates of loans entered into on the platform and failure rates in relation to issuers where they default on payments, become insolvent, are wound up or cease to carry on business.

Service Disclosure

The operator is also under an obligation to disclose information about its operating model. This provides both lender/investors and borrowers/issuers with an understanding of the crowdfunding platform in terms of how the platform functions, how and by whom the operator is remunerated for the service, the eligibility criteria for both borrowers/issuers and lenders/investors that use the service, and any limits on the amounts of loans or investments that may be sought by a borrower/issuer or limits on the funds provided by a lender/investor.

The extensive list of specific information that needs to be disclosed by the operator also includes the steps to be taken by the operator in the event that there is a material change in a borrower’s/issuer’s circumstances and the rights of each party in that situation; information on any arrangements for facilitating the transfer of loans or the sale of investments, the conditions for using them and any risks involved; and details on the measures implemented to ensure that the platform is not used for money-laundering.

Due Diligence

The Regulations require a certain amount of due diligence to be carried out on the borrowers and issuers; the purpose of these checks is to ensure that the business carried out by the borrower or issuer is lawful in the place where it is carried out.

The Regulations stipulate that an operator is not permitted to allow a borrower or issuer to use its service unless it is a body corporate. In addition, the Regulations stipulate the minimum steps to be undertaken by the operator when conducting due diligence on the borrower/issuer. These due diligence steps include verifying the borrower’s/issuer’s identity, which include the details of its incorporation and registration, as well as the identity of its directors, the borrower’s/issuer’s financial strength, credit history, and the valuation of the business amongst other considerations.

In addition to the due diligence, the operator is also obliged to disclose information about each borrower/ issuer on its website. Once again the DFSA provides the minimum information which needs to be provided; this includes the full name of the borrower/issuers, its directors and officers, a description about the business of the borrower or issuer, the most recent financial statements of the borrower, the results of the due diligence carried out by the operator, and a detailed description of the proposal for which it is seeking funding. The proposal should include the details about the total amount of funding sought, how the funds will be used and what will happen if the target level of funding has either not been met or has been exceeded. Also, in relation to a loan or debenture, the duration of the loan or debenture, details of interest payable and any other rights attaching to the loan or debenture need to be included, and in respect of a share issue, any rights attaching to the share, such as dividend, voting or pre-emption rights must be set out.

Additional Obligations

The Regulations prohibit operators, borrowers and issuers from advertising specific lending or investment proposals to those who are not existing clients of the operator. In such an event, it is possible that advertising an investment proposal to non-clients may constitute “an offer of securities to the public” under the DFSA laws, which may result in the onerous requirement of a prospectus. Nevertheless, the Regulations do not prevent an operator from generally advertising its crowdfunding services to potential clients.

In addition, there is an express set of requirements which the operator must comply with if there is a material change affecting a borrower/issuer, either during the commitment period or later. In such a case, a material change might include a change in the management, control or structure of the business, any changes in relation to its assets, or a default in respect of any other obligation. The main steps include notifying the lender/investors and requiring the lenders/investors to reconfirm their commitment or informing them whether their rights have been affected.

It is important to note that the DFSA considers a material change to occur in a very limited number of cases. This is because all relevant information about the borrower or issuer would have been reviewed by the operator as part of the due diligence.

Some of the other obligations on the operator include: taking reasonable steps to restrict borrowers and issuers from seeking funding from other crowdfunding platforms during the commitment period; ensuring that all lenders and investors who use its service are treated equally; and taking reasonable steps to ensure that the operator’s own staff members do not use the platform as neither the lenders/investors nor as the borrowers/issuers.

Conclusion

As a result of the DFSA Regulations, crowdfunding activities which were previously carried out through interim arrangements, are now formally regulated. The DFSA’s efforts to implement such regulations is a reflection of the UAE Government’s National Innovation Strategy which seeks to create an innovation-friendly ecosystem for FinTech businesses, and small and medium sized enterprises generally.

For further information and assistance with any aspect of the DIFC and DFSA regulatory framework and licensing process, please do not hesitate to contact us.

Marketing and Promotion of Foreign Funds in the UAE

Posted on March 27, 2018 - 9:56 am by riaabgmanager

Introduction

The regulatory framework in the United Arab Emirates (“UAE”) applicable to foreign domiciled investment funds (“Foreign Funds”) marketed onshore in the UAE^[1] has been subject to continuous developments over the past few years.

The UAE Securities and Commodities Authority (“SCA”), the onshore regulator responsible for the licensing and marketing of Foreign Funds onshore has introduced a raft of rules and regulations that govern the marketing of Foreign Funds in the UAE. Essentially, the marketing of Foreign Funds is prohibited, unless they are registered with the SCA, marketed by and distributed through a local SCA-licensed agent.

Regulatory Framework

The SCA Board of Directors’ Chairman Decision No. (9/R.M) of 2016 Concerning the Regulations as to Mutual Funds (the “2016 Regulations”) and the Chairman of the SCA Board of Directors’ Resolution No. 3 R.M of 2017 Concerning the Organization of Promotion and Introduction activities (the “2017 Regulations”) (collectively the “2016 and 2017 Regulations”) are the main pieces of legislation governing the marketing of Foreign Funds onshore in the UAE.

Rules Relating to the Marketing of Foreign Funds

The 2016 and 2017 Regulations regulate the “announcement, publication or dissemination of data, information or advertising materials related to Financial Products by any means”. ‘Financial Products’ include foreign securities such as “units of investment funds issued by foreign issuers”.

The General Prohibition

The 2016 and 2017 Regulations prohibit the marketing of Foreign Funds unless the Foreign Funds are:

approved by the SCA;
registered with the SCA; and
a licensed local promoter is appointed to distribute the Foreign Funds.

The Registration Process

The representatives of the Foreign Fund are required to submit an application for the registration of the Foreign Fund to the SCA in the prescribed manner together with the requisite supporting documents, which includes the Foreign Fund’s prospectus. Upon the submission of the application for registration of the Foreign Fund, the SCA shall issue a decision on the registration within 30 business days from the date of submission. The term of approval is for one year and expires at the end of December each year; so subsequent renewal applications are required to be made.

Exemptions Available to Foreign Funds under the 2016 and 2017 Regulations

The Foreign Fund may evade the requirements set out in the General Prohibition set out above if certain situations exist.

The 2016 Regulations do not apply in the following situations:

Reverse Solicitation – where an investor based in the UAE has initiated the request to purchase or to receive the interests in the Foreign Fund, and the solicitation by the relevant investor is not based on the marketing activities conducted by the Foreign Fund;
Federal or Local Governmental Agencies (Sovereign or Wealth Funds) – where the marketing of the Foreign Fund is carried out to a federal or governmental agency or their respective wholly owned subsidiaries in the UAE; or
Discretionary Investment Account – accumulation of money for the purposes of investment in a joint bank account, the conclusion of group insurance agreements, participation in social security, employee incentive programs or investment plans associated with insurance contracts (unless the investment are directed from such plan towards a mutual fund).

The 2017 Regulations supplement the 2016 Regulations and provide for additional situations in which the scope of the 2016 and 2017 Regulations would not apply; these include:

Reverse Solicitation – the 2017 Regulations has been retained the reverse solicitation exemption as set out in the 2016 Regulations;
Qualified Investor – private placements to ‘Qualified investors’ are not subject to General Prohibition. A ‘Qualified Investor’ is defined in the 2017 Regulations as:

(a) the federal government, local governments, governmental institutions and agencies, or the companies fully owned by any of them;

(b) international agencies and organizations: ‘international agencies and organizations’ entities who are capable of deciding whether or not to invest in the Foreign Funds through their own respective investigations;

(c) a person licensed to practice a commercial activity in the UAE, and that undertaking investment activities is one of its purposes;

(d) a high net worth individual; and

(e) the investor represented by an investment manager licensed by the SCA.

Financial Products that are listed on a SCA Licensed Market – this exemption is available when an entity is promoting Financial Products, which are listed on any of the Markets. The definition of Market only refers to an SCA licensed exchange;
Introductions by Legal, Analysts and/or Financial Advisors – introductions are exempt from the licensing requirements if they form part of the professional’s entity’s consultation. However, the introducer has certain obligations in respect of making certain disclosures;; and
Introductions and Promotions amongst the Group Company – an entity is exempt from the prohibitions set out above if they make promotions or introductions to a “parent company, affiliate company, sister company and allied company, or related parties, or within the members of a group”.

In respect of Qualified Investors who are ‘high-net-worth individuals’ in the UAE; the licensing requirements will need to be adhered to in order to promote Foreign Funds to them; and the funds will need to be registered with the SCA.

Summary

The 2016 Regulations and 2017 Regulations provide a host of exemptions to Foreign Funds, however, if any of the exemptions under the 2016 and 2017 Regulations do not apply then the entities proposing to market Foreign Funds to potential investors in the UAE will require the Foreign Fund to be registered with the SCA and an SCA licensed distributor will need to be appointed accordingly.

For further information and assistance with any aspect of the UAE, DIFC and ADGM regulatory framework and licensing process, please do not hesitate to contact us.

[1] The 2016 and 2017 Regulations only apply to onshore investment funds and excludes those based or promoted to potential investors in the Dubai International Financial Centre and the Abu Dhabi Global Market.

The DFSA’s Innovation Testing Licence for Financial Technology Firms

Posted on March 22, 2018 - 2:11 pm by riaabgmanager

Introduction

The Dubai Financial Services Authority (the “DFSA”), the independent financial services regulator of the Dubai International Financial Centre (“DIFC”) has recently announced the launch of its Innovation Testing Licence (the “ITL”).

The ITL is a restricted licence that allows qualifying financial technology (“FinTech”) firms a controlled environment to develop and test innovative financial services technology and concepts without being subject to all the general regulatory requirements that would otherwise apply to firms conducting financial services in or from the from the DIFC.

In implementing the ITL, the DFSA recognises the importance of innovation and technology to support and enable financial service businesses, products and services that can vastly enhance and improve the efficiency of the global market place including better services and solutions to business and individuals.

Eligibility Criteria for the Innovation Testing Licence

Any FinTech firm proposing to apply for the ITL will need to first satisfy the following criteria in order for it to be considered for the ITL:

1. It must involve innovation and the use of financial technology:

The DFSA will take into consideration:

– whether the business model, product or service uses new, emerging or existing technology in an innovative way; and

– if it brings a new benefit to customers or industry.

2. It must involve an activity that, if carried on in the DIFC, would amount to a financial service (or combination of financial services):

The activity proposed must involve a financial service within the scope of the DFSA’s regulatory regime.

3. It must be ready (or soon be ready) to start live testing with customers or industry:

The DFSA will want to see a regulatory test plan (“Test Plan”) that for example: sets out the objectives and parameters for testing, and the timeline and key milestones for that testing.

4. The FinTech firm must intend to roll out its business on a broader scale in or from the DIFC after it has successfully completed the testing phase:

The DFSA will want to see evidence of how the FinTech firm intends to roll out its business at the end of the test period.

Once this eligibility criteria has been satisfied, the FinTech firm seeking an ITL must initiate discussions with the DFSA and the DIFC Authority in respect of the general regulatory requirements that it will be subject to.

The general regulatory requirements that may apply to the applicant will be dependent on a case by case basis; however the DFSA may waive or modify the relevant rules and requirements that may have been otherwise applicable[1]. This allows the FinTech firm to test its innovative products, services and business models without having to comply with the all the general regulatory requirements that may be inappropriate or disproportionate to the innovative nature of the FinTech business.

In addition, the FinTech firm seeking an ITL must satisfy certain general requirements these include: compliance with the UAE Federal Laws and DIFC Laws, acting with integrity, care, diligence and due skill as well as the FinTech business being located in the DIFC.

Application Process

The FinTech firm submitting an application for the ITL will need to complete:

1. an ITL application form; and

2. file a Test Plan which should set out amongst other things, the:

– business and the proposed innovative FinTech product or service;

– objectives and parameters for the testing of service or products;

– timeline and key milestones for testing;

– number and type of customers that will take part in the testing and how they will be sourced;

– key risks of testing and how they will be mitigated; and

– how the progress in respect of the testing will be reported to the DFSA.

Upon submission of the ITL application form and Test Plan, the DFSA will review the complete application and will need to be satisfied that the information included in the application and Test Plan is appropriate and complete.

The applicable fees for a FinTech firm seeking an ITL will depend on the nature of its activities. However, given the ‘start-up’ nature of the FinTech firm, the DFSA may consider reducing or waiving the relevant fees for the duration of the testing period. Once the FinTech business has completed testing, it will be expected to pay the standard fees as prescribed by the DFSA.

Issue of and Validity of ITL

If the DFSA is satisfied with the applicant’s application for an ITL, it will issue an ITL which may contain certain restrictions and conditions on the FinTech firm: this could include for example:

– a restriction on the business that may be carried on under the ITL to testing the specific FinTech product or service;

– a restriction the number of and type of customers that may participate in the testing;

– period during which it may carry out the relevant testing;

– a condition that the FinTech business complies with its regulatory test plan; and/or

– a condition to disclose in any communications that it is only authorised by the DFSA to test its product or service.

Once the ITL has been issued, the FinTech firm will be able to test the product or service for a period of 6 to 12 months. An extension may be sought from the DFSA beyond the testing period, however this will only be granted by the DFSA in exceptional circumstances.

If the business meets the requirements detailed in the Test Plan and it can meet DFSA’s full authorisation requirements it may be granted full authorisation.

For further information and assistance with any aspect of the DIFC and DFSA regulatory framework and licensing process, please do not hesitate to contact us.

[1] DFSA Rule Book – General Module Chapter 13.

LexisNexis® Mergers& Acquisitions Law Guide 2018 并购法律指南 2018

Posted on February 13, 2018 - 12:55 pm by riaabgmanager

For an update on M&A practices around the world with an Asia-Pacific focus, please review the LexisNexis Mergers and Acquisitions Law Guide 2018 eBook, bilingual version (English and Chinese), including the UAE chapter contributed by RIAA Barker Gillette (Middle East) LLP:

MandA Law Guide 2018 Biling eBook Final

Getting the Deal Through: Country Focus 2017

Posted on January 8, 2018 - 3:24 pm by riaabgmanager

Please click on the following link to download the Getting the Deal Through: Country Focus 2017 – United Arab Emirates: The Legal Landscape contributed by RIAA Barker Gillette (Middle East) LLP:

UAE Country Focus (RIAA Barker Gillette 2017)

Reproduced with permission from Law Business Research Ltd. Getting the Deal Through: Country Focus 2017, (published in September 2017) For further information please visit gettingthedealthrough.com

LexisNexis Foreign Investment Law Guide | 外国投资法指南 2017-2018

Posted on January 8, 2018 - 3:13 pm by riaabgmanager

Please click on the following link to download the LexisNexis Foreign Investment Law Guide | 外国投资法指南 2017-2018 – UAE Chapter (in English and Chinese) contributed by RIAA Barker Gillette (Middle East) LLP:

LexisNexis Foreign Investment Law Guide 2017-2018 – UAE (EN and CN)

LexisNexis Mergers and Acquisitions Law Guide 2018

Posted on January 8, 2018 - 2:57 pm by riaabgmanager

Please click on the following link to download the LexisNexis Mergers and Acquisitions Law Guide 2018 – UAE Chapter contributed by RIAA Barker Gillette (Middle East) LLP:

LexisNexis M&A Guide 2018 – UAE

Older posts

Newer posts

Category Archives: Insight article

Initial Coin Offerings in the United Arab Emirates

The DIFC’s New Private Wealth Management and Succession Planning Regime

10 Key Changes Proposed in the New DIFC Employment Law

The DFSA’s Crowdfunding Regulations

Marketing and Promotion of Foreign Funds in the UAE

The DFSA’s Innovation Testing Licence for Financial Technology Firms

LexisNexis® Mergers& Acquisitions Law Guide 2018 并购法律指南 2018

Getting the Deal Through: Country Focus 2017

LexisNexis Foreign Investment Law Guide | 外国投资法指南 2017-2018

LexisNexis Mergers and Acquisitions Law Guide 2018

Stay in touch

News/Insight

What they say...