June 6, 2016
The Dubai International Financial Centre ("DIFC") was established over a decade ago as a financial services hub for the Middle East region. It has attracted over 400 global and regional financial services firms and has established Dubai as the leading regional financial centre.
This note provides a snapshot of the DIFC and the regulatory landscape of carrying out financial services activities in and from the DIFC. This note is not meant to be exhaustive.
1. What is the DIFC?
The DIFC is a geographically defined financial free zone in Dubai in which the civil and commercial laws of the United Arab Emirates do not apply. It has a unique set of civil and commercial laws that are inspired by English Common Law. It was established as a financial services hub for the Middle East region.
2. What are some of the key factors that attract firms to the DIFC?
3. Who regulates financial services in the DIFC?
The Dubai Financial Services Authority ("DFSA") is the independent financial services regulator in the DIFC.
4. When is a DFSA licence required?
A firm carrying on a financial service in or from the DIFC must be authorised to do so by the DFSA.
5. What is a "financial service"?
A financial service is any one of 24 activities specified by the DFSA Rulebook which is carried on by way of business in or from the DIFC. Common financial services activities carried on in or from the DIFC include "Advising on Financial Products or Credit", "Arranging Credit or Deals in Investments", "Managing Assets" and "Managing a Collective Investment Fund". The term "by way of business" means engaging in, holding oneself out as willing to engage in or regularly soliciting other persons or entities to engage in transactions constituting a financial services activity. There are a number of instances where a firm does not require a licence such as, for example, engaging in financial service activities with group companies only.
6. What is the geographical scope of a DFSA licence?
A DFSA-authorised firm is allowed to carry on its activities ‘in or from the DIFC’. Carrying out the same activities ‘onshore’ in the UAE (and, indeed, in the rest of the Middle East) will generally require the firm to obtain separate ‘onshore’ licences or use licensed intermediaries unless an exemption is available.
7. How long does authorisation take?
The DIFC and DFSA formation and licensing process is likely to take 4-6 months. The process is relatively predicable but is document heavy and involves extensive interaction with the DIFC and DFSA.
8. What are the key steps in the authorisation process?
The key steps are as follows:
9. Are there any mandatory licensed functions?
All DFSA-authorised firms must appoint a senior executive officer, a finance officer, a compliance officer and a money laundering reporting officer – the latter two positions may be combined. The persons holding such positions must be authorised by the DFSA (i.e., be DFSA-authorised individuals). All except the finance officer must be resident in the UAE. The DFSA may temporarily waive the residency requirement on a case by case basis.
10. Does a DFSA-authorised firm need an office in the DIFC?
All DFSA-authorised firms must have an office in the DIFC.
11. What are the main regulatory requirements for DFSA-authorised firms?
DFSA-authorised firms must comply with 12 core principles:
12. What are the main regulatory requirements for DFSA-authorised individuals?
DFSA-authorised individuals must comply with six core principles:
Gibson Dunn, with more than 1,200 lawyers in 18 offices in major cities throughout the United States, Europe, the Middle East, Asia and South America, is committed to providing the highest quality legal services to its clients. Gibson Dunn has been advising leading Middle Eastern institutions, companies, financial sponsors, sovereign wealth funds and merchant families on their global and regional transactions and disputes for more than 35 years.
Please contact the Gibson Dunn lawyer with whom you usually work, or the following lawyers in the firm’s Dubai office, with any questions, thoughts or comments arising from this article.
Hardeep Plahe (+971 (0) 4 318 4611, firstname.lastname@example.org)
Graham Lovett (+971 (0) 4 318 4620, email@example.com)
© 2016 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.