FORMATION REQUIREMENTS AND PROCEDURE
On 3rd January 2013, the Dubai International Financial Centre (the “DIFC”) introduced its representative office regime, allowing foreign financial institutions to market and promote their financial services in or from the DIFC. The financial service of operating a representative office is a stand-alone and the DFSA’s least regulated form of financial activity.
A firm intending to carry out the financial service of operating a representative office must seek to become an authorised firm and ensure that its key individuals also get authorised by way of getting regulated by the DFSA (the “Authorised Firm” and “Authorised Individual”, respectively).
This Insight provides a general overview of the formation procedure and requirements of conducting the financial service of operating a representative office in the DIFC.
Meaning and Ambit of Operating a Representative Office in DIFC
Operating a representative office means the marketing of one or more financial services or financial products which are offered in a jurisdiction other than the DIFC (“Operating a Representative Office”).
Marketing in particular means:
- providing information on one or more financial products or financial services;
- engaging in promotions in relation to (i); or
- making introductions or referrals in connection with the offer of financial services or financial products; provided that such activities do not constitute:
- advising on financial products or credit; or
- receiving and transmitting orders in relation to a financial product.
The Authorised Firm which is licenced to carry on the financial service of Operating a Representative Office may not be licenced to carry on any other financial service.
An Authorised Firm which is licensed to carry out the activity of Operating a Representative Office in particular must not:
- share an office with another DFSA Authorised Firm;
- represent anyone other than itself or a member of its group;
- permit any staff member to be an employee of another DFSA Authorised Firm;
- hold itself out as able to carry on a financial service other than Operating a Representative Office;
- misrepresent its status expressly or by implication;
- hold or control money or other property belonging to another person/client except to the extent that this is necessary to deal with its ordinary business operating expenses; and
- market a unit of a foreign fund unless the fund meets the criteria either for a Designated Fund under Rule 4.7.2 or for a non-Designated Fund under Rule 4.7.3 of the DFSA Representative Office Module.
The procedure for Operating a Representative Office in or from the DIFC is divided into three (3) stages:
- Pre-application:this is the first stage whereby the applicant will conduct a meeting with the DFSA. This pre-application meeting is beneficial in order for the DFSA to ascertain whether the applicant’s parent is regulated by a recognized financial services regulator as per the DFSA’s requirement (this is one of the key requirements for conducting the financial service of Operating a Representative Office in or from the DIFC), and whether Operating a Representative Office is indeed the correct financial activity which the client should be aiming to look at.
- Becoming Authorized:Once it is concluded with the DFSA that the applicant can proceed with the process, the next step would be to submit all application forms, application fee and supporting documentation in order to get the firm and its individuals authorized by the DFSA. Within 120 days of submitting the application forms, fee and supporting documentation, the DFSA will furnish an “in principle” approval. This “in principle” approval will allow the applicant to proceed with the Registrar of Companies (the “ROC”) procedure.
- Getting Incorporated:Upon receiving the “in principle” approval, the applicant will then commence the process with the ROC in order to incorporate the company.
Status and Legal Structure of the Applicant
An application for Operating a Representative Office may only be made by an applicant who is:
- incorporated; and
- regulated by a recognised financial services regulator;
in a jurisdiction other than the DIFC.
It should also be borne in mind that the applicant should ensure that the legal structure of its DFSA entity should be constituted as a branch.
Place of Business
The applicant firm must establish a place of business within the geographical boundaries of the DIFC.
The following individuals must be appointed by the Authorized Firm:
- Principal Representative; and
- Money Laundering and Reporting Officer.
The Principal Representative and the Money Laundering and Reporting Officer of the Authorized Firm must be the same individual and a resident of the United Arab Emirates.
In order to attain authorization for conducting the financial service of Operating a Representative Office, the following documentation and information must be supplied to the DFSA:
- the Representative Office Form;
- the Principal Representative Form;
- the Authorised Persons Forms (for senior managers, etc. (if appointed));
- name of the supervisory contact from the relevant regulator including postal address, telephone number, fax number and e-mail address;
- details of systems and controls the Authorised Firm will have in place to ensure it only conducts the activities of Operating a Representative Office;
- identification and details of all controllers (individuals or corporations holding more than ten per cent (10%) of the shares in the Authorised Firm) the full name and date of birth for each controller that is an individual and for each of the board members of all corporate controllers.
- latest audited financial statements for the head office; and
- details of Principle Representative.
The following documentation and information must be supplied for the incorporation of the branch to the ROC:
- application for company name reservation (optional);
- DIFCSTAT application for registration of a foreign recognised company;
- the ‘in principle’ approval from the DFSA which must state the business that has been approved and draft licence, if any, issued to the applicant;
- a copy of the current certificate of the foreign company’s incorporation or registration in its place of origin, certified by the relevant authority in the jurisdiction in which it is incorporated or registered;
- a copy of the foreign company’s constitution certified as a true copy by the company secretary or director of the company. This signature must be notarised in the country of origin;
- a copy of the foreign company’s most recent audited accounts filed with the relevant authority in the jurisdiction in which it is incorporated;
- resolution of the board of directors authorising the establishment of the foreign recognised company in the DIFC;
- the Personnel Sponsorship Agreement signed by both parties;
- DIFCSTAT Notification of Personal Data Operations Form; and
- copy of the lease agreement for the office space in DIFC.
An applicant will only be authorised to carry on the financial service of Operating a Representative Office if the DFSA is satisfied that the applicant is fit and proper to hold a licence. In making this assessment the DFSA may consider:
- whether the applicant is subject to supervision by a recognised financial services regulator;
- whether the applicant’s financial services regulator in its home state has been made aware of the proposed application and has expressed itself as having no objection to the establishment by the applicant of a representative office in the DIFC; and
- any other relevant matters.
In relation to the assessment above:
- the applicant must demonstrate to the DFSA’s satisfaction that it is fit and proper;
- the applicant must demonstrate to the DFSA’s satisfaction that its Principal Representative is fit and proper;
- the DFSA will consider any
- matter which may harm or may have harmed the integrity or the reputation of the DFSA or DIFC;
- the DFSA will consider the activities of the applicant and the associated risks, and accumulation of risks that those activities pose to the objectives of DFSA; and
- the DFSA will consider the cumulative effect of factors which, if taken individually, may be regarded as insufficient to give reasonable cause to doubt the fitness and propriety of an applicant.
DFSA Application Fee
- application fee for Operating a Representative Office: two thousand United States Dollar (USD 2,000); and
- application fee for each Authorized Individual: one thousand United States Dollar (USD 1,000).
ROC Application Fee
- application for name reservation fee (optional): eight hundred United States Dollar (USD 800);
- application fee for incorporation of foreign recognized company: eight thousand United States Dollar (USD 8,000); and
- licensing fee: twelve thousand United States Dollar (USD 12,000).
DFSA Annual Renewal Fee
- renewal of license: four thousand United States Dollar (USD 4,000)
ROC Annual Renewal Fee
- ROC license renewal: twelve thousand United States Dollar (USD 12,000)
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This newsletter is for information purposes only. It does not constitute professional advice or an opinion. Please contact Mr. Dominique Lecocq on firstname.lastname@example.org for any questions.