1.1.1. Definition of Regulated Activities

An activity shall be a Regulated Activity that may be carried on by an Authorised Firm, subject to the terms of its Licence, if that activity:

1. (a) is specified in the list of activities in Schedule 1; and
2. (b) is carried on by way of business as described in GEN 1.1.9; and
3. (c) is not otherwise excluded in accordance with any other provision in GEN 1.1.

The Regulated Activities that may be carried on by an Authorised Firm, subject to the terms of its Licence, are specified in Schedule 1 and 1.4.1(b).

1.1.2. Form and content of application for a Licence

A Person may apply to the AFSA for a Licence authorising a Centre Participant to carry on one or more Regulated Activities by:

1. (a) completing the form prescribed in Schedule 3 and filing the form with the AFSA accompanied by such documents as are specified in the form;
2. (b) providing such further information as the AFSA may require; and
3. (c) paying the fee prescribed in the Fees Rules.

Guidance: AFSA discretion to waive requirements A Person may apply to the AFSA to waive the requirements as to the contents of the Form prescribed in Schedule 3 pursuant to section 32(4) of the Framework Regulations.

1.1.3. Adequate and appropriate financial resources

This section was added on 2 December 2018.

1.1.4. Adequate and appropriate non-financial resources

In assessing whether an applicant has adequate and appropriate non‐financial resources for the purposes of section 34(1)(a) of the Framework Regulations, the AFSA will consider:

1. (a) the skills and experience of those who will manage the applicant's affairs;
2. (b) the applicant's resources to identify, monitor, measure and take action to remove or reduce risks as to its safety and soundness;
3. (c) the effectiveness of the applicant's business management; and
4. (d) whether the applicant's non‐financial resources are sufficient to enable the applicant to comply with the Regulations and Rules that are likely to be relevant to the applicant.

1.1.5. Fitness and propriety

In assessing whether an applicant is fit and proper for the purposes of section 34(1)(b) of the Framework Regulations, the AFSA will consider:

1. (a) the fitness and propriety of the members of its Governing Body;
2. (b) the applicant's connection with any Person or membership of any Group;
3. (c) the fitness and propriety of the applicant's Controllers or any other Person associated with the applicant;
4. (d) the impact a Controller might have on the applicant's ability to comply with the applicable requirements;
5. (e) the Regulated Activities undertaken or to be undertaken by the applicant and the risks to their continuity;
6. (f) the nature (including the scale and complexity) of the activities of the applicant and any associated risks that those activities pose to the AFSA’s Regulatory Objectives;
7. (g) the complexity of any products or services that the applicant may offer or provide in carrying on those activities;
8. (h) whether the applicant's business model will allow for its affairs and business to be conducted and managed in a sound and prudent manner, having regard to, amongst other things, the interests of its Clients and the integrity of the AIFC;
9. (i) any matter which may harm or may have harmed the integrity or the reputation of the AFSA or AIFC, including through the carrying on of a business by the applicant for a purpose connected with a Financial Crime; and
10. (j) any other relevant matters.

1.1.6. Effective supervision

In assessing whether an applicant is capable of being effectively supervised by the AFSA for the purposes of section 34(1)(c) of the Framework Regulations, the AFSA will consider:

1. (a) the nature, including the complexity, of the Regulated Activities that the applicant will carry on; and
2. (b) the way in which the applicant's business is organised; and
3. (c) (if the applicant is a member of a Group) whether membership of the Group is likely to prevent the AFSA’s effective supervision of the applicant; and
4. (d) whether the applicant is subject to consolidated supervision.

1.1.7. Compliance arrangements

In assessing whether an applicant has adequate compliance arrangements for the purposes of section 34(1)(d) of the Framework Regulations, the AFSA will consider whether it has:

1. (a) clear and comprehensive policies and procedures relating to compliance with all applicable legal requirements; and
2. (b) adequate means to implement those policies and procedures and monitor that they are operating effectively and as intended.

1.1.8. Modification or withdrawal of an Authorised Firm’s Licence

An Authorised Firm may apply to the AFSA to change the scope of its Licence, to have a condition or restriction varied or withdrawn, or to have its Licence withdrawn by:

1. (a) completing the form prescribed in Schedule 3 and filing the form with the AFSA accompanied by such documents as are specified in the form;
2. (b) providing such further information as the AFSA may require; and
3. (c) paying the fee prescribed in the Fees Rules.

1.1.9. Activities carried on by way of business

A Person carries on an activity by way of business for the purposes of GEN 1.1.1 if that Person:

1. (a) engages in the activity in a manner which in itself constitutes the carrying on of a business;
2. (b) holds himself out as willing and able to engage in that activity; or
3. (c) regularly solicits other Persons to engage with him in transactions constituting that activity.

1.1.10. Exclusion in respect of Dealing in Investments as Principal

A Person does not carry on the Regulated Activity specified in paragraph 1 of Schedule 1 by entering into a transaction, unless that Person:

1. (a) holds himself out as willing, as principal, to buy, sell or subscribe for Investments at prices determined by him generally and continuously rather than in respect of each particular transaction;
2. (b) holds himself out as engaging in the business of buying Investments with a view to selling them;
3. (c) holds himself out as engaging in the business of underwriting Investments; or
4. (d) regularly solicits members of the public with the purpose of inducing them to enter into transactions.

1.1.11. Exclusion in respect of acting as nominee

A Person does not carry on any of the Regulated Activities specified in paragraphs 1, 2, 3, 5, 6, 10, 11, 12 or 15 of Schedule 1 where that Person enters into a transaction solely as a nominee for another Person and is bound to and does act on that other Person’s instructions.

1.1.12. Exclusion in respect of acting with or for Group companies

A Person does not carry on any of the Regulated Activities specified in paragraphs 1, 2, 3, 5, 6, 10, 11, 12, 15 or 18 of Schedule 1 where that Person is a Body Corporate and carries on that activity solely as principal with or for other Bodies Corporates:

1. (a) which are within the same Group as that Person; or
2. (b) which are or propose to become participators in a joint enterprise and the transaction is entered into for the purposes of or in connection with that enterprise;

and for the purposes of the activities specified in paragraphs 3, 5, 6 and 12 of Schedule 1 the assets in question belong to a Body Corporate falling within (a) or (b).

This Exclusion does not apply to a Credit Provider that only provides Commercial Captive Finance.

1.1.13. . Exclusion in respect of non-financial business

A Person does not carry on any of the Regulated Activities specified in paragraphs 1, 2, 3, 5, 6, 10, 11, 12 or 15 of Schedule 1 where that the Person carries on the activity solely for the purposes of or in connection with the sale of goods or the supply of services to a customer of the Person or a member of the same Group, provided that:

1. (a) the supplier’s main business is to sell goods or supply services and not to carry on any Financial Service; and
2. (b) the customer is not an individual; and for the purposes of the activities specified in paragraphs 3, 5, 6 and 2 of Schedule 1 the assets in question belong to that customer or member.

This Exclusion does not apply to a Credit Provider that only provides Commercial Captive Finance.

1.1.14. Exclusion in respect of dealing in Commodity Derivatives or Environmental Instruments

A Person who is a Body Corporate does not carry on the Regulated Activity specified in paragraphs 1 or 2 of Schedule 1, where:

• (a) the Person carries on such activities as a member of an Authorised Market Institution or Recognised Non-AIFC Market Institution;
• (b) the Person carries on such activities for its own account or for another Body Corporate which is in the same Group as the Person, provided that any such member of the Group for which the Person acts is a wholly-owned Subsidiary of a Holding Company within the Group or is the Holding Company itself;
• (c) the Person restricts such activities to transactions involving or relating only to Commodity Cerivatives or Environmental Instruments on that Authorised Market Institution or Recognised Non-AIFC Market Institution;
• (d) the main business of the Person is dealing in relation to Commodity Derivatives or Environmental Instruments; and
• (e) the Person is not part of a Group whose main business is the provision of financial services.

1.1.15. Exclusion in respect of acquisition or disposal of a Body Corporate

A Person does not carry on a Regulated Activity specified in paragraphs 1, 2, 10 or 11 of Schedule 1 if the activity is carried on solely for the purposes of or in connection with the acquisition or disposal of Shares in a Body Corporate, other than an Investment Company, provided that:

1. (a) such Shares carry at least 50 per cent of the voting rights or the acquisition will take an existing holding to at least 50 per cent; or
2. (b) the object of the transaction may reasonably be regarded as being the acquisition of day to day control of the Body Corporate.

1.1.16. Exclusion in respect of acting as a trustee

1. (a) A Person who is a trustee does not carry on a Regulated Activity specified in paragraphs 1, 3, or 5 of Schedule 1 in circumstances where he is acting as a trustee.
2. (b) A Person does not carry on a Regulated Activity specified in paragraph 7 of Schedule 1 by way of business where he is:
3. (i) acting as trustee, enforcer or protector; or
4. (ii) where he is arranging for a Person to act as trustee, in respect of less than three (3) trusts.
5. (c) A Person falling within paragraph (d) or (e) of the definition of a DNFBP does not provide Trust Services where it only:
6. (i) arranges for a Person to act as trustee in respect of an express trust; or
7. (ii) provides services with respect to the creation of an express trust; provided that:
8. (1) the provision of such services is solely incidental to the practice of law or accounting as the case may be; and
9. (2) the DNFBP is not holding itself out as Providing Trust Services.
10. (d) A Person is not Providing Trust Services if that Person is the Trustee of a Fund and the activities are in connection with, or arise from, acting as the Trustee of the Fund. Guidance Acting as trustee, protector or enforcer are not activities incidental to the practice of law or accounting and require a License.

1.1.17. Exclusion in respect of Single Family Offices

A Person does not carry on a Regulated Activity specified in paragraphs 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, or 15 of Schedule 1 if:

• (a) that Person is a Single Family Office; and
• (b) the activity is carried on exclusively for the purposes of, and only in so far as it is, carrying out its duties as a Single Family Office.

1.2.1. Form and content of application for a Licence

A Person may apply to the AFSA for a Licence for a Centre Participant to carry on one or more Market Activities in the AIFC by:

• (a) completing the form prescribed in Schedule 3 and filing the form with the AFSA accompanied by such documents as are specified in the form;
• (b) providing such information and documents as the AFSA may require; and
• (c) paying the fee prescribed in the Fees Rules to the AFSA.

1.2.2. Adequate and appropriate financial resources

In assessing whether an applicant has adequate and appropriate financial resources for the purposes of section 37(1)(a) of the Framework Regulations, the AFSA will consider:

• (a) how the applicant will comply with the applicable provisions of AMI 2.2;
• (b) the provision the applicant makes in respect of any liabilities, including contingent and future liabilities;
• (c) the means by which the applicant manages the risks to its business;
• (d) the rationale for, and basis of, the applicant's business plan;
• (e) whether the applicant's assets are appropriate given the applicant's liabilities;
• (f) the liquidity of the applicant's resources;
• (g) the nature and scale of the business which will be carried on by the applicant;
• (h) the risks to the continuity of the services which will be provided by the applicant;
• (i) the applicant's membership of a Group and any relevant effect which that membership may have; and
• (j) whether the applicant is capable of meeting its debts as they fall due.

1.2.3. Adequate and appropriate non-financial resources

In assessing whether an applicant has adequate and appropriate non‐financial resources for the purposes of section 37(1)(a) of the Framework Regulations, the AFSA will consider:

• (a) the skills and experience of those who will manage the applicant's affairs;
• (b) the applicant's resources to identify, monitor, measure and take action to remove or reduce risks as to its safety and soundness;
• (c) the applicant’s resources to control and monitor access to, and the use of, its facilities in a manner designed to protect the orderly functioning of the market and the interests of investors;
• (d) the applicant’s resources to reduce the extent to which its facilities can be used for a purpose connected with Market Abuse, Financial Crime or money laundering, and to facilitate their detection and monitor their incidence;
• (e) the applicant’s resources to monitor and take action in the event of a member of an applicant being unable to meet his obligations in respect of one or more Market Contracts;
• (f) the effectiveness of the applicant's business management; and
• (g) whether the applicant's non‐financial resources are sufficient to enable the applicant to comply with the Regulations and Rules that are likely to be relevant to the applicant.

1.2.4. Adequate and appropriate technology resources

In assessing whether an applicant has adequate and appropriate technology resources for the purposes of section 37(1)(a) of the Framework Regulations, the AFSA will consider:

• (a) the applicant’s resources for the evaluation, selection and on-going monitoring of the information technology systems used by the applicant;
• (b) the applicant’s willingness and ability to use development and testing methodologies in line with internationally accepted testing standards in order to test the viability and effectiveness of such systems; and
• (c) the means by which the applicant will secure and maintain the confidentiality of the data and ensure that the systems used by the applicant are reliable and adequately protected from external attack or incident.

1.2.5. Fitness and propriety

In assessing whether an applicant is fit and proper for the purposes of section 37(1)(b) of the Framework Regulations, the AFSA will consider:

• (a) the fitness and propriety of the members of its Governing Body;
• (b) the applicant's connection with any Person or membership of any Group;
• (c) the fitness and propriety of the applicant's Controllers or any other Person associated with the applicant;
• (d) the impact a Controller might have on the applicant's ability to comply with the applicable requirements;
• (e) the Market Activities concerned and the risks to their continuity;
• (f) the nature (including the scale and complexity) of the activities of the applicant and any associated risks that those activities pose to the AFSA’s objectives;
• (g) whether the applicant's business model will allow for its facilities to function in a fair and orderly manner, having regard to, amongst other things, the orderly functioning of the market and the interests of investors;
• (h) any matter which may harm or may have harmed the integrity or the reputation of the AIFC or AFSA , including through the carrying on of a business by the applicant for a purpose connected with Market Abuse or a Financial Crime; and

(i) any other relevant matters.

1.2.6. Effective supervision

In assessing whether an applicant is capable of being effectively supervised by the AFSA for the purposes of section 37(1)(c) of the Framework Regulations, the AFSA will consider:

1. (a)      the nature, including the complexity, of the Market Activities that the applicant will carry on;
2. (b)      if the applicant seeks a licence to carry on the Market Activity of Operating an Exchange, a Loan Crowdfunding Platform or an Investment Crowdfunding Platform, the size, nature and complexity of any markets in respect of which the applicant will offer its facilities in carrying on that Market Activity;
3. (c)      if the applicant seeks a licence to carry on the Market Activity of Operating a Clearing House, the complexity of the Investments and transactions, and the size of the likely transaction values and volumes in respect of which the applicant will offer clearing and settlement services in carrying on that Market Activity;
4. (c)      the way in which the applicant's business is organised;
5. (d)      (if the applicant is a member of a Group) whether membership of the Group is likely to prevent the AFSA’s effective supervision of the applicant; and
6. (e)      whether the applicant is subject to consolidated supervision.

1.2.7. Compliance arrangements

In assessing whether an applicant has adequate compliance arrangements for the purposes of section 37(1)(d) of the Framework Regulations, the AFSA will consider whether it has:

1. (a)      clear and comprehensive policies and procedures relating to compliance with all applicable legal requirements; 
2. (b)      adequate means to implement those policies and procedures and monitor that they are operating effectively and as intended;
3. (c)      effective arrangements for monitoring and enforcing compliance of its Members with its own rules and, if relevant, its clearing and settlement arrangements; and
4. (d)     if the applicant seeks a licence to carry on the Market Activity of Operating an Exchange, effective arrangements to verify that issuers admitted to trading on its facilities comply with the Market Rules; 
5. (e)    [intentionally omitted]

1.2.8. Modification or withdrawal of an Authorised Market Institution’s Licence

An Authorised Market Institution may apply to the AFSA to change the scope of its Licence, to have a condition or restriction varied or withdrawn, or to have its Licence withdrawn by:

• (a) completing the form prescribed in Schedule 3 and filing the form with the AFSA accompanied by such documents as are specified in the form;
• (b) providing such further information as the AFSA may require; and
• (c) paying the fee prescribed in the Fees Rules to the AFSA.

1.3.1. Definition of Ancillary Service

The Ancillary Services that may be carried on by an Ancillary Service Provider, subject to the terms of its Licence, are specified in Schedule 2.

1.3.2. Form and content of application for a Licence

A Person may apply to the AFSA for a Licence authorising a Centre Participant to carry on one or more Ancillary Services in the AIFC by:

• (a) completing the form prescribed in Schedule 3 and filing the form with the AFSA accompanied by such documents as are specified in the form;
• (b) providing such further information as the AFSA may require; and
• (c) paying the fee prescribed in the Fees Rules to the AFSA.

1.3.3. Fitness and propriety

In assessing whether an applicant is fit and proper for the purposes of section 41 of the Framework Regulations, the AFSA will consider:

1. (a) the applicant’s standing with any relevant regulatory body;
2. (aa) registration with the AIFC Legal Services Board of at least one employee of the applicant applying for a Licence to carry on an Ancillary Service of Providing Legal Services;
3. (b) the applicant’s disciplinary record;
4. (c) the applicant’s procedures for monitoring and preventing Financial Crime;
5. (d) the risk posed to the AIFC by the applicant’s activities; and
6. (e) such other matters as the AFSA considers relevant.

1.3.3-1 Effective supervision

In assessing whether an applicant is capable of being effectively supervised by the AFSA for the purposes of section 41(1) of the Framework Regulations, the AFSA will consider:

(a)     the nature, including the complexity, of the Ancillary Services that the applicant will carry on; and

(b)     the way in which the applicant's business is organised; and

(c)     (if the applicant is a member of a Group) whether membership of the Group is likely to prevent the AFSA’s effective supervision of the applicant; and

(d)     whether the applicant is subject to consolidated supervision.

1.3.4. Notifications

An Ancillary Service Provider must promptly notify the AFSA of any change in its:

• (a) name; or
• (b) legal status; or
• (c) address; or
• (e) beneficial ownership.

1.3.5. Application to modify or withdraw an Ancillary Service Provider’s Licence

An Ancillary Service Provider may apply to the AFSA to change the scope of its Licence, to have a condition or restriction varied or withdrawn, or to have its Licence withdrawn by:

• (a) completing the form prescribed in Schedule 3 and filing the form with the AFSA accompanied by such documents as are specified in the form;
• (b) providing such further information as the AFSA may require; and
• (c) paying the fee prescribed in the Fees Rules.

1.3.6. Withdrawal of an Ancillary Service Provider’s Licence by the AFSA

The AFSA may withdraw the Licence of an Ancillary Service Provider:

1. (a) on the application of the Ancillary Service Provider; or
2. (b) [intentionally omitted]
3. (c) following a request by the Registrar of Companies; or
4. (d) in the event of the insolvency or the entering into administration of the Ancillary Service Provider; or
5. (e) if the AFSA considers it necessary or desirable in the interests of the AIFC.

1.4.1. Activities performed in FinTech Lab

1. (a)      the Regulated and/or Market Activities that are specified in Schedule 1 and 4 of GEN can be carried on by a Person subject to the terms and Licence issued under FINTECH.
2. (b)      a Person may apply to the AFSA for a Licence authorising a Centre Participant to carry on activities not specified in (a).
3. (c)For the purposes of (b), the AFSA may grant a Licence for a Person to carry on activities as specified in the Licence.

2.1.1. Appointments to be filled by Approved Individuals

(1) Subject to (2) an Authorised Person, must make the following appointments and ensure that they are held by one or more Approved Individuals at all times:

(a) Senior Executive Officer;

(b) Finance Officer; 

(c) Compliance Officer; and

(d) Money Laundering Reporting Officer

(2) For an Authorised Person Operating a Representative Office the mandatory appointments in (1) may be carried on by its Principal Representative.

2.1.2. Appointments to be filled by Approved Individuals or Designated Individuals

[intentionally omitted]

2.2.1. Designation of roles as Controlled Functions

The functions specified in GEN 2.2.2 to 2.2.5 are Controlled Functions.

2.2.2. Senior Executive Officer

The Senior Executive Officer function is carried out by an individual who:

• (a) has, either alone or jointly with other Approved Individuals, ultimate responsibility for the day‐to‐day management, supervision and control of one or more (or all) parts of an Authorised Person's Regulated Activities; and
• (b) is a Director, Partner or Senior Manager of the Authorised Person

2.2.3. Director

The Director function is carried out by an individual who is a director of an Authorised Person which is a Body Corporate.

2.2.4. Finance Officer

The Finance Officer function is carried out by an individual who is a Director, Partner or Senior Manager of an Authorised Person who has responsibility for monitoring the Authorised Person's compliance with the applicable Rules in the Prudential Rulebook.

2.2.5. Compliance Officer

The Compliance Officer function is carried out by an individual who is a Director, Partner or Senior Manager of an Authorised Person who has responsibility for compliance matters in relation to the Authorised Person's Regulated Activities.

2.2.5-1. Money Laundering Reporting Officer

The Money Laundering Reporting Officer function must be carried out by an individual who is a Director, Partner or Senior Manager of an Authorised Person and who has responsibility for the implementation of an Authorised Person's anti‐money laundering policies, procedures, systems and controls and day to day oversight of its compliance with the Rules in AML and any relevant anti‐money laundering Rules.

2.2.6. Application for Approved Individual status

An Authorised Person may apply for its officer or Employee or future officer or Employee to be granted Approved Individual status by:

1. (a) completing the form prescribed in Schedule 3 and filing the form with the AFSA accompanied by such documents as are specified in the form;
2. (b) providing such further information as the AFSA may require; and
3. (c) paying the Fee prescribed in the Fees Rules to the AFSA.

Guidance: criteria for approval of Approved Individual Section 43 of the Framework Regulations provides

(1) The AFSA may only authorise an individual to carry on a Controlled Function if it is satisfied that the individual is fit and proper to be an Approved Individual.

(2) In making this assessment, the AFSA must have regard to:

1. (a) the individual's integrity; and
2. (b) the individual's competence and capability; and
3. (c) the individual's financial soundness; and
4. (d) the individual's proposed role within the Authorised Person; and
5. (e) any other matters that the AFSA considers to be relevant to the application.

(3) The AFSA will not regard an individual as fit and proper if the individual:

1. (a) is bankrupt; or
2. (b) has been convicted of a serious criminal offence; or
3. (c) is the subject of an administrative or civil finding; or
4. (d) is incapable, through mental or physical incapacity, of managing his affairs.

2.2.7. AFSA discretion to waive requirements

An Authorised Person may apply to the AFSA to waive the requirements made pursuant to Section 43(1) of the Framework Regulations in the light of any registration, authorisation or approval the relevant officer or Employee may have in a jurisdiction outside the AIFC.

2.2.8. Modification or withdrawal of an Approved Individual’s registration

An Authorised Person or an Approved Individual may apply to the AFSA to modify or withdraw the Approved Individual’s status by:

• (a) completing the form prescribed in Schedule 3 and filing the form with the AFSA accompanied by such documents as are specified in the form;
• (b) providing such further information as the AFSA may require; and
• (c) paying the fee prescribed in the Fees Rules to the AFSA.

2.2.9. Dismissal or resignation of an Approved Individual

In the event of an Approved Individual ceasing to be employed by an Authoised Person to perform a Controlled Function, the Authoised Person must:

• (a) request the withdrawal of the Approved Individual status within seven days of the Approved Individual ceasing to be employed;
• (b) inform the AFSA of any circumstances which lead the Authoised Person to consider that the individual is no longer fit and proper; and
• (c) if the Approved Individual was dismissed or requested to resign, provide the AFSA with a statement of the reason, or reasons, for the dismissal or resignation.

2.3.1. Designation of roles as Designated Functions

The functions specified in GEN 2.3.2 to 2.3.6 are Designated Functions.

2.3.2. Senior Manager

The Senior Manager function is carried out by an individual who is responsible either alone or jointly with other individuals for the management, supervision or control of one or more parts of an Authorised Person's Regulated Activities who is:

• (a) an Employee of the Authorised Person; and
• (b) not a Director or Partner of the Authorised Person.

2.3.3. Responsible Officer

The Responsible Officer function is carried out by an individual who:

• (a) has significant responsibility for the management of one or more aspects of an Authorised Person’s affairs; and
• (b) exercises a significant influence on the Authorised Person as a result of (a); but
• (c) is not an Employee of the Authorised Person

2.3.4. Money Laundering Reporting Officer

[intentionally omitted]

2.3.5. Risk Manager

The Risk Manager function is carried out by an individual who is a Director, Partner or Senior Manager of an Authorised Person and who has responsibility for all aspects of the risk management function in relation to the Authorised Person's Regulated Activities.

2.3.6. Internal Audit Manager

The Internal Audit Manager function is carried out by an individual who is a Director, Partner or Senior Manager of an Authorised Person and who has responsibility for all aspects of the internal audit function in relation to the Authorised Person's Regulated Activities.

Guidance: criteria for appointment of Designated Individual

Section 46 of Framework Regulations provides:

(1) Before appointing an individual to carry on a Designated Function, an Authorised Person must take reasonable steps to satisfy itself that the individual is fit and proper to be a Designated Individual.

(2) In making this assessment the Authorised Person must have regard to:

1. (a) the individual's integrity; and
2. (b) the individual's competence and capability; and
3. (c) the individual's financial soundness; and
4. (d) the individual's proposed role within the Authorised Person; and
5. (e) any other matters that the AFSA may prescribe by Rules.

(3) An Authorised Person may not regard an individual as fit and proper if the individual:

1. (a) is bankrupt; or
2. (b) has been convicted of a serious criminal offence; or
3. (c) is the subject of an administrative or civil finding; or
4. (d) is incapable, through mental or physical incapacity, of managing his affairs

2.3.7. Appointment of Designated Individual

In respect of each Designated Individual that it appoints, an Authorised Person must keep records of the assessment process that it has undertaken in accordance with section 46 of the Framework Regulations to satisfy itself that the relevant individual is a fit and proper Person. Such records must be kept for a minimum of six years from the date of the assessment

3.1.1. Definition of a Controller

A Controller is a Person who, either alone or with any Associate:

• (a) holds 10% or more of the shares in either the Authorised Person or a Holding Company of that Authorised Person; or
• (b) is entitled to exercise, or controls the exercise of, 10% or more of the voting rights in either the Authorised Person or a Holding Company of that Authorised Person; or
• (c) is able to exercise significant influence over the management of the Authorised Person as a result of holding shares or being able to exercise voting rights in the Authorised Person or a Holding Company of that Authorised Person or having a current exercisable right to acquire such shares or voting rights.

3.1.2. Definition of “share” and “holding”

A reference in this chapter to the term:

• (a) “share” means:

(i) in the case of an Authorised Person, or a Holding Company of an Authorised Person, which has a share capital, its allotted shares;

(ii) in the case of an Authorised Person, or a Holding Company of an Authorised Person, with capital but no share capital, rights to a share in its capital; and

(iii) in the case of an Authorised Person, or a Holding Company of an Authorised Person, without capital, any interest conferring a right to share in its profits or losses or any obligation to contribute to a share of its debt or expenses in the event of its winding up; and

(iv)      in the case of an Authorised Person, or a Holding Company of an Authorised Person going through a Resolution, a capital instrument or share issued as a result of the Resolution Authority exercising its Conversion Power; and 

• (b) “a holding” means, in respect of a Person, shares, voting rights or a right to acquire shares or voting rights in an Authorised Person or a Holding Company of that Authorised Person held by that Person either alone or with any Associate.

3.1.3. Disregarded holdings

For the purposes of determining whether a Person is a Controller, any shares, voting rights or rights to acquire shares or voting rights that a Person holds, either alone or with any Associate, in an Authorised Person or a Holding Company of that Authorised Person are disregarded if:

• (a) they are shares held for the sole purpose of clearing and settling within a short settlement cycle; or
• (b) they are shares held in a custodial or nominee capacity and the voting rights attached to the shares are exercised only in accordance with written instructions given to that Person by another Person; or
• (c) the Person is an Authorised Person or a Regulated Financial Institution and it:

(i) acquires the shares as a result of an underwriting of a share issue or a placement of shares on a firm commitment basis;

(ii) does not exercise the voting rights attaching to the shares or otherwise intervene in the management of the issuer; and

(iii) retains the shares for a period less than one year.

3.2.1. Threshold for approval requirement

For the purposes of section 48(b) of the Framework Regulations, the thresholds at which the prior written approval of the AFSA is required are when the relevant holding is increased:

• (a) from below 30% to 30% or more; or
• (b) from below 50% to 50% or more.

3.2.2. Approval process

(1) A Person who is required to obtain the prior written approval of the AFSA pursuant to section 48 of the Framework Regulations must make an application to the AFSA using the form prescribed in Schedule 3.

(2) Where the AFSA proposes to approve a proposed change of control, it will:

• (a) do so as soon as practicable and in any event within 30 days of the receipt of a duly completed application, unless a different period is considered appropriate by the AFSA and notified to the applicant in writing; and
• (b) issue to the applicant, and where appropriate to the Authorised Person, an approval notice as soon as practicable after making that decision.

(3) Where the AFSA proposes to object to or grant a conditional approval to a proposed change of control, it will follow the procedures in Schedule 1 to the Framework Regulations

3.2.3. Effect of AFSA approval or conditional approval

(1) An approval, including a conditional approval granted by the AFSA pursuant to GEN 3.2.1, is valid for a period of one year from the date of the approval, unless an extension is granted by the AFSA in writing.

(2) A Person who has been approved by the AFSA as a Controller of an Authorised Person subject to any conditions must comply with the relevant conditions of approval.

3.3.1. Notification for decrease in the level of control of Authorised Person incorporated in the AIFC

A Controller of an Authorised Person which is incorporated in the AIFC must submit, using the form prescribed in Schedule 3, a written notification to the AFSA where that Person:

• (a) proposes to cease being a Controller; or
• (b) proposes to decrease that Person’s holding from more than 50% to 50% or less.

3.3.2. Notification of changes relating to control of Branches

(1) In the case of an Authorised Person which is a Branch, a written notification to the AFSA must be submitted by a Controller or a Person proposing to become a Controller of that Authorised Person in accordance with (3) in respect of any one of the events specified in (2).

(2) For the purposes of (1), a notification to the AFSA is required when:

• (a) a Person becomes a Controller;
• (b) an existing Controller proposes to cease being a Controller; or
• (c) an existing Controller’s holding is:

(i) increased from below 30% to 30% or more;

(ii) increased from below 50% to 50% or more; or

(iii) decreased from more than 50% to 50% or less.

(3) The notification required under (1) must be made by a Controller or Person proposing to become a Controller of a Branch using the Form prescribed in Schedule 3 as soon as possible, and in any event, before making the relevant acquisition or disposal.

3.4.1. Obligations of Authorised Person relating to its Controllers

(1) An Authorised Person must have adequate systems and controls to monitor:

• (a) any change or proposed change of its Controllers; and
• (b) any significant changes in the conduct or circumstances of existing Controllers which might reasonably be considered to impact on the fitness and propriety of the Authorised Person or its ability to conduct business soundly and prudently.

(2) An Authorised Person must, subject to (3), notify the AFSA in writing of any event specified in (1) as soon as possible after becoming aware of that event.

(3) An Authorised Person need not comply with the requirement in (2) if it is satisfied on reasonable grounds that a proposed or existing Controller has either already obtained the prior approval of the AFSA or notified the event to the AFSA as applicable.

3.4.2. Annual report

(1) An Authorised Person must submit to the AFSA an annual report on its Controllers within four months of its financial year end.

(2) The Authorised Person’s annual report on its Controllers must include:

• (a) the name of each Controller; and
• (b) the current holding of each Controller, expressed as a percentage.

4.1.1. Application of the Principles for Authorised Persons

The Principles for Authorised Persons set out in Section 4.2 apply to Authorised Persons in respect of Regulated Activities and Market Activities.

4.1.2. Application of the Principles for Approved Individuals and Designated Individuals

The Principles for Approved Individuals and Designated Individuals set out in Section 4.3 apply to Approved Individuals and Designated Individuals in respect of Controlled Functions and Designated Functions.

4.2.1. Principle 1 ‐ Integrity

An Authorised Person must observe high standards of integrity and fair dealing.

4.2.2. Principle 2 ‐ Due skill, care and diligence

In conducting its business activities, an Authorised Person must act with due skill, care and diligence.

4.2.3. Principle 3 ‐ Management

An Authorised Person must ensure that its affairs are managed effectively and responsibly by its senior management.

4.2.4. Principle 4 ‐ Systems and controls

An Authorised Person must have adequate systems and controls to ensure, as far as is reasonably practical, that it complies with all relevant Regulations and Rules.

4.2.5. Principle 5 ‐ Resources

An Authorised Person must maintain and be able to demonstrate the existence of adequate resources to conduct and manage its affairs. These include adequate financial and system resources as well as adequate and competent human resources.

4.2.6. Principle 6 ‐ Market conduct

An Authorised Person must observe proper standards of conduct in financial markets.

4.2.7. Principle 7 ‐ Information and interests

An Authorised Person must pay due regard to the interests of its Clients and communicate information to them in a way which is clear, fair and not misleading.

4.2.8. Principle 8 ‐ Conflicts of interest

An Authorised Person must take all reasonable steps to ensure that conflicts of interest between itself and its Clients, between its Employees and Clients and between one Client and another are identified and then prevented or managed, or disclosed, in such a way that the interests of a Client are not adversely affected.

4.2.9. Principle 9 ‐ Suitability

An Authorised Person must take reasonable care to ensure the suitability of its Advice and discretionary decisions for Clients who are entitled to rely upon its judgment.

4.2.10. Principle 10 ‐ Client assets and money

Where an Authorised Person has control of or is otherwise responsible for assets or money belonging to a Client which it is required to safeguard, it must arrange proper protection for them in accordance with the responsibility it has accepted.

4.2.11. Principle 11 ‐ Relations with the AFSA

An Authorised Person must deal with the AFSA in an open and co‐operative manner and keep the AFSA promptly informed of significant events or anything else relating to the Authorised Person of which the AFSA would reasonably expect to be notified.

4.2.12. Principle 12 ‐ Compliance with high standards of corporate governance

An Authorised Person must have a corporate governance framework as appropriate to the nature, scale and complexity of its business and structure, which is adequate to promote the sound and prudent management and oversight of the Authorised Person's business and to protect the interests of its Clients and stakeholders.

4.2.13. Principle 13 ‐ Remuneration practices

An Authorised Person must have a Remuneration structure and strategies which are well aligned with the long-term interests of the Authorised Person, and are appropriate to the nature, scale and complexity of its business.

4.3.1. Principle 1 ‐ Integrity

Each Approved Individual and Designated Individual must observe high standards of integrity and fair dealing in carrying out every Controlled Function or Designated Function.

4.3.2. Principle 2 ‐ Due skill, care and diligence

Each Approved Individual and Designated Individual must act with due skill, care and diligence in carrying out every Controlled Function or Designated Function.

4.3.3. Principle 3 ‐ Market conduct

Each Approved Individual and Designated Individual must observe proper standards of conduct in financial markets in carrying out every Controlled Function or Designated Function.

4.3.4. Principle 4 ‐ Relations with the AFSA

Each Approved Individual and Designated Individual must deal with the AFSA in an open and co‐operative manner and must disclose appropriately any information of which the AFSA would reasonably be expected to be notified.

4.3.5. Principle 5 ‐ Management, systems and control

Each Approved Individual and Designated Individual who has significant responsibility must take reasonable care to ensure that the business of the Authorised Person for which he is responsible is organised so that it can be managed and controlled effectively.

4.3.6. Principle 6 ‐ Compliance

Each Approved Individual and Designated Individual who has significant responsibility must take reasonable care to ensure that the business of the Authorised Person for which he is responsible complies with any Regulations or Rules.

5.1.1. Requirement to maintain systems and controls

An Authorised Person must establish and maintain systems and controls, including but not limited to financial and risk systems and controls that ensure that its affairs are managed effectively and responsibly by its senior management.

5.1.2. Review of systems and controls

An Authorised Person must undertake regular reviews of its systems and controls.

5.1.3. Business plan and strategy

(1) An Authorised Person must produce a business plan which enables it, amongst other things, to manage the risks to which it and its Clients are exposed.

(2) The business plan must take into account the Authorised Person's current business activities and the business activities forecast for the next twelve months.

(3) The business plan must be documented and updated as appropriate to take account of changes in the business environment and to reflect changes in and the complexities of the business of the Authorised Person.

5.1.4. Prevention of market abuse, financial crime and other illegal conduct

An Authorised Person must establish and maintain systems and controls that ensure, as far as reasonably practical, that the Authorised Person and its Employees do not engage in conduct, or facilitate others to engage in conduct, which may constitute:

• (a) Market Abuse, wherever committed;
• (b) a Financial Crime under any applicable laws; or
• (c) a contravention of applicable Regulations or Rules.

5.2.1. Responsibility for compliance

An Authorised Person which outsources any of its functions or activities directly related to Regulated Activities or Market Activities to a service provider (including a service provider within its Group) is not relieved of its regulatory obligations and remains responsible for compliance with the Framework Regulations and Rules.

5.2.2. Outsourced function deemed to be carried on by Authorised Person

The outsourced function under GEN 5.2.1 shall be deemed to be carried out by the Authorised Person itself.

5.2.3. Due diligence and supervision

An Authorised Person which uses a service provider as referred to in GEN 5.2.1 must ensure that it:

• (a) has undertaken due diligence in choosing a suitable service provider;
• (b) effectively supervises the outsourced functions or activities; and
• (c) deals effectively with any act or failure to act by the service provider that leads, or might lead, to a breach of any Regulations or Rules.

5.2.4. Notification of AFSA of material outsourcing arrangements

An Authorised Person must inform the AFSA about any material outsourcing arrangements.

Guidance: material outsourcing arrangement An outsourcing arrangement will be considered to be material if it is a service of such importance that weakness or failure of that service would cast serious doubt on the Authorised Person's continuing ability to remain fit and proper or to comply with the Framework Regulations and Rules administered by the AFSA.

5.2.5. Material outsourcing arrangements

An Authorised Person which has a material outsourcing arrangement must:

• (a) establish and maintain comprehensive outsourcing policies, contingency plans and outsourcing risk management programmes;
• (b) enter into an appropriate and written outsourcing contract; and
• (c) ensure that the outsourcing arrangements neither reduce its ability to fulfil its obligations to Clients and the AFSA, nor hinder supervision of the Authorised Person by the AFSA.

5.2.6. Terms of outsourcing contracts

An Authorised Person must ensure that the terms of its outsourcing contract with each service provider under a material outsourcing arrangement require the service provider to:

1. (a) provide information and documents where required by the AFSA under section 96 of the Framework Regulations; and
2. (b) deal in an open and co‐operative way with the AFSA.

5.3.1. Governing Body

An Authorised Person must have a Governing Body that meets the requirements of GEN 5.3.2 (membership), 5.3.3 (responsibilities) and 5.3.4 (competence, training and access to information).

5.3.2. Governing Body – membership

An Authorised Person’s Governing Body must comply with the requirements set out below:

• (a) the composition of the Governing Body of an Authorised Person must reflect an adequately broad range of experience;
• (b) the Governing Body must possess adequate collective knowledge, skills and experience in order to understand the Authorised Person’s activities and risks; and
• (c) members of the Governing Body must:

(i) commit sufficient time to perform their functions on the Governing Body; and

(ii) act with honesty, integrity and independence of mind; and

(iii) effectively assess and challenge, where necessary, the decisions of the senior management, and oversee and monitor decision making.

5.3.3. Governing Body – responsibilities

The Governing Body of an Authorised Person must:

• (a) define and oversee the implementation of governance arrangements that ensure the effective and prudent management of the Authorised Person in a manner which promotes the integrity of the market, which at least must include: the segregation of duties in the organisation; and the prevention of conflicts of interest in its operation;
• (b) monitor and periodically assess the effectiveness of the Authorised Person’s governance arrangements; and
• (c) take appropriate steps to address any deficiencies found as a result of the monitoring under sub-paragraph (b).

5.3.4. Governing Body – competence, training and access to information

An Authorised Person must:

• (a) devote adequate human and financial resources to the induction and training of members of the Governing Body;
• (b) ensure that the Governing Body has access to the information and documents it requires to oversee and monitor management decision-making; and
• (c) engage a broad set of qualities and competences when recruiting Persons to the Governing Body, and for that purpose have a policy promoting diversity on the management body; and
• (d) notify the AFSA of the identity of all the members of its Governing Body.

5.3.5. Senior management

An Authorised Person must ensure that the senior management of the Authorised Person have clear responsibility for the day‐to‐day management of the Authorised Person's business in accordance with the business objectives and strategies approved or set by the Governing Body.

5.3.6. Management information

An Authorised Person must establish and maintain arrangements to provide its Governing Body and senior management with the information necessary to organise, monitor and control its activities, to comply with all relevant Regulations and Rules and to manage risks. The information must be relevant, accurate, comprehensive, timely and reliable.

5.3.7. Remuneration structure and strategy

The Governing Body of an Authorised Person must ensure that the Remuneration structure and strategy of that Authorised Person:

• (a) are consistent with the business objectives and strategies and the identified risk parameters within which the Authorised Person's business is to be conducted;
• (b) provide for effective alignment of risk outcomes and the roles and functions of the Employees, taking account of:

(i) the nature of the roles and functions of the relevant Employees; and

(ii) whether the actions of the Employees may expose the Authorised Person to unacceptable financial, reputational and other risks;

• (c) at a minimum, include the members of its Governing Body, the senior management, Approved Individuals and any Designated Individuals; and
• (d) are implemented and monitored to ensure that they operate, on an on‐going basis, effectively and as intended.

5.4.1. Requirement to maintain compliance arrangements

An Authorised Person must establish and maintain compliance arrangements, including processes and procedures that ensure and evidence, as far as reasonably practicable, that the Authorised Person complies with all relevant Regulations and Rules.

5.4.2. Documentation of compliance arrangements

An Authorised Person must document the organisation, responsibilities and procedures of the compliance function.

5.4.3. Compliance Officer – sufficient resources

An Authorised Person must ensure that the Compliance Officer has access to sufficient resources, including an adequate number of competent staff, to perform his duties objectively and independently of operational and business functions.

5.4.4. Compliance Officer – access to records and management

An Authorised Person must ensure that the Compliance Officer has unrestricted access to relevant records and to the Authorised Person’s Governing Body and senior management.

5.4.5. Monitoring and reporting arrangements

An Authorised Person must establish and maintain monitoring and reporting processes and procedures to ensure that any compliance breaches are readily identified, reported and promptly acted upon.

5.4.6. Documentation of monitoring and reporting arrangements and breaches

An Authorised Person must document the monitoring and reporting processes and procedures as well as keep records of breaches of any relevant Regulations or Rules.

5.5.1. Requirement to maintain internal audit function

An Authorised Person must establish and maintain an internal audit function with responsibility for monitoring the appropriateness and effectiveness of its systems and controls.

5.5.2. Independence of internal audit function

An Authorised Person must ensure that its internal audit function is independent from operational and business functions.

5.5.3. Access to records and resources

An Authorised Person must ensure that its internal audit function has unrestricted access to all relevant records and recourse when needed to the Authorised Person's Governing Body or the relevant committee, established by its Governing Body for this purpose.

5.5.4. Documentation of organisation, responsibilities and procedures

An Authorised Person must document the organisation, responsibilities and procedures of the internal audit function.

5.6.1. Identification of conflicts of interest

An Authorised Person or Ancillary Service Provider must take all reasonable steps to identify conflicts of interest that may arise between:

• (a) the Authorised Person or Ancillary Service Provider, including its managers and Employees, and the Clients of the Authorised Person or Ancillary Service Provider, or any Person directly or indirectly linked to the Ancillary Service Provider by control; or
• (b) one Client of the Authorised Person or Ancillary Service Providerand another Client, in the course of the Authorised Person carrying on any Regulated Activity or Market Activity, or Ancillary Service Provider carrying on Ancillary Services.

5.6.2. Factors relevant to the existence of a conflict of interest in the provision of a service

For the purposes of identifying the types of conflict of interest that arise, or may arise, in the course of providing a service and whose existence may entail a material risk of damage to the interests of a Client, an Authorised Person or Ancillary Service Provider must take into account, as a minimum, whether the Authorised Person or Ancillary Service Provider, or a Person directly or indirectly linked by control to the Authorised Person  or Ancillary Service Provider:

• (a) is likely to make a financial gain, or avoid a financial loss, at the expense of the Client; or
• (b) has an interest in the outcome of a service provided to the Client or of a transaction carried out on behalf of the Client, which is distinct from the Client's interest in that outcome; or
• (c) has a financial or other incentive to favour the interest of another Client or group of Clients over the interests of the Client; or
• (d) carries on the same business as the Client; or
• (e) receives or will receive from a Person other than the Client an inducement in relation to a service provided to the Client, in the form of monies, goods or services, other than the standard commission or fee for that service.

5.6.3. Management of conflicts of interest

If arrangements made by an Authorised Person or Ancillary Service Provider to manage conflicts of interest are not sufficient to ensure, with reasonable confidence, that risks of damage to the interests of a Client will be prevented, the Authorised Person or Ancillary Service Provider must clearly disclose the general nature and/or sources of conflicts of interest to the Client before undertaking business for the Client.

5.6.4. Disclosure of conflicts of interest

The disclosure in GEN 5.6.3 must:

• (a) be made in a durable medium; and
• (b) include sufficient detail, taking into account the nature of the Client, to enable that Client to take an informed decision with respect to the service in the context of which the conflict of interest arises.

5.7.1. Establishment of information barriers

When an Authorised Person establishes and maintains an information barrier (that is, an arrangement that requires information held by an Authorised Person in the course of carrying on one part of the business to be withheld from, or not to be used for, Persons with or for whom it acts in the course of carrying on another part of its business) it may:

• (a) withhold or not use the information held; and
• (b) for that purpose, permit Employees in the first part of its business to withhold the information held from Employees in the other part of the business, but only to the extent that the business of one of those parts involves the carrying on of Regulated Activities or Market Activities.

5.7.2. Information barriers with a group

Information may also be withheld or not used by an Authorised Person when this is required by an established arrangement maintained between different parts of the business (of any kind) in the same group.

5.7.3. Relevance of information barrier to Market Abuse

Acting in conformity with GEN 5.7.1 and 5.7.2 does not amount to Market Abuse.

5.7.4. Effect of information barrier

When an Authorised Person manages a conflict of interest using the arrangements in GEN 5.7.1 and 5.7.2 which take the form of an information barrier, individuals on the other side of the information barrier will not be regarded as being in possession of knowledge denied to them as a result of the information barrier.

5.8.1. Operational risk

An Authorised Person must establish a robust operational risk management framework with appropriate systems and controls to identify, monitor and manage operational risks that key participants, other Authorised Persons, service providers (including outsources) and utility providers might pose to itself.

5.8.2. Legal risk

An Authorised Person must have a well‐founded, clear, transparent, and enforceable legal basis for each material aspect of its activities in all relevant jurisdictions.

5.8.3. Fraud risk

An Authorised Person must establish and maintain effective systems and controls to:

• (a) deter and prevent suspected fraud against the Authorised Person; and
• (b) report suspected fraud and other financial crimes to the AFSA and other relevant authorities.

5.8.4. Business continuity plan

An Authorised Person must have a business continuity plan, which is subjected to periodic review and scenario testing, that addresses events posing a significant risk of disrupting operations, including events that could cause a widespread or major disruption.

5.9.1. Record keeping obligation

An Authorised Person or Ancillary Service Provider must make and retain records of matters and dealings, including Accounting Records and corporate governance practices which are the subject of requirements and standards under the Framework Regulations and Rules.

5.9.2. Retrieval of records

An Authorised Person or Ancillary Service Provider must ensure that records stored pursuant to GEN 5.9.1 are capable of reproduction on paper within a reasonable period not exceeding five Business Days.

6.1.1. Notification of requirement to produce a report

Where the AFSA requires an Authorised Person to provide it with a report under section 97 of the Framework Regulations (Power to require the production of a report) it will give written notification to the Authorised Person of:

1. (a) the purpose of its report, and
2. (b) its scope, and
3. (c) the timetable for completion and
4. (d) any other relevant matters.

6.1.2. Nomination or approval of Skilled Person

• (a) The Person appointed to produce a report shall be referred to as the “Skilled Person”.
• (b) Where the AFSA nominates the Skilled Person, the Authorised Person must appoint the Person so nominated.
• (c) Where the AFSA invites the Authorised Person to nominate a Skilled Person, the Authorised Person must provide the AFSA with the details of an appropriately qualified Person within such period as the AFSA may direct. The AFSA will confirm within a reasonable period where it approves the appointment of the Person so nominated. If the AFSA does not approve the Person so nominated, it may require the Authorised Person to nominate another Person or itself nominate a Person.

6.1.3. Obligations of Skilled Person

When an Authorised Person appoints a Skilled Person, it must enter into a written contract with the Skilled Person whose terms:

• (a) require and permit the Skilled Person to co‐operate with the AFSA in relation to the Authorised Person and to communicate to the ASFA information on, or his opinion on, matters of which he has, or had, become aware in his capacity as a Skilled Person reporting on the Authorised Person in the following circumstances:

(i) the Skilled Person reasonably believes that, as regards the Authorised Person concerned:

(A) there is or has been, or may be or may have been, a contravention of any requirement that applies to the Authorised Person concerned; and

(B) that the contravention may be of material significance to the AFSA in determining whether to exercise, in relation to the Authorised Person concerned, any powers conferred on the AFSA under any provision of the Framework Regulations;

(ii) the Skilled Person reasonably believes that the information on, or his opinion on, those matters may be of material significance to the AFSA in determining whether the Authorised Person concerned satisfies and will continue to satisfy the fit and proper requirements; or

(iii) the Skilled Person reasonably believes that the Authorised Person is not, may not be, or may cease to be, a going concern;

• (b) require the Skilled Person to prepare a report within the time specified by the AFSA; and
• (c) waive any duty of confidentiality owed by the Skilled Person to the Authorised Person which might limit the provision of information or opinion by that Skilled Person to the AFSA in accordance with (a) or (b).

6.1.4. Contract with Skilled Person

An Authorised Person must ensure that the contract required under GEN 6.1.2:

• (a) is governed by the law of the AIFC; and
• (b) expressly provides that the AFSA has a right to enforce the provisions included in the contract under GEN 6.1.2; and
• (c) expressly provides that, in proceedings brought by the AFSA for the enforcement of those provisions, the skilled Person is not to have available by way of defence, set‐off or counter claim any matter that is not relevant to those provisions; and
• (d) if the contract includes an arbitration agreement, expressly provides that the AFSA is not, in exercising the right in (b) to be treated as a party to, or bound by, the arbitration agreement; and
• (e) provides that the provisions included in the contract under GEN 6.1.2 are irrevocable and may not be varied or rescinded without the AFSA's consent.

6.2.1. Core information

An Authorised Person or Ancillary Service Provider must provide the AFSA with reasonable advance notice of a change in:

• (a) the Authorised Person’s or Ancillary Service Provider's name; or
• (b) any business or trading name under which the Authorised Person or Ancillary Service Provider carries on a Regulated Activity or Market Activity;
•  or Ancillary Service; or
• (c) the address of the Authorised Person’s or Ancillary Service Provider's principal place of business in the AIFC; or
• (d) in the case of a Branch, its registered office or head office address; or
• (e) its legal structure; or
• (f) an Approved Individual’s name or any material matters relating to his fitness and propriety.

6.2.2. Branches

An Authorised Person which is incorporated in the AIFC must provide the AFSA with reasonable advance notice of the establishment or closure of a branch office anywhere in the world from which it carries on financial services.

6.2.3. Regulatory impact

An Authorised Person or Ancillary Service Provider must advise the AFSA immediately if it becomes aware, or has reasonable grounds to believe, that any of the following matters may have occurred or may be about to occur:

1. (a) the Authorised Person’s or Ancillary Service Provider's failure to satisfy the fit and proper requirements; or
2. (b) any matter which could have a significant adverse effect on the Authorised Person’s or Ancillary Service Provider's reputation; or
3. (c) any matter in relation to the Authorised Person or Ancillary Service Provider which could result in serious adverse financial consequences to the financial system or to other Authorised Persons or Ancillary Service Provider; or
4. (d) a significant breach of a Rule by the Authorised Person or Ancillary Service Provider, or any of its Employees; or
5. (e) a breach by the Authorised Person or Ancillary Service Provider, or any of its Employees of any requirement imposed by any applicable law by the Authorised Person or Ancillary Service Provider, or any of its Employees; or
6. (f) any proposed restructuring, merger, acquisition, reorganisation or business expansion which could have a significant impact on the Authorised Person’s or Ancillary Service Provider's risk profile or resources; or
7. (g) any significant failure in the Authorised Person’s or Ancillary Service Provider's systems or controls, including a failure reported to the Authorised Person by the Authorised Person’s or Ancillary Service Provider's Auditor; or
8. (h) any action that would result in a material change in the capital adequacy or solvency of the Authorised Person or Ancillary Service Provider; or
9. (i) non-compliance with Rules due to an emergency outside the Authorised Person’s or Ancillary Service Provider's control and the steps being taken by the Authorised Person or Ancillary Service Provider.

6.2.4. Major Acquisitions

(1) A Bank as defined in BBR Rules, which makes or proposes to make a Major Acquisition as defined in (2) must:

1. (a) if it is incorporated in the AIFC, comply with the requirements in Rule 6.2.4 (4) of GEN rules; and
2. (b) if it is a Branch, comply with the requirements in Rule 6.2.4 (7) of GEN rules.

(2) Subject to (3), a Major Acquisition is an acquisition in which the relevant Bank acquires or proposes to acquire, directly or indirectly, a shareholding in a Body Corporate where that acquisition:

1. (a) is of a value (whether by one acquisition or a series of acquisitions) of 10% or more of:
2. (i) the Bank’s Capital, as defined in BBR Rules; or

(ii) the capital resources of the Bank calculated in accordance with the requirements of the Financial Services Regulator in its home jurisdiction, if it is operating as a Branch in the AIFC; or

1. (b) even if it does not exceed the 10% threshold referred to in (a), it is reasonably likely to have a significant regulatory impact on the Bank’s activities.

(3) An acquisition is not a Major Acquisition for the purposes of (2) if it is an investment made by a Bank:

1. (a) in accordance with the terms of a contract entered into by the Bank as an incidental part of its ordinary business; or
2. (b) as a routine transaction for managing the Bank’s own investment portfolio and therefore can reasonably be regarded as made for a purpose other than acquiring management or control of a Body Corporate either directly or indirectly.

Guidance

(1) Examples of the kind of investments referred to in Rule 6.2.4(2)(b) include an acquisition of a stake in a small specialised trading firm that engages in high risk trades or other activities that could pose a reputational risk to the Bank.

(2) The onus is on a Bank proposing to make an acquisition to consider whether it qualifies as a Major Acquisition under Rule 6.2.4(2)(b). Generally, in the case of a Bank that is operating as a Branch in the AIFC), the significant regulatory impact referred to in Rule 6.2.4 (2) (b) should be prudential risk to the Bank as a whole. If a Bank is uncertain about whether or not a proposed acquisition qualifies as a Major Acquisition under Rule 6.2.4 (2)(b), the Bank may seek guidance from the AFSA.

(3) Examples of contractual arrangements of the kind referred to in Rule 6.2.4 (3)(a) include enforcement of a security interest in the securities of the investee Body Corporate or a loan workout pursuant to a loan agreement entered into between a bank and its client.

(4) Examples of the kind of investments referred to in Rule 6.2.4(3)(b) include temporary investments, such as investments included in the Bank’s trading book or which are intended to be disposed of within a short term (e.g. within 12 months).

(4) A Bank which is an Authorised Firm incorporated in the AIFC must:

1. (a) before making a Major Acquisition:
2. (i) notify the AFSA in writing of the proposed Major Acquisition at least 45 days prior to the proposed date for effecting the Major Acquisition; and

(ii) provide the AFSA with all the relevant information relating to that Major Acquisition to enable the AFSA to assess the regulatory impact of the proposed Major Acquisition on the Bank; and

1. (b) not effect the proposed Major Acquisition unless:
2. (i) it has either received written advice from the AFSA that it has no objection to that Major Acquisition or has not received any written objection or request for additional information from the AFSA within 45 days after the date of the notification; and

(ii) if the AFSA has imposed any conditions relating to the proposed Major Acquisition, it has complied with, and has the on-going ability to comply with, the relevant conditions.

(5) The AFSA may only object to a proposed Major Acquisition if it is of the view that the proposed Major Acquisition is reasonably likely to have a material adverse impact on the Bank’s ability to comply with its applicable regulatory requirements or on the financial services industry in the AIFC as a whole. The AFSA may also impose any conditions it considers appropriate to address any concerns it may have in relation to the proposed Major Acquisition.

(6) Without limiting the generality of its powers, the factors that the AFSA may take into account for the purposes of (2) include:

1. (a) the financial and other resources available to the Bank to carry out the proposed Major Acquisition;
2. (b) the possible impact of the proposed Major Acquisition upon the Bank’s resources, including its capital, both at the time of the acquisition and on an on-going basis;
3. (c) the managerial capacity of the Bank to ensure that the activities of the investee Body Corporate are conducted in a prudent and reputable manner;
4. (d) the place of incorporation or domicile of the investee Body Corporate and whether or not the laws applicable to that entity are consistent with the laws applicable to the Bank. In particular, whether there are any restrictions in relation to exchange of confidential regulatory information that are likely to pose challenges to the AFSA in carrying out its supervisory duties including those relating to consolidated supervision where applicable; and
5. (e) any other undue risks to the Bank or the financial services industry in the AIFC as a whole arising from the proposed Major Acquisition. Guidance Factors which the AFSA may take into account in assessing whether there are any undue risks arising from the proposed Major Acquisition include the size and nature of the business of the investee Body Corporate, its reputation and standing, its present and proposed management structure and the quality of management, the reporting lines and other monitoring and control mechanisms available to the Bank and the past records of the Bank relating to acquisitions of a similar nature.

(7) A Bank which operates as a branch in the AIFC:

1. (a) notify the AFSA in writing of any Major Acquisition in accordance with the notification requirement applying to the Bank under the requirements of the Financial Services Regulator in its home jurisdiction (the home regulator); and
2. (b) if there is no notification requirement applying to the Bank under (a), comply with the requirements in Rule 6.2.4 (4) as if it were a Bank incorporated in the AIFC. The AFSA must follow the same procedures, and shall have the same powers, as set out in Rule

6.2.4 (6) in relation to such a notification.

(8) A Bank which gives to the AFSA a notification under (7)(a) must:

1. (a) notify the AFSA of the Major Acquisition at the same time as it notifies the home regulator;
2. (b) provide to the AFSA the same information as it is required to provide to the home regulator; and
3. (c) provide to the AFSA copies of any communications it receives from the home regulator relating to the notification it has provided to the home regulator as soon as practicable upon receipt.

(9) The AFSA may, for the purposes of the requirements in this section, require from the Bank any additional information relating to the Major Acquisition as it may consider appropriate. A Bank must provide any such additional information to the AFSA promptly.

(10) The AFSA may, where it considers appropriate, withdraw its no objection position or modify or vary any condition it has imposed or any remedial action it has required under the Rules in this section. Guidance The AFSA will generally not withdraw a no objection position it has conveyed to a Bank, except in very limited circumstances. An example of such a situation is where the Bank is found to have provided to the AFSA inaccurate or incomplete information and that commission or omission has a material impact on the AFSA’s no objection decision.

(11) The procedures in Section 11 of the AIFC Financial Services Framework Regulations apply to a decision of the AFSA under this Rule 6.2.4, to object to an acquisition or to impose or vary conditions.

(12) If the AFSA decides to exercise its power under this Rule to object to an acquisition or to impose or vary conditions, the Authorised Firm may appeal to the AIFC Court for a review of the decision.

6.2.5. Suspected Market Abuse

(1) An Authorised Person must notify the AFSA immediately if it:

• (a) receives an order from a Client, or arranges or executes a transaction with or for a Client; and
• (b) has reasonable grounds to suspect that the order or transaction may constitute Market Abuse.

(2) The notification under (1) must specify:

• (a) sufficient details of the order or transaction; and
• (b) the reasons for the Authorised Person suspecting that the order or transaction may constitute Market Abuse.

(3) An Authorised Person must not inform the Client, or any other Person involved in the order or transaction, of a notification under this Rule.

6.2.6. Fraud and errors

An Authorised Person or Ancillary Service Provider must notify the AFSA immediately if one of the following events arises in relation to its activities:

• (a) it becomes aware that an Employee may have committed a fraud against one of its or another Person’s Clients; or
• (b) a fraud has been committed against it; or
• (c) it has reason to believe that a Person is acting with intent to commit a serious fraud against it; or
• (d) it identifies significant irregularities in its accounting or other records, whether or not there is evidence of fraud; or
• (e) it suspects that one of its Employees who is connected with the Authorised Person’s or Ancillary Service Provider's Regulated Activities or Market Activities may be guilty of serious misconduct.

6.2.7. Other regulators

An Authorised Person must advise the AFSA immediately of:

• (a) the granting or refusal of any application for or revocation of authorisation to carry on financial services in any jurisdiction; or
• (b) the granting, withdrawal or refusal of an application for, or revocation of, membership of the Authorised Person of any regulated exchange or clearing house; or
• (c) the Authorised Person becoming aware that a Financial Services Regulator or another enforcement or regulatory agency has started an investigation into the affairs of the Authorised Person; or
• (d) the appointment of inspectors, howsoever named, by a Financial Services Regulator or another enforcement or regulatory agency to investigate the affairs of the Authorised Person; or
• (e) the imposition of disciplinary measures or disciplinary sanctions on the Authorised Person in relation to its financial services or governance by any Financial Services Regulator or any regulated exchange or clearing house.

6.2.8. Action against an Authorised Person

An Authorised Person must notify the AFSA immediately if:

• (a) civil proceedings are brought against the Authorised Person and the amount of the claim is significant in relation to the Authorised Person’s financial resources or its reputation; or
• (b) the Authorised Person is prosecuted for, or convicted of, any offence involving fraud or dishonesty, or any penalties are imposed on it for tax evasion.

6.2.9. Winding up, bankruptcy, insolvency and resolution

An Authorised Person or Ancillary Service Provider must notify the AFSA immediately on:

• (a) the calling of a meeting to consider a resolution for winding up the Authorised Person or Ancillary Service Provider; or
• (b) an application to dissolve the Authorised Person or Ancillary Service Provider, or to strike it from the register maintained by the AIFC Registrar of Companies, or a comparable register in another jurisdiction; or
• (c) the presentation of a petition for the winding up of the Authorised Person or Ancillary Service Provider;or
• (d) the making of, or any proposals for the making of, a composition or arrangement with creditors of the Authorised Person or Ancillary Service Provider; or
• (e) the application of any Person against the Authorised Person or Ancillary Service Provider for the commencement of any insolvency proceedings, resolution action, appointment of any receiver, administrator or provisional liquidator under the law of any country.

6.2.10. Information relating to corporate governance and remuneration

An Authorised Person must provide to the AFSA notice as soon as practicable of any significant changes to its corporate governance framework or the remuneration structure or strategy that affect its Regulated Activities or Market Activities.

6.2.11. Accuracy of information

An Authorised Person or Ancillary Service Provider must take reasonable steps to ensure that all information that it provides to the AFSA in accordance with any applicable legislation is:

• (a) factually accurate or, in the case of estimates and judgements, fairly and properly based; and
• (b) complete, in that it should include anything of which the AFSA would reasonably expect to be notified.

6.2.12. Correction of inaccurate information

An Authorised Person or Ancillary Service Provider must notify the AFSA immediately it becomes aware, or has information that reasonably suggests, that it:

• (a) has or may have provided the AFSA with information which was or may have been false, misleading, incomplete or inaccurate; or
• (b) has or may have changed in a material particular.

6.3.1. Financial statements

An Authorised Person must prepare financial statements in accordance with the International Financial Reporting Standards ("IFRS") for each financial year of the Authorised Person.

6.3.2. Approval of financial statements

The financial statements of an Authorised Person must be approved by the Directors and signed on its behalf by at least one of the Directors.

6.3.3. Accounting records and regulatory returns

An Authorised Person must keep Accounting Records which are sufficient to show and explain transactions are such as to:

• (a) be capable of disclosing the financial position of the Authorised Person on an ongoing basis;
• (b) record the financial position of the Authorised Person as at its financial year end; and
• (c) ensure that any financial statements prepared by the Authorised Person comply with the Framework Regulations and Rules.

6.3.4. Retention of and access to records

An Authorised Person must ensure that its Accounting Records are:

• (a) retained by the Authorised Person for at least six years from the date to which they relate;
• (b) at all reasonable times, open to inspection by the AFSA or the Auditor of the Authorised Person; and
• (c) if requested by the AFSA capable of reproduction, within a reasonable period not exceeding five Business Days, in hard copy and in English.

6.3.5. Financial year end

An Authorised Person must not change its financial year end without the prior consent of the AFSA.

6.3.6. Appointment and termination of Auditors

An Authorised Person must:

• (a) notify the AFSA of the appointment of an Auditor using the form prescribed in Schedule 3;
• (b) prior to the appointment of the Auditor, take reasonable steps to ensure that the Auditor has the required skills, resources and experience to audit the business of the Authorised Person for which the Auditor has been appointed;
• (c) notify the AFSA immediately if the appointment of the Auditor is or is about to be terminated, or on the resignation of its Auditor, using the form prescribed in Schedule 3;
• (d) appoint an Auditor to fill any vacancy in the office of Auditor and ensure that the replacement Auditor can take up office at the time the vacancy arises or as soon as reasonably practicable; and
• (e) comply with any request by the AFSA to replace an Auditor previously appointed by that Authorised Person.

6.3.7. Independence of the Auditor

An Authorised Person must:

• (a) take reasonable steps to ensure that the Auditor and the relevant audit staff of the Auditor are independent of and not subject to any conflict of interest with respect to the Authorised Person; and
• (b) notify the AFSA if it becomes aware, or has reason to believe, that the Auditor or the relevant audit staff of the Auditor are no longer independent of the Authorised Person, or have a conflict of interest which may affect their judgement in respect of the Authorised Person.

6.3.8. Co‐operation with Auditors

An Authorised Person must take reasonable steps to ensure that it and its Employees:

• (a) provide any information to its Auditor that its Auditor reasonably requires, or is entitled to receive as Auditor;
• (b) give the Auditor right of access at all reasonable times to relevant records and information within its possession;
• (c) allow the Auditor to make copies of any records or information referred to in (b);
• (d) do not interfere with the Auditor's ability to discharge its duties;
• (e) report to the Auditor any matter which may significantly affect the financial position of the Authorised Person; and
• (f) provide such other assistance as the Auditor may reasonably request it to provide.

6.3.9. Audit reports

An Authorised Person must:

• (a) require, in writing, its Auditor to:
• (i) conduct an audit of and produce a report on the Authorised Person’s financial statements in accordance with the International Standards on Auditing; and
• (ii) such other reports as the AFSA may require; and
• (b) submit any reports so produced to the AFSA within four months of the Authorised Person’s year end.