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4. KEY INFORMATION AND CLIENT AGREEMENT
FINANCIAL SERVICES LEGISLATION
RULES
CONDUCT OF BUSINESS RULES
Guidance: Purpose of this rulebook
SCHEDULE 1: TRANSACTION RECORDS
SCHEDULE 2: KEY INFORMATION AND CONTENT OF CLIENT AGREEMENT
SCHEDULE 3: TRADE CONFIRMATION
SCHEDULE 4: PERIODIC STATEMENTS
SCHEDULE 5: FINANCIAL PROMOTIONS
Entire Act

4. KEY INFORMATION AND CLIENT AGREEMENT

4.1. Application

This chapter applies to an Authorised Firm intending to carry out Regulated Activities with or for a Client. The obligation in this section to enter into a written client agreement does not apply to an Authorised Firm when it is carrying on a Regulated Activity with or for a Professional Client or Market Counterparty, but the Authorised Firm must still provide specified key information to a Professional Client or Market Counterparty, in accordance with this chapter, before providing services. This chapter does not apply to an Authorised Firm when it is:

  • (a) carrying out the Regulated Activity of providing financing using Shari'ah- compliant Financial Contracts; or
  • (b) a Fund Manager offering the Units of a Fund it manages.

Guidance: Other information requirements Other information requirements will apply to the provision of Shari'ah-compliant Financial Contracts, which are in the AIFC IFR Rules. Similarly, specific disclosure requirements apply to the Offering Materials provided in relation to Units in a Fund, as set out in the AIFC CIS Rules.

4.2. Client agreement

4.2.1. Requirement to enter into a client agreement

Subject to COB 4.2.3, an Authorised Firm must not carry on a Regulated Activity with or for a Person unless:

  1. (a) the Authorised Firm has provided to that Person the key information specified in Schedule 2 in good time before the service is provided to enable the Person to make an informed decision relating to the relevant Regulated Activity; and
  2. (b) if the Person is classified as a Retail Client, there is a written client agreement entered into between the Authorised Firm and that Person.

Guidance: Meaning of "key information"

In this COB 4.2, "key information" means the information specified in Schedule 2.

4.2.2. Relationship between key information and client agreement

An Authorised Firm may either:

  • (a) provide a person with a copy of the proposed client agreement containing the key information; or
  • (b) provide the key information separately from the client agreement.

4.2.3. Where it is impracticable to provide key information or enter into a client agreement

An Authorised Firm may provide a Financial Product or Financial Service to a Retail Client or Professional Client without having to provide key information and/or enter into a client agreement in accordance with COB 4.2.1 where it is impracticable to do so, provided that the Authorised Firm:

  • (a) first explains to the Client why it is impracticable to enter into a client agreement; and
  • (b) enters into a client agreement as soon as practicable thereafter.

Guidance: Example of where it may be impracticable

It may be impracticable to provide the key information or enter into a client agreement if a Client requests the Authorised Firm to execute a transaction on a time-critical basis.

4.2.4. Records of explanation to the Client

Where an Authorised Firm has given the explanation referred to in COB 4.2.3(a) verbally, it should maintain sufficient records to enable the Authorised Firm to demonstrate to the AFSA that it has provided that explanation to the Client.

4.3. Content of client agreement

If the Authorised Firm is required to enter into a written client agreement with the Client, the agreement must set out the essential rights and obligations of both parties.

4.4. Content of key information

Schedule 2 sets out:

  • (a) the core key information that must be included in every client agreement, or otherwise provided to a Client in accordance with COB 4.2.2 (and specifies that, more information is to be disclosed to Retail Clients than to Professional Clients or Market Counterparties); and
  • (c) additional key information that must be included in any client agreement or otherwise provided to a Client in relation to certain activities.

4.5. Record keeping

The Authorised Firm should retain a copy of the client agreement for a period of six years from the date on which the relationship with the relevant Client has terminated.

4.6. Provision of key features document relating to Security Tokens

(1)   An Authorised Firm must not provide a Financial Service to which this section applies to a Person unless it has provided that Person with a key features document containing the information in (2).

(2)   The key features document must contain the following information in respect of each Security Token relevant to the Financial Services that the Authorised Firm will provide to the Person:

(a) the risks associated with and essential characteristics of the Issuer, other Person responsible for discharging the obligations associated with the rights conferred (if different to the Issuer) and guarantor if any, of the Security Token, including their assets, liabilities and financial position;

(b) the risks associated with and essential characteristics of the Security Token, including the rights and obligations conferred and the type or types of Investment which it constitutes;

(c) whether the Security Token is or will be admitted to trading and, if so, the details relating to such admission, including details of the facility and whether the facility is within the AIFC;

(d) whether the Client can directly access the trading facility, or whether access is only through an intermediary, and the process for accessing the facility;

(e) risks associated with the use of DLT, particularly those relating to Digital wallets and the susceptibility of private cryptographic keys to misappropriation;

(f) whether the Client, the Authorised Firm or a third party is responsible for providing a Digital wallet service in respect of the Security Token, and any related risks (for example, at whose risk the Client’s Security Tokens are held in the Digital wallet, whether it is accessible online or stored offline, what happens if keys to the Digital wallet are lost and what procedures can be followed in such an event);

(g) how the Client may exercise any rights conferred by the Security Tokens such as voting or participation in shareholder actions; and

(h) any other information relevant to the particular Security Token that would reasonably assist the Client to understand the product and technology better and to make informed decisions in respect of it.

      (3)   The key features document must be provided in good time before the relevant Financial Service is provided to the Person, to enable that Person to make an informed decision about whether to use the relevant Financial Service.

      (4)   The key features document does not need to be provided to a Person to whom the Authorised Firm has previously provided that information, if there has been no significant change since the information was previously provided.