3.8. Requirements for Digital Asset Service Providers Managing Investments and a Collective Investment Scheme
Guidance: A Digital Asset Service Provider which carries on a Regulated Activity of Managing Investments in relation to Digital Assets is an Authorised Firm to which provisions of the following AIFC Acts apply either directly or in respect of its officers and Employees who are Approved or Designated Individuals:
FSFR (in whole);
AML (in whole);
Chapter 2 (Client classification) of the COB;
Chapter 3 (Communication with Clients and Financial Promotions) of the COB;
Chapter 4 (Key information and client agreement) of the COB;
COB 5.2 (Suitability assessment);
Chapter 7 (Conflicts of interest) of the COB;
Chapter 15 (Complaints handling and dispute resolution) of the COB;
Chapter 16 (Record keeping and internal audit) of the COB;
Chapter 2 (Controlled and Designated Functions) of the GEN;
Chapter 3 (Control of Authorised Persons) of the GEN;
Chapter 4 (Core Principles) of the GEN;
Chapter 5 (Systems and Controls) of the GEN;
Chapter 6 (Supervision) of the GEN; and
Rules on Currency Regulation and Provision of Information on Currency Transactions in the AIFC (in whole).
A Digital Asset Service Provider which carries on a Regulated Activity of Managing a Collective Investment Scheme in relation to Digital Assets is an Authorised Firm to which provisions of the following AIFC Acts apply either directly or in respect of its officers and Employees who are Approved or Designated Individuals:
FSFR (in whole);
AML (in whole);
Chapter 2 (Client classification) of the COB;
Chapter 3 (Communication with Clients and Financial Promotions) of the COB;
Chapter 4 (Key information and client agreement) of the COB;
Chapter 7 (Conflicts of interest) of the COB;
Chapter 15 (Complaints handling and dispute resolution) of the COB;
Chapter 16 (Record keeping and internal audit) of the COB;
Chapter 2 (Controlled and Designated Functions) of the GEN;
Chapter 3 (Control of Authorised Persons) of the GEN;
Chapter 4 (Core Principles) of the GEN;
Chapter 5 (Systems and Controls) of the GEN;
Chapter 6 (Supervision) of the GEN; and
Rules on Currency Regulation and Provision of Information on Currency Transactions in the AIFC (in whole).
3.8.1. Verification of information
(1) In addition to requirements set out in Chapter 3 of the COB, a Digital Asset Service Provider Managing Investments or a Collective Investment Scheme must not provide statements, promises, forecasts or other types of information which it knows or suspects to be misleading, false or deceptive or which it should have reasonably known to be misleading, false or deceptive at the time of making such statement, promise or forecast.
(2) Prior to making any statement, promise or forecast, a Digital Asset Service Provider Managing Investments or a Collective Investment Scheme must verify factual information against appropriate and reliable source materials and must use all reasonable endeavours to verify the continued accuracy of such information (for as long as such information is communicated by or on behalf of the Digital Asset Service Provider). A Digital Asset Service Provider should state the date on which the information was last verified in the relevant communication.
3.8.2. Client reporting and valuation
(1) A Digital Asset Service Provider Managing Investments or a Collective Investment Scheme must, at least monthly, provide to each of its Clients a written statement containing the following information:
(a) the total value of Digital Assets in a Client’s account; and
(b) the change in amount and valuation of Digital Assets in a Client’s account during the relevant reporting period.
(2) A Digital Asset Service Provider Managing Investments or a Collective Investment Scheme must ensure that all assets under management are subject to ongoing independent valuation.
(3) A Digital Asset Service Provider Managing Investments or a Collective Investment Scheme must have comprehensive and well documented valuation policies and procedures in place to ensure the production of timely and accurate statement in accordance with DAA 3.8.2. (1).
3.8.3. Risk management and due diligence
(1) A Digital Asset Service Provider Managing Investments or a Collective Investment Scheme must ensure that liquidity risk and market risk are each monitored and tested regularly, and appropriate measures are in place as required to address any such risk in a prompt manner.
(2) All such risk management and due diligence must be audited by an independent third party on an annual basis and provided to the AFSA upon request.
3.8.4. Content of confirmation notes
For the purposes of COB 9.1.3., a Digital Asset Service Provider Managing a Collective Investment Scheme must include the following general information:
(a) the Digital Asset Service Provider’s name and address;
(b) a description of the Digital Assets;
(c) whether the Transaction is a sale or purchase;
(d) the price or unit price at which the Transaction was executed;
(e) if applicable, a statement that the Transaction was executed on an execution-only basis;
(f) the date and time of the Transaction;
(g) the amount the Digital Asset Service Provider charges in connection with the Transaction, including Commission charges and the amount of any Mark-up or Mark-down, Fees, taxes or duties;
(h) the amount or basis of any amounts received from another Person in connection with the services; and
(i) a statement that the price at which the Transaction has been Executed is on a Historic Price or Forward Price basis, as the case may be.
(2) A Digital Asset Service Provider may combine items (f) and (j) above in respect of a Transaction where the Client has requested a note showing a single price combining both of these items.