1.1 Application

This Perimeter Guidance (PERG) applies to:

(a)     a Person who is considering carrying on activities in the AIFC which may fall within the scope of the AIFC Financial Services Framework Regulations (FSFR) and is seeking guidance on whether the Person needs to become an Authorised Person or an Ancillary Service Provider;

(b)     a Person who seeks to become an Authorised Person or an Ancillary Service Provider under the FSFR and who is, or is considering, applying for authorisation to carry on regulated activities in the AIFC;

(c)     a Person who is seeking guidance on whether any communication the Person may be seeking to make or cause to be made will be a Financial Promotion and be subject to the restriction in section 27 of the FSFR (Prohibition relating to Financial Promotions); and

(d)     Persons generally.

1.2 Purpose

The purpose of PERG is to give guidance about the circumstances in which authorisation to perform the activities that are regulated under the FSFR is required, including applicability of any available exemptions or exclusions.

Activities that might be exempt include such Regulated Activities, Market Activities or Ancillary Services that are exempt from the General Prohibition set by section 24 of the FSFR. See below sections 2.1.4. and 2.1.5. of PERG where you can find examples of such exempt or excluded activities.

Activities that might be excluded include such activities that are not carried out “by way of business”, as described in Rule 1.1.9 of the AIFC General Rules (GEN) and are not regulated under the FSFR. See below section 2.1.1. of PERG where you can see explanation of “by way of business”.

1.3 Overview

The key and governing act under the Financial Services Framework is the FSFR adopted by the AFSA, which provide a legal basis for the regulation and supervision of financial services. Under this AIFC Act (the term AIFC Act refers to an act adopted by the AIFC Body) Persons are permitted by the AFSA to carry on various financial activities in the AIFC, which are subject to regulation (referred to as Regulated Activities, Market Activities or Ancillary Services).

For reference: AIFC Bodies are the AIFC Management Council, the Governor of the AIFC, the AIFC Authority, the Astana Financial Services Authority, the AIFC Court and the International Arbitration Centre (Article 9 of the Constitutional Statute on the AIFC).

The “regulatory perimeter” for the AIFC financial services regulation is set out in the FSFR and contains two key prohibitions underlying that perimeter:

(1)     the General Prohibition, which prohibits Persons from carrying on a Regulated Activity, Market Activity or Ancillary Service unless it is authorised to do so by the AFSA or is exempt; and

(2)     the Financial Promotion prohibition, which prohibits unauthorised Persons from communicating promotion of Investments or any Regulated Activity.

Regulated Activities, Market Activities and Ancillary Services are specified in GEN: for example, Accepting Deposits, Managing Investments, Effecting Contracts of Insurance, Dealing in Investments as Agent; Providing Legal Services, Providing Audit Services; Operating and Exchange, Operating a Clearing House, etc. (see Chapter 2 of PERG (Authorisation (Getting Regulated)).

In addition to the regulatory perimeter the AIFC legal framework also has a currency perimeter, which sets parameters for AIFC Participants offering services to the residents of the Republic of Kazakhstan through the services of Kazakhstan’s commercial banks (second tier banks) or AIFC Banks. The currency perimeter is regulated by the AIFC Rules on Currency Regulation and Provision of Information on Currency Transactions in the AIFC (AIFC Rules on Currency Regulation). Currently AIFC Rules on Currency Regulation are undergoing through second round amendments review, which once finalised will be reflected in the updated version of PERG.   

The FSFR, and the secondary legislation made under the FSFR (e.g., Rules), are complex. Although PERG gives guidance about Regulated Activities, Market Activities, or Ancillary Services and Financial Promotions, it does not aim to, nor can it, be exhaustive.

References have been made to relevant provisions in the FSFR and secondary legislation. However, since reproducing an entire statutory provision would sometimes require a lengthy quotation, or considerable further explanation, many provisions of the FSFR, or secondary legislation made under the FSFR, are cross-referred.

For the precise details of the legislation, readers of PERG should, therefore, refer to the FSFR and the secondary legislation itself, as well as PERG.

1.4 Acting Law of the AIFC

The Acting Law of the AIFC is based on the Constitution of the Republic of Kazakhstan and consists of: 

(1)     the Constitutional Statute on the AIFC (Constitutional Statute);

(2)     the AIFC Acts; and

(3)     the Acting Law of the Republic of Kazakhstan, which applies in part to matters not governed by the Constitutional Statute and AIFC Acts.

Constitutional Statute on the AIFC applies at all times.

Kazakhstan legislation applies as part of the Acting Law of the AIFC whenever the AIFC Acts do not displace that Kazakhstan legislation. Kazakhstan law does not apply at all in the AIFC if there has been a valid process of creation of law by an AIFC Act to displace the general law.

E.g., as part of the Acting law of Kazakhstan, criminal law and criminal procedure always apply in the AIFC. Another example would be the Republic’s tax law, though the Constitutional Statute makes provision for a beneficial tax exemptions for some activities in the AIFC. A third would be the law relating to activities in the AIFC territory which are not regulated by the AFSA: hotels, restaurants, sports etc. where the AIFC Acts are not applied, and thus the general law of Kazakhstan applies in full.

Examples of cases, where the AIFC Acts disapply the general law of Kazakhstan are Kazakhstan law on companies and other forms of a legal entity.

A boundary between application of the AIFC Acts and the legislation of Kazakhstan is prescribed further in the AIFC Acts. This is achieved under the AIFC Regulations on AIFC Acts, section 40:

40. Application

(1) Because, by virtue of article 4 of the Constitutional Statute, AIFC legislation is able to apply in the AIFC despite any Acting Law of Kazakhstan on civil or commercial matters, the rights and liabilities between Persons in any civil or commercial matter are to be decided according to the relevant law for the time being in force in the Jurisdiction chosen in accordance with subsection (2).

(2) The Jurisdiction chosen is to be the Jurisdiction first ascertained under the following paragraphs:  

(a) so far as there is a regulatory content, the AIFC Acts or any other law in force in the AIFC; failing which,

(b) the law of any Jurisdiction other than the AIFC expressly applying under any AIFC Act; failing which,  

(c) the laws of a Jurisdiction as agreed between all the relevant Persons concerned in the matter; failing which,

(d) the laws of any Jurisdiction that appears to the Court or Arbitrator to be the Jurisdiction most closely related to the facts of and the Persons concerned in the matter; failing which,

(e) the Acting Law of Kazakhstan.

Considering this structure of regulation, it is critical to recognise that the Constitutional Statute sets out the areas of economic activity which are considered as a priority to the AIFC. This include under Article 2.2 (2), (3), and (4) of the Constitutional Statute: 2) developing a securities market in the Republic of Kazakhstan and integrating it with international capital markets; 3) developing insurance markets, banking services, Islamic finance, financial technologies, digital assets, electronic commerce and innovative projects in the Republic of Kazakhstan; 4) developing financial and professional services based on international best practice.

1.5 Status

PERG has been prepared for information purposes and does not constitute an exhaustive list of requirements that might be applicable to the firm’s business operations or to individuals, since the application of the PERG depends on the nature, scale and complexity of the business.

PERG is a Regulatory Material (for example, guidance, modifications, rules, policy statements), adopted by the AFSA under an AIFC Act. In cases when the FSFR and the secondary legislation say otherwise they will override PERG.

PERG stands at the guidance level in the Financial Services Framework Acts:

Financial Services Framework Regulations (FSFR)

Rules

Guidance – PERG

1.6 Updating PERG

PERG will be amended from time to time in the light of changing circumstances, developing business practices, or case law with the actual version published on the website of the AFSA. The newer version will be identified by the date in the cover page of the document.

1.7 Defined terms

The terms with initial capital letters (other than proper nouns) have the meaning as defined in the AIFC Glossary.

GEN uses the terms Authorised Firm, Authorised Market Institution, Authorised Person, and Ancillary Service Provider.

Authorised Firm is a Centre Participant which has been licensed by the AFSA to carry on one or more Regulated Activities.

Authorised Market Institution is a Centre Participant which has been licensed by the AFSA to carry on one or more Market Activities.

Authorised Person is either an Authorised Firm or an Authorised Market Institution.

Ancillary Service Provider is a Centre Participant which has been licensed by the AFSA to carry on one or more Ancillary Services.

1.8 List of general guidance to be found in PERG