7. Main functions, powers and objectives of the AFSA

(1) The AFSA has such functions and powers as are conferred, or expressed to be conferred, on it:

1. (a) by or under the Constitutional Statute of the Republic of Kazakhstan “On the Astana International Financial Centre” (“the Constitutional Statute”); and
2. (b) by or under any other law made by the Governor or the Management Council.

(2) The AFSA has power to do whatever it deems necessary for or in connection with, or reasonably incidental to, performing its functions and exercising its powers conferred in accordance with (1).

(3) In performing its functions and exercising its powers, the AFSA will pursue the following objectives (“the Regulatory Objectives”):

1. (a) the regulation, control and supervision of financial activities in the AIFC by Centre Participants with a view to the maintenance of the safety and soundness of the financial system within the AIFC;
2. (b) ensuring that financial markets in the AIFC are fair, efficient, transparent and orderly;
3. (c) creating fair, transparent and non-discriminatory conditions for Centre Participants;
4. (d) fostering and maintaining confidence in the AIFC’s financial system and regulatory regime;
5. (e) fostering and maintaining the financial stability of the AIFC’s financial services industry and capital markets, including the reduction of systemic risks;
6. (f) preventing, detecting and restraining actions that may cause damage to the reputation of the AIFC or to the financial activities carried out in the AIFC by taking appropriate measures, including by imposing sanctions;
7. (g) protecting interests of investors and users of financial services;
8. (h) implementing in the AIFC a regulatory regime that complies with international standards in the sphere of regulation of financial services;
9. (i) fostering the development of financial technologies in the AIFC; and
10. (j) pursuing such other objectives as may be specified by AIFC’s Regulations from time to time.

(3-1) In pursuing the objective referred to in (3)(f) in the context of anti-money laundering, countering the financing of terrorism and proliferation of weapons of mass destruction the AFSA shall exercise control and supervision over the compliance of Centre Participants with the relevant AIFC Acts by conducting inspections, taking appropriate enforcement actions and imposing sanctions.

8. AFSA power to make Rules

(1)      Any provision in these Regulations to the effect that the AFSA may make Rules on a particular issue is without prejudice to the general rulemaking power of the AFSA and other Centre Bodies under Article 4(3) of the Constitutional Statute.

(2)      The Rules, in such cases or classes of cases as may be prescribed by them, may extend, exclude, waive and/or modify the application of provisions of these Regulations, the Rules or any other legislation administered by the AFSA, with the exception of Part 9 (Enforcement) of these Regulations, if the Board of Directors of the AFSA considers it necessary or desirable order to facilitate the pursuit of AFSA’s Regulatory Objectives.

9. AFSA power to modify or waive Rules

(1) The AFSA may, on the application of a Person or on its own initiative and by written notice, direct that:

(a) 1 or more relevant provisions: (i) apply to the Person with the modifications mentioned in the notice; or (ii) do not apply in relation to the Person.

(b) the AFSA does not intend to take regulatory action over a particular state of affairs or particular conduct.

(2) The AFSA must not make a direction under (1)(a) unless it is satisfied that:

(a) compliance by the Person with the relevant provisions, or with the relevant provisions as unmodified, would be unduly burdensome or would not achieve the purpose for which the relevant provisions were made, and

(b) the direction would not adversely affect the advancement of any of the AFSA’s Regulatory Objectives.

(2-1) The AFSA shall make public by way of guidance the criteria applicable to the making of directions under (1)(b) after the date of publication of the guidance

(3) A direction under (1) may be given subject to conditions.

(4) The AFSA, on the application of the Person or on its own initiative, may: (a) revoke a direction; or (b) vary it.

(5) In this section: “Relevant provisions” means any provision (a) of these Regulations, the Rules or any other legislation administered by the AFSA, and (b) of any other Regulations and Rules which (i) relate to the functions of the AFSA and (ii) are declared by Rules adopted by the Board of Directors of the AFSA to be a provision to which this section applies.

(6) Unless the AFSA is satisfied that it is inappropriate or unnecessary to do so, it must publish a notice under subsection (1) in a way the AFSA considers appropriate for bringing the notice to the attention of: (a) person(s) likely to be affected by it; and (b) others who may be likely to become subject to a similar notice.

(7) The application for a direction, revocation of a direction or its variation must be accompanied by the filing fee prescribed in the Rules by the AFSA from time to time.

10. AFSA decision making procedure

(1) Where a provision in these Regulations or Rules made thereunder requires the AFSA to make a decision, the AFSA will follow the decision making procedures set out in Schedule 1.

(2) Should it consider it necessary or desirable to do so, the AFSA may establish a mechanism whereby a decision made in accordance with (1) may be reviewed by officers of the AFSA who were not involved in making such decision or an objective independent third party competent to carry out such function.

11. Appeals against decisions of the AFSA, and the AFSA's statutory immunity

(1) A Person aggrieved by a decision of the AFSA may appeal to the AIFC Court against the decision.

(2) The grounds of an appeal under this section are that:

• (a) the decision was ultra vires or there was some other error of law;
• (b) the decision was unreasonable;
• (c) the decision was made in bad faith;
• (d) there was a lack of proportionality; or
• (e) there was a material error as to the procedure.

(3) The procedure to be adopted by parties to an appeal and by the AIFC Court on such an appeal is set out in Schedule 2.

(4) Neither the AFSA nor any Person who is, or is acting as, a director, officer or member of staff of the AFSA shall be held liable for anything done or omitted to be done in the performance or purported performance of its functions, or in the exercise or purported exercise of its powers, under these Regulations or any other AIFC Regulations or Rules, unless the act or omission is shown to have been done in bad faith.

12. Definition of Centre Participant

A Centre Participant is defined under Article 1(5) of the Constitutional Statute.

13. Definition of Authorised Firm

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

14. Definition of Authorised Market Institution

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

15. Definition of Authorised Person

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

16. Definition of Ancillary Service Provider

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

17. Definition of Regulated Activity

The AFSA may make Rules prescribing which kinds of Regulated Activities, with such modifications or limitations as may be specified, may be carried on by an Authorised Firm.

18. Definition of Market Activity

(1) The activities specified in Schedule 4 of AIFC General Rules constitute Market Activities for the purposes of these Regulations and Rules made thereunder.

(2) The AFSA may make Rules adding to, removing activities from, or otherwise modifying the lists of Market Activities prescribed under section 18(1).

19. Definition of Ancillary Service

The AFSA may make Rules prescribing which kinds of Ancillary Services, with such modifications or limitations as may be specified, may be carried on by an Ancillary Service Provider.

20. Definition of Controlled Function

(1) The AFSA may make Rules prescribing functions (“Controlled Functions”) of an Authorised Person that may only be carried out by individuals who have been approved by the AFSA to carry out those functions.

(2) Controlled Functions prescribed under section 20(1) may include the functions of senior officers or employees with material responsibility for both or either:

• (a) managing an Authorised Person; or
• (b) the carrying on by an Authorised Person of its Regulated or Market Activities

21. Definition of Approved Individual

An Approved Individual is an individual who is approved by the AFSA to carry out a Controlled Function.

22. Definition of Designated Function

The AFSA may make Rules prescribing functions (“Designated Functions”) of an Authorised Person that may only be carried out by individuals who have been appointed by the Authorised Person as a Designated Individual in relation to that function

23. Definition of Designated Individual

A Designated Individual is an individual who is appointed by an Authorised Person to carry out a Designated Function.

24. The General Prohibition

A Centre Participant must not carry on a Regulated Activity, Market Activity or Ancillary Service unless it is licensed to do so by the AFSA.

25. Prohibition relating to Controlled Functions

(1) A Person must not carry out a Controlled Function for an Authorised Person unless he is approved by the AFSA as an Approved Individual to carry out that Controlled Function for the Authorised Person.

(2) An Authorised Person must take all reasonable steps to ensure that no Person performs a Controlled Function on its behalf:

• (a) without being authorised by the AFSA as an Approved Individual in relation to the relevant Controlled Function; or
• (b) contrary to a restriction imposed by the AFSA; or
• (c) where Approved Individual status of that individual has been suspended or withdrawn.

26. Prohibition relating to Designated Functions

An Authorised Person must take all reasonable steps to ensure that no Person performs a Designated Function on its behalf

• (a) without being appointed by the Authorised Person as a Designated Individual in relation to the relevant Designated Function; or
• (b) contrary to a restriction imposed by the AFSA; or
• (c) where Designated Individual status of that individual has been suspended or withdrawn.

27. Prohibition relating to Financial Promotions

(1) A “Financial Promotion” is any communication (made via any medium including brochures, telephone calls and presentations) the purpose or effect of which is:

• (a) to promote or advertise
• (i) Investments or
• (ii) any Regulated Activity; or
• (b) to invite or induce any Person
• (i) to enter into an agreement with any Person in relation to Investments or
• (ii) to engage in any Regulated Activity.

(2) A Centre Participant may not make a Financial Promotion except as provided by or under these Regulations.

(3) The AFSA may make Rules relating to:

• (a) the circumstances in which a Centre Participant may make, or will be deemed to make, a Financial Promotion; and
• (b) the form and content of such Financial Promotion.

28. Enforceability of Agreements

(1) Subject to section 28(5), a Centre Participant who makes an agreement whilst acting in breach of the General Prohibition, or who makes an agreement as a result of the making by himself or another Person of a Financial Promotion which is in breach of the Financial Promotions Prohibition, will not be entitled to enforce such agreement against any party (a "relevant party") to the agreement.

(2) Subject to any agreement that may otherwise be reached between the parties, a relevant party may apply to the AIFC Court to recover:

• (a) any money paid or property transferred by him under the agreement;
• (b) compensation reflecting any loss sustained by the relevant party as a direct result of such payment or transfer; and
• (c) compensation for an amount becoming due that is dependent upon a contingency occurring under the relevant agreement, provided that such contingency has occurred prior to the relevant party being notified by the other party or by the AFSA that the agreement was entered into in breach of the General Prohibition or the Financial Promotions Prohibition.

(3) If the relevant party chooses not to perform the agreement or, under section 28(2), recovers money paid or property transferred by him under the agreement, he must in turn repay any money or property received under the agreement.

(4) The compensation recoverable under section 28(2)(b) is the amount agreed between the parties to the agreement or, following an application to the AIFC Court, the amount determined by the AIFC Court.

(5) If the AIFC Court is satisfied that the Centre Participant:

• (a) who acted in breach of the General Prohibition reasonably believed that he was not in breach of the General Prohibition by entering into such agreement; or
• (b) who made the Financial Promotion reasonably believed that he was not in breach of the Financial Promotions Prohibition; or
• (c) who made an agreement as a result of the making by another Person of a Financial Promotion which was in breach of the Financial Promotions Prohibition, did not know that the relevant Financial Promotion was in breach of the Financial Promotions Prohibition.

and that it is fair and just in the circumstances to make such an order, it may make one or more of the following orders:

• (d) an order that the agreement be enforced between the parties to such extent and under such terms and conditions as the AIFC Court sees fit; or
• (e) an order that money paid or property transferred under the agreement be retained or dealt with in accordance with the agreement or in such manner as the AIFC Court deems fit.

(6) For the purposes of (5), it is not relevant that the relevant Centre Participant was unaware of the existence of either the General Prohibition or the Financial Promotion Prohibition.

(7) Where property transferred under the agreement has been transferred to a third party, a reference in this section to such property will be interpreted as a reference to the value of the property at the time of the transfer under the agreement.

(8) In this section, "agreement" means an agreement, the making or performance of which constitutes, purports to constitute or is part of, the carrying on of a Regulated Activity, Market Activity or Ancillary Service.

29. False claims to be a Centre Participant

(1) A Person who is not a Centre Participant must not represent that he is a Centre Participant.

(2) A Centre Participant who is not an Authorised Firm, an Authorised Market Institution or an Ancillary Service Provider must not represent that he is such a Person.

30. Application for a Licence to carry on Regulated Activities

(1) A Person may apply to the AFSA for a Licence authorising a Centre Participant to carry on one or more Regulated Activities.

(2) An Authorised Firm may apply to the AFSA to extend, vary or withdraw its Licence to carry on Regulated Activities.

(3) The applicant for a Licence, variation of a Licence or withdrawal of a Licence may withdraw its application by giving the AFSA notice at any time before the AFSA issues, varies or withdraws the Licence or rejects the application.

31. Form and content of application for a Licence

(1) An application for a Licence or variation or withdrawal of a Licence must be in such form and contain such information as may be prescribed by the AFSA from time to time.

(2) The AFSA may make Rules providing that certain Centre Participants or types of Centre Participant may not be granted a Licence to carry on particular Regulated Activities.

(3) The AFSA may make Rules providing for such requirements referred to in 31(1) to be varied in cases where an application is made by or on behalf of a Centre Participant which is, at the time of application, regulated in a jurisdiction other than the AIFC.

(4) The AFSA may waive all or any part of its generally adopted requirements as to form and contents either in individual cases or generally, provided it is satisfied in either case that:

• (a) materially similar, up-to-date information is provided in other documentation already issued or completed by the applicant; or
• (b) such information is not necessary in the light of any registration or authorisation of the applicant in another jurisdiction; or
• (c) such information is not considered by the AFSA to be relevant in the context of any particular application.

(5) The AFSA may require the applicant to provide additional information reasonably required for the AFSA to be able to decide the application.

(6) If at any time between the filing of an application and the grant of a Licence or the grant of an extension to a Licence the applicant becomes aware of a material change reasonably likely to be relevant to the application under consideration, it must inform the AFSA in writing of such change without delay.

32. Financial technology

The AFSA may, on the application of a Person or its own initiative and by written notice, waive or modify the requirements of these Regulations or Rules made thereunder where it considers it necessary or desirable to do so in the field of financial technology.

33. Exemption

The AFSA may issue an order or make Rules:

• (a) prescribing certain Centre Participants or categories of Centre Participant to be exempted from

(i) the General Prohibition in respect of Regulated Activities; or

(ii) the requirements referred to in section 34(1); and

• (b) providing for any such exemptions to be:

(i) limited to certain Regulated Activities or specified circumstances; or

(ii) subject to certain conditions and restrictions.

34. Criteria for the grant of a Licence to carry on Regulated Activities

(1) The AFSA may only grant a Licence authorising a Centre Participant to carry on one or more Regulated Activities if it is satisfied that the Centre Participant:

• (a) has adequate and appropriate resources, including financial resources;
• (b) is fit and proper;
• (c) is capable of being effectively supervised; and
• (d) has adequate compliance arrangements, including policies and procedures, that will enable it to comply with all the applicable legal requirements.

(2) The AFSA may make Rules prescribing the matters to which the AFSA will have regard in making the above assessment.

35. Grant or rejection of application

(1) The AFSA may:

• (a) grant an application for a Licence, variation or withdrawal of a Licence either without conditions, restrictions or requirements or with such conditions, restrictions or requirements as it considers appropriate; or
• (b) reject the application.

(2) Where the AFSA grants an application for a Licence or variation or withdrawal of a Licence, the AFSA will notify the applicant of:

• (a) such decision;
• (b) the date on which the Licence or extension will be deemed to take effect;
• (c) the Regulated Activity or Regulated Activities that the applicant is authorised to carry on; and
• (d) any conditions and restrictions applicable to the Licence or the newly extended Licence.

(3) Where the AFSA rejects an application for Authorisation or variation or withdrawal of an Authorisation, the AFSA will inform the applicant in writing of such refusal and, where requested by the applicant, the reasons for such refusal, and of the applicant’s right to appeal that decision to the AIFC Court.

36. Application for a Licence to carry on Market Activities

(1) A Person may apply to the AFSA for a Licence authorising a Centre Participant to carry on one or more Market Activities.

(2) An Authorised Market Institution may apply to the AFSA to extend, vary or withdraw its Licence to carry on Market Activities.

(3) The applicant for a Licence, variation of a Licence or withdrawal of a Licence may withdraw its application by giving the AFSA notice at any time before the AFSA issues, varies or withdraws the Licence or rejects the application.

(4) An application under this section must be made in such manner as the AFSA may require.

37. Criteria for the grant of a Licence to carry on Market Activities

(1) The AFSA may only grant a Licence authorising a Centre Participant to carry on one or more Market Activities if it is satisfied that the Centre Participant:

• (a) has adequate and appropriate resources, including financial resources and technology resources;
• (b) is fit and proper;
• (c) is capable of being effectively supervised; and
• (d) has adequate compliance arrangements, including policies and procedures, that will enable it to comply with all the applicable legal requirements, including the Rules.

(2) The AFSA may make Rules prescribing the matters to which the AFSA will have regard in making the above assessment.

38. Grant or rejection of application

(1) The AFSA may:

• (a) grant an application under section 36, either without conditions, restrictions or requirements or with such conditions, restrictions or requirements as it considers appropriate; or
• (b) reject the application.

(2) Where the AFSA grants an application under section 36, the AFSA will notify the applicant of:

• (a) such decision;
• (b) the date on which the Licence will be deemed to take effect;
• (c) the Market Activity or Market Activities that the applicant is authorised to carry on; and
• (d) any conditions and restrictions applicable to the Licence.

(3) Where the AFSA rejects an application under section 36, the AFSA will inform the applicant in writing of such refusal and, where requested by the applicant, the reasons for such refusal, and of the applicant’s right to appeal that decision to the AIFC Court .

(4) The AFSA may vary the terms of a Licence granted by it under this section, either on the application of the Authorised Market Institution or upon its own initiative.

39. Exemption for Authorised Market Institutions

(1)      An Authorised Investment Exchange is exempt from the General Prohibition in respect of any Regulated Activity:

1. (a)which is carried on as a part of the Authorised Investment Exchange's business as an investment exchange; or
2. (b)which is carried on for the purposes of, or in connection with, the provision by the Authorised Investment Exchange of services designed to facilitate the provision of clearing services by another Person.

(2)      An Authorised Clearing House is exempt from the General Prohibition in respect of any Regulated Activity:

1. (a)which is carried on for the purposes of, or in connection with, the provision of clearing services by the Authorised Clearing House; or
2. (b)which is carried on for the purposes of, or in connection with, the provision by the Authorised Clearing House of services designed to facilitate the provision of clearing services by another Person.

(3)      An Authorised Private E-currency Trading Facility is exempt from the General Prohibition in respect of any Regulated Activity:

1. (a)which is carried on as a part of the Authorised Private E-currency Trading Facility's business as a private E-currency trading facility; or
2. (b)which is carried on for the purposes of, or in connection with, the provision by the Authorised Private E-currency Trading Facility of services designed to facilitate the provision of clearing services by another Person.

(4)      Subject to AMI 7.2, an Authorised Crowdfunding Platform is exempt from the General Prohibition in respect of any Regulated Activity which is carried on as a part of the Authorised Crowdfunding Platform's business as a private crowdfunding platform.

40. Application for a License to carry on Ancillary Services

(1) A Person may apply to the AFSA for a License permitting a Centre Participant to carry on one or more Ancillary Services.

(2) An Ancillary Service Provider may apply to the AFSA to extend, vary or withdraw its Licence to carry on Ancillary Services.

(3) An application under this section must be made in such manner as the AFSA may by Rules require.

41. Criteria for the grant of a Licence to carry on Ancillary Services

(1) The AFSA may only grant a Licence permitting a Centre Participant to carry on one or more Ancillary Services if it is satisfied that the Centre Participant is fit and proper.

(2) The AFSA may prescribe by Rules:

• (a) the Centre Participants or class of Centre Participants who may be permitted to carry on Ancillary Services;
• (b) the requirements for the grant of such a Licence; and
• (c) the circumstances in which the AFSA may revoke such a Licence.

42. Applications for Controlled Function approval

(1) The AFSA may make Rules detailing:

• (a) the procedure for application to the AFSA for registration as an Approved Individual including requirements as to the form and content of the application, any fees payable by an Authorised Person in respect of its Approved Individuals and the procedures for modification or withdrawal of an Approved Individual’s registration;
• (b) principles or other requirements to which Approved Individuals are required to adhere in the performance of Controlled Functions;
• (c) requirements for Approved Individuals to report to the AFSA; and
• (d) the circumstances in which registration of an Approved Individual may be withdrawn at the instance of the AFSA.

(2) The AFSA may waive all or any part of its generally adopted requirements as to the form and content of an application under section 42(1) if it is satisfied that such information is not necessary in the light of any registration, authorisation or approval the relevant individual may have in a jurisdiction outside the AIFC.

43. Criteria for approval

(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:

• (a) the individual's integrity;
• (b) the individual's competence and capability;
• (c) the individual's financial soundness;
• (d) the individual's proposed role within the Authorised Person; and
• (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:

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

44. Grant or rejection of application

(1) The AFSA may:

• (a) grant or vary an approval under section 42 either without conditions restrictions or requirements or with such conditions restrictions or requirements as it considers appropriate; or
• (b) reject the application.

(2) Where the AFSA grants an application for approval or variation of an approval under section 42, the AFSA will notify the Authorised Person accordingly.

(3) Where the AFSA rejects an application for approval or variation of an approval under section 42, the AFSA will inform the Authorised Person in writing of such refusal and, where requested by the Authorised Person, the reasons for such refusal, and of the Authorised Person’s right to appeal that decision to the AIFC Court.

45. Residency requirement for Authorised Individual

The AFSA may require an Authorised Person to ensure that a particular Controlled Function is carried on by an Authorised Individual who is resident in the Republic of Kazakhstan.

46. Criteria for appointment of Designated Individual

(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 and to carry on the relevant Designated Function.

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

• (a) the individual's integrity;
• (b) the individual's competence and capability;
• (c) the individual's financial soundness;
• (d) the individual's proposed role within the Authorised Person; and
• (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:

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

47. Review of appointments by the AFSA

(1) An Authorised Person must maintain records of the assessment process that it conducts in respect of each Designated Individual appointed by it.

(2) An Authorised Person must make such records available to the AFSA on request.

(3) If the AFSA considers that a Designated Individual is not fit and proper, it may take such steps as it considers necessary or desirable in the interests of the AIFC.

51. Requirement to have Business Rules

An Authorised Market Institution must establish rules (“Business Rules”) governing relations between itself and the participants in the market and dealing with such matters as may be prescribed for this purpose in rules by the AFSA.

52. Approval and consultation on Business Rules

(1) An Authorised Market Institution may only bring its Business Rules and any amendment thereto into effect after such rules have been approved by the AFSA.

(2) The AFSA may require an Authorised Market Institution to make its Business Rules and any amendment thereto available for public consultation prior to their becoming effective.

53. Legal effect of Business Rules

The Business Rules (other than Listing Rules) of an Authorised Market Institution have effect as a contract:

• (a) between the Authorised Market Institution and each participant in the market; and
• (b) between a participant and each other participant; under which each of those Persons agrees to observe the Business Rules to the extent that they apply to the Person and to engage in conduct that the Person is required by the Business Rules to engage in.

54. Enforcement of Business Rules

(1) If a Person who is under an obligation to comply with or enforce any of an Authorised Market Institution’s Business Rules fails to meet that obligation, an application to the AIFC Court may be made by:

1. (a) the AFSA; or
2. (b) the Authorised Market Institution; or
3. (c) the operator of a clearing and settlement facility with which the Authorised Market Institution has clearing and settlement arrangements; or
4. (d) a Person aggrieved by the failure.

(2) After giving an opportunity to be heard to the applicant and the Person against whom the order is sought, the AIFC Court may make orders giving directions to:

1. (a) the Person against whom the order is sought; or
2. (b) if that Person is a Body Corporate, the directors of the Body Corporate; or
3. (c) if that Person is a Listed Fund, the Fund Manager of the Listed Fund, about compliance with, or enforcement of, the Business Rules.

(3) For the purposes of this section:

1. (a) if a Body Corporate fails to comply with or enforce provisions of the Business Rules of an Authorised Market Institution, a Person who holds Securities of that Body Corporate that are able to be traded on a market operated by the Authorised Market Institution is taken to be a Person aggrieved by the failure;
2. (b) if a Fund Manager of a Listed Fund fails to comply with or enforce provisions of the Business Rules of an Authorised Market Institution in respect of that Listed Fund, a person who holds Units in that Listed Fund is taken to be a Person aggrieved by the failure.

(4) There may be other circumstances in which a Person may be aggrieved by a failure for the purposes of this section.

55. Persons eligible for Membership

(1) Subject to such further admission criteria as the AFSA may prescribe by Rules, an Authorised Market Institution may only admit as a Member:

• (a) an Authorised Firm; or
• (b) a Recognised Non-AIFC Member.

(2) An Authorised Person engaged in the activity of Operating a Private E-currency Business may only admit as a Member a Person who satisfies admission criteria set out in its Membership Rules and which is either:

• (a) an Authorised Firm;
• (b) a Recognised Non-AIFC Member; or
• (c) a body corporate or an individual (natural person) that carries on the activity solely as principal.

56. AFSA power to require report from an Authorised Market Institution

Without prejudice to its powers under section 96 (Power to gather information), the AFSA may require, at such frequency and in such manner and in such form as it may prescribe in Rules, an Authorised Market Institution to provide the AFSA with a report or reports relating to the conduct of or the performance of the regulatory functions of an Authorised Market Institution, including but not limited to a report or reports addressing:

• (a) ongoing compliance of the Authorised Market Institution with the terms of its Licence; or
• (b) complaints received and dealt with and disciplinary matters arising and dealt with; or
• (c) adequacy and performance of systems and controls; or
• (d) financial matters concerning the operation of the Authorised Market Institution.

57. AFSA power to impose requirements on an Authorised Market Institution

Without limiting the powers available to the AFSA under Part 8 (Supervision of Authorised Persons), the AFSA may direct an Authorised Market Institution to do or not do specified things that the AFSA considers are necessary or desirable or to ensure the integrity of the AIFC financial markets, including but not limited to directions:

1. (a)requiring compliance with any duty, requirement, prohibition, obligation or responsibility applicable to an Authorised Market Institution; or
2. (b)requiring an Authorised Market Institution to act in a specified manner in relation to a transaction conducted on or through the facilities operated by an Authorised Market Institution, or in relation to a specified class of transactions; or
3. (c)requiring an Authorised Market Institution to act in a specified manner or to exercise its powers under any rules that the Authorised Market Institution has made; or
4. (d)excluding the application of any requirements for engaging in the activity of Operating a Private E-currency Business imposed by the Rules; or
5. (e)imposing on an Authorised Person engaged in the activity of Operating a Private E-currency Business any additional requirements that the AFSA considers appropriate.

58. AFSA power to give directions to an Authorised Market Institution

Without limiting the application of section 95 (Exercise of supervisory powers by the AFSA), the AFSA may direct an Authorised Market Institution to:

1. (a)close the market or facilities operated by an Authorised Market Institution in a particular manner or for a specified period; or
2. (b)suspend transactions on the market or through the facilities operated by the Authorised Market Institution; or
3. (c)suspend transactions in Securities, Units of a Listed Fund or Private E-currencies conducted on the market or through the facilities operated by the Authorised Market Institution; or
4. (d)prohibit trading in Securities, Units of a Listed Fund or Private E-currencies conducted on the market or through the facilities operated by the Authorised Market Institution; or
5. (e)defer for a specified period the completion date of transactions conducted on the market or through the facilities operated by the Authorised Market Institution; or
6. (f)prohibit a specified Person from undertaking any transactions on the facilities operated by the Authorised Market Institution; or
7. (g)do any act or thing, or not do any act or thing, in order to ensure an orderly market, or reduce risk to the AFSA’s objectives.

59. Liability of Authorised Market Institutions and their Employees

Neither an Authorised Market Institution nor any Employee of an Authorised Market Institution may be held liable for anything done or omitted to be done in the performance or discharge or purported performance or discharge of their respective duties and regulatory functions if the act or omission is shown to have been committed or omitted in good faith.

60. Prohibition – Offer of Securities

A Person must not make an Offer of Securities except as provided in Rules made by the AFSA

61. Definition of an Offer of Securities

An Offer of Securities means a communication to any Person in any form or by any means, presenting information on the terms of the Offer and the Securities offered, so as to enable an investor to decide whether or not to buy or subscribe to those Securities but excluding:

1. (a) any communication in connection with the trading of Securities admitted to trading on an Authorised Investment Exchange; or
2. (b) any communication made for the purposes of complying with the on-going reporting requirements of the AFSA or an Authorised Market Institution; or
3. (c) any other communication prescribed in the Rules by the AFSA.

Guidance: Offers of Units in a Listed Fund

For the avoidance of doubt, this Chapter 2 does not apply to the Offer of Units in a Listed Fund. While a Unit of a Listed Fund is, in general terms, a type of security, it is not a Security for the purposes of the Framework Regulations (as defined in the Glossary (GLO)) or any other AIFC Financial Services Regulations or Rules to which GLO applies. Rules in relation to the Offer of Units in a Listed Fund are set out, inter alia, in the AIFC Collective Investment Scheme Rules. Fund Managers should also refer to the applicable Business Rules.

62. Prohibition – Admission to trading

A Person may not have Securities or Units in a Listed Fund admitted to trading on an Authorised Investment Exchange unless:

1. (a) such Investments have been admitted to the Official List maintained by the Authorised Investment Exchange; and
2. (b) in relation to Securities, a Prospectus in relation to the relevant Securities containing the information prescribed for this purpose by the AFSA has been approved by the Authorised Investment Exchange; and
3. (c) in relation to Units in Listed Funds other than Overseas Listed Funds:
4. (i) the Fund is a Non-Exempt Fund under the AIFC Collective Investment Scheme Rules; and

(ii) there are Offering Materials in relation to the relevant Units and the Authorised Investment Exchange has satisfied itself that such Offering Materials satisfies the requirements in AIFC Collective Investment Scheme Rules.

Guidance: Units in a Listed Fund

For the avoidance of doubt, a Prospectus is not required in relation to Units in a Listed Fund. The requirements in relation to Offering Materials, which apply to Units in a Listed Fund (other than Overseas Listed Funds), are set out in the CIS. The requirements in relation to Offering Materials for Overseas Listed Funds will be regulated according to the Business Rules.

63. Exemptions

The AFSA may, at its discretion and on its own initiative, identify by Rules:

• (a) Exempt Offerors; and
• (b) Exempt Securities to which the prohibition in section 62 does not apply or applies in a modified manner.

64. Maintaining an Official List

(1) Subject to (3), an Official List for an Authorised Investment Exchange may be maintained by either the relevant Authorised Investment Exchange or the AFSA.

(2) An Authorised Investment Exchange must, when maintaining an Official List, comply with the relevant requirements in these Regulations and the Rules made thereunder.

(3) The AFSA may, at any time, transfer the responsibility for maintaining an Official List hitherto maintained by an Authorised Investment Exchange to the AFSA where it considers it necessary or desirable to do so.

(4) An Authorised Investment Exchange must not permit trading of Securities or Units in a Listed Fund on its facilities unless such Investments are admitted to, and not suspended from, an Official List maintained by the Authorised Investment Exchange or the AFSA except where otherwise prescribed in the Rules.

65. Listing Rules Requirements

(1) An Authorised Investment Exchange must, when maintaining an Official List, establish and maintain Listing Rules as part of its Business Rules.

(2) The Listing Rules of an Authorised Investment Exchange must contain such provisions as are prescribed in the Rules.

(3) Where the AFSA maintains an Official List, it will, by Rules, prescribe the relevant Listing Rules.

66. Admission of Securities or Units in a Listed Fund to an Official List

(1) An Authorised Investment Exchange or the AFSA may grant admission of Securities or Units in a Listed Fund to an Official List maintained by it only where it is satisfied that such admission is in accordance with the relevant Listing Rules.

(2) Where a Person applies to have Securities or Units in a Listed Fund admitted to an Official List maintained by an Authorised Investment Exchange or the AFSA, the Authorised Investment Exchange or the AFSA, as is relevant, must notify the applicant in writing of its decision in relation to the application for admission of such Investments to the Official List.

(3) Where a Person has any Securities or Units in Listed Funds included on an Official List, such Investments must be admitted to trading on an Authorised Investment Exchange as soon as possible.

(4) Where any Securities or Units in Listed Funds included in an Official List are not admitted to trading in accordance with the requirement in section 66(3), such Investments must be removed from the Official List.

(5) The AFSA may, by Rules, prescribe any circumstances in which Securities or Units in a Listed Fund admitted to an Official List need not comply with the requirement in section 66(3).

67. AFSA objection to admission of Securities or Units in a Listed Fund to an Official List

(1) Where an Authorised Investment Exchange maintains an Official List, the AFSA may:

1. (a) object to the admission of Securities or Units in a Listed Fund to such an Official List; or
2. (b) impose conditions or restrictions in respect of the admission of Securities or Units in a Listed Fund to such an Official List, or vary or withdraw such conditions or restrictions, in the circumstances specified in section 67(3).

(2) Where the AFSA maintains an Official List, the AFSA may:

1. (a) refuse an application for admission of Securities or Units in a Listed Fund to such an Official List; or
2. (b) impose conditions or restrictions, in respect of the admission of Securities or Units in a Listed Fund to such an Official List, or vary or withdraw such conditions or restrictions, in the circumstances specified in section 67(3).

(3) The AFSA may exercise its powers under section 67(1) or 67(2) where:

1. (a) the AFSA reasonably considers that:
2. (i) granting the Securities or Units in a Listed Fund admission to an Official List would be detrimental to the interests of Persons dealing in the relevant Securities or Units in a Listed Fund using the facilities of an Authorised Investment Exchange or otherwise; or

(ii) any requirements in the Listing Rules as are applicable have not been or will not be complied with; or

(iii) any requirement imposed by the AFSA has not been or will not be complied with; or

(iv) the Issuer of the Securities or Units in a Listed Fund has failed or will fail to comply with any obligations applying to it including those relating to having its Securities or Units in a Listed Fund admitted to an Official List or listed or traded in another jurisdiction; or

1. (b) the AFSA otherwise considers it necessary or desirable to do so.

(4) Where the AFSA objects to the admission of Securities or Units in a Listed Fund to an Official List pursuant to section 67(3)(a), such Investments must not be admitted by an Authorised Investment Exchange to its Official List.

(5) Where the AFSA imposes conditions or restrictions on the admission of Securities or Units in a Listed Fund to an Official List pursuant to section 67(3)(b), such Investments must not be admitted by an Authorised Investment Exchange to its Official List unless there is compliance with those conditions and restrictions.

68. Suspending and delisting Securities or Units in a Listed Fund from an Official List

(1) The AFSA or an Authorised Investment Exchange may, in accordance with its Listing Rules, suspend or delist Securities or Units in a Listed Fund from its Official List with immediate effect or from such date and time as may be specified where it is satisfied that there are circumstances that warrant such action or it is in the interests of the AIFC.

(2) The AFSA may direct an Authorised Investment Exchange to suspend or delist Securities or Units in a Listed Fund from an Official List with immediate effect or from such date and time as may be specified if it is satisfied there are circumstances that warrant such action or it is in the interests of the AIFC.

(3) The AFSA may withdraw a direction made under section 68(2) at any time.

(4) Securities or Units in a Listed Fund that are suspended from an Official List remain admitted to an Official List for the purposes of this Part.

(5) The AFSA may, by Rules, prescribe any additional requirements or procedures relating to the delisting or suspension of Securities or Units in a Listed Fund from, or restoration of Securities or Units in a Listed Fund to, an Official List.

69. Prospectus content

A Prospectus must contain:

• (a) information which is material to an investor for making an informed assessment of:

(i) the assets and liabilities, profits and losses, financial position, and prospects of the Issuer and of any guarantor;

(ii) the rights attaching to the Securities; and

(iii) the reasons for the issuance and its impact on the Issuer; and

• (b) such further information and documents as may be specified by the AFSA pursuant to section 70.

70. AFSA power to prescribe Prospectus content

(1) The AFSA may, by Rules, prescribe the information that must be included in a Prospectus.

(2) The AFSA may, in prescribing the information to be included in a Prospectus, require specific content for a Prospectus of a particular type of Security.

(3) The Issuer or other Person responsible for the issue of a Prospectus must include in the Prospectus all the information required under subsections (1) and (2) that would be reasonable for him to have knowledge of, or acquire through reasonable enquiries.

(4) The AFSA may by Rules prescribe:

• (a) the circumstances in which a Prospectus may incorporate any material by reference; and
• (b) the Persons liable for the content of a Prospectus.

71. AFSA power to authorise omission of information

The AFSA may authorise the omission from the Prospectus, or constituent parts thereof, of certain information to be included therein, where it considers that any of the following conditions is met:

• (a) disclosure of such information would be contrary to the public interest;
• (b) disclosure of such information would be seriously detrimental to the Issuer or to the guarantor, if any, provided that the omission of such information would not be likely to mislead the public with regard to facts and circumstances essential for an informed assessment of the Issuer or guarantor, if any, and of the rights attached to the securities to which the prospectus relates;
• (c) such information is of minor importance in relation to admission to trading on an Authorised Investment Exchange and would not influence the assessment of the financial position and prospects of the Issuer or guarantor, if any.

72. AFSA power to publish or require publication of information

Where a Person issuing a Prospectus fails to publish any information which that Person is required to publish by or under these Regulations, the AFSA may direct the Issuer to publish such information or in a time frame prescribed by the AFSA or publish such information itself.

73. Obligation to issue a Supplementary Prospectus

If at any time after the issue of a Prospectus there is a significant change in, or a material mistake or inaccuracy affecting any matter contained in the Prospectus or a significant new matter arises, the Issuer or the Person responsible for the issue of the Prospectus must issue a Supplementary Prospectus which provides details of the change, mistake, inaccuracy or new matter.

74. Right to withdraw

(1) Where the obligation to issue a Supplementary Prospectus arises, investors who have already agreed to purchase or subscribe for the Securities before the Supplementary Prospectus is published have the right to withdraw their acceptances. Subject to (2), such right is exercisable within five working days after the issue of the Supplementary Prospectus or such longer period as either the Issuer may decide or the Authorised Investment Exchange or the AFSA may direct.

(2) Investors may exercise the right to withdraw their acceptances if the significant new factor, material mistake or material inaccuracy in (1) arose or was noted before the closing of the offer period or the delivery of the securities, whichever occurs first.

75. Prohibition against misleading and deceptive statements or omissions

(1) A Person must not issue a Prospectus if there is:

• (a) a misleading or deceptive statement in the Prospectus; or
• (b) any material omission from the Prospectus; or
• (c) a significant new matter or a significant change in circumstances is known to the Issuer before the Prospectus is issued.

(2) A Person does not contravene the prohibition in section 75(1) if that Person can prove the circumstances or matters specified in sections 76 or 77.

76. Defence of reasonable inquiries and reasonable belief

A Person does not commit a contravention of section 75(1), if that Person proves that he:

• (a) made all inquiries that were reasonable in the circumstances; and
• (b) after making such inquiries, believed on reasonable grounds that the Prospectus was not misleading or deceptive.

77. Defence of reasonable reliance on information given by another Person

(1) A Person does not commit a contravention of section 75(1) if the Person proves that he placed reasonable reliance on information given to him by:

• (a) if the Person is not a natural Person, someone other than a member of the governing body, employee or agent of the Person; or
• (b) if the Person is a natural Person, someone other than an employee or agent of the natural Person.

(2) For the purposes of this Part, a Person is not the agent of a Person merely because he performs a particular professional or advisory function for the Person.

78. Statements about future matters

(1) A Person is taken to make a misleading or deceptive statement about a future matter whether by himself or through his agent, if he, at the time of making the statement or causing the statement to be made, did not have reasonable grounds for making the statement or causing the statement to be made.

(2) The onus for proving that reasonable grounds existed for the purposes of section 78(1) is on the Person who made the statement or caused the statement to be made.

(3) A Person referred to in section 78(2) may rely on the circumstances referred to in section 76 or 77 in order to prove that he had reasonable grounds for making the statement relating to the future matter.

79. Civil compensation

(1) Any Person prescribed in Rules made by the AFSA as being liable for a Prospectus is liable to pay compensation to another Person who has acquired Securities to which the Prospectus relates and who has suffered loss or damage arising from any untrue or misleading statement in the Prospectus or the omission from it of any material matter required to have been included in the Prospectus under these Regulations or Rules made thereunder.

(2) The AFSA may make Rules prescribing circumstances in which a Person who would otherwise be liable under section 79(1) will not be so liable.

(3) Nothing in this section affects the powers, rights or liabilities that any Person may have apart from this section including the power to institute proceedings under section 129 (Action for Damages).

80. Stop orders

If the AFSA is satisfied that an Offer of Securities to the Public would contravene or has contravened these Regulations or the Rules made for the purposes of these Regulations or it is necessary or desirable in the interest of the AIFC, the AFSA may issue a stop order directing that no offer, issue, sale or transfer of the Securities be made for such a period of time as it thinks appropriate.

81. Definition of Reporting Entity

A Person is a Reporting Entity if the Person:

(1) has Securities or Units admitted to an Official List;

(2) is the Fund Manager of a Listed Fund; or

(3) is declared by the AFSA to be a Reporting Entity.

82. Governance

(1) A Reporting Entity must have a corporate governance framework which is adequate to promote prudent and sound management of the Reporting Entity in the long-term interest of the Reporting Entity and its shareholders.

(2) For the purposes of the requirement in section 82(1), the AFSA may, by Rules, prescribe:

1. (a) corporate governance principles and standards that apply to a Reporting Entity, including any requirements applicable to its board of directors and individual members, controllers, employees or any other Person as appropriate;
2. (b) requirements relating to fair treatment of shareholders; and
3. (c) provisions to address conflicts of interests.

(3) The requirements in section 82 do not apply to Listed Funds or Fund Managers of Listed Funds. The AFSA may, by Rules, prescribe any circumstances in which such requirements do not apply to certain other Reporting Entities.

83. Market disclosure

(1) A Reporting Entity must, subject to section 83(5), make disclosures to the market of information specified by the AFSA in the circumstances prescribed by the Rules.

(2) Without limiting the generality of section 83(1), the AFSA may, by Rules, prescribe the type of information and the circumstances in which such information must be disclosed including:

• (a) financial information;
• (b) Inside Information as defined in section 87(a); and
• (c) any other information or material change which occurs in relation to a Reporting Entity.

(3) Where information is required to be disclosed pursuant to section 83(1), the Reporting Entity must:

• (a) issue a release of information to the market disclosing the information; and
• (b) file a report with the AFSA, in the manner prescribed by the Rules.

(4) Where a Reporting Entity has failed to publish information required to be published pursuant to section 83(1) and the Rules made for the purposes of this section, the AFSA may publish such information in a manner considered appropriate by the AFSA.

(5) The AFSA may, by Rules, prescribe the circumstances in which a Reporting Entity need not comply with the disclosure requirement in section 83(1).

84. Financial reports

The AFSA may prescribe by Rules:

• (a) financial reports to be filed by a Reporting Entity;
• (b) audit requirements to be observed by a Reporting Entity.

85. Sponsors and compliance advisers

(1) The AFSA may, where it considers it appropriate to do so, require that a Reporting Entity or a Person that intends to have Securities or Units in a Listed Fund admitted to an Official List or admitted to trading on an Authorised Investment Exchange appoints an Authorised Firm or Accredited Firm to act as a sponsor or compliance adviser.

(2) The AFSA may, by Rules, prescribe:

1. (a) the circumstances in which a Reporting Entity is required to appoint a sponsor or compliance adviser;
2. (b) the requirements applicable to the Reporting Entity and to an Authorised Firm or Accredited Firm appointed as a sponsor or compliance adviser; and
3. (c) any other matter necessary to give effect to such appointments.

86. Market Abuse

A Person must not:

• (a) acquire or dispose of, or attempt to acquire or dispose of, for his own account or for the account of a third party, either directly or indirectly, an Investment, on the basis of Inside Information relating to the Investment; or
• (b) disclose Inside Information to another Person otherwise than in the proper course of the exercise of his employment, profession or duties; or
• (c) recommend or induce any Person, on the basis of Inside Information, to acquire or dispose of an Investment to which that information relates; or
• (d) effect, or participate in effecting, transactions or orders to trade (otherwise than for legitimate reasons in conformity with accepted market practice on the relevant market) which:

(i) give, or are likely to give a false or misleading impression as to the supply of, or demand for, or as to the price or value of, one or more Investments; or

(ii) secure the price of one or more Investments at an abnormal or artificial level;

• (e) effect, or participate in effecting, transactions or orders to trade which employ fictitious devices or any other form of deception or contrivance; or
• (f) disseminate, or cause the dissemination of, information by any means which gives, or is likely to give, a false or misleading impression as to an Investment by a Person who knew or could reasonably be expected to have known that the information was false or misleading.

87. Rules relating to Market Abuse

The AFSA may issue Rules in respect of the scope and effect of section 86, including:

• (a) the meaning of Inside Information;
• (b) particular types of conduct that are to be regarded as contravening or not contravening section 86;
• (c) particular types of conduct that are not to be regarded as contravening section 86; and
• (d) reasons which may or may not be regarded as legitimate, and practices that may or may not be regarded as accepted market practice for the purposes of section 86(d), and such Rules will be binding on all Persons to whom section 86 relates.

88. Takeover Rules

(1) The AFSA may prescribe by Rules (“the Takeover Rules”):

1. (a) the procedures for and obligations of Persons in respect of a Takeover of an Issuer whose Securities are admitted to an Official List with a view to ensuring:
2. (i) that where a Takeover takes place, it does so in an efficient, competitive, fair and informed market;

(ii) that shareholders are treated fairly and shareholders of the same class are treated the same; and

(iii) that a Takeover is conducted in an orderly framework;

1. (b) principles to be observed by a Person involved in a Takeover (“the Takeover Principles”), relating to, but not limited to:
2. (i) treatment of shareholders and of classes of shareholders in a Takeover;

(ii) adequacy of time and of information provided to shareholders to enable proper consideration of a Takeover bid;

(iii) avoidance of the creation of false markets; and

(iv) avoidance of oppression of minorities.

(2) A Person who is involved in a Takeover of an Issuer whose Securities are admitted to an Official List must comply with and observe the spirit and the wording of the Takeover Principles.

(3) The requirements of section 88 do not apply to Listed Funds.

89. Recognition of Non-AIFC Market Institutions

(1) A Person which operates an investment exchange, clearing house from a place of business in a jurisdiction other than the AIFC may apply to the AFSA for an order declaring it to be a Recognised Non-AIFC Investment Exchange or Recognised Non-AIFC Clearing House as appropriate (together “Recognised Non-AIFC Market Institutions”).

(2) An application under subsection (1) must be made in such manner as the AFSA may by Rules require.

(3) The AFSA may make an order referred to in subsection (1) if, having regard to the law and practice of the country or territory in which the applicant's head office is situated and to the rules and practice of the applicant, it appears to the AFSA that the following requirements are met:

• (a) investors are afforded protection equivalent to that which they would be afforded if the body concerned were required to comply with the relevant requirements for the licensing of an Authorised Market Institution in 0 of Part 3;
• (b) there are adequate procedures for dealing with a Person who is unable, or likely to become unable, to meet his obligations in respect of one or more Market Contracts connected with the investment exchange or clearing house;
• (c) the applicant is able to co‐operate with the AFSA by the sharing of information and in other ways;
• (d) adequate arrangements exist for co‐operation between the AFSA and those responsible for the supervision of the applicant in the country or territory in which the applicant or the applicant's head office is situated.

90. Exemption for Recognised Non-AIFC Market Institutions from General Prohibition

(1) An Recognised Non-AIFC Investment Exchange will not be deemed to be carrying on any Market Activity or Regulated Activity in the AIFC where such activity:

• (a) is carried on as a part of the Recognised Non-AIFC Investment Exchange's business as an investment exchange; or
• (b) is carried on for the purposes of, or in connection with, the provision by the exchange of services designed to facilitate the provision of clearing services by another Person.

(2) An Recognised Non-AIFC Clearing House will not be deemed to be carrying on any Market Activity or Regulated Activity in the AIFC where such activity:

• (a) is carried on for the purposes of, or in connection with, the provision of clearing services by the Recognised Non-AIFC Clearing House; or
• (b) is carried on for the purposes of, or in connection with, the provision by the Recognised Non-AIFC Clearing House of services designed to facilitate the provision of clearing services by another Person.

91. Recognised Non-AIFC Member

(1) A Person located in a jurisdiction other than the AIFC may apply to the AFSA for an order declaring it to be a Recognised Non-AIFC Member.

(2) An application under subsection (1) must be made in such manner as the AFSA may by Rules require.

(3) The AFSA may make an order referred to in subsection (1) if, the applicant satisfies the AFSA that the following requirements are met:

• (a) the applicant is licensed or otherwise authorised to trade on or use the facilities of an exchange or clearing house in a jurisdiction acceptable to the AFSA;
• (b) the applicant is regulated in respect of trading in such jurisdiction by a regulator to a standard satisfactory to the AFSA;
• (c) the law and practice under which the applicant is licensed or otherwise authorised is broadly equivalent to the AFSA’s regulatory regime as it applies to a Member;
• (d) when using the facilities of an Authorised Investment Exchange or Authorised Clearing House, the applicant does not exceed the scope of the activities it is authorised to carry on by those responsible for the supervision of the applicant in the country or territory in which the applicant's head office is situated;
• (e) the applicant has agreed to cooperate with the AFSA and subject itself to such parts of the legal and regulatory framework administered by the AFSA as the AFSA may require.

(4) The AFSA will only make an order referred to in subsection (1) if adequate arrangements exist, or will exist, for co-operation between the AFSA and those responsible for the supervision of the applicant in the country or territory in which the applicant or the applicant's head office is situated.

(5) The AFSA may prescribe by Rules ongoing criteria which a Person must satisfy in order to continue to be a Recognised Non-AIFC Member.

(6) If it is necessary or desirable in pursuit of its Regulatory Objectives, the AFSA may revoke or vary an order declaring a Person to be a Recognised Non-AIFC Member in the circumstances and manner prescribed in the Rules made for the purposes of this section.

95. Exercise of supervisory powers by the AFSA

(1) The AFSA may exercise any of the powers set out in this Chapter at any time where it considers it necessary or desirable to do so in accordance with its Regulatory Objectives.

(2) The AFSA may set out in Rules or guidance circumstances in which it is likely to exercise such powers.

(3) Where the AIFC has exercised one or more of the powers set out in this Chapter it may, where it considers it necessary or desirable to do so in accordance with its Regulatory Objectives:

• (a) withdraw a prohibition, restriction or requirement; or
• (b) substitute or vary an existing prohibition, restriction or requirement.

(4) A requirement imposed on a Person as a result of the exercise by the AFSA of powers under this Part may be enforceable by injunction on the application of the AFSA to the AIFC Court.

(5) Any prohibition or requirement including any variation or substitution of such prohibition or requirement, does not operate so as to render an agreement unenforceable by a party to the agreement if he proves that in entering into the agreement he acted in good faith and was unaware of any notice given, served or published in relation to such imposition, withdrawal, substitution or variation.

96. Power to gather information

(1) The AFSA may, by notice in writing, require an Authorised Person, Approved Individual, Designated Individual or other Employee of an Authorised Person to:

• (a) give, or procure the giving of, such specified information; or
• (b) produce, or procure the production of, such specified documents; to the AFSA as the AFSA considers necessary or desirable to meet the objectives of the AFSA.

(2) The AFSA may require an Authorised Person to allow the AFSA to enter its premises during normal business hours or at any other time as may be agreed for the purpose of inspecting and copying information or documents stored in any form on such premises, as it considers necessary or desirable to meet the Regulatory Objectives of the AFSA.

(3) The AFSA may exercise its powers under this section 96 in respect of any information, documents or premises wherever they may be located in the Republic of Kazakhstan.

(4) Information given or a document produced as a result of the exercise by the AFSA of powers under this section is admissible in evidence in any proceedings, provided that any such information or document also complies with any requirements relating to the admissibility of evidence in such proceedings.

97. Power to require the production of a report

(1) The AFSA may, by notice in writing, require an Authorised Person to provide the AFSA with a report on any matter as the AFSA considers necessary or desirable to meet the objectives of the AFSA.

(2) The Person appointed to make a report required by section 97(1) must be a Person nominated or approved by the AFSA.

(3) Where a requirement has been made of an Authorised Person under this section, the Authorised Person must take all reasonable steps to ensure that:

• (a) any Person who is providing or has provided services to the Authorised Person must provide all such assistance as the appointed Person may reasonably require; and
• (b) the appointed Person co-operates with the AFSA.

(4) The obligation in section 97(1) is enforceable on application by the AFSA to the AIFC Court.

(5) The costs of providing a report under section 97(1) will be borne by the Authorised Person to whom a notice has been given under section 97(1).

(6) Subject to section 97(7), information given or a document produced as a result of the exercise by the AFSA of powers under this section is admissible in evidence in any proceedings, provided that any such information or document also complies with any requirements relating to the admissibility of evidence in such proceedings.

(7) The AFSA may not disclose a statement made by a Person in a report made pursuant to a requirement made of the Person under section 97(1) to any law enforcement agency for the purpose of criminal proceedings against the Person unless:

• (a) the Person consents to the disclosure; or
• (b) the AFSA is required by law or court order to disclose the statement.

98. Power to restrict, withdraw or suspend a Licence

The AFSA may:

• (a) impose or vary such conditions, restrictions and requirements on a Licence as the AFSA considers appropriate; or
• (b) withdraw an Authorised Person’s Licence or vary its Licence to remove one or more Regulated Activities or Market Activities; or
• (c) suspend an Authorised Person’s Licence in relation to one or more Regulated Activities or Market Activities.

99. Power to impose a prohibition

The AFSA may prohibit an Authorised Person from:

• (a) entering into certain specified transactions or types of transactions; or
• (b) soliciting business from certain specified Persons or types of Persons; or
• (c) carrying on business in a specified manner or other than in a specified manner; or
• (d) using a particular name or description in respect of the Authorised Person; or
• (e) dealing with any relevant property in a specified manner or other than in a specified manner; or
• (f) assisting, counselling or procuring another Person to deal with any relevant property in a specified manner or other than in a specified manner.

100. Power to impose a requirement

(1) The AFSA may require an Authorised Person to:

• (a) take or refrain from taking such action as the AFSA considers appropriate;
• (b) carry on business in, and only in, a specified manner;
• (c) deal with any relevant property in a specified manner;
• (d) deal with any relevant property such that:

(i) the property remains of a value and in a condition that appears to the AFSA to be desirable with a view to ensuring that the Person will be able to meet its liabilities in relation to the business which constitutes a Regulated Activity for which it holds a Licence; and

(ii) the Person is able at any time to transfer or dispose or otherwise deal with the property when instructed to do so by the AFSA.

(2) For the purposes of this section:

• (a) “dealing” in relation to property includes the maintaining, holding, disposing and transferring of property; and
• (b) “relevant property”, in relation to an Authorised Person, means:

(i) any property held by the Person on behalf of any of the clients of the Person, or held by any other Person on behalf of or to the order of the Person; or

(ii) any other property which the AFSA reasonably believes to be owned or controlled by the Person.

101. Power to enter into enforceable agreement

(1) The AFSA may enter into a written agreement with any Person.

(2) An agreement under (1) may include an agreement to:

• (a) pay any sum to any Person (including the AFSA); or
• (b) take remedial action; or
• (c) do any other thing.

(3) The terms of such an agreement may be varied with the consent of the AFSA.

(4) If the AFSA considers that the Person who entered into the agreement has been or is in breach of any of its terms, it may apply to the AIFC Court for:

• (a) an order directing the Person to comply with the terms of the agreement; or
• (b) an order directing the Person to pay to any Person or to the AFSA an amount up to the amount of any financial benefit that the Person has obtained directly or indirectly and that is reasonably attributable to the breach; or
• (c) any order that the AIFC Court considers appropriate directing the Person to compensate any other Person who has suffered loss or damage as a result of the breach; or
• (d) any other order that the AIFC Court considers appropriate.

102. Obligation of disclosure to the AFSA

(1) Subject to (2), an Authorised Person must disclose to the AFSA anything which reasonably tends to show:

• (a) a breach, or likely breach of a provision of legislation administered by the AFSA; or
• (b) a failure, or likely failure, to comply with any obligation to which a Person is subject under such legislation; or
• (c) any other matter as the AFSA may prescribe in Rules; which may be attributable to the conduct of the Authorised Person or its Employees.

(2) Section 102(1) does not apply to the extent that compliance with such requirement would disclose a Privileged Communication.

(3) An Authorised Person must establish and implement appropriate systems and internal procedures to enable its compliance with section 102(1).

(4) Any provision in an agreement between an Authorised Person and a director, officer, employee, agent or auditor thereof is void in so far as it purports to hinder compliance with an obligation under section 102(1).

(5) No Person may be subjected to detriment or loss or damage merely by reason of undertaking any act to cause or assist an Authorised Person to comply with an obligation under section 102(1).

(6) The AIFC Court may, on application of an aggrieved Person, make any order for relief where a Person has been subjected to any such detriment or loss or damage as referred to in section 102(5).

103. Obligation to comply with an order or requirement of the AFSA

Where the AFSA makes an order, issues a direction or prohibition, or makes any requirement in relation to an Authorised Person pursuant to a provision of this Law or Rules or legislation administered by the AFSA, such Authorised Person must, unless he has a reasonable excuse, comply with such order, direction, prohibition or requirement.

104. Provision of information to the AFSA

An Authorised Person must not:

• (a) provide information which is false, misleading or deceptive to the AFSA; or
• (b) conceal information where the concealment of such information is likely to mislead or deceive the AFSA.

105. Obstruction of the AFSA

An Authorised Person must not engage in conduct that is intended to obstruct the AFSA in the exercise of any powers under this Part or Part 9 (Enforcement), including without limitation the:

• (a) destruction of documents;
• (b) failure to give or produce information or documents specified by the AFSA;
• (c) failure to attend before the AFSA at a specified time and place to answer questions;
• (d) giving of information that is false or misleading; and
• (e) failure to give any assistance in relation to an investigation which the Person is able to give.

106. No liability for provision of information or documents to the AFSA

An Authorised Person, an Approved Individual, a Designated Individual or any other Employee of an Authorised Person is neither liable to a proceeding, nor subject to a liability, nor in breach of any duty, merely by reason of:

• (a) complying, or proposing to comply, with a requirement made, or purporting to have been made, under any provision of this Part for inspection of, copying of, giving of or production of, information or documents;
• (b) the giving of information or production of a document by the Person to the AFSA in good faith and in reasonable belief that the information or document is relevant to any functions of the AFSA whether such information or document is given or produced pursuant to a requirement at law or otherwise.

107. Self-incrimination

Subject to section 108(1), it is not a reasonable excuse for a Person to refuse or fail to:

• (a) permit inspection and copying of any information or document; or
• (b) give or produce, or procure the giving or production of, any information or document; or
• (c) answer questions; pursuant to any requirement under either this Part 8 (Supervision of Authorised Persons) or 0 (Enforcement) on the grounds that any such information or document or answer, as the case may be:
• (d) might tend to incriminate the Person or make the Person liable to a penalty; or
• (e) is, or contains, or might reveal a Privileged Communication; or
• (f) is, or contains, or might reveal a communication made in confidence.

108. Privilege

(1) Where the AFSA requires a lawyer to give information or to produce a document or to answer a question, and the giving of the information or the production of the document or the answer to the question would involve disclosing a Privileged Communication made by, on behalf of, or to, the lawyer in his capacity as a lawyer, the lawyer is entitled to refuse to comply with the requirement unless:

• (a) where the Person to whom, or by, or on behalf of whom, the communication was made is a body corporate that is under official management or is being wound up, the official manager or liquidator of the body as the case may be consents to the lawyer complying with the requirement; or
• (b) otherwise, the Person to whom, or by, or on behalf of whom, the communication was made consents to the lawyer complying with the requirement.

(2) Where a lawyer so refuses to comply with a requirement, he must, as soon as practicable, give to the AFSA a written notice setting out:

• (a) where the lawyer knows the name and address of the Person to whom, or by whom, or on behalf of whom, the communication was made, then that name and address; and
• (b) where the requirement to give information or produce a document relates to a communication which was made in writing, then sufficient particulars to identify the document containing the communication.

(3) “Privileged Communication” means a communication attracting a privilege arising from the provision of professional legal advice and any other privilege applicable at law, but does not include a general duty of confidentiality.

109. Requirement to appoint an Auditor

An Authorised Person must appoint an Auditor.

110. Auditor rules

The AFSA may make such Rules regarding:

• (a) the appointment, term of office, registration or removal of auditors;
• (b) the qualification or approval of auditors;
• (c) the duties, functions and powers of auditors;
• (d) the scope, content and timing of any reports, reviews or audits to be undertaken by auditors;
• (e) the remuneration of auditors;
• (f) the notification or reporting obligations of auditors (whether to the relevant Authorised Person, the AFSA or otherwise); and
• (g) such other related or ancillary matters the AFSA thinks fit.

111. Relevant Transfer

The AFSA may provide by Rules that the transfer of the business of carrying on specified Regulated Activities by an Authorised Firm (a “Relevant Transfer”) either:

• (a) may only be made by an order of the AIFC Court under section 112; or
• (b) may be made by such an order if the transferor elects.

112. Application to the AIFC Court

(1) An application to the AIFC Court for an order sanctioning a Relevant Transfer may be made by either the transferor or the transferee under the Relevant Transfer or both.

(2) Where an application is made to the AIFC Court for an order sanctioning a Relevant Transfer, the AFSA may give directions in respect of:

• (a) the preparation of a report in relation to the transfer;
• (b) the notification of specified Persons of the transfer; and
• (c) the publication of notices in relation to the transfer.

(3) On an application under (1), the following are entitled to be heard:

• (a) any Person who alleges that he would be adversely affected by the carrying out of the transfer; and
• (b) the AFSA.

113. Powers of the Court in relation to a transfer scheme

(1) The AIFC Court may make an order under this section sanctioning a Relevant Transfer if:

• (a) any directions made by the ASFA pursuant to section 112(2) have been complied with;
• (b) on or before the Relevant Transfer becoming effective, the transferee:

(i) will have the authorisation required (if any) to enable it to carry on the business which is to be transferred to it in the place to which it is to be transferred; and

(ii) will possess adequate financial resources to carry on the business concerned in accordance with the legislation applicable in the place to which it is to be transferred; and

• (c) the AIFC Court considers, in all the circumstances of the case, it is appropriate to sanction the Relevant Transfer.

(2) If the AIFC Court makes an order sanctioning a Relevant Transfer, it may by that or any subsequent order make such provision (if any) as it thinks fit:

• (a) for the transfer to the transferee of the whole or any part of the undertaking concerned and of any property or liabilities of the Authorised Firm concerned; or
• (b) for the continuation by (or against) the transferee of any pending legal proceedings by (or against) the firm concerned; or
• (c) with respect to such incidental, consequential and supplementary matters as are, in its opinion, necessary to secure that the Relevant Transfer is fully and effectively carried out; or
• (d) for dealing with the interests of any Person who, within such time and in such manner as the AIFC Court may direct, objects to the Relevant Transfer; or
• (e) for the dissolution, without winding up, of any firm concerned.

(3) An order may:

• (a) transfer property or liabilities whether or not the Authorised Firm concerned otherwise has the capacity to effect the transfer in question; or
• (b) make provision in relation to property which was held by the Authorised Firm concerned as trustee; or
• (c) make provision as to future or contingent rights or liabilities of the Authorised Firm concerned, including provision as to the construction of instruments under which such rights or liabilities may arise.

(4) If an order makes provision for the transfer of property or liabilities:

• (a) the property is transferred to and vests in; and
• (b) the liabilities are transferred to and become liabilities of; the transferee as a result of the order.

(5) If any property or liability included in the order is governed by the law of any jurisdiction other than the AIFC, the order may require the Authorised Firm concerned, if the transferee so requires, to take all necessary steps for securing that the transfer to the transferee of the property or liability is fully effective under the law of that country or territory.

(6) Property transferred as the result of an order under this section may, if the AIFC Court so directs, vest in the transferee free from any charge which is (as a result of the scheme) to cease to have effect.

(7) An order under this section which provides for the transfer of property is to be treated as an instrument of transfer for the purposes of any Regulation or Rule requiring the delivery of an instrument of transfer to register property.

114. Power of the AFSA to conduct an investigation

(1) The AFSA may conduct such investigation as it considers appropriate and expedient:

• (a) where it has reason to suspect that a contravention of any legislation administered by the AFSA is being or may have been committed; or
• (b) further to a request made by a Financial Services Regulator.

(2) A Person is entitled to legal representation during the course of an investigation.

115. Costs of an Investigation

(1) The AFSA will pay the costs and expenses of an investigation save that, where, as a result of an investigation under section 114, the Person under investigation is found to have contravened any legislation administered by the AFSA, the AFSA or, where appropriate, the AIFC Court, may order that the Person must pay the AFSA in respect of the whole or any part of the costs and expenses of the investigation.

(2) The AFSA may apply to the AIFC Court for an order under section 115(1) only where there is a proceeding before the AIFC Court relating to the alleged contravention by the Person.

116. Powers to Obtain Information and Documents for Investigation

(1) Where the AFSA considers that a Person is or may be able to give information or produce a document which is or may be relevant to an investigation, it may:

• (a) enter the business premises of such Person during normal business hours for the purpose of inspecting and copying information or documents stored in any form on such premises;
• (b) require such Person, by written notice, to

(i) give, or procure the giving of, specified information in such form as it may reasonably require; or

(ii) produce, or procure the production of, specified documents; or

(iii) to attend before an officer, employee or agent of the AFSA at a specified time and place to answer questions in private (compulsory interview); or

(iv) give it any assistance in relation to the investigation which the Person is able to give.

(2) Where the AFSA exercises its power under section 116(1)(a) to enter business premises, it may:

• (a) require any appropriate Person to make available any relevant information stored at those premises for inspection or copying;
• (b) require any appropriate Person to convert any relevant information into a form capable of being copied; and
• (c) use the facilities of the occupier of the premises, free of charge, to make copies.

(3) Where the AFSA exercises its power under section 116(1)(b)(iii) to conduct a compulsory interview, it may give a direction:

• (a) concerning who may be present;
• (b) preventing any Person present during any part of the compulsory interview from disclosing to any other Person any information provided to the interviewee or questions asked by the interviewer during the compulsory interview;
• (c) concerning the conduct of any Person present, including as to the manner in which they will participate in the interview;
• (d) requiring the interviewee to swear an oath or give an affirmation that the answers of the interviewee will be true; and
• (e) requiring the interviewee to answer any questions relevant to the investigation.

(4) The AFSA may require the relevant Person to give such information or produce such documents by the end of a reasonable period, at a place and in a form specified in the notice.

(5) The AFSA may exercise its powers under section 116(1) in respect of any Person within, or outside of, the AIFC provided that, if the Person is outside the AIFC and is not an Authorised Person or Approved Individual, the AFSA will either:

• (a) use any arrangements it has with a regulatory authority in the jurisdiction in which the Person is resident or domiciled, or the premises are located, to assist it to exercise the power; or
• (b) apply to the AIFC Court for an order compelling the Person to provide the information, produce or procure the production of the documents, or answer questions, or permitting the AFSA to enter the premises of that Person.

117. Use and effect of information and documents obtained for an Investigation

(1) Subject to section 117(2), any information given or document produced as a result of the exercise by the AFSA of powers under section 116 is admissible in evidence in any proceedings, provided that any such information or document also complies with any requirements relating to the admissibility of evidence in such proceedings.

(2) The AFSA may not disclose a statement made by a Person in answer to any question asked pursuant to a requirement made of the Person under section 116(1)(b)(iii) to any law enforcement agency for the purpose of criminal proceedings against the Person unless:

• (a) the Person consents to the disclosure; or
• (b) the AFSA is required by law or court order to disclose the statement.

(3) The AFSA may retain possession of any information and documents given to it pursuant to a requirement made under section 116(1) for so long as is necessary:

• (a) for the purposes of the investigation to which the notice relates; or
• (b) for a decision to be made about whether or not a proceeding to which the information or documents would be relevant should be commenced; or
• (c) for such a proceeding to be completed.

(4) A Person is not entitled to claim a lien on any documents as a basis for failing to comply with a requirement made under section 116(1), but any lien is not otherwise prejudiced.

(5) Where a Person is unable to produce information or documents in compliance with a requirement made under section 116(1), the AFSA may require the Person to state, to the best of that Person’s knowledge or belief, where the information or documents may be found and who last had possession, custody or control of the information or documents.

(6) Where the AFSA considers that, if disclosed, the fact of the issuing of a notice requiring a Person to:

• (a) produce documents; or
• (b) give information; or
• (c) attend a compulsory interview; or
• (d) give assistance; may hinder the investigation to which it relates, the AFSA may direct a Person who receives a notice under section 116(1) and/or that person’s legal representative not to disclose the receipt of the notice or any information relating to compliance therewith to any other Person, other than his legal representative under a duty of confidentiality.

118. Sanctions for contraventions

(1) If the AFSA considers that a Person has committed a Contravention, it may:

• (a) fine the Person such amount as it considers appropriate in respect of the contravention; and/or
• (b) censure the Person in respect of the contravention; and/or
• (c) make a direction requiring the Person to effect restitution or compensate any other Person in respect of the contravention within such period and on such terms as the AFSA may direct; and/or
• (d) make a direction requiring the Person to account for, in such form and on such terms as the AFSA may direct, such amounts as the AFSA determines to be profits or unjust enrichment arising from the contravention; and/or
• (e) make a direction requiring the Person to cease and desist from such activity constituting or connected to the contravention as the AFSA may stipulate; and/or
• (f) make a direction requiring the Person to do an act or thing to remedy the contravention or matters arising from the contravention; and/or
• (g) make a direction prohibiting the Person from holding office in or being an employee of any Authorised Person.

(2) Nothing in this section prevents the AFSA from exercising any other power that it may exercise under any legislation administered by it.

119. General contravention provision

A Person commits a Contravention if he:

• (a) fails to comply with any prohibition or requirement imposed on him by the AFSA , any undertaking given by him to the AFSA, or any agreement made by him with the AFSA; or
• (b) does anything that is prohibited under, or that contravenes any legislation administered by the AFSA; or
• (c) does not do something that the Person is required to do under any legislation administered by the AFSA; or
• (d) commits an act of fraud or abuses any fiduciary duty which he owes to his clients or customers or to an Authorised Person; or
• (e) acts in a deceptive, misleading or dishonest manner in any context; or
• (f) otherwise commits any contravention described as such in these Regulations or Rules made by the AFSA.

120. Involvement in contraventions

(1) If a Person is knowingly concerned in a Contravention by another Person of legislation administered by the AFSA, that Person also commits a Contravention of the relevant legislation.

(2) A Person is knowingly concerned in a Contravention if, and only if, that Person:

• (a) has aided, abetted, counselled, or procured the Contravention; or
• (b) has induced, whether by threats or promises or otherwise, the Contravention; or
• (c) has in any way, by act or omission, directly or indirectly, been knowingly involved in or been party to, the contravention; or
• (d) has conspired with another or others to commit the Contravention.

121. Contraventions by Bodies Corporate

(1) If a Contravention committed by a Body Corporate is shown:

• (a) to have been committed with the consent or connivance of an officer; or
• (b) to be attributable to any neglect on his part; the officer as well as the Body Corporate commits the Contravention and is liable to sanctions accordingly.

(2) If the affairs of a Body Corporate are managed by its members, subsection (1) applies in relation to the acts and defaults of a member in connection with his functions of management as if he were a director of the Body Corporate.

(3) The AFSA may by Rules provide for the application of any provision of this section, with such modifications as the AFSA considers appropriate, to a Body Corporate formed or recognised under the law of a territory outside the AIFC.

122. Appointment of Managers

(1) Where it considers it necessary or desirable in the pursuit of its objectives, the AFSA may issue a written notice requiring an Authorised Person to appoint one or more individuals to act as managers of the business of such Person on such terms as the AFSA may specify in any such notice.

(2) The terms specified in the written notice may be varied by the AFSA from time to time by further written notice.

(3) An individual so appointed by an Authorised Person must be either nominated or approved by the AFSA.

123. Compulsory Winding up

(1) The AFSA may present a petition to the AIFC Court for the winding up of an Authorised Person.

(2) On such a petition, the AIFC Court may wind up the Authorised Person if it is of the opinion that it is just and equitable that it should be wound up.

124. Injunction – contraventions

(1) Where a Person has engaged, is engaging or is proposing to engage in conduct that constituted, constitutes or would constitute a contravention within the meaning of section 119 the AIFC Court may, on application of the AFSA or any aggrieved Person, make one or more of the following orders:

• (a) an order restraining the Person from engaging in the conduct including but not limited to, engaging in conduct that may constitute a contravention;
• (b) an order requiring that Person to do any act or thing including, but not limited to, acts or things to remedy the contravention or to minimise loss or damage;
• (c) any other order as the AIFC Court sees fit.

125. Injunction – investigations and proceedings

(1) Where:

• (a) the AFSA is conducting or has conducted an investigation into the acts or omissions of a Person (the ‘relevant Person’) which may constitute a contravention within the meaning of section 119; or
• (b) a civil or regulatory proceeding has been instituted, by the AFSA or otherwise, against a relevant Person in relation to an alleged contravention, the AIFC Court may, on application of the AFSA or any aggrieved Person, make one or more of the following orders:
• (c) an order restraining the relevant Person from paying, transferring, disposing of, or otherwise dealing with, any assets of his which he is reasonably likely to dispose of or otherwise deal with;
• (d) an order restraining any other Person holding assets on behalf of the relevant Person from paying, transferring, disposing of, or otherwise dealing with, any assets of the relevant Person which are reasonably likely to be disposed of or otherwise dealt with;
• (e) an order prohibiting the relevant Person or any other Person from taking or sending out of the jurisdiction of the AIFC Court any assets of the relevant Person or held on his behalf;
• (f) in the event that the relevant Person is a natural Person

(i) an order appointing a receiver or trustee, having such powers as the AIFC Court may see fit, of the property or any of the property of the relevant Person;

(ii) an order requiring him to deliver up to the AIFC Court his passport and such other documents as the AIFC Court sees fit; or

(iii) an order prohibiting him from leaving the Republic of Kazakhstan without the consent of the AIFC Court;

• (g) in the event that the relevant Person is a Body Corporate, an order appointing a receiver or receiver and manager, having such powers as the AIFC Court may see fit, of the property or any of the property of the relevant Person.

(2) Nothing in section 125 affects the powers that any Person or the AIFC Court may have apart from this section.

126. Injunction – market abuse

(1) If, on the application of the AFSA, the AIFC Court is satisfied:

• (a) that there is a reasonable likelihood that any Person will engage in Market Abuse; or
• (b) that any Person is or has engaged in Market Abuse and that there is a reasonable likelihood that the Market Abuse will continue or be repeated; the AIFC Court may make an order restraining the Market Abuse.

(2) If on the application of the AFSA the AIFC Court is satisfied:

• (a) that any Person is or has engaged in Market Abuse; and
• (b) that there are steps which could be taken for remedying the Market Abuse; the AIFC Court may make an order requiring him to take such steps as the AIFC Court may direct to remedy it.

(3) If, on the application of the AFSA, the AIFC Court is satisfied that any Person:

• (a) may be engaged in Market Abuse; or
• (b) may have been engaged in Market Abuse. the AIFC Court may make an order restraining the Person concerned from disposing of, or otherwise dealing with, any assets of his which it is satisfied that he is reasonably likely to dispose of, or otherwise deal with.

(4) In subsection (2), references to remedying any Market Abuse include references to mitigating its effect.

127. Restitution Order – contraventions

(1) The AIFC Court may, on the application of the AFSA, make an order under subsection (2) if it is satisfied that a Person has committed a contravention within the meaning of section 119, and:

• (a) that profits have accrued to him as a result of the contravention; or
• (b) that one or more Persons have suffered loss or been otherwise adversely affected as a result of the contravention.

(2) The AIFC Court may order the Person concerned to pay to the AFSA such sum as appears to the Court to be just and equitable having regard:

• (a) in a case within paragraph (a) of subsection (1), to the profits appearing to the AIFC Court to have accrued; and
• (b) in a case within paragraph (b) of subsection (1), to the extent of the loss or other adverse effect; and
• (c) in a case within both of those paragraphs, to the profits appearing to the AIFC Court to have accrued and to the extent of the loss or other adverse effect.

(3) Any amount paid to the AFSA in pursuance of an order under subsection (2) must be paid by it to such Person or distributed by it among such Persons as the AIFC Court may direct.

(4) On an application under subsection (1) the AIFC Court may require the Person concerned to supply it with such accounts or other information as it may require for any one or more of the following purposes:

• (a) establishing whether any and, if so, what profits have accrued to him as mentioned in paragraph (a) of subsection (1);
• (b) establishing whether any Person or Persons have suffered any loss or adverse effect as mentioned in paragraph (b) of subsection (1) and, if so, the extent of that loss or adverse effect; and
• (c) determining how any amounts are to be paid or distributed under subsection (3).

(5) The AIFC Court may require any accounts or other information supplied under subsection (4) to be verified in such manner as it may direct.

(6) Nothing in this section affects the right of any Person other than the AFSA to bring proceedings in respect of the matters to which this section applies.

128. Restitution Order – market abuse

(1) The AIFC Court may, on the application of the AFSA, make an order under subsection (4) if it is satisfied that a Person:

• (a) has engaged in Market Abuse; or
• (b) by taking or refraining from taking any action, has required or encouraged another Person or Persons to engage in behaviour which, if engaged in by the Person concerned, would amount to Market Abuse; and the condition mentioned in subsection (2) is fulfilled.

(2) The condition is that:

• (a) profits have accrued to the Person concerned as a result; or
• (b) one or more Persons have suffered loss or been otherwise adversely affected as a result.

(3) But the AIFC Court may not make an order under subsection (4) if it is satisfied that:

• (a) the Person concerned believed, on reasonable grounds, that his behaviour did not fall within paragraph (a) or (b) of subsection (1); or
• (b) he took all reasonable precautions and exercised all due diligence to avoid behaving in a way which fell within paragraph (a) or (b) of subsection (1).

(4) The AIFC Court may order the Person concerned to pay to the AFSA such sum as appears to the AIFC Court to be just having regard:

• (a) in a case within paragraph (a) of subsection (2), to the profits appearing to the AIFC Court to have accrued;
• (b) in a case within paragraph (b) of subsection (2), to the extent of the loss or other adverse effect;
• (c) in a case within both of those paragraphs, to the profits appearing to the AIFC Court to have accrued and to the extent of the loss or other adverse effect.

(5) Any amount paid to the AFSA in pursuance of an order under subsection (4) must be paid by it to such Person or distributed by it among such Persons as the AIFC Court may direct.

(6) On an application under subsection (1) the AIFC Court may require the Person concerned to supply it with such accounts or other information as it may require for any one or more of the following purposes:

• (a) establishing whether any and, if so, what profits have accrued to him as mentioned in paragraph (a) of subsection (2);
• (b) establishing whether any Person or Persons have suffered any loss or adverse effect as mentioned in paragraph (b) of subsection (2) and, if so, the extent of that loss or adverse effect; and
• (c) determining how any amounts are to be paid or distributed under subsection (5).

(7) The AIFC Court may require any accounts or other information supplied under subsection (6) to be verified in such manner as it may direct.

(8) Nothing in this section affects the right of any Person other than the AFSA to bring proceedings in respect of the matters to which this section applies.

129. Action for damages

(1) Unless otherwise provided under Rules made by the AFSA, where a Person:

• (a) intentionally, recklessly or negligently commits a breach of duty, requirement, prohibition, obligation or responsibility imposed by or under these Regulations; or
• (b) commits fraud or other dishonest conduct in connection with a matter arising under such Regulations; that Person is liable to compensate any other Person for any loss or damage caused to that other Person as a result of such conduct, and otherwise is liable to restore such other Person to the position they were in prior to such conduct.

(2) The AIFC Court may, on application of the AFSA or a Person who has suffered loss or damage caused as a result of conduct described in subsection (1), make orders for the recovery of damages or for compensation or for the recovery of property or for any other order as the AIFC Court sees fit, except where such liability is excluded under these Regulations or any Rules made by the AFSA.

(3) Nothing in this section affects the powers that any Person or the Court may have apart from this section.

130. Power of the AFSA to intervene in proceedings

(1) The AFSA may intervene as a party in any proceedings in the AIFC Court where it considers such intervention appropriate to meet one or more of its Regulatory Objectives.

(2) Where the AFSA so intervenes, it will, subject to any other law, have all the rights, duties and liabilities of such a party.

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

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 derivatives 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; 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.

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 Digital Asset Trading Facility, 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;
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; and
5. (e)     if the applicant seeks a licence to carry on the Market Activity of Operating a Digital Asset Trading Facility, effective arrangements to verify that members admitted to trading on its facilities comply with the Conduct of Business Rules and the Authorised Market Institution Rules.

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 Schedule 4 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.

1.3.4. 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:

1. (a) Senior Executive Officer;
2. (b) Finance Officer; and
3. (c) Compliance 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

(1) An Authorised Person, except for an Authorised Person Operating a Representative Office, must make the following appointments and ensure that they are held by either an Approved Individual or a Designated Individual at all times:

1. (a) Money Laundering Reporting Officer; and
2. (b) such other role or function as the AFSA may direct from time to time.

(2) A Banking Business Firm, as defined in the BBR Rules, must also make the following appointments and ensure that they are held by either an Approved Individual or a Designated Individual at all times:

1. (a) Risk Manager; and
2. (b) Internal Audit Manager.
3. 
   

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.

2.2.6. 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 Firm 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 Authorised Firm to perform a Controlled Function, the Authorised Firm 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 Authorised Firm 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

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.

2.3.5. 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

• (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 must take all reasonable steps to identify conflicts of interest that may arise between:

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

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 must take into account, as a minimum, whether the Authorised Person or a Person directly or indirectly linked by control to the Authorised Person:

• (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 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 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 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 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 must provide the AFSA with reasonable advance notice of a change in:

• (a) the Authorised Person’s name; or
• (b) any business or trading name under which the Authorised Person carries on a Regulated Activity or Market Activity; or
• (c) the address of the Authorised Person’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 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 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 reputation; or
3. (c) any matter in relation to the Authorised Person which could result in serious adverse financial consequences to the financial system or to other Authorised Persons; or
4. (d) a significant breach of a Rule by the Authorised Person or any of its Employees; or
5. (e) a breach by the Authorised Person or any of its Employees of any requirement imposed by any applicable law by the Authorised Person 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 risk profile or resources; or
7. (g) any significant failure in the Authorised Person’s systems or controls, including a failure reported to the Authorised Person by the Authorised Person’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
9. (i) non-compliance with Rules due to an emergency outside the Authorised Person’s control and the steps being taken by the Authorised Person.

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 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 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 and insolvency

An Authorised Person must notify the AFSA immediately on:

• (a) the calling of a meeting to consider a resolution for winding up the Authorised Person; or
• (b) an application to dissolve the Authorised Person 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
• (d) the making of, or any proposals for the making of, a composition or arrangement with creditors of the Authorised Person; or
• (e) the application of any Person against the Authorised Person for the commencement of any insolvency proceedings, 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 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 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.

1.2.1. Modifications and exclusions stated in a COB rule

The general application rule in COB 1.1 may be modified or excluded to the extent stated in the relevant provision in COB, depending on the type of Authorised Firm involved, the nature of its activities, and/or the classification of the Client to whom it provides services.

1.2.2. Exclusions in relation to certain categories of Centre Participant

For the avoidance of doubt, the requirements in COB do not apply to:

1. (a) a Representative Office;
2. (b) an Authorised Market Institution (other than an Authorised Crowdfunding Platform and an Authorised Digital Asset Trading Facility), except for COB 3 (Communications with Clients and Financial Promotions);
3. (c) an Authorised Crowdfunding Platform, except for COB 3 (Communications with Clients and Financial Promotions), COB 4 (Key Information and Client Agreement);
4. (d) an Authorised Digital Asset Trading Facility, except for COB 2 (Client Classification) and COB 3 (Communications with Clients and Financial Promotions); or
5. (e) a MTF Operator and an OTF Operator, except for COB 15 (Complaints Handling and Dispute Resolution).

For the purposes of 1.2.2(c), references in COB 3, COB 4, COB 7, COB 8 and COB Schedule

2 to:

1. (a) "Authorised Firms" shall be read as if it were a reference to "an Authorised Crowdfunding Platforms";
2. (b) "Regulated Activities" shall be read as if it were a reference to "Market Activities";
3. (c) references to "Professional Client" or a "Market Counterparty" shall be read as if they were a reference to "Accredited Lender or Accredited Investor"; and
4. (d) references to "Retail Client" shall be read as if they were a reference to "Retail Lender or Retail Investor".

For the purposes of 1.2.2(d), references in COB 2 and COB 3 to:

1. (a)  "Authorised Firms" shall be read as if it were a reference to "an Authorised Digital Asset Trading Facility "; and
2. (b)  "Regulated Activities" shall be read as if it were a reference to "Market Activities".

For the purposes of 1.2.2(e), references in COB 15 to "Retail Client" shall be read as if they were a reference to "Member, who is a natural person with Direct Electronic Access".

Guidance: Other applicable requirements

Although the Centre Participants listed in COB 1.2.2 are not generally subject to the requirements in COB, they will be subject to requirements in other Rules, which may include but are not limited to requirements in REP, AMI and GEN as applicable.

1.2.3. Application in respect of Insurance Intermediaries

The requirements in COB do not apply to Insurance Intermediaries, with the exception of COB 3 (Communications with Clients and Financial Promotions), COB 4 (Key Information and Client Agreement), COB 8.5 (Client money: Insurance Intermediation and Insurance Management) and COB 11</a> (Insurance Intermediaries).

Guidance: Insurance Intermediaries

Given the different nature of their activities compared with other Authorised Firms, Insurance Intermediaries are subject to specific conduct of business requirements that are set out in COB 11.

1.2.4. Application in respect of Trust Service Providers

The requirements in COB do not generally apply to Trust Service Providers, with the exception of COB 3 (Communications with Clients and Financial Promotions), COB 4 (Key Information and Client Agreement), COB 5.2 (Suitability Assessments), COB 7 (Conflicts of Interest), COB 12 (Trust Service Providers), and COB 15 (Record Keeping).

Guidance: Trust Service Providers

Trust Service Providers provide services that are distinct from those provided by other Authorised Firms, so they are not required to comply with all of the COB rules. COB 12 imposes a specific framework on Trust Service Providers that takes into account the nature of their activities and the risk profile that they represent compared with other Authorised Firms.

1.2.5. Application in respect of Ancillary Service Providers

The requirements in COB do not apply to Ancillary Service Providers, with the exception of COB 13 (Ancillary Service Providers).

Guidance: Ancillary Service Providers

Ancillary Service Providers may already be subject to professional standards, regulation by professional bodies, and/or codes of conduct. As a result, they are not required to comply with most of the requirements in COB. Instead, they are subject to duties and obligations under COB 13, which sets out high-level principles applicable to these firms.

1.2.6. Application in respect of Credit Rating Agencies

The requirements in COB do not apply to Credit Rating Agencies, with the exception of COB 14 (Credit Rating Agencies).

Guidance: Credit Rating Agencies

In order to ensure that Credit Rating Agencies provide independent analyses and opinions, COB 14 requires Credit Rating Agencies to comply with high-level principles that are based on international standards promoted by the International Organisation of Securities Commissions.

1.2.7. Table summarising modifications and exclusions

The general application rule in COB 1.1 is modified or excluded to the extent stated in this table in COB 1.2.7 by reference to the category of Client receiving services from the Authorised Firm ("who?") and/or the nature of the activity ("what?").

2.1.1. Obligation to classify Clients

An Authorised Firm providing any Financial Products or Financial Services to any Person must classify that Person as one of the following categories of Client:

• (a) a Retail Client;
• (b) a Professional Client; or
• (c) a Market Counterparty

2.1.2. Obligation to notify classification to Clients

An Authorised Firm must notify a new Client of its classification as a Retail Client, Professional Client, or Market Counterparty in accordance with COB 2.1.1 in respect of the Financial Product or Financial Service being provided to that Client.

2.1.3. Person may be classified as more than one category of Client

An Authorised Firm may classify a Person as belonging to different categories of Client in respect of:

• (a) a specific Financial Product, Financial Service, or Transaction; or
• (b) different types of Financial Product or Transaction, which are to be provided to, or carried out on behalf of, that Person.

2.2.1. Classification as a Retail Client

An Authorised Firm must classify as a Retail Client any Client that is not a Professional Client or a Market Counterparty.

2.2.2. Authorised Firm may choose to treat any Person as a Retail Client

An Authorised Firm may choose to provide Financial Products or Financial Services to any Person as a Retail Client simply by classifying that Person as a Retail Client. If the Authorised Firm classifies the Person as a Retail Client in this way, it will not be required to assess whether that Person would otherwise be classified as a Professional Client or a Market Counterparty.

2.3.1. Classification as a Professional Client

An Authorised Firm may classify a Person as a Professional Client if that Person:

1. (a) meets the requirements to be a Deemed Professional Client; or
2. (b) meets the requirements to be an Assessed Professional Client, in accordance with COB 2.5.1 or 2.5.5, provided that Person has not been classified as a Retail Client in accordance with COB 2.6.

2.4.1. Requirements to be a Deemed Professional Client

For the purposes of COB 2.3.1, each of the following entities is a Deemed Professional Client unless it is a Market Counterparty or is given a different classification under COB 2:

1. (a) a national or regional government;
2. (b) a public body that manages public debt;
3. (c) a central bank;
4. (d) an international or supranational institution (such as the World Bank, the International

Monetary Fund, or the European Investment Bank) or other similar international organisation;

1. (e) an Authorised Firm, or any other authorised or regulated financial institution, including a bank, securities firm or insurance company;
2. (f) an Authorised Market Institution, or any other authorised or regulated exchange, trading facility, central securities depository, or clearing house;
3. (g) a Collective Investment Scheme or its management company, or any other authorised or regulated collective investment undertaking or the management company of such an undertaking;
4. (h) a pension fund or the management company of a pension fund;
5. (i) a commodity dealer or a commodity derivatives dealer;
6. (j) a Large Undertaking as specified in COB 2.4.2;
7. (k) a Body Corporate whose shares are listed or admitted to trading on any exchange of an IOSCO member country;
8. (l) a trustee of a trust which has, or had during the previous 12 months, assets of at least USD 10 million; or
9. (m) any other institutional investor whose main activity is to invest in financial instruments, including an entity dedicated to the securitisation of assets or other financial transactions.

2.4.2. Large Undertakings

A Person is a Large Undertaking for the purposes of COB 2.4.1(j) if it met, as at the date of its most recent financial statements, at least two of the following requirements:

• (a) it has total assets of at least USD 20 million on its balance sheet;
• (b) it has a net annual turnover of at least USD 40 million; or
• (c) it has own funds of at least USD 2 million.

2.5.1. Assessed Professional Clients: Individual Clients

For the purposes of COB 2.3.1, an Authorised Firm may treat an individual Client as an Assessed Professional Client if:

• (a) the Client has net assets of at least USD 100,000; and
• (b) either:

(i) the Authorised Firm assesses the Client, on reasonable grounds, to have sufficient experience and understanding of relevant Financial Products, Financial Services, Transactions and any associated risks; or

(ii) the Client works or has worked in the previous two years in an Authorised Firm or any other authorised or regulated financial institution, including a bank, securities firm or insurance company, in a position that requires knowledge of the type of Financial Products, Financial Services or Transactions envisaged; and

• (c) the following procedure is followed:

(i) the Client must confirm in writing to the Authorised Firm that it wishes to be treated as a Professional Client either:

(1) generally;

2) in respect of a specific Financial Product, Financial Service, or Transaction; or

(3) in respect of a type of Financial Product, Financial Service, or Transaction;

(ii) the Authorised Firm must give the Client a clear warning in writing setting out the protections that the Client may lose as a result of giving up its classification as a Retail Client; and

(iii) the Client must confirm in writing, in a separate document from the client agreement or other contract, that it is aware of the consequences of losing such protections.

Guidance: Meaning of an "individual"

For the purposes of COB 2.5.1, an "individual" means a Person who is a natural person and not an Undertaking.

2.5.2. Calculation of an individual's net assets

For the purposes of COB 2.5.1(a), the calculation of an individual Client's net assets:

• (a) must exclude the value of the primary residence of the Client; and
• (b) may include any assets held directly or indirectly by the Client.

2.5.3. Assessment of experience and understanding

For the purposes of the assessment required under COB 2.5.1(b)(i) and 2.5.6(a), an Authorised Firm must, where applicable, consider the following matters:

• (a) the Person’s knowledge and understanding of:

(i) the relevant Financial Products, Financial Services, and Transactions; and

(ii) any associated risks, either generally or in relation to a specific Financial Product, Financial Service, or Transaction;

• (b) the length of time during which the Person has participated in financial market activity;
• (c) the frequency with which the Person has carried out Transactions;
• (d) the extent to which the Person has previously relied on professional financial advice;
• (e) the size and nature of Transactions that have been undertaken by, or on behalf of, the Person in financial markets;
• (f) the Person’s relevant qualifications or training;
• (g) the composition and size of the Person’s portfolio of Investments;
• (h) in the case of insurance Transactions, relevant experience in relation to similar Transactions to be able to understand the risks associated with such Transactions; and
• (i) any other matters which the Authorised Firm considers relevant.

2.5.4. Legal structures or vehicles containing an individual's investment portfolio

An Authorised Firm may classify as an Assessed Professional Client a legal structure or vehicle, including an Undertaking, trust or foundation, that is set up solely for the purpose of managing the investment portfolio of an individual where that individual has been assessed as meeting the requirements in COB 2.5.1.

2.5.5. Individual joint account holders

An Authorised Firm may classify as a Professional Client an individual (the “joint account holder”) who has a joint account with an individual assessed as meeting the requirements in COB 2.5.1 (the “primary account holder”) if:

• (a) the joint account holder is a Family Member of the primary account holder;
• (b) the account is used for the purposes of managing Investments for the primary account holder and the joint account holder;
• (c) the following procedure is followed:

(i) the joint account holder must confirm in writing to the Authorised Firm that investment decisions relating to the joint account are generally made for, or on behalf of, him by the primary account holder;

(ii) the joint account holder must confirm in writing to the Authorised Firm that he wishes to be treated as a Professional Client either:

(1) generally;

(2) in respect of a specific Financial Product, Financial Service or Transaction; or

(3) in respect of a type of Financial Product or Transaction;

(ii) the Authorised Firm must give the joint account holder a clear warning in writing setting out the protections that the joint account holder may lose as a result of giving up his classification as a Retail Client; and

(iii) the joint account holder must confirm in writing, in a separate document from the client agreement or other contract, that he is aware of the consequences of losing such protections.

2.5.6. Assessed Professional Clients: Undertakings

For the purposes of COB 2.3.1, an Authorised Firm may treat an Undertaking as an Assessed Professional Client if:

• (a) the Authorised Firm assesses the Undertaking (which may involve assessing an individual or individuals authorised to make investment decisions on behalf of the Undertaking), on reasonable grounds, to have sufficient experience and understanding of the relevant Financial Products, Financial Services or Transactions and any associated risks; and
• (b) the Undertaking has own funds of at least USD 1 million.

2.5.7. Other types of Undertaking

An Authorised Firm may also classify an Undertaking as an Assessed Professional Client if the Undertaking has:

• (a) a Controller;
• (b) a Holding Company;
• (c) a Subsidiary (whether direct or indirect); or
• (d) a joint venture partner,

that meets the requirements in COB 2.5.6 to be classified as an Assessed Professional Client.

2.5.8. Client no longer meeting the requirements to be a Professional Client

If an Authorised Firm becomes aware that a Client no longer meets the requirements to be classified as a Professional Client, the Authorised Firm must, as soon as possible, inform the Client that this is the case and, where appropriate, discuss with the Client the steps that the Authorised Firm and the Client may take to address the situation, which may include the Authorised Firm notifying the Client of its reclassification.

2.6.1. Obligation to notify Professional Client of right to be treated as a Retail Client

If an Authorised Firm provides services to Retail Clients and Professional Clients, it must, when first establishing a relationship with a Person as a Professional Client, notify that Person in writing of:

• (a) that Person’s right to be classified as a Retail Client;
• (b) the higher level of protection available to Retail Clients; and
• (c) the period of time within which the Person may choose to be classified as a Retail Client.

If the Person does not choose to be classified as a Retail Client within the time specified by the Authorised Firm, the Authorised Firm may classify that Person as a Professional Client.

2.6.2. Authorised Firm not providing services to Retail Clients

If an Authorised Firm does not provide services to Retail Clients, it must inform its Clients of this fact and any relevant consequences.

2.6.3. Professional Client that asks to be treated as a Retail Client

If a Professional Client makes a request to the Authorised Firm to be treated as a Retail Client, the Authorised Firm must classify it as a Retail Client, unless the Authorised Firm does not provide services to Retail Clients.

Guidance: Request to an Authorised Firm that does not provide services to Retail Clients

An Authorised Firm that does not provide services to Retail Clients may receive a request from a Professional Client asking to be classified as a Retail Client. If the nature of the Client or the level of protection that it requires are such that it no longer meets the requirements to be a Professional Client, then the Authorised Firm should cease providing services to that Client.

2.7.1. Classification as a Market Counterparty

An Authorised Firm may classify a Person as a Market Counterparty, unless and to the extent that Person is given a different classification under this chapter COB 2, if that Person meets the requirements to be:

1. (a) a Deemed Professional Client; or
2. (b) an Assessed Professional Client and is the subsidiary of a Holding Company that is a Deemed Professional Client by virtue of being a Large Undertaking falling within COB 2.4.1(j), provided that the arrangement meets the conditions in COB 2.7.2.

2.7.2. Requirement for confirmation by the Client

In order for an Authorised Firm to classify a Person as a Market Counterparty, the Authorised Firm must ensure that:

• (a) the Person has been given prior written notification of its classification as a Market Counterparty; and
• (b) the Person has not requested to be classified other than as a Market Counterparty within the time specified in the notification.

2.8.1. Trusts

If an Authorised Firm intends to provide Financial Products or Financial Services to a trust, it must, unless otherwise provided in COB, treat the trustee of the trust, and not the beneficiaries of the trust, as its Client.

2.8.2. Funds

If an Authorised Firm provides a Financial Product or Financial Service to a Fund that does not have a separate legal personality, that Fund will be the Client of the Authorised Firm.

2.9.1. General application of the "agent as client" rule

Subject to COB 2.9.2, if an Authorised Firm is aware that a Person (the "agent"), with or for whom it is intending to provide a service is acting as an agent for another Person (the "underlying client") in relation to that service, then the Authorised Firm must treat the agent as its Client in respect of the service.

2.9.2. Exclusion from the "agent as client" rule

The underlying client is treated, for the purposes of these Rules, as the Client of the Authorised Firm in respect of the service, if:

• (a) the Authorised Firm has agreed with the agent in writing to treat the underlying client as its Client; or
• (b) the agent is neither:

(1) another Authorised Firm; or

(2) an Authorised Market Institution, and the main purpose of the arrangements between the parties is the avoidance of duties that the Authorised Firm would otherwise have to the underlying client.

2.9.3. Agreement in relation to more than one underlying client

If an Authorised Firm makes an agreement with the agent under COB 2.9.2(a) in relation to more than one underlying client, the Authorised Firm may rely upon the agent to act as a single point of contact for all communications between the Authorised Firm and all of the underlying clients for which the agent is acting. Accordingly, where the Authorised Firm communicates with the underlying clients, the Authorised Firm may send to, or receive from, the agent a single communication covering all of the underlying clients, without having to notify or obtain consent from each underlying client. However, where the Authorised Firm is required to provide any communications to any single underlying client, relating to matters specific to that underlying client, the Authorised Firm will still be required to provide to the agent the information specific to that underlying client, including the following:

• (a) any risk warnings required by COB;
• (b) trade confirmations for the purposes of COB 9</a>; and
• (c) periodic statements for the purposes of COB 9.

2.10.1. Requirement to keep records

An Authorised Firm must keep records of:

• (a) the procedures which it has followed under COB 2, including any documents that evidence the Client’s classification; and
• (b) any notification sent to the Client under COB 2, together with evidence of despatch.

2.10.2. Length of recordkeeping requirement

The records in COB 2.10.1 must be kept for at least six years from the date on which the business relationship with a Client ended.

2.10.3. Date on which the business relationship ended

For the purposes of COB 2.10.2, an Authorised Firm may, if the date on which the business relationship with the Client ended is unclear, treat the date of the completion of the last transaction with the Client as the date on which the business relationship ended.

2.10.4. Obligation to provide access to the AFSA

An Authorised Firm must ensure that the AFSA has access to all of the records required under COB 2.10.1, including any records maintained by or at its head office or any other branch of the same legal entity, or a member of its Group. An Authorised Firm must notify the AFSA immediately if, for any reason, it is no longer able to provide access to these records.

3.1.1. General requirement

COB 3 applies to:

• (a) an Authorised Firm communicating with a Client in relation to a Regulated Activity; and/or
• (b) an Authorised Firm communicating or approving a Financial Promotion.

3.1.2. Territorial scope

This chapter COB 3 applies to:

1. (a) any communications of an Authorised Firm to a Client; and/or
2. (b) any Financial Promotions communicated or approved by an Authorised Firm, in relation to a Regulated Activity carried on by an Authorised Firm operating within the jurisdiction of the AIFC as specified in Part 1 of the Framework Regulations.

3.2.1. General requirement

An Authorised Firm must ensure that:

• (a) any communication with a Client in relation to a Financial Product or Financial Service; or
• (b) any Financial Promotion that it communicates or approves, is fair, clear and not misleading.

3.2.2. No avoidance of regulatory liability

Any communication by an Authorised Firm with a Client, or any Financial Promotion that it communicates or approves, must not attempt to limit or avoid any duty or liability it may have to that Client or any other Person under any applicable AIFC Rules or Regulations.

3.2.3. Information to be communicated directly to Client

Where a Rule in COB requires information to be provided to a Client, the Authorised Firm must provide that information directly to the Client and not to another Person, unless it is on the written instructions of the Client.

Guidance: Meaning of "communication"

For the purposes of COB 3, a communication includes, but is not limited to, a Financial Promotion, a client agreement, terms of business, Financial Product terms and conditions, a mandate, power of attorney entered into for the purposes of a Financial Product or Financial Service and any other communication which relates in whole or in part to the provision of a Financial Product or Financial Service.

3.3.1. Prohibition on Financial Promotions

A Person must not make a Financial Promotion in relation to a Regulated Activity carried on an Authorised Firm licensed by the AFSA unless:

1. (a) the Person is an Authorised Firm;
2. (b) the content of the Financial Promotion is approved by an Authorised Firm; or
3. (c) the Financial Promotion is exempt under COB 3.3.3.

Persons who make a Financial Promotion falling within (a), (b) or (c) above shall be "Authorised Promoters" for the purposes of this COB 3.

3.3.2. Financial Promotion by a Representative Office

A Representative Office may make a Financial Promotion only in relation to a Financial Product or Financial Service offered both:

• (a) in a jurisdiction other than the AIFC; and
• (b) by a related party of the Representative Office.

3.3.3. Exempt Financial Promotions

For the purposes of COB 3.3.1(c), a communication is an exempt Financial Promotion if it is:

• (a) directed at and capable of acceptance exclusively by a Person who is believed by the Person making the Financial Promotion, on reasonable grounds, to be a Professional Client or Market Counterparty;
• (b) made to a Person as a result of an unsolicited request by that Person to receive the Financial Promotion;
• (c) made or issued by or on behalf of a government or non-commercial government entity, including a central bank;
• (d) made by a Person in the course of providing legal or accountancy services and may reasonably be regarded as incidental to and a necessary part of the provision of such services;
• (e) included in a Prospectus approved by the AFSA in accordance with MAR; or
• (f) included in any document required or permitted to be published under the Listing Rules.

3.3.4. Other exclusions from the Financial Promotions Prohibition

A Person does not breach the Financial Promotions Prohibition if:

• (a) the Person acts as a mere conduit for the making of the Financial Promotion, such as:

(i) a newspaper or magazine;

(ii) a website carrying third-party banner advertisements;

(iii) a postman or courier;

(iv) a person paid to hand out promotional material to the public and an event venue, unless in each case that Person created the Financial Promotion; or

• (b) the Financial Promotion is not made for a commercial or business purpose.

3.3.5. Content of a Financial Promotion

An Authorised Promoter must ensure that any Financial Promotion that it communicates or approves contains the information in Schedule 5.

3.3.6. Financial Promotions included in other communications

If an Authorised Promoter communicates information to a Client (whether in a document required by these Rules or otherwise), the Person must not include or embed a Financial Promotion in the communication in a way that obscures:

• (a) the objectives or purpose of the communication; or
• (b) the nature or purpose of the Financial Promotion.

3.3.7. Withdrawal of a financial promotion

If an Authorised Promoter becomes aware that a Financial Promotion that it has previously communicated or approved does not comply or no longer complies with this Rule, it must ensure that the Financial Promotion is withdrawn as soon as practicable by either:

• (a) ceasing to make the Financial Promotion and telling any other Person known to be relying on it that the promotion is withdrawn; or
• (b) withdrawing its approval and telling any Person known to be relying on it that the promotion is withdrawn.