Financial regulation

Financial institutions must comply with the requirements set out in Law 5/20, of January 27 – Law to Prevent and Combat Money Laundering, Financing Terrorism and Proliferation of Weapons of Mass Destruction.
 
Qualified holdings: the banking financial institution over which a natural or legal person, directly or indirectly, intends to hold a qualified holding must first formulate an authorization request to the Central Bank (BNA). A holding in a company, directly or indirectly, of not less than 10% of the capital or voting rights of the company in which a participation is held or which, for any reason, makes it possible to exercise a significant influence over the management of the institution in which the participation is held, shall be deemed to be qualified.

Australian Financial Services (AFS)

AFS Licenses carry a range of financial solvency and risk management requirements. Current general obligations include, but are not limited to:

• ensuring the financial services covered by the license are provided honestly and fairly;
• ensuring adequate arrangements are in place for managing conflicts of interests;
• complying with financial services laws and conditions of the license;
• employing adequate resources (e.g. financial, technological and human resources) to carry out the services covered by the license;
• maintaining the skills and competence to provide the financial services covered by the license;
• employing a dispute resolution and risk management system; and
• ensuring employees are adequately trained and competent to provide the financial services.

The time and resources required for a new license and to maintain ongoing compliance with an AFS License can be significant depending on the required AFS License authorizations. Some of the more time-consuming requirements concern the preparation of licensing proofs on topics such as risk management, compliance, information technology processes and capabilities.

AFS licensees are required to notify ASIC of any 'significant' breach (or likely breach) of their obligations or financial services laws as soon as practically possible, and in any event within ten business days of becoming aware of the significant breach (or likely breach). Failure to report a significant breach is an offence and may result in penalties.

Australian Prudential and Regulation Authority 

APRA requires all ADIs to comply with its prudential requirements relating to governance, audit, risk management and capital adequacy from the commencement of their banking operations.

APRA's current prudential requirements include but are not limited to:

• maintaining sufficient capital adequacy (namely the prudential capital ratio (PCR));
• ensuring substantial shareholders are 'fit and proper' in the sense that they are financially sound;
• ensuring persons who hold key positions within the ADI are 'fit and proper';
• providing evidence of adequate risk management and internal control systems, business continuity management and information security standards;
• providing evidence of adequate compliance systems and processes;
• employing accounting systems that maintain secure, up-to-date records of all transactions and commitments undertaken by the ADI; and
• engaging in adequate internal and external audit procedures and arrangements.

If APRA authorizes an entity to be deemed an 'authorized deposit-taking institution' this does not automatically allow the ADI to refer to itself as a 'bank' unless special provision has been made. APRA will generally permit an ADI to refer to itself as a 'bank' in its trading name and advertising if the ADI holds at least AUD50 million in Tier 1 capital.

Depending on the nature of the breach, if an APRA-regulated institution becomes aware that it has breached (or will breach) a prudential requirement and that breach is ‘significant’, a breach of a prudential requirement must be reported immediately, or within 10 business days after the institution becomes aware a breach has occurred. Failure to report such a breach is an offence and may result in penalties.

A corporation may also be required to register with APRA as a registered financial corporation under the Financial Sector (Collection of Data) Act 2001 (Cth). In general, this Act applies to any corporation which engages in the provision of finance in the course of carrying on business in Australia. Provision of finance includes but is not limited to:

• the lending of money, with or without security;
• carrying out of activities, whether directly or indirectly, that result in the funding of originating loans or other financing;
• the supplying of goods by way of hire-purchase;
• purchase of debentures or other securities (other than shares) issued by a corporation; and
• acquisition of debts due to another person.

Intra-group financing activity between corporations that are related to one another does not constitute provision of finance.

There are some exemptions, including that this Act does not apply to corporations whose:

• sum of assets in Australia, consisting of debts due to the corporation resulting from transactions entered into in the course of the provision of finance by the corporation, does not exceed AUD50 million in aggregate value; and
• sum of the values of the principal amounts outstanding on loans or other financing, as entered into in a financial year, does not exceed AUD50 million in aggregate value.

Under this Act, APRA collects data from registered financial corporations. Corporations may be required to submit the appropriate forms on a monthly or quarterly basis, as confirmed by APRA upon registration.

Financial institutions must at all times comply with the authorization requirements. Threshold conditions (such as having adequate financial resources and structural and compliance arrangements in place) are an ongoing compliance requirement for authorized firms.

Failure to comply with the threshold conditions and with the applicable laws and regulations can result in sanctions for the institutions concerned and can even lead to the revocation of the authorization.

Investment firms, management companies of undertakings for collective investment, undertakings for collective investment which have not designated a management company, credit institutions and insurance companies governed by Belgian law and the branches of such institutions established in Belgium governed by the laws of third countries, shall appoint compliance officers of good repute and with the requisite knowledge and experience with a view to ensuring compliance with the rules referred to in the laws.

The activities carried out by financial institutions are subject to several limitations and restrictions. In general terms, such limitations and restrictions are related to granting credit, risk concentration, investments, conditional operations, loans in and trading with foreign currency, administration of third-party funds and microcredit finance and payroll deduction credit.

People who sell or give advice about mutual funds must be registered through the sponsorship of a dealer, with the provincial securities commission in each province where they want to sell mutual funds.

A dealer, or retail distributor, must be registered with the appropriate securities commission(s) and, depending on the jurisdiction and the types of securities the dealer can sell, it may have to be a member of the Mutual Fund Dealers Association (MFDA) or Investment Industry Regulatory Organization of Canada (IIROC). The advisors sponsored by a dealer are also regulated by the MFDA or IIROC, except in Québec where they are regulated by the Chambre de la sécurité financière.

The regulated entities are under ongoing compliance requirements. They must maintain the thresholds that allow them to operate and they also have to continuously submit certain information to the CMF. For example, the regulated entities shall inform any amendments to their by-laws within a short time of them becoming effective.

In addition, in the case of the banks, they must maintain minimum reserves of cash that are to be determined by the Chilean Central Bank.

Minimum capital requirements are an ongoing compliance requirement for authorized entities.

On 24 August 2012, the Colombian government enacted Decree 1771 of 2012 which amended certain capital adequacy requirements for Colombian credit institutions set forth in Decree 2555 of 2010. Decree 1771 of 2012 maintains the requirement for a credit institution’s technical capital to be at least 9% of that institution’s total risk-weighted assets.

Since 1 August 1 2013, technical capital has consisted of the sum of basic capital (Patrimonio Básico), or primary capital (Tier I), and secondary capital (Patrimonio Adicional), or secondary capital (Tier II); however, primary capital (Tier I) will also consist of the sum of ordinary basic capital (Patrimonio Básico Ordinario), or Common Equity Tier I, and a new category of additional basic capital (Patrimonio Básico Adicional), or Additional Tier I.

In addition, Decree 1771 of 2012 introduced a new measure of ‘core solvency’ for Common Equity Tier 1, which requires higher quality capital and is set at a minimum of 4.5% of risk-weighted assets.

By means of Decree 1771 of 2012, the Colombian Government implemented some Basel III accords into the legal regime applicable to Colombian credit institutions, specifically with regard to the capital adequacy requirements as mentioned above.

Threshold conditions (such as having adequate financial resources and compliance arrangements in place) are an ongoing compliance requirement for authorized companies.

Failure to comply with these threshold conditions and other more specific regulatory rules can result in sanctions for companies and other regulated individuals, and loss of authorization status.

Fulfilment of the prerequisites of authorization (such as having adequate financial resources and compliance arrangements in place) and acting in accordance with the applicable legislation are ongoing compliance requirements for authorized firms. Authorized entities may also have to comply with specific compliance requirements applicable to certain entities.

Entities supervised by the Finnish Financial Supervisory Authority (FIN-FSA) shall report various information regularly to the FIN-FSA.

Failure to comply with the authorization prerequisites and applicable legislation can result in administrative sanctions for firms and regulated individuals, and loss of authorization.

Authorized entities must, without purporting to be exhaustive, comply with all required conditions listed above and also with the legal and regulatory rules applicable to their activities.

Threshold conditions, such as having adequate financial resources and compliance arrangements in place, are an ongoing compliance requirement for authorized firms.

Failure to comply with the threshold conditions and more detailed regulatory rules may result in sanctions for firms and regulated individuals, and loss of regulated status.

Bank of Ghana 

Banks and specialized deposit-taking institutions are required to maintain the prescribed minimum unimpaired paid up capital and minimum capital adequacy ratios, become members of the Ghana Deposit Protection Scheme, pay an annual license fee and comply with any conditions imposed by the Bank of Ghana or statutory provision. Failure to meet these requirements may result in the revocation of the license. 

Securities and Exchange Commission 

The Securities Exchange Commission must be notified by an institution to which it has granted a license of any change of particulars from those submitted in the application form within 14 days of the change. Other compliance requirements include notifying the Securities and Exchange Commission of the appointment, removal and resignation of auditors within 30 days of the occurrence (except for banks and insurance companies), maintaining the prescribed minimum liquid funds and appointing a designated compliance officer. The failure to comply with these requirements may result in a penalty of GHS500 for each infringement and the suspension, revocation or restriction of a license. 

National Insurance Commission 

A company must maintain the prescribed solvency margin and minimum capital (or higher amount where one is imposed by the National Insurance Commission), prescribed level of reserves and also deposit 10% of the minimum capital with the Bank of Ghana when required to do so. 

The insurance company must notify the National Insurance Commission within 14 days of the termination of the appointment of a director, auditor or senior member of staff. The prior written approval of the National Insurance Commission is required for: 

• the appointment of a director or a principal officer.

National Pensions Regulatory Authority 

A trustee, pension fund manager or custodian must report fraud, forgery, theft or other acts of dishonesty that occur in its establishment and a staff member whose appointment is terminated on any of these grounds to the Board of the National Pensions Regulatory Authority. A trustee, pension fund manager or custodian is prohibited from employing a person whose name is on the list maintained by the National Pensions Regulatory Authority of employees dismissed on those grounds without its prior approval.

Failure to report any of the above-mentioned incidents is an offense punishable by a fine of GHS24,000 or a term of imprisonment of not more than two years or, where applicable, both. 

A trustee, pension fund manager or custodian who employs a person named in the above dismissed employees list is liable to a penalty of an amount of not less than GHS3,000 or, in the case of persistent contravention, revocation of license or registration.

Threshold conditions (such as having adequate financial resources and compliance arrangements in place) are an ongoing compliance requirement for authorized firms.

Failure to comply with the threshold conditions and more detailed regulatory rules can result in sanctions for firms and regulated individuals, and a loss of regulated status.

The ongoing compliance obligations imposed on a regulated entity will vary depending on the industry within which it operates and the type of authorization obtained.

The Central Bank of Ireland monitors ongoing compliance with prudential standards, primarily through examining returns (weekly, monthly and annual), financial statements and annual reports, conducting regular review meetings and on-site inspections.

The Central Bank of Ireland has published fitness and probity standards for persons performing particular functions within a regulated entity. These standards in general require that such a person is: (i) competent and capable; (ii) honest, ethical and acts with integrity; and (iii) financially sound. In the case of credit institutions considered to be “significant” for the purposes of the EU single supervisory mechanism and credit institutions applying for authorizations, fitness and probity assessments are carried out by the European Central Bank.

Failure to comply with these regulatory requirements can result in sanctions for regulated firms and individuals performing prescribed functions within those firms, and loss of regulated status.

Certain conditions, requirements and thresholds (eg financial resources, compliance measures and adequate internal organization, policies and procedures, integrity, professionalism and independency requirements of the senior management) must be met in order to preserve the authorized status of the bank or financial intermediary. Failure to comply with such requirements can result in sanctions for intermediaries or banks and/or regulated entities, and in the revocation of the authorization granted.

Approved or authorized entities have continuous obligations such as sufficient guarantees, in particular with regard to the composition and amount of their capital, their organization, their human, technical and financial resources, the integrity and experience of their managers, as well as their own measures to ensure the security of clients’ transactions.

They must undertake, in writing, that any modifications made to their statutes during the course of their existence are subject to the prior authorization of the Regional Council when they relate to a distribution of capital between shareholders, a change in the scope or nature of the guarantees presented, a change in the accounting methods and information used, any other modification of the statutes is the subject of information to the Regional Council.

In case of failure of those entities to comply with key requirements, the Regional Council can take steps to restore compliance with the rule. If violations continue, it can decide on the sanctions to be taken, in accordance with the provisions of the General Regulations, in particular the suspension of all or part of their activities.

Registration does not require regular renewal.

Firms conducting financial instruments business and providers of financial instruments intermediary services are subject to compliance with general legal and regulatory requirements including disclosure obligations. Failure to comply with applicable law and regulation may result in the revocation of the firm's registration.

Minimum capital requirements apply to financial instruments businesses. A first-class financial instruments business must maintain minimum capital of ¥50 million while a second-class financial instruments business must maintain a minimum of ¥10 million in capital. There are no minimum capital requirements for providers of financial instruments intermediary services.

All entities under the supervision of the Commission de Surveillance du Secteur Financier must comply with all Luxembourg laws and regulations on an ongoing basis.

In respect of credit institutions, banks shall transmit to the Commission de Surveillance du Secteur Financier mainly financial and accounting data relating to their activities on a monthly, quarterly, half-yearly or annual basis, depending on the object.

The Commission de Surveillance du Secteur Financier must assess whether the application meets the threshold required by Luxembourg law and regulations.

For the instructions relating to the ongoing information to be provided by a PFS, please refer to circulars CSSF 05/187, CSSF 10/433 CSSF 08/364, IML 96/124.

There are minimum capital requirements which must be met, compliance procedures to be followed and anti-money laundering reporting obligations. 

Failure to comply with the above and existing detailed rules and regulations may ultimately result in sanctions by the regulators and a loss of the corresponding license.

Financial institutions are subject to prudential supervision (eg capital adequacy, liquidity, operational and technological risk) and requirements on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT), protection of users of financial services and efficiency of operation and competition in financial services.

The compliance requirements are:

• compliance with the legal form of institutions carrying out banking activities;
• compliance with legal and economic conditions (minimum share capital, compliance of an asset/liability ratio, condition of good reputation of directors, competence, etc.).

The main ongoing compliance requirements for authorized financial entities, include rules concerning:

• the governance structure;
• the conduct of business;
• operational management;
• proper service provision (eg know-your-customer requirements and provision of information to customers); and
• the financial health of the company (eg concerning equity capital, solvency and liquidity).

Registered banks are required to meet minimum prudential, reporting and other standards on an ongoing basis, and comply with specific and standard conditions of registration.

Failure to comply can result in sanctions for banks and, in serious cases, loss of registration.

Key prudential requirements for banks operating in New Zealand relate to capital, liquidity, governance, disclosure, credit ratings, outsourcing, connected exposures, open bank resolutions and macro prudential issues. The Reserve Bank of New Zealand has the discretion to take enforcement action and to decide what enforcement action to take for non-compliance.

There is also legislation expected to be introduced into Parliament by the end of 2019 which would implement a new conduct licensing regime (regulated by the Financial Markets Authority) for banks, insurers and non-bank deposit takers requiring these entities to meet high standards of fair customer treatment and regulating sales target-based incentives. Providers of financial services in New Zealand must be registered under the Financial Services Provider (Registration and Dispute Resolution) Act 2008 and, if those services are provided to retail clients, must join an approved dispute resolution scheme.

When entering into a consumer credit contract, lenders must comply with ‘lender responsibilities’. This includes providing clear and concise information, helping the borrower make informed decisions, assessing afordability, ensuring that the credit agreement is not oppressive and that the borrower is not treated oppressively.

Any financial advisor has disclosure obligations to meet and must exercise care, diligence and care when carrying out its required conduct obligations.

Reporting entities have obligations imposed on them by the Anti-Money Laundering and Countering Financing of Terrorism Act 2009. These obligations include: carrying out a risk assessment, design; implementation and maintenance of a compliance program that sets out procedures, policies and internal controls ; undertaking customer due diligence; and monitoring and reporting suspicious transactions.

Audits, reviews and an annual report must be submitted to the relevant anti-money laundering/countering financing of terrorism supervisor.

The firm must have started its business within one year from the day the authorization was granted, and must still be active. Threshold conditions (such as fulfilling the governance and capital requirements as well as being compliant with the terms of the authorization) are an ongoing compliance requirement for authorized firms.

Failure to comply with the capital requirements and more detailed regulatory rules can result in sanctions for firms and regulated individuals, and loss of authorization.

Many threshold conditions (such as having adequate financial resources, a minimum capital stock and compliance arrangements in place) are also ongoing compliance requirements for authorized firms.

These include:

• minimum capital and equity capital (basic equity and supplementary capital) requirements;
• risk concentration limits, which are based on a firm's equity capital global limits (these limits are overall limits, global limits for operations, individual limits, related individuals exposures and foreign companies and corporate group exposures);
• general and specific provisions for loans granted according to a firm's level of risk; and
• functions (companies must have at least an audit unit, a risk unit, an anti-money laundering system, a market conduct officer and a law compliance officer).

Failure to comply with the threshold conditions and more detailed regulatory rules allow the Superintendence of Banking, Insurance and Private Pension Fund Management Companies (SBS), in addition to imposing the applicable sanctions, to directly supervise the operation of the relevant firm and to request financial and internal information in order to determine if the failure to comply will be resolved. If the situation has not been resolved within the period of time given to the relevant entity, the SBS is entitled to intervene in the administration of the company and, when necessary, to initiate its dissolution and liquidation.

Threshold conditions (such as having adequate financial resources and compliance arrangements in place) are an ongoing compliance requirement for authorized firms.

Failure to comply with the threshold conditions and more detailed regulatory rules can result in sanctions being imposed on firms and regulated individuals, as well as the loss of regulated status.

Threshold conditions (including solvency requirements) are ongoing compliance requirements for authorized firms.

Failure to comply with the threshold conditions and more detailed regulatory rules can result in sanctions for firms and regulated individuals, and loss of regulated status.

Commercial banks

All commercial banks in Puerto Rico are regulated by the Office of the Commissioner of Financial Institutions of Puerto Rico (OCFI) and also have their deposits insured by the US Federal Deposit Insurance Corporation (FDIC) and as such are required to comply with the regulations of the FDIC. These essentially regulate capital, asset quality, management, earnings, liquidity and interest rate sensitivity management. In addition, special attention is given to anti-money laundering regulation and bank secrecy. Some commercial banks are also members of the US Federal Reserve System (Fed) and are subject to the Fed regulations as well.

Securities broker-dealers

Securities broker-dealers in Puerto Rico are required to become members of self-regulatory organizations such as the Financial Industry Regulatory Authority (FINRA). Most, if not all, securities broker-dealers in Puerto Rico are members of FINRA and are required to comply with its regulations. These regulations pertain to net capital requirements, communications with clients, disclosures to clients, licensing and supervision of personnel and claims, among others.

Threshold conditions (such as having adequate own funds and compliance arrangements in place) are an ongoing compliance requirement for credit institutions, non-banking financial institutions, investment firms, investment vehicles and fund managers.

Failure to comply with the threshold conditions and more detailed regulatory rules can result in sanctions for regulated entities, such as written warning, fines, temporary suspension of the respective entity's authorization or even prohibition from performing the authorized activity.

Threshold conditions (such as a requirement as to the amount of funds held, meeting liquidity ratios and disclosure of information) are an ongoing compliance requirement for most types of authorized persons.

Failure to comply with the threshold conditions and other regulatory rules can result in sanctions being imposed, including loss of authorization.

Approved or authorized entities have continuous obligations such as sufficient guarantees, in particular with regard to the composition and amount of their capital, their organization, their human, technical and financial resources, the integrity and experience of their managers, as well as their own measures to ensure the security of clients’ transactions.

They must undertake, in writing, that any modifications made to their Articles of Association during the course of their existence are subject to the prior authorization of the Regional Council when they relate to a distribution of capital between shareholders, a change in the scope or nature of the guarantees submitted, a change in the accounting methods and information used, for any other modification to the Articles of Association, the Regional Council must be informed.

In case of failure of those entities to comply with key requirements, the Regional Council can take steps to restore compliance with the rules. If violations continue, it can decide on the sanctions to be taken, in accordance with the provisions of the General Regulations, in particular the suspension of all or part of their activities.

Ongoing compliance requirements differ depending on the type of license obtained. Typically, threshold conditions regarding the maintenance of adequate financial resources and reporting requirements are ongoing requirements for authorized firms. An annual license fee is also typically payable.

The Monetary Authority of Singapore may take regulatory and enforcement action for a failure to comply with ongoing compliance requirements, resulting in sanctions for regulated entities including a possible revocation of authorization.

Threshold conditions (such as having adequate financial resources and compliance arrangements in place) are an ongoing compliance requirement for authorized firms.

Failure to comply with the threshold conditions and the more detailed regulatory rules can result in sanctions for firms and regulated individuals, and even result in a loss of regulated status.

Legal entities undertaking a regulated activity without being authorized or exempt may also be subject to various monetary and non-monetary sanctions issued by the National Bank of Slovakia.

The main ongoing compliance requirements include:

• the payment of annual fees, such as licensing fees;
• if required, maintaining required levels of capital; and
• adhering to any conditions of authorization imposed by regulators, such as continuous disclosure.

Threshold conditions (such as having adequate financial resources and compliance arrangements in place) are an ongoing compliance requirement for authorized firms.

Failure to comply with the threshold conditions and more detailed regulatory rules can result in sanctions for firms and regulated individuals, and loss of regulated status.

Threshold requirements (such as having adequate resources and compliance arrangements in place) are an ongoing compliance requirement for authorized firms.

Failure to comply with the threshold conditions and more detailed regulatory rules can result in sanctions for firms and regulated individuals, and loss of regulated status.

There are two main forms of ongoing compliance requirements, namely merit-based regulations and disclosure-based regulations.

Merit-based regulations

Ongoing compliance obligations are determined depending on the type of transaction involved, for example corporate governance requirements apply to an offering of equity securities and credit rating requirements apply when a transaction involves debt instruments.

Examples of merit based regulations include the following.

The Corporate Governance Code for listed companies

The latest version of these guidelines for listed companies was issued in 2017 and contains eight main practices of good governance. Although not mandatory, compliance with good corporate governance provides reassurance for investors.

The investment governance code for institutional investors (I Code)

Having considered the Stewardship Code of United Kingdom, the Securities and Exchange Commission (SEC) has issued this code which sets out seven keys practices regarding investment governance of institutional investors. Similarly to the Corporate Governance Code for Listed Companies, this I CODE is not a mandatory guideline but has been encouraged by the SEC to be implemented to enhance creditability and investment environment.

Notification of the security exchange commission no. korjor. 3/2560 - determination of untrustworthy characteristics of company directors and executives

This Notification sets out criteria to determine the characteristics of untrustworthy directors.

Credit-rating requirements

The issuance of bonds/debentures and bills or an investment unit of funds requires a credit rating which is required to be given by approved credit rating agencies. There are currently five approved credit-rating agencies under the laws of Thailand, being Standard & Poor's, Moodys, Fitch Ratings, Rating and Investment Information, Inc. and the Japan Credit Rating Agency, Ltd.

Disclosure-based regulations

Disclosure requirements depend on the nature of a transaction and the type of investors involved, for example disclosure requirements for private placement are more lenient than for initial public offerings. Disclosure of information about a company, the securities and investors are generally required. In some instances, approval must be obtained before commencement of a transaction and/or certain documentary requirements must be fulfilled upon completion.

Examples of disclosure based obligations include the following.

Equity securities

The offering of equity securities to the public requires disclosure on a strict basis. Disclosure is normally carried out by filing a form and preparing a prospectus which contains information regarding the issuer, details of securities, risks of investment.

Bonds / debentures

The offering of bonds / debentures requires disclosure of certain details, including the terms and conditions of the bonds / debentures, any transfer restrictions and the rights of holders of such debt instruments.

Executive summary

The issuer is obliged to prepare an Executive Summary in the form required, which is attached to the subscription form for the securities. In addition, disclosures must be published on the website of the Securities and Exchange Commission and investors are encouraged to read it.

Compliance requirements may be applicable to banks, funds and financial institutions. Ukrainian law sets out general compliance and prudential requirements depending on the type of financial activity, such as lending, asset management, securities trading or fund investment.

Failure to comply with the threshold conditions and more detailed regulatory rules can result in sanctions for a bank, fund or financial institution and regulated individuals, as well as loss of regulated status.

Threshold conditions (such as having adequate financial resources and compliance arrangements in place) are an ongoing compliance requirement for authorized firms.

Failure to comply with the threshold conditions and more detailed regulatory rules can result in sanctions for firms and regulated individuals, and loss of regulated status.

Threshold conditions (such as having adequate financial resources and compliance arrangements in place) are an ongoing compliance requirement for authorized firms.

Failure to comply with the threshold conditions and more detailed regulatory rules can result in sanctions for firms and regulated individuals, and loss of regulated status.

Whether the firm is located onshore or in a free zone, the firm will have ongoing compliance requirements. For example, if the firm is located in the Dubai International Financial Centre (DIFC) it will have to apply for an annual trading license from the Registrar of Companies and will need to comply with the relevant regulations and rules found in the Dubai Financial Services Authority (DFSA) Handbook. Furthermore, from time to time, the Central Bank will issue circulars with updated regulations/rules which financial firms will need to comply. In order to be clear which compliance regulations apply it is necessary to consider each case on its specific facts. But in any case, failure to comply with ongoing compliance of the relevant regulator can result in sanctions for firms including severe fines.

Lending

Compliance requirements vary depending on the type of lender (bank or non-bank), the regulatory agency from which that entity seeks authorization, and the products being offered. Nevertheless, common requirements include periodic financial reports to the regulator, assessment of management, compliance with Know your Customer (KYC) and anti-money laundering (AML) rules and regulations, compliance with applicable interest rate caps, fee limitations, disclosure obligations, and limitations or prohibitions on referral fees.

Broker-dealers

Specific requirements include:

• continually updating relevant information provided at the time of registration – for both the firm and its registered individuals;
• supervision of each business activity and each registered individual by a qualified (by examination) supervisor/principal pursuant to detailed written supervisory procedures;
• annual review and certification of adequacy of the broker-dealer's supervisory structure and procedures by the broker-dealer's CEO or an equivalent senior officer;
• regular (annual or bi-annual) regulatory examinations by the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA) and, in some cases, state regulators;
• detailed procedures for opening customer accounts including obtaining detailed background and financial information for each customer, including required AML-related information;
• maintenance of accurate books and records relating to each part of the business, including transactions, finances, and customer/client information in prescribed formats and for prescribed periods;
• requirements for protection of confidential customer/client information and material non-public information;
• supervision, review and retention of all communications with the public (including all electronic communications);
• detailed minimum net capital requirements and regular reporting of net capital calculations and immediate notification and/or cessation of business requirements if capital falls below prescribed amounts;
• detailed requirements for protecting customer securities and funds;
• requirement to establish, maintain and enforce detailed cybersecurity, business continuity and disaster recovery procedures; and
• continuing education requirements for each registered individual.

Investment Advisers (as defined in the Investment Advisers Act of 1940)

Specific requirements include:

• continually updating relevant information provided at the time of registration;
• supervision of each business activity and each employee pursuant to detailed written compliance procedures;
• annual review of the Investment Advisers' written policies and procedures designed to prevent violations of the Investment Advisers Act of 1940 (IAA) and the rules thereunder;
• periodic regulatory examinations by the SEC and/or state regulators;
• developing and maintaining procedures with respect to political contributions;
• maintenance of accurate books and records relating to each part of the business;
• requirements for protection of confidential customer/client information and material non-public information;
• requirement to deliver a brochure and one or more brochure supplements to each client or prospective client that contains all information required by Part 2 of SEC Form ADV (a uniform form used by Investment Advisers to register with both the SEC and state securities authorities);
• requirements for prevention of misuse of material non-public information;
• requirement to establish, maintain and enforce a detailed code of ethics;
• requirement to file Form PF (reporting form for 'investment advisers to private funds'), providing data intended to facilitate monitoring of systemic risk private fund (applies to all private funds including private equity funds, hedge funds and liquidity funds);
• requirement to establish, maintain and enforce detailed cybersecurity, business continuity and disaster recovery procedures;
• compliance with rules relating to advertising and marketing materials; and
• compliance with requirements relating to custody of client assets.