It is unclear how far the DFSA licence extends to those activities carried on with companies and individuals based in the UAE, but outside the DIFC free zone.
The DFSA has the right to grant licences to financial services providers to provide services “in and from the DIFC”. The meaning, effect and extent of “from” are unclear and it is unlikely that the DFSA – or any other DIFC or Dubai organisation – will clarify the position in the near future.
There is a grey area between those activities plainly undertaken “in the DIFC” i.e. physically within the DIFC (such as meetings with DIFC, onshore or overseas clients at which financial services activities are undertaken) which are permissible – and operating an effective business in onshore UAE, which is not.
While there is clearly a point at which a company will be operating outside the scope of its licence, this is often seen as a risk assessment point or management issue. DIFC firms have addressed these risks in a variety of ways, by:
- ensuring that any marketing activity/documentation is given, or at least confirmed, in writing, and stating or evidencing that the documents are given “from the DIFC”
- ensuring that no substantive advice is physically given to clients in onshore UAE
- establishing onshore representative offices
- the inclusion of wording on websites to the effect that (a) the site does not contain advice, and (b) the content of the site is located in, and provided from, the DIFC.
The UAE Securities and Commodities Authority (SCA) is expected to introduce regulations prohibiting foreign companies from marketing units in investment funds onshore in the UAE (for this purpose a DIFC financial services provider is treated as a foreign company). A foreign company will probably need to obtain SCA approval to market its units in the UAE, but may also have to engage a UAE licensed distributor, or establish a UAE Central Bank/SCA licensed branch to do so.
We recommend that some form of risk investment appraisal is carried out before applying for a financial services licence from the DFSA.