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DIFC to have new rules on wealth management clients.

New rules being introduced by Dubai International Financial Centre (DIFC) should help boost the DIFC's share of the Gulf's burgeoning wealth management business. The Dubai Financial Services Authority (DFSA), the regulatory body for DIFC has published its response to public comments on the proposed chances to client classification. The new regulations clarify the distinction between 'professional investors' and those that are less sophisticated.

The DFSA said a total of 22 sets of written comments were received, which 'greatly assisted the DFSA in developing and refining its proposals so that they meet the needs of market participants while also achieving good regulatory outcomes'.

"The new client classification regime, contained in the Conduct of Business Module (COB) chapter 2, is set to come into effect on 1 April 2015, with one exception. This relates to the increase of the asset test applicable to 'assessed' Professional Clients from $500,000 to $1 million, which will come into effect on 1 April 2016."

The DFSA said public comments supported allowing authorised firms in the DIFC more time to adjust to an increase in the asset threshold. " Importantly, the new regime has no retrospective effect. As a result, client classifications of existing Clients, as well as Transactions and Client Agreements entered into with such Clients under the old client classification regime do not have to be unwound. The new regime contains transitional provisions to grandfather those classifications, transactions and agreements."

The DFSA has also made minor changes to the draft Rule to clarify matters, both through its own initiative and prompted by public comments.

Among issues for future consideration, the DFSA said that, "A few commentators noted that client classification may not be entirely appropriate in some circumstances, particularly for reinsurance related activities. While there is some merit to this argument, we thought it appropriate not to make any piece-meal changes to the current regime in this area. Instead, we expect to consider these issues in due course as part of a discrete project to review the regulatory regime applicable to insurance-related Financial Services.

"A few commentators also suggested that Firms should be able to treat, as their Client, an agent (e.g. an individual holding a power of attorney from a principal), instead of the principal. Under the existing COB regime (in relation to which CP97 proposed no change), the principal and not the agent is the Client of the Firm (unless the agent is another Authorised Firm). We intend to consider whether there are any circumstances in which a Firm may be able to demonstrate to us that there is a genuine need to treat the agent, and not the principal, as the Client of the Firm and, by doing so, the principal is not unduly deprived of the regulatory protection otherwise available to him as the Client of the Firm."

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Publication:CPI Financial
Date:Feb 26, 2015
Words:481
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