• 2.2 2.2 Assessing the fitness and propriety of applicants

    • 2.2.1

      We expect applicants seeking authorisation/recognition to be fit and proper. This provides us with the assurance that applicants are willing and able to fulfil their obligations under the law. The onus is on each applicant to establish that they are fit and proper.

    • Reputation and standing

      • 2.2.2

        In assessing the reputation and standing of an applicant, we can take into consideration any relevant matters including:

        (a) any matter affecting the propriety of the applicant's conduct, whether or not such conduct may have resulted in the commission of a criminal offence, the contravention of the law, or the institution of legal or disciplinary proceedings of whatever nature;
        (b) whether an applicant has ever been the subject of disciplinary procedures by a government body or agency or any self-regulatory organisation or other professional body;
        (c) a contravention of any provision of financial services legislation or of rules, regulations, statements of principle or codes of practice made under it or made by a recognised self-regulatory organisation, non-ADGM financial services regulator or regulated exchange or clearing house;
        (d) whether an applicant has been refused, or had a restriction placed on, the right to carry on a trade, business or profession requiring a licence, registration or other permission;
        (e) an adverse finding or an agreed settlement in a civil action by any court or tribunal of competent jurisdiction resulting in an award against or payment by an applicant;
        (f) whether an applicant has been censured, disciplined, publicly criticised or the subject of a court order at the instigation of any regulatory authority, or any officially appointed inquiry, or any other non-ADGM financial services regulator;
        (g) whether an applicant has been open and truthful in all its dealings with us; and
        (h) any other matter that we consider relevant.

    • Locations of offices

      • 2.2.3

        An applicant should be able to satisfy us that it will establish an office and maintain a presence in the ADGM based on the activities it will carry on.

    • Close Links

      • 2.2.4

        We need to be satisfied, as to who are the applicant's Close Links or where the applicants is closely related to another person (for example a parent or subsidiary company or someone who owns and controls 20% or more of the applicant). This is to make sure we are not prevented from effectively supervising the applicant.

    • Legal status of Firms and Recognised Bodies

      • 2.2.5

        We will only consider an application for authorisation or recognition where the legal status of the proposed ADGM entity is a Body Corporate or a Partnership. Individuals cannot make an application. In respect of the regulated activities of Effecting Contracts of Insurance or Carrying Out Contracts of Insurance as Principal, a firm can only be a Body Corporate.

      • 2.2.6

        In the case of non-ADGM persons other than companies limited by shares, we will consider whether the legal form is appropriate for the activities proposed.

      • 2.2.7

        If the applicant is seeking to branch in to the ADGM, we will take into account where the applicant's head office is located.

    • Ownership and Group

      • 2.2.8

        In relation to the ownership and Group structure of an applicant, we may have regard to:

        (a) the applicant's position within its group, including any other relationships that may exist between the applicant, controllers, associates and other persons that may be considered a close link;
        (b) the financial strength of the Group and its implications for the applicant;
        (c) whether the Group has a structure which makes it possible to:
        (i) exercise effective supervision;
        (ii) exchange information among regulators who supervise group members; and
        (iii) determine the allocation of responsibility among the relevant regulators;
        (d) any information provided by other regulators or third parties in relation to the applicant or any entity within its Group; and
        (e) whether the applicant or its group is subject to any adverse effect or considerations arising from a country or countries of incorporation, establishment and operations of any member of its group. In considering these matters, we may also have regard to the type and level of regulatory oversight in the relevant country or countries of the group members and the regulatory infrastructure and adherence to internationally held conventions.

    • Controllers

      • 2.2.9

        In relation to the controllers of an applicant, we may, taking into account the nature, scale and complexity of the firm's business and organisation, have regard to:

        (a) the background, history and principal activities of the applicant's controllers, including that of the controller's directors, partners or other officers associated with the applicant, and the degree of influence that they are, or may be, able to exert over the applicant and/or its activities;
        (b) where the Controller will exert significant management influence over the applicant, the reputation and experience of the controller or any individual within the controller;
        (c) the financial strength of a controller and its implications for the applicant's ability to ensure the sound and prudent management of its affairs, in particular where a controller agrees to contribute any funds or other financial support such as a guarantee or a debt subordination agreement in favour of the Firm or Recognised Body; and
        (d) whether the applicant is subject to any adverse effect or considerations arising from the country or countries of incorporation, establishment or operations of a controller. In considering such matters, we may have regard to, among other things, the type and level of regulatory oversight, which the controller is subject to in the relevant country or countries and the regulatory infrastructure and adherence to internationally held conventions and standards.

      • 2.2.10

        Where we have any concerns relating to the fitness and propriety of an applicant for a Financial Services Permission stemming from a Controller of such a Person, we may consider imposing conditions on the Financial Services Permission designed to address such concerns. For example, we may impose, in the case of a start-up, a condition that there should be a shareholder agreement that implements an effective shareholder dispute resolution mechanism.

    • Resources, systems and controls

      • 2.2.11

        We will have regard to whether the applicant has sufficient resources, including the appropriate systems and controls, such as:

        (a) the applicant's financial resources and whether it complies, or will comply, with any applicable financial rules, and whether the applicant appears to be in a position to be able to comply with such rules;
        (b) the extent to which the applicant is or may be able to secure additional capital in a form acceptable to us where this appears likely to be necessary at any stage in the future;
        (c) the availability of sufficient competent human resources to conduct and manage the applicant's affairs, in addition to the availability of sufficient Approved Persons to conduct and manage the applicant's activities;
        (d) whether the applicant has sufficient and appropriate systems and procedures in order to support, monitor and manage its affairs, resources and regulatory obligations in a sound and prudent manner;
        (e) whether the applicant has appropriate anti-money laundering procedures and systems designed to ensure full compliance with applicable money laundering and counter terrorism legislation, and relevant UN Security Council and applicable sanctions and resolutions, including arrangements to ensure that all relevant staff are aware of their obligations;
        (f) the impact of other members of the applicant's group on the adequacy of the applicant's resources and, in particular, though not exclusively, the extent to which the applicant is or may be subject to consolidated prudential supervision by us or another non-ADGM financial services regulator;
        (g) whether the applicant is able to provide sufficient evidence about the source of funds available to it, to our satisfaction. This is particularly relevant in the case of a start-up entity; and
        (h) the matters specified in paragraph 2.2.88(c).

    • Firms and Recognised Persons: Collective suitability of individuals or other Persons connected to the firm

      • 2.2.12

        Although individuals performing Controlled and Recognised Functions are required to be Approved Persons and/or Recognised Persons and that a firm is required to appoint certain Approved and Recognised Persons to certain functions, we will also consider:

        (a) the collective suitability of all of the firm's staff taken together, and whether there is a sufficient range of individuals with appropriate knowledge, skills and experience to understand, operate and manage the firm's affairs in a sound and prudent manner;
        (b) the composition of the Governing Body of the firm. The factors that would be taken into account by us in this context include, depending on the nature, scale and complexity of the firm's business and its organisational structure, whether:
        (i) the governing body has a sufficient number of members with relevant knowledge, skills and expertise among them to provide effective leadership, direction and oversight of the firm's business. For this purpose, the members of the governing body should be able to demonstrate that they have, and would continue to maintain, including through training, the necessary skills, knowledge and understanding of the firm's business to be able to fulfil their roles;
        (ii) the individual members of the governing body have the commitment necessary to fulfil their roles, demonstrated, for example, by a sufficient allocation of time to the affairs of the firm and reasonable limits on the number of memberships held by them in other boards of directors or similar positions. In particular, we will consider whether the membership in other boards of directors or similar positions held by individual members of the governing body has the potential to conflict with the interests of the firm and its customers and stakeholders; and
        (iii) there is a sufficient number of independent members on the governing body. We will consider a member of the governing body to be "independent" if he is found, on reasonable grounds by the governing body, to be independent in character and judgement and able to make decisions in a manner that is consistent with the best interests of the Firm;
        (c) the position of the Firm in any Group to which it belongs;
        (d) the individual or collective suitability of any person or persons connected with the firm;
        (e) the extent to which the firm has robust human resources policies designed to ensure high standards of conduct and integrity in the conduct of its activities;
        (f) whether the firm has appointed Auditors, actuaries and advisers with sufficient experience and understanding in relation to the nature of the firm's activities; and
        (g) whether the remuneration structure and strategy adopted by the firm is consistent with the requirements in GEN 3.3.42(1).

    • Recognised Bodies: other considerations

      • 2.2.13

        In determining whether a Recognised Body has satisfied its recognition requirements set out in MIR Chapter 2 and GEN Chapter 3, we will consider:

        (a) its arrangements, policies and resources for fulfilling its obligations under the recognition requirements as set out in MIR 4.2.1;
        (b) its arrangements for managing conflicts and potential conflicts between its commercial interest and applicable regulatory requirements;
        (c) the extent to which its constitution and organisation provide for effective governance;
        (d) the arrangements made to ensure that the Governing Body has effective oversight of its regulatory functions;
        (e) the fitness and propriety of its Approved Persons and the access the approved persons have to the Governing Body;
        (f) the size and composition of the Governing Body including:
        (i) the number of independent members on the Governing Body;
        (ii) the number of members of the Governing Body who represent members of the Recognised Body or other persons and the types of persons whom they represent; and
        (iii) the number and responsibilities of any members of the governing body with executive roles within the Recognised Body;
        (g) the structure and organisation of its Governing Body, including any distribution of responsibilities among its members and committees;
        (h) the integrity, relevant knowledge, skills and expertise of the members of the governing body to provide effective leadership, direction and oversight of the Recognised Body's business. For this purpose, such individuals should be able to demonstrate that they have, and would continue to maintain, including through training, necessary skills, knowledge and understanding of the Recognised Body's business to be able to fulfil their roles;
        (i) the commitment necessary by the members of the governing body to fulfil their roles effectively, demonstrated, for example, by a sufficient allocation of time to the affairs of the Recognised Body and reasonable limits on the number of memberships held by them in other boards of directors or similar positions. In particular, the Regulator will consider whether the membership in other boards of directors or similar positions held by individual members of the governing body has the potential to conflict with the interests of the Recognised Body and its stakeholders;
        (j) the integrity, qualifications and competence of its approved persons;
        (k) its arrangements for ensuring that it employs individuals who are honest and demonstrate integrity;
        (l) the independence of its regulatory departments from its commercial departments; and
        (m) whether the remuneration structure and strategy adopted by the Recognised Body is consistent with the requirements in GEN 3.3.42(1).

      • 2.2.14

        We will consider a Director to be "independent" if the Director is found, on the reasonable determination of the Governing Body, to:

        (a) be independent in character and judgement; and
        (b) have no relationships or circumstances which are likely to affect or could appear to affect the director's judgement in a manner other than in the best interests of the Recognised Body.

      • 2.2.15

        In forming a determination the Governing Body should consider the length of time the director has served as a member of the Governing Body and whether the relevant director:

        (a) has been an employee of the Recognised Body or group within the last five years;
        (b) has or has had, within the last three years, a material business relationship with the Recognised Body, either directly or as a partner, shareholder, director or senior employee of a body that has such a relationship with the Recognised Body;
        (c) receives or has received, in the last three years, additional remuneration or payments from the Recognised Body apart from a director's fee, participates in the Recognised Body's share option, or a performance- related pay scheme, or is a member of the Recognised Body's pension scheme;
        (d) is or has been a director, partner or employee of a firm which is the Recognised Body's auditor;
        (e) has close family ties with any of the Recognised Body's advisors, directors or senior employees;
        (f) holds cross directorships or has significant links with other directors through involvement in other bodies; or
        (g) represents a significant shareholder.