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3.11

Professional Indemnity Insurance ["PII"] — As set out in section 6.12 of the PRU Rulebook, a Manager shall maintain PII cover appropriate to the nature, size, and risk profile of the Manager's business. A Retail Manager should obtain a minimum PII coverage as set out in Appendix 4. For Restricted and Start-up Managers, we may consider granting a waiver of the requirement under appropriate circumstances acceptable to the Regulator.

Appendix 1 — Minimum Competency Criteria

  Start-Up Manager Restricted Manager Retail Manager
(i) Number of Licensed Directors:

A Licensed Director is a Controlled Function set out in GEN 5.3.3. Nominee directors such as legal advisers or corporate secretaries will not count towards meeting this requirement.

Of these Directors,

•   Minimum years of individual relevant experience#:
•   Number of Directors resident in the U.A.E.
At least 2

5 years

At least 1
At least 2*

5 years

At least 1
At least 2*

5 years

At least 1
(ii) Number of Approved Persons residing in the U.A.E:

Approved Persons (as set out in GEN 5.3) will include the Licensed Directors, Licensed Partners and Senior Executive Officer ["SEO"] of the Manager.

Minimum years of relevant experience#:
At least 2

5 years
At least 2

5 years
At least 3

5 years
(10 years for the SEO)
(iii) Number of employees / professionals conducting the regulated activities residing in the U.A.E:

Such employees / professionals may include the Approved Persons and Recognised Persons (as set out in GEN 5.4) of the Manager.
At least 2 At least 2 At least 3

#: The relevance of an individual's experience should be assessed in the context of the role that the individual will perform in the Manager. For example, experience in proprietary trading for financial institutions could be counted towards meeting the relevant experience criteria for a relevant professional conducting regulated activities in respect of discretionary portfolio management activities. Relevant experience may also include sector experience (e.g. corporate strategy and management of businesses), particularly for private equity and venture capital Managers. Directors/Partners, SEO and Senior Managers should have managerial experience or experience in a supervisory capacity as part of their relevant experience.

*: For a Manager that is deemed as high impact or systemically important, the Regulator may require the Manager to have more than 2 directors.

•   The following are examples where the Regulator would consider a Start-up/Restricted Manager as having met the minimum competency criteria:

Example 1

The Manager has two resident Licensed Directors, one of whom is the SEO, who is responsible for the conduct of investment management activities. The other is the Chief Operating Officer, who is responsible for back office functions such as trade reconciliation and reporting (i.e. not conducting a regulated activity). Both directors have at least 5 years of relevant experience in their respective functions. The Manager will meet the minimum competency criteria if it employs at least one additional resident full-time employee/professional, who will conduct investment management activities. There will not be any minimum experience criteria for this additional employee, although the employee should be suitably competent.

Example 2

The Manager has two Licensed Directors conducting investment management activities. Both directors are resident in the U.A.E and have at least 5 years of relevant experience in investment management. One of the directors is the SEO. The Manager should appoint another Recognised Person independent of the front office to be the Compliance Officer / Finance Officer / Money Laundering Reporting Officer.

Example 3

The Manager in ADGM ("ADGM Manager") is a subsidiary of a foreign-based Manager who is regulated in its home jurisdiction. The ADGM Manager has one resident Licensed Director appointed as the SEO, who has 5 years of relevant experience and carries out investment management activities. The ADGM Manager has another director based overseas. The ADGM Manager will meet the criteria if it employs an additional resident full-time employee/professional to conduct the investment management activities, and this employee will be required to have at least five 5 years of relevant experience.

Appendix 2: Minimum Compliance Arrangements

Category Compliance Arrangements
Retail Manager
•   The Manager should put in place an independent and dedicated compliance function in the U.A.E with staff who are suitably qualified and independent from the front office.
•   Compliance staff may perform other non-conflicting and complementary roles such as that of an in-house legal counsel.
Restricted Manager
•   A Manager should have an independent compliance function with staff who are suitably qualified and independent from the front office.
•   The Manager may, depending on the size and scale of the business:
(i) rely on compliance oversight and support from an independent and dedicated compliance team at its holding company or related entity; or
(ii) engage an external service provider to support its compliance arrangements. The Manager should ensure that the service provider is competent and familiar with the regulatory requirements for Managers in ADGM. The service provider should be able to provide meaningful onsite presence at the Manager.
In either case, the Manager should designate a senior staff independent from the front office (e.g. COO or CFO) to oversee the compliance arrangement;
Start-up Manager
•   A Start-up Manager should ensure that it has adequate compliance arrangements appropriate to the scale, nature and complexity of its operations. This may take the form of an independent compliance function, compliance support from overseas affiliates and/or use of external service providers that meet the requirements set out above.

Appendix 3 — Internal Audit Arrangements

Category Internal Audit Arrangements
Retail Manager
•   The Manager should have an independent and dedicated internal audit function.
•   The internal audit function may be undertaken by an internal audit team within the Manager, a group internal audit team from the parent or related company of the Manager, or outsourced to a third party service provider.
Restricted Manager
•   The internal audit function may be undertaken by an internal audit team within the Manager independent from the business functions, a group internal audit team from the parent or related company of the Manager, or outsourced to a third party service provider.
•   Where the Manager does not have a dedicated internal audit function, the adequacy of the Manager's internal audit arrangements should be assessed against the context of the Manager's overall business scale and control environment i.e. whether there are periodic checks similar to those performed by internal auditors, which are performed by control functions such as risk management and compliance.
Start-up Manager
•   The SEO and Board of the Manager are ultimately responsible for ensuring there are adequate internal controls within the Manager and should take reasonable measures to ensure that the internal controls are complied with.

Appendix 4 — PII Coverage for Retail Managers

•   PII coverage — A Retail Manager should maintain a PII coverage as follows:
Min PII Remarks
0.15% x AUM
(subject to a cap of
US$15mil)
•   Copy of PII to be submitted to the Regulator on an annual basis.
•   Amount of PII deductible should not exceed 20% of the Manager's CET1 Capital.
•   Alternative PII — The Regulator may consider alternative forms of PII subject to the following conditions:
Type Conditions
Group PII
•   Minimum coverage to be at least 5 times the required quantum under a standalone non-hybrid PII.
•   If the deductible of the Group PII is greater than 20% of the applicant's base capital, an undertaking from the applicant's parent company to cover the excess in the event of a claim would be required.
Hybrid PII
•   Sub-limits to be set for the non-PII sections of the hybrid PII.
•   Total coverage under the hybrid PII less the sub-limits for the non-PII sections should be at least equivalent to the required quantum under a standalone non-hybrid PII.
Group Hybrid PII
•   Sub-limits to be set for the non-PII sections of the Group hybrid PII.
•   Total coverage of the Group hybrid PII less the sub-limits for the non-PII sections has to be at least 5 times the required quantum under a standalone non-hybrid PII.
•   If the deductible of the Group hybrid PII is greater than 20% of the applicant's base capital, an undertaking from the applicant's parent company to cover the excess in the event of a claim would be required.