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3.8

Internal Audit — The internal audit arrangements should be appropriate to the scale, nature and complexity of its operations. The internal audit may be conducted by the internal audit function within the Dealer, an internal audit team from the head office of the Dealer, or outsourced to a third party service provider, as set out in Appendix 3.

Appendix 1 — Minimum Competency Criteria

  Restricted Dealer Institutional Dealer Retail Dealer
(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.

Minimum years of relevant experience#:

Of these Directors,

•   Number of executive Directors:

Executive Directors are employed full-time in the day-to-day operations of the company and should be resident in the U.A.E.
•   Minimum years of relevant experience# of Senior Executive Officer ["SEO"]:

The SEO is a Controlled Function set out in GEN 5.3.2.
At least 2

5 years

At least 1

5 years
At least 2*

5 years

At least 1

5 years
At least 2*

5 years

At least 1

10 years
(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 SEO of the Dealer.

Minimum years of relevant experience#:
At least 2

5 years
At least 2

5 years
At least 3

5 years
(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 Dealer.
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 Dealer. For example, experience in proprietary trading for financial institutions could be counted towards meeting the relevant experience criteria for a relevant professional conducting Dealing Activities on behalf of customers. Directors/Parnters, SEO and Senior Managers should have managerial experience or experience in a supervisory capacity as part of their relevant experience.

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

•   The following are examples where the Regulator would consider a Restricted/Institutional Dealer as having met the minimum competency criteria:

Example 1

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

Example 2

The Dealer has two executive directors as dealers. Both directors are resident in the U.A.E and have at least 5 years of relevant experience in dealing activities. One of the directors is the SEO. The Dealer should appoint another Recognised Person independent of the front office to be the Compliance Officer / Finance Officer / Money Laundering Reporting Officer.

Example 3

The Dealer in ADGM ("ADGM Dealer") is a subsidiary of a foreign-based Dealer who is regulated in its home jurisdiction. The ADGM Dealer has one resident executive director appointed as the SEO, who has 5 years of relevant experience and heads the dealing function. The ADGM Dealer has another director based overseas. The ADGM Dealer will meet the criteria if it employs an additional resident full-time employee/professional to conduct dealing 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 Dealer
•   The Dealer 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.
Institutional Dealer
•   The Dealer should have an independent compliance function with staff who are suitably qualified and independent from the front office.
•   The Dealer 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 Dealer should ensure that the service provider is competent and familiar with the regulatory requirements for Dealers in ADGM. The service provider should be able to provide meaningful onsite presence at the Dealer.
In either case, the Dealer should designate a senior staff independent from the front office (e.g. COO or CFO) to oversee the compliance arrangement;
Restricted Dealer

Appendix 3 — Internal Audit Arrangements

Category Internal Audit Arrangements
Retail Dealer
•   The Dealer should have an independent and dedicated internal audit function.
•   The internal audit function may be undertaken by an internal audit team within the Dealer, a group internal audit team from the parent or related company of the Dealer, or outsourced to a third party service provider.
Institutional Dealer
•   The internal audit function may be undertaken by an internal audit team within the Dealer independent from the business functions, a group internal audit team from the parent or related company of the Dealer, or outsourced to a third party service provider.
•   Where the Dealer does not have a dedicated internal audit function, the adequacy of the Dealer's internal audit arrangements should be assessed against the context of the Dealer'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 other control functions such as risk management and compliance.
Restricted Dealer
•   The SEO and Board of the Dealer are ultimately responsible for ensuring there are adequate internal controls within the Dealer and should take reasonable measures to ensure that the internal controls are complied with.