PRU 1.2.1

The following terms and abbreviations bear the following meanings for the purpose of these Rules:

Accepting Deposits Means the Regulated Activity specified in paragraph 38 of Schedule 1 of the FSMR.
Accounting Records Means records and underlying documents comprising initial and other accounting entries and associated supporting documents such as:
(a) cheques;
(b) records of electronic fund transfers;
(c) invoices;
(d) contracts;
(e) the general and subsidiary ledgers, journal entries and other adjustments to the financial statements that are not reflected in journal entries; and
(f) work sheets and spread sheets supporting cost allocations, computations, reconciliations and disclosures.
Acting as the Administrator of a Collective Investment Fund Means the Regulated Activity specified in paragraph 60 of Schedule 1 of the FSMR.
Acting as the Trustee of an Investment Trust Means the Regulated Activity specified in paragraph 61 of Schedule 1 of the FSMR.
Adjusted Capital Resources Capital resources calculated in accordance with the PIN rules.
Administering a Specified Benchmark Means the Regulated Activity specified in paragraph 68(1)(b) of the FSMR Schedule 1.
Advising on Investments or Credit Means the Regulated Activity specified in paragraph 28 of Schedule 1 of the FSMR.
ALCO Asset and Liability Committee.
Alternative Standardised Approach The manner in which the Operation Risk Capital Requirement is calculated in accordance with Sections 6.11 and A6.3.
Annual Audited Expenditure The expenditure calculated in accordance with Rule 3.7.3.
Arranging Credit Means the Regulated Activity specified in paragraph 50 of Schedule 1 of the FSMR.
Arranging Custody Means the Regulated Activity specified in paragraph 46 of Schedule 1 of the FSMR.
Arranging Deals in Investments Means the Regulated Activity specified in paragraph 16 of Schedule 1 of the FSMR.
Asset-Backed Commercial Paper (ABCP) Programme A programme that predominantly issues commercial paper with an Original Maturity of one year or less that is backed by assets or other Exposures held in a bankruptcy-remote SPE.
Associate Means, in respect of a Person 'A' holding Shares or entitled to exercise, or control the exercise of voting power, in an Authorised Person or a Holding Company of an Authorised Person:
(1)
(a) the spouse of A;
(b) a child or stepchild of A;
(c) the trustee of any settlement, including an disposition or arrangement under which property is held on trust or subject to a comparable obligation, under which A has a life interest in possession;
(d) an Undertaking of which A is a Director;
(e) a Person who is an Employee or Partner of A;
(f) where A is an Undertaking:
(i) a Director of A;
(ii) a Subsidiary or wholly owned Subsidiary of A; or
(iii) a Director or Employee of such a Subsidiary or wholly owned Subsidiary; or
(g) a Person who has an agreement or arrangement with A with respect to the acquisition, holding or disposal of Shares or other interests in the Authorised Person or the Holding Company of an Authorised Person or under which they undertake to act together in exercising their voting power in relation to an Authorised Person or the Holding Company of an Authorised Person or that other Person.
(2) Means in respect of a Person 'A', any Person, including an affiliated company which is:
(a) an Undertaking in the same Group as A; or
(b) any other Person whose business or domestic relationship with A or his Associate might reasonably be expected to give rise to a community of interest between them which may involve a conflict of interest in dealings with third parties.
AT1 Additional tier 1.
AT1 Capital Has the meaning given in Section 3.14.
Auditor A Partnership or Company that is registered by the Regulator to provide audit services to:
(a) an Authorised Person or Recognised Body that is a Domestic Firm or to;
(b) a Domestic Fund; or
(c) a Public Listed Company.
Authorised Person A Person, other than a Recognised Body, who holds a Financial Services Permission.
Bank Means a Credit Institution.
Base Capital Requirement Has the meaning given in Section 3.6.
Basic Indicator Approach The manner in which the Operational Risk Capital Requirement is calculated in accordance with Sections 6.11 and A6.1.
BCBS The Basel Committee on Banking Supervision.
Body Corporate Any body corporate, and a body corporate constituted under the law of a country or territory outside of ADGM.
Branch Means a place of business within ADGM:
(a) which has no separate legal personality;
(b) forms a legally dependant part of an Authorised Person whose principal place of business and head office is in a jurisdiction other than ADGM; and
(c) through which the Authorised Person carries on Regulated Activities in or from ADGM.
By Way of Business A Person carries on an activity specified in these Rules by way of business only if he carries on that activity from a permanent place of business maintained by him in ADGM and:
(a) engages in that activity in a manner which constitutes the carrying on of a business by him;
(b) holds himself out as willing and able to engage in that activity; or
(c) regularly solicits other Persons to engage with him in transactions constituting that activity.
Capital Conservation Buffer Means the capital buffer requirements as applied in Section 3.9.
Capital Requirement The amount of capital an Authorised Person must hold, calculated in accordance with Sections 3.3, 3.4 or 3.5, as applicable.
Capital Resources The total Capital Resources of an Authorised Person calculated in accordance with Section 3.11.
Carrying Out Contracts of Insurance as Principal Means the Regulated Activity specified in paragraph 32 of Schedule 1 of the FSMR.
Category A prudential grouping of Authorised Persons which determines the application of these Rules.
CCF Credit conversion factor.
CEA Credit equivalent amount.
Central Bank The Central Bank of the UAE or its equivalent in another country or territory.
Certificate Certificate is an instrument:
(a) which confers on the holder contractual or property rights to or in respect of a Share, Debenture, Unit or Warrant held by a Person; and
(b) the transfer of which may be effected by the holder without the consent of that other Person;
but excludes rights under an Option.
CET1 Common equity tier 1.
CET1 Capital Has the meaning given in Section 3.13.
Clean-Up Call An Option that permits the SE Exposures (e.g. asset-backed Securities) to be called before all of the underlying Exposures or SE Exposures have been repaid. In the case of Traditional Securitisations, this is generally accomplished by repurchasing the remaining SE Exposures once the pool balance or outstanding Securities have fallen below some specified level. In the case of a synthetic Exposure, the Clean-Up Call may take the form of a clause that extinguishes the credit protection.
Client A Retail Client, Professional Client or Market Counterparty.
Client Assets Means Client Money and Client Investments.
Client Investments Means all Investments held or controlled by an Authorised Person on behalf of a Client in the course of, or in connection with the carrying on of Investment Business.
Client Money Means money of any currency which an Authorised Person holds on behalf of a Client (including any receivables of the Authorised Person in respect of bank accounts or clearing or brokerage accounts) or which an Authorised Person treats as Client Money, subject to the exclusions in COBS 14.2.6.
CLN Credit-linked note.
Close Links A Person (Person A) has Close Links with a Person (Person B) if:
(a) Person B:
(i) is a Holding Company of Person A;
(ii) is a Subsidiary of Person A;
(iii) is a Holding Company of the Subsidiary of Person A;
(iv) is a Subsidiary of a Holding Company of Person A; or
(v) owns and controls 20% or more of the voting rights or Shares of Person A; or
(b) Person A owns and controls 20% or more of the voting rights or Shares of Person B.
Close Relative In relation to any individual:
(a) his spouse;
(b) his children and step-children, his parents and step-parents, his brothers and sisters and his step-brothers and step-sisters; and
(c) the spouse of any individual within (b).
Closely Related Has the meaning given in Rule A4.11.5.
Collateral Means a Client Investment which has been paid for in full by a Client and which is held or controlled by the Authorised Person under the terms of a deposit, pledge, charge or other security arrangement.
Collective Investment Fund Means an arrangement falling within section 106 of FSMR and which is not excluded under FUNDS Chapter 2.
Collective Investment Fund Risk Capital Requirement A component of Market Risk Capital Requirement calculated in accordance with Section 5.9.
Commodities Risk Capital Requirement A component of the Market Risk Capital Requirement to cover the risk of holding or taking positions in commodities, including precious metals, but excluding gold, calculated in accordance with Section 5.7.
Concentration Risk The risk faced by an Authorised Person arising out of its Large Exposures.
Connected In relation to a Person (A), a Person which has or has at any relevant time had the following relationship to A:
(a) a member of A's Group;
(b) a Controller of A;
(c) a member of a Partnership of which A is a member;
(d) an Employee or former Employee of A;
(e) if A is a Company:
(i) an officer or manager of A or of a Parent of A;
(ii) an agent of A or of a Parent of A;
(f) if A is a Partnership is or has been a member, manager or agent of A; or
(g) if A is an unincorporated association of Persons which is not a Partnership, is or has been an officer, manager or agent of A.
Connected Counterparties For Concentration Risk purposes, and in relation to a Person, a Connected Counterparty means another Person to whom the first Person has an Exposure and who fulfils one of the following conditions:
(a) he is Connected to the first Person;
(b) he is an Associate of the first Person;
(c) the same Persons significantly influence the Governing Body of each of them; or
(d) one of those Persons has an Exposure to the other that was not incurred for the clear commercial advantage of both of them and which is not on arm's length terms.
Constitution Means in relation to a Fund:
(a) which is in the form of a Body Corporate, the instrument of incorporation;
(b) which is in the form of an Investment Trust, the trust deed;
(c) which is in the form of a Partnership, the partnership deed; or
(d) adopting a form other than one specified in paragraphs (a) to (c) of this definition, an instrument creating the legal form of the Fund to which the Fund Manager is a party setting out provisions relating to any aspect of the operation or management of the Fund.
Controlled Early Amortisation Early Amortisation that meets the conditions in Rule 4.14.58.
Counterparty Means any Person with or for whom an Authorised Person carries on, or intends to carry on, any regulated business or associated business. In this context, Counterparty includes an individual, unincorporated body, company, government, local authority or other public body.
Counterparty Risk The risk that an Authorised Person's Counterparty does not perform its obligations under the terms of a contract.
CPW Counterparty weighting.
CR Exposure The Exposure value or amount for a Credit Risk Exposure.
CRA Means a credit rating agency.
Credit Derivative Any contract which transfers the Credit Risk of a reference obligation or set of reference obligations from the protection buyer to the protection seller, such that the protection seller has an Exposure to the reference obligation(s).
Credit Enhancement A contractual arrangement in which the Authorised Person retains or assumes an SE Exposure and, in substance, provides some degree of added protection to other parties to the transaction.
Credit Facility Any facility which includes any arrangement or agreement which extends monetary credit whether funded or unfunded to a Person including but not limited to any loan or syndicated loan, mortgage, overdraft, financial lease, letter of credit, financial guarantee, trade finance, transaction finance, project finance or asset finance.
Credit Institution Means:
(a) an undertaking whose business is to receive Deposits or other repayable funds from the public and to grant Credits for its own account; or
(b) an Electronic Money Institution.
Credit Quality Grade A credit quality step in a credit quality assessment scale. A credit quality assessment scale is a scale onto which the credit assessments of an ECAI or an expert credit agency are mapped.
Credit Rating Agency A Person carrying on in or from ADGM the Regulated Activity of Operating a Credit Rating Agency for which it has an authorisation under its Financial Services Permission.
Credit Risk Means, in relation to an Authorised Person, the risk of loss if another party fails to perform on its financial obligation to the Authorised Person.
Credit Risk Capital Requirement (CRCOM) The credit risk capital requirement calculated in accordance with Section 4.6.
Credit-Enhancing Interest-Only Strip An on-balance sheet asset that:
(a) represents a valuation of cash flows related to future margin income; and
(b) is subordinated.
CRM Credit risk mitigation.
CRW Credit risk weight for an Exposure.
CV Contracted value for delivery.
Dealing in Investments as Agent Means the Regulated Activity specified in paragraph 12 of Schedule 1 of the FSMR.
Dealing in Investments as Principal Means the Regulated Activity specified in paragraph 4 of Schedule 1 of the FSMR.
Debenture Means an instrument creating or acknowledging indebtedness, whether secured or not, but excludes:
(a) an instrument creating or acknowledging indebtedness for, or for Money borrowed to defray, the consideration payable under a contract for the supply of goods or services;
(b) a cheque or other bill of exchange, a banker's draft or a letter of credit (but not a bill of exchange accepted by a banker);
(c) a banknote, a statement showing a balance on a bank account, or a lease or other disposition of property; and
(d) a Contract of Insurance.
Delta The measure of an Option's sensitivity to a change in value of the underlying Investment, asset or property.
Deposit
(1) Means a sum of Money paid on terms:
(a) under which it will be repaid, with or without interest or a premium, and either on demand or at a time or in circumstances agreed by or on behalf of the Person making the payment and the Person receiving it; and
(b) which is not referable to the provision of property (other than currency) or services or the giving of security.
(2) In (1) Money is paid on terms which are referable to the provision of property or services or the giving of security if:
(a) it is paid by way of advance or part payment under a contract for the sale, hire or other provision of property or services, and is repayable only in the event that the property or services are not in fact sold, hired or otherwise provided;
(b) it is paid by way of security for the performance of a contract or by way of security in respect of loss which may result from the non-performance of a contract; or
(c) without prejudice to (b), it is paid by way of security for the delivery up of property, whether in a particular state of repair or otherwise.
(3) A sum is not a Deposit if it is paid:
(a) by a Person in the course of carrying on a business consisting wholly or to a significant extent of lending Money;
(b) by one company to another at a time when both are members of the same Group;
(c) by an Authorised Person authorised under its Financial Services Permission to carry on the following Regulated Activities:
(i) Accepting Deposits;
(ii) Effecting Contracts of Insurance; or
(iii) Carrying Out Contracts of Insurance as Principal; or
(d) by a Person who is a Close Relative of the Person receiving it or who is a Director, manager or Controller of that Person.
(4) A sum is not a Deposit if it is received:
(a) by a lawyer acting in his professional capacity;
(b) by an accountant acting in his professional capacity;
(c) by an Authorised Person or a Recognised Body authorised under its Financial Services Permission to carry on any one or more of the following Regulated Activities:
(i) Dealing in Investments as Principal;
(ii) Dealing in Investments as Agent;
(iii) Arranging Credit;
(iv) Arranging Deals in Investments;
(v) Managing Assets;
(vi) Operating a Collective Investment Fund;
(vii) Effecting Contracts of Insurance;
(viii) Carrying Out Contracts of Insurance as Principal;
(ix) Insurance Intermediation;
(x) Insurance Management; or
(xi) Managing a Profit Sharing Investment Account,
in the course of or for the purpose of any such Regulated Activity disregarding any applicable exclusions in the GEN rules; or
(d) by a Person as consideration for the issue by him of a Debenture.
Derivative or Derivative Contract Means Specified Investments falling within paragraphs 94 to 96 of Schedule 1 of FSMR or, so far as relevant to such investments, any investment falling within paragraph 98 of that Schedule.
Director
(1) In relation to an Undertaking established under the Companies Regulations, a Person who appears on the Register of Directors maintained by the Registrar of Companies; and
(2) in relation to all other Undertakings, a Person who has been admitted to a register which has a corresponding meaning to the Register of Directors or performs the function of acting in the capacity of a Director, by whatever name called.
Displaced Commercial Risk Capital Requirement The requirement calculated in accordance with the IFR rules.
Domestic Firm An Authorised Person or Recognised Body which:
(a) has its registered and head office in the ADGM; or
(b) if it is a Subsidiary of an Undertaking whose principal place of business and head office is in a jurisdiction other than the ADGM, has its registered office in the ADGM.
Domestic Fund A Fund established or domiciled in the ADGM.
Duration Method A measure of General Market Risk calculated in accordance with Rule A5.2.19.
DvP Delivery versus Payment.
E An Exposure value or amount.
E* An Exposure value or amount adjusted in the manner provided in the relevant Rule.
EAE The Exposure value or amount for an Early Amortisation Exposure.
Early Amortisation A mechanism that, once triggered, allows investors to be paid out prior to the originally stated maturity of the Amortisation provision will be considered either controlled or non-controlled.
ECAI A CRA or an external credit rating agency approved by the Regulator for the purpose of these Rules.
Effecting Contracts of Insurance Means the Regulated Activity specified in paragraph 31 of Schedule 1 of the FSMR.
Employee Means an individual:
(a) who is employed or appointed by a Person in connection with that Person's business, whether under a contract of service or for services or otherwise; or
(b) whose services, under an arrangement between that Person and a third party, are placed at the disposal and under the control of that Person.
Equity Risk Capital Requirement A component of Market Risk Capital Requirement and calculated in accordance with Section 5.5.
Evergreening Evergreening refers to the practice by some banks to roll over or renew their non-performing loans or potentially non-performing loans, so that they can avoid recognising them as non-performing loans in their accounts and consequently avoid provisioning for them.
Excess Spread Gross finance charge collections and other income received by the trust or SPE minus certificate interest, servicing fees, charge-offs, and other senior trust or SPE expenses.
Expenditure Based Capital Minimum A Capital Requirement calculated in accordance with Section 3.7.
Exposure
(1) The maximum loss that an Authorised Person (and where applicable its PSIA holders) might suffer if:
(a) a Counterparty or a group of Connected Counterparties fail to meet their obligations; or
(b) it realises assets or off-balance sheet positions.
(2) An Exposure also includes any asset or off-balance sheet item, which could result in a potential loss to the Authorised Person due to Market Risk or Operational Risk or any other risk factor.
FCCA Financial Collateral Comprehensive Approach as described in Rule 4.9.5.
FCSA Financial Collateral Simplified Approach as described in Rule 4.9.5.
Financial Group A group of entities which includes an Authorised Person and:
(a) any Parent incorporated in ADGM;
(b) any Financial Institution subsidiaries (whether direct or indirect) of the Parent or Parents in (a) or of the Authorised Person;
(c) any Financial Institution in which the Parent or Parents in (a), the Financial Institution subsidiaries in (b) or the Authorised Person (whether direct or indirect) hold 20% or more of the voting rights or capital; and
(d) any entity which the Regulator directs the Authorised Person to include in accordance with Rule 8.1.2.
Financial Group Capital Resources The Capital Resources of a Financial Group calculated in accordance with Rule 8.3.4.
Financial Institution Means:
(1) an Authorised Person; or
(2) any Person which carries out as its principal business an activity which would, if carried out in ADGM, be a Regulated Activity; and
(3) is not one of the following:
(A) a governmental organisation, including the Central Bank of any State; or
(B) a multilateral development bank.
Financial Instrument Any contract that gives rise to both a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial Product Means an Investment, a Credit Facility, a Deposit, a Profit Sharing Investment Account, or a Contract of Insurance.
Financial Services Permission is a permission given, or having effect as if so given, by the Regulator in accordance with Part 4 of the Financial Services and Markets Regulations.
First Loss Position Represents the first level of support provided to the Special Purpose Entity or vehicle that should bear all, or a significant part of, the risk associated with the items held by the Special Purpose Entity or vehicle.
Foreign Exchange Risk Capital Requirement A component of the Market Risk Capital Requirement and as calculated in accordance with Section 5.6.
Fund Means a Collective Investment Fund.
Fund Manager Means a Person responsible for the management of the property held for or within a Fund and who otherwise operates the Fund.
Fund Property The property held for or within a Fund.
Future Means an instrument comprising rights under a contract:
(a) for the sale of a commodity or property of any other description under which delivery is to be made at a future date and at a price agreed on when the contract is made and that contract:
(i) is made or traded on a regulated exchange;
(ii) is made or traded on terms that are similar to those made or traded on a regulated exchange; or
(iii) would, on reasonable grounds, be regarded as made for investment and not for commercial purposes; or
(b) where the value of the contract is ultimately determined by reference, wholly or in part, to fluctuations in:
(i) the value or price of property of any description; or
(ii) an index, interest rate, exchange rate, any combination of these, or other factor designated for that purpose in the contract; and
which is wholly settled by cash or set-off between the parties but excludes:
(iii) rights under a contract where one or more of the parties takes delivery of any property to which the contract relates;
(iv) a contract under which Money is received by way of Deposit or an acknowledgement of a debt on terms that any return to be paid on the sum deposited or received will be calculated by reference to an index, interest rate, exchange rate or any combination of these or other factors; or
(v) a Contract of Insurance.
Gamma The measure of the rate of change of Delta.
General Market Risk
(1) For the purposes of the Interest Rate Risk Capital Requirement, means the risk that losses may arise from price changes in Securities caused by parallel or non-parallel shifts in the yield curve or from price movements in the equity market for a given country;
(2) For the purposes of the Equity Risk Capital Requirement, means the risk that losses may arise from a price movement in the equity market for a given country; or
(3) For the purposes of internal models, means both of the above risks.
Governing Body The board of Directors, Partners, committee of management or other Governing Body of an Undertaking.
Group Has the meaning given in section 258 of FSMR.
Group Risk The risk of loss to the Authorised Person as a result of its membership of, or linkages within a Group.
High Quality Liquid Assets (HQLA) Liquid assets that meet the conditions in Rules A9.2.2 to A9.2.9 of App9.
Holding Company Has the meaning given in the Companies Regulations.
Home State Regulator Means the relevant Regulated Activities regulator of a Branch in its home member state.
ICR Means the Individual Capital Requirement given in Section 10.6.
Implicit Support Arises when an Authorised Person provides support to a securitisation in excess of its predetermined contractual obligation.
Insurance Intermediation Means the Regulated Activity specified in paragraph 33 of Schedule 1 of the FSMR.
Insurance Management Means the Regulated Activity specified in paragraph 36 of Schedule 1 of the FSMR.
Insurance Manager An Authorised Person whose Financial Services Permission authorises it to carry on the Regulated Activity of Insurance Management.
Insurance Money
(1) Means, subject to (2), any monies arising from Insurance Intermediation or the Insurance Management business which are any of the following:
(a) premiums, additional premiums and return premiums of all kinds;
(b) claims and other payments due under Contracts of Insurance;
(c) refunds and salvages;
(d) fees, charges, taxes and similar fiscal levies relating to Contracts of Insurance;
(e) discounts, commissions and brokerage; or
(f) monies received from or on behalf of a Client of an Insurance Manager, in relation to his Insurance Management business.
(2) Monies are not Insurance Monies where there is a written agreement in place between the Insurance Intermediary or Insurance Manager and the Insurer to whom the relevant monies are to be paid (or from whom they have been received) under which the Insurer agrees that:
(a) the Insurance Intermediary or Insurance Manager , as the case may be, holds as agent for the Insurer all monies received by it in connection with Contracts of Insurance effected or to be effected by the Insurer;
(b) insurance cover is maintained for the Client once the monies are received by the Insurance Intermediary or the Insurance Manager , as the case may be; and
(c) the Insurer's obligation to make a payment to the Client is not discharged until actual receipt of the relevant monies by the Client.
(3) In this definition, a Client of an Insurance Manager means:
(a) any Insurer for which the Insurance Manager provides Insurance Management;
(b) any shareholder of an Insurer mentioned in (a); or
(c) any Person on whose behalf the Insurance Manager undertakes to establish that Person as an Insurer.
Insurer A Person carrying on in the ADGM either or both of the following Regulated Activities for which it has authorisation under its Financial Services Permission:
(a) Effecting Contracts of Insurance; or
(b) Carrying Out Contracts of Insurance as Principal.
Interest Rate Risk Capital Requirement A component of Market Risk Capital Requirement and calculated in accordance with Section 5.4.
Internal Capital Adequacy Assessment Process (ICAAP) The internal capital adequacy assessment process prescribed in Chapter 10.
Internal Risk Assessment Process (IRAP) The internal risk assessment process prescribed in Section 10.3.
International Financial Reporting Standards Means the International Financial Reporting Standards as issued and amended from time to time by the International Accounting Standards Board.
Investment
(1) Means either a Security or Derivative.
(2) Such Security or Derivative includes:
(a) a right or interest in the relevant Security or Derivative; and
(b) any instrument declared as a Security or Derivative by the GEN rules.
Investment Business The business of:
(a) Dealing in Investments as Principal;
(b) Dealing in Investments as Agent;
(c) Arranging Credit;
(d) Arranging Deals in Investments;
(e) Managing Assets;
(f) Advising on Investments or Credit;
(g) Operating a Collective Investment Fund;
(h) Providing Custody;
(i) Arranging Custody;
(j) Managing a Profit Sharing Investment Account; or
(k) Acting as the Trustee of an Investment Trust.
Investment Grade A credit rating which is a Credit Quality Grade of 1, 2 or 3.
Investment Risk Reserve Represents the amount that is appropriated out of the income of investment account holders, after allocating the Mudarib's share, in order to meet future losses attributable to investment account holders.
Investment Trust Means an express trust created solely for collective investment purposes under section 114 of FSMR.
Islamic Contracts Any contract designed to comply with Shari'a.
Islamic Financial Business Any part of the financial business of an Authorised Person or Recognised Body which is carried out in accordance with Shari'a.
Islamic Financial Institution An Authorised Person or Recognised Body which has, on its Financial Services Permission, an endorsement authorising it to conduct its entire financial business in accordance with Shari'a.
Issuer In relation to:
(a) any Security other than a Unit in a Collective Investment Fund, means the Person by whom it is or is to be issued;
(b) a Unit in a Collective Investment Fund, means the Fund Manager; and
(c) an interest in a Limited Liability Partnership, means the Partnership.
Large Exposure An Exposure, whether in an Authorised Person's Non-Trading Book or Trading Book, or both, to a Counterparty or group of Closely Related Counterparties or a group of Counterparties Connected to the Authorised Person which in aggregate equals or exceeds 10% of the Authorised Person's Capital Resources.
LCR Requirement The LCR required to be maintained by an Authorised Person under Rule 9.3.4.
Leverage Ratio The amount expressed as a percentage value that is calculated in accordance with Rule 3.18.
Liquidity Coverage Ratio (LCR) The amount expressed as a percentage value that is calculated in accordance with Rule 9.3.4 and section A9.2 of App9.
Liquidity Risk The risk that an Authorised Person, although solvent, either does not have available sufficient financial resources to enable it to meet its obligations as they fall due, or can secure such resources only at excessive cost.
Managing a Collective Investment Fund Means the Regulated Activity specified in paragraph 59 of Schedule 1 of the FSMR.
Managing a Profit Sharing Investment Account Means the Regulated Activity specified in paragraph 64(2) of Schedule 1 of the FSMR.
Managing Assets Means the Regulated Activity specified in paragraph 56 of Schedule 1 of the FSMR.
Market Counterparty
(1) An Authorised Person may treat a Professional Client referred to in part (2) of the definition of Professional Client as a Market Counterparty provided that the firm:
(a) in the case of a Professional Client referred to in part (2)(a) to (f) of the definition of Professional Client, has given to that Client a prior written notification of the classification as a Market Counterparty and that Client has not requested to be treated otherwise; and
(b) in the case of a Professional Client referred to in part (2)(g), (h), or (i) of the definition of Professional Client, has obtained the prior written consent of that Client to be treated as a Market Counterparty.
(2) The notification and consent referred to in (1) may be given in respect of all services or in respect of each individual Transaction.
(3) The notification in (1)(a) need only be given to one of:
(a) a Fund or its Fund Manager; or
(b) a pension fund or its management company.
Market Risk The risk of loss that arises from fluctuations in the values of assets or in interest or exchange rates.
Market Risk Capital Requirement The requirement calculated in accordance with Rule 5.3.1.
Matched Principal Has the meaning described in Rule 1.3.3(2).
Maturity Ladder A table that ordinally ranks the maturity time bands and assets and liabilities within them.
Maturity Method This is an advanced approach that an Authorised Person may use to measure the risk of holding or taking positions in debt Securities and other interest rate-related instruments, calculated in accordance with Rule A5.2.17.
Maturity Mismatch A difference between the maturity of an asset and the corresponding liability.
MDB Multilateral development bank.
Modified Duration The time period calculation for the purposes of the Duration Method in accordance with Rule A5.2.21.
Money Any form of money, including cheques and other payable orders.
Multilateral Trading Facility (MTF) Means a system which brings together multiple third party buying and selling interests in Investments, in accordance with its non-discretionary rules, in a way that results in a contract in respect of such Investments.
MV Market value.
Netting A process by which the claims and obligations between two Counterparties are offset against each other to leave a single net sum.
Non-Trading Book Describes positions, Exposures and on-and off-balance sheet items, which are not in the Trading Book.
NP Nominal principal amount.
OBS Exposures Off balance sheet Exposures.
Operating a Collective Investment Fund
(1) Means:
(a) being legally accountable to the Unitholders in the Fund for the management of the property held for or within a Fund under the Fund's Constitution; and
(b) establishing, managing or otherwise operating or winding up a Collective Investment Fund.
(2) To the extent that any activity under (1) constitutes Managing Assets, Acting as the Administrator of a Collective Investment Fund, Dealing in Investments as Agent, Dealing in Investments as Principal, Arranging Credit, Arranging Deals in Investments, or Providing Custody, such a Regulated Activity is taken to be incorporated within Managing a Collective Investment Fund.
(3) The Person referred to in (1) is a Fund Manager.
Operating a Credit Rating Agency Means the Regulated Activity specified in paragraph 65 of Schedule 1 of the FSMR.
Operating a Multilateral Trading Facility or Organised Trading Facility Means the Regulated Activity specified in paragraph 54 of Schedule 1 of the FSMR.
Operating a Representative Office Means the Regulated Activity specified in paragraph 67 of Schedule 1 of the FSMR.
Operational Risk
(1) Refers to the risk of incurring losses due to the failure of systems, processes, and personnel to perform expected tasks.
(2) Operational Risk losses also include losses arising out of legal risk.
Operational Risk Capital Requirement The requirement calculated in accordance with Section 6.11.
Option An Option is an instrument that confers on the holder, upon exercise, rights of the kind referred to in any of the following:
(a) a right to acquire or dispose of:
(i) a Security (other than a Warrant) or contractually based Investment;
(ii) currency of any country or territory; or
(iii) a commodity of any kind;
(b) a right to receive a cash settlement, the value of which is determined by reference to:
(i) the value or price of an index, interest rate or exchange rate; or
(ii) any other rate or variable; or
(c) a right to acquire or dispose of another Option under (a) or (b).
Option Risk Capital Requirement A component of the Market Risk Capital Requirement and calculated in accordance with Section 5.8.
Organised Trading Facility (OTF) Means a system which brings together multiple third party buying and selling interests in Investments, in accordance with its discretionary rules, in a way that results in a contract in respect of such Investments.
Original Maturity
(1) The time period between the date an offer is made and the date it expires or lapses.
(2) In relation to Debentures, the interval between its issue date and the date on which it becomes due and payable.
Originator
(1) An entity which, either itself or through related entities, directly or indirectly, creates the Exposure being securitised; or
(2) any entity which purchases or advises or causes an SPE to purchase the Exposures of a third party, which are then used in a securitisation (for avoidance of doubt, selling credit protection such that the entity or the SPE has a long position in the Credit Risk of the obligor is equivalent to purchasing Exposures).
(3) Where an entity lends to an SPE with a view to enabling that SPE to make loans which are then used in a securitisation, the entity will generally be deemed to be acting as an Originator.
OTC Derivative or OTC Derivative Contract Means a Derivative Contract the execution of which does not take place on a Recognised Investment Exchange.
Parent Means a Holding Company as defined in section 1015 of the Companies Regulations 2015.
Partner In relation to an Undertaking which is a Partnership, a Person occupying the position of a Partner, by whatever name called.
Partnership Means any partnership, including a partnership constituted under the law of a country, jurisdiction or territory outside the ADGM, but not including a Limited Liability Partnership.
Person A Person includes any natural person, Body Corporate or body unincorporated, including a legal person, company, Partnership, unincorporated association, government or state.
PII Professional indemnity insurance.
Potential Future Credit Exposure (PFCE) An amount calculated by multiplying the nominal principal amount of an OTC Derivative contract by a specified percentage dependent on the nature and residual maturity of the contract.
Private Equity Fund A Fund is a Private Equity Fund if it;
(a) invests in unlisted companies, by means of Shares, convertible debt or other instruments carrying equity participation rights or reward; or
(b) participates in management buy-outs or buy-ins.
Professional Client
(1) An Authorised Person may classify a Person as a Professional Client only if such a Person:
(a) either:
(i) has net assets of at least $500,000 (excluding the value of the primary residence of that Person). Assets held directly or indirectly by that Person may be included; or
(ii) is, or has been in the previous 2 years:
(A) an Employee of the Authorised Person; or
(B) an Employee in a professional position in another Authorised Person;
(b) subject to (2), appears, on reasonable grounds, to the Authorised Person , to have sufficient experience and understanding of relevant financial markets, products or transactions and any associated risks following the analysis specified in the COB rules; and
(c) has not elected to be treated as a Retail Client in accordance with the COB rules.
(2) An Authorised Person may consider the following Persons as possessing the necessary degree of experience and understanding of relevant financial markets, products or transactions without having to undertake the analysis referred to in (1)(b):
(a) a Collective Investment Fund or a regulated pension fund;
(b) a Financial Institution or the management company of a regulated pension fund;
(c) a properly constituted government, government agency, central bank or other national monetary authority of any country or jurisdiction;
(d) a public authority or state investment body;
(e) a supranational organisation whose members are either countries, central banks or national monetary authorities;
(f) a Recognised Body, regulated exchange or regulated clearing house;
(g) a Body Corporate whose Shares are listed or admitted to trading on any regulated exchange of an IOSCO member country;
(h) a Body Corporate which has called up Share capital of at least $10,000,000; or
(i) any other institutional investor whose main activity is to invest in Financial Instruments, including an entity dedicated to the securitisation of assets or other financial transactions.
(3) A personal investment vehicle may be classified as a Professional Client without having to meet the requirements in (1)(a)(i) if it is established and operated for the sole purpose of facilitating the management of the investment portfolio of an existing Professional Client.
Profit Equalisation Reserve Represents the amount appropriated out of the Mudaraba income, before allocating the Mudarib's share, in order to maintain a certain level of investment returns for investment account holders and to increase owners' equity.
Profit Sharing Investment Account (PSIA) An account or portfolio managed:
(a) in relation to property of any kind, including the currency of any country or territory, held for or within the account or portfolio;
(b) in accordance with Shari'a and held out as such; and
(c) under the term of an agreement whereby:
(i) the investor agrees to share any profit with the manager of the account or portfolio in accordance with a predetermined specified percentage or ratio; and
(ii) the investor agrees that he alone will bear any losses in the absence of negligence or breach of contract.
Providing Credit Means the Regulated Activity specified in paragraph 48 of Schedule 1 of the FSMR.
Providing Custody Means the Regulated Activity specified in paragraph 43 of Schedule 1 of the FSMR.
Providing Information in Relation to a Specified Benchmark Means the Regulated Activity specified in paragraph 68(1)(a) of Schedule 1of the FSMR.
Providing Money Services Means the Regulated Activity specified in paragraph 52 of Schedule 1 of the FSMR.
PSE Public sector enterprise.
Public Listed Company Has the meaning given in the Companies Regulations.
Qualifying Holding Any holding in the capital of a non-financial Undertaking of which the Authorised Person is a Controller.
Recognised Body Means a Recognised Investment Exchange and a Recognised Clearing House.
Recognised Clearing House Means a clearing house which provides Clearing Services in the ADGM in relation to which a recognition order is in force under Part 12 of FSMR.
Recognised Investment Exchange Means an investment exchange in relation to which a recognition order is in force under Part 12 of FSMR.
Regulated Activity An activity constitutes a Regulated Activity under these Rules where:
(1) It is one of the activities below:
(a) Accepting Deposits;
(b) Providing Credit;
(c) Providing Money Services;
(d) Dealing in Investments as Principal;
(e) Dealing in Investments as Agent;
(f) Arranging Credit;
(g) Arranging Deals in Investments;
(h) Managing Assets;
(i) Advising on Investments or Credit;
(j) Managing a Collective Investment Fund;
(k) Providing Custody;
(l) Arranging Custody;
(m) Effecting Contracts of Insurance;
(n) Carrying Out Contracts of Insurance as Principal;
(o) Insurance Intermediation;
(p) Insurance Management;
(q) Managing a Profit Sharing Investment Account;
(r) Acting as the Administrator of a Collective Investment Fund;
(s) Acting as the Trustee of an Investment Trust;
(t) Operating a Representative Office;
(u) Operating a Credit Rating Agency;
(v) Administering a Specified Benchmark;
(w) Operating a Multilateral Trading Facility or Organised Trading Facility;
(x) Providing Information in Relation to a Specified Benchmark; and
(y) Shari'a-compliant Regulated Activities; and
(2) Such activity prescribed in (2) is carried on By Way of Business.
Regulator Means the Regulated Activities regulator of ADGM.
Related Person Has the meaning given in Rule 4.4.6.
Relevant Entity Means any of the following:
(a) a Financial Institution; or
(b) a financial Holding Company.
Representative Office A Person carrying on in the ADGM the Regulated Activity of Operating a Representative Office for which it has authorisation under its Financial Services Permission.
Re-securitisation Has the meaning given in Section 4.14.
Re-securitisation Exposure Has the meaning given in Section 4.14.2(c).
Restricted PSIA (PSIAr) A PSIA in respect of the investment account holder imposes certain restrictions as to where, how and for what purpose his funds are to be invested.
Retail Client Means a Client specified under COBS 2.3.
Revolving Securitisation A Traditional or Synthetic Securitisation in which the specified items consist of revolving assets such as loan facilities or credit card balances which permit borrowers to vary the drawn amount within an agreed limit, or the scheme itself is revolving.
Rho The measure of an Option's sensitivity to a change in interest rates.
Risk Capital Requirement Has the meaning given in Section 3.8.
RWA Risk weighted assets.
SE Exposure The Exposure value or amount for a securitisation Exposure.
Securities Underwriting Capital Requirement A component of the Market Risk Capital Requirement defined in Section 5.10.
Security For the purposes of these Rules, a Security is:
(a) a Share;
(b) a Debenture;
(c) a Warrant;
(d) a Certificate;
(e) a Unit;
(f) a Structured Product; or
(g) a Derivative.
Servicer A Person that administers the securitised items.
SFT Securities Financing Transactions, such as repo, reverse repo, security lending and borrowing, and margin lending transactions.
Share Means a share or stock in the capital of any Body Corporate or any unincorporated body but excludes:
(a) an instrument creating or acknowledging indebtedness for, or for Money borrowed to defray, the consideration payable under a contract for the supply of goods or services;
(b) a cheque or other bill of exchange, a banker's draft or a letter of credit (but not a bill of exchange accepted by a banker);
(c) a banknote, a statement showing a balance on a bank account, or a lease or other disposition of property; and
(d) any Contract of Insurance.
Shari'a-compliant Regulated Activities Means the Regulated Activities specified in paragraph 64 of Schedule 1 of the FSMR.
Simplified Approach An alternative application of the provisions of Chapter 4 for an Authorised Person in Category 2 and 3A, as described in Sections 4.7 and A4.12.
Special Purpose Entity (SPE) A corporation, trust, or other entity organised for a specific purpose, the activities of which are limited to those appropriate to accomplish the purpose of the SPE, and the structure of which is intended to isolate the SPE from the Credit Risk of an Originator or seller of Exposures. SPEs are commonly used as financing vehicles in which Exposures are sold to a trust or similar entity in exchange for cash or other assets funded by debt issued by the trust.
Specific Risk The risk that losses on an Authorised Person's net long or short position in an individual equity or Security may arise from a negative or positive price movement of that equity or Security relative to the relevant market generally.
Sponsor An Authorised Person that repackages third party assets directly into a securitisation scheme. Where an Authorised Person repackages non-investment Grade third party assets, it may fall within the definition of an Originator unless it originates or repackages no more than 10% of the scheme's total assets.
Standardised Approach The manner in which the Operational Risk Capital Requirement is calculated in accordance with Sections 6.11 and A6.2.
Structured Product Means an instrument comprising rights under a contract where:
(a) the gain or loss of each party to the contract is ultimately determined by reference to the fluctuations in the value or price of property of any description, an index, interest rate, exchange rate or a combination of any of these as specified for that purpose in the contract ("the underlying factor") and is not leveraged upon such fluctuations;
(b) the gain or loss of each party is wholly settled by cash or set-off between the parties;
(c) each party is not exposed to any contingent liabilities to any other Counterparty; and
(d) there is readily available public information in relation to the underlying factor;
but excludes any rights under an instrument:
(e) where one or more of the parties takes delivery of any property to which the contract relates;
(f) which is a Debenture; or
(g) which is a Contract of Insurance.
Subsidiary Has the meaning given to the term in the Companies Regulations.
Supervisory Review and Evaluation Process (SREP) The supervisory review and evaluation process prescribed in Chapter 10.
Synthetic Securitisation Has the meaning given in Rule 4.14.2(b).
T Trade date, which is the date on which a transaction is entered into.
T1 Tier 1.
T1 Capital Has the meaning given in Rule 3.12.1.
T2 Tier 2.
T2 Capital Has the meaning given in Rule 3.15.1.
Theta The ratio of the change in an Option price to the decrease in time to expiration. Theta can also be referred to as time decay.
Total Return Swap A contract under which two parties exchange their positive or negative returns on a notional amount of a reference asset for a specified period of time.
Trading Book The positions and Exposures including on and off-balance sheet items eligible for inclusion in the Trading Book, as described in Section 2.2.
Traditional Securitisation Has the meaning given in Rule 4.14.2(a).
Trust Administration Services The provision of Trust Administration Services include:
(a) the keeping of Accounting Records relating to an express trust and the preparation of trust accounts;
(b) the preparation of trust instruments or other documents relating to an express trust;
(c) the management and administration of trust assets subject to an express trust;
(d) dealing with trust assets subject to an express trust, including the investment, transfer and disposal of such assets;
(e) the distribution of trust assets subject to an express trust; and
(f) the payment of expenses or remuneration out of an express trust.
Trust Deed A deed entered into by a Fund Manager and the Trustee to create an Investment Trust.
Trustee Means the Person, described under FUNDS 12.3.4 who is appointed under a Trust Deed as the trustee of an Investment Trust to hold the Investment Trust's Property on trust for the Unitholders and to oversee the operation of the Investment Trust and, in relation to a Domestic Fund, is authorised under its Financial Services Permission to Act as the Trustee of the Investment Trust.
Undertaking Means:
(a) a Body Corporate or Partnership; or
(b) an unincorporated association carrying on a trade or business, with or without a view to profit.
Underwriting An arrangement under which a party agrees to buy, before issue, a specified quantity of Securities in an issue of Securities on a given date at a given price, if no other party has purchased or acquired them.
Unit Means a unit in or a Share representing the rights or interests of a Unitholder in a Fund.
Unitholder Means any holder of a Unit in the Fund or of any right or interest in such a Unit, otherwise known as a 'participant' and whose name is entered on the Fund's register in relation to that Unit.
Unrestricted PSIA (PSIAu) A PSIA in respect of which the investment account holder authorises the Authorised Person to invest the account holder's funds in a manner which the Authorised Person deems appropriate without laying down any restrictions as to where, how and for what purpose the funds should be invested.
Unsettled Transaction A transaction where delivery of an instrument is due to take place against the receipt of cash but remains outstanding.
VaR Value at risk.
Vega The measure of the sensitivity of the value of the Option to a change in the volatility of the underlying asset.
Walkaway Clause A provision which permits a non-defaulting party to make payments, or no payments at all, to the estate of the defaulter, even if the defaulter is a net creditor.
Warrant Means an instrument that confers on the holder a right entitling the holder to an unissued Share, Debenture or Unit.