DIFC issues new rules

The Dubai International Financial Centre (DIFC) yesterday issued new regulations lifting the ceiling on 'administrative' fines for individuals and companies operating in its premises, according to a report in the UAE daily The National.

The maximum fine the regulator can impose for minor legal breaches has been quadrupled, the daily reported.

The new rules also reduce costs for running investment funds in the financial free zone.

The changes lift the ceiling on “administrative” fines to US$20,000 (Dh73,456) from $5,000 for individuals, and to $100,000 from $25,000 for companies operating in the DIFC.

They give the Dubai Financial Services Authority (DFSA) greater scope to punish infractions without going to the DIFC Courts or the Financial Markets Tribunal, and allow the regulator to levy penalties for a broader range of offences.

They include conducting financial services activities without a licence, conducting activities not allowed by a licence and falsely claiming authorisation to do business in the DIFC.

The DFSA imposes administrative penalties for minor breaches, although companies and individuals can appeal against them through the DIFC’s legal system.

For more serious violations, the DFSA seeks an “enforceable undertaking” agreement with a person or company suspected of breaking DIFC laws.

If that agreement is not accepted, the regulator can take the case to court.

Paul Koster, chief executive of DFSA, said the higher fines were meant to bring the regulator’s enforcement tools in line with global standards.

Maximum fines had not been raised since the DFSA was founded in 2004.

“Enforcement is a critical element for the regulator to communicate to the market that you should comply with the rules and regulations and the law,” Koster said when the changes were proposed in April.

The new regime comes four months after the DFSA announced its biggest fine ever: a Dh11.1 million penalty for “unauthorised transactions” by the majority shareholders of Damas, the region’s largest jewellery retailer.

Before that, the DFSA’s largest fine had been the Dh3.5m it charged Shuaa Capital for allegedly manipulating the share price of DP World last year.

Another change to regulations yesterday reduced costs for investment funds operating out of the centre to $10,000 a year from $40,000.

The move was recommended by a panel formed last year to advise on how to make establishing funds in the DIFC “more attractive to both fund managers and participants in the funds industry”.

The lower fees coincide with a strategic overhaul aimed at keeping the DIFC’s edge against other commercial centres in the Gulf.

Making the cost of operating in the DIFC cheaper has been a major thrust of the review, led since last year by the global consultancy McKinsey.

While businesses at the DIFC have cheered efforts to reduce costs, some have complained the centre has yet to address their biggest expense: rents.

Despite declines in Dubai property prices by as much as 50 per cent last year, DIFC commercial rents are still some of the highest in the world, rivalling those in London and New York.

The new rules emerged from consultation papers issued by the DFSA this year, in which the regulator described the proposed changes and invited comment from the public.

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