20 Aug 2015 Obtaining a Securities and Commodities Authority Financial Consultation and Financial Analysis License in the UAE
Obtaining SCA Financial Consultation Financial Analysis License UAE
In the United Arab Emirates (the “UAE”) until 2008, the UAE Central Bank had the responsibility to regulate the activity of financial consultation as part of the financial investment businesses. As of December 2008, the UAE Securities & Commodities Authority (“SCA”) issued Decision No. 48/R of 2008 Concerning the Financial Consultation and Financial Analysis (the “Regulation”). The transfer of the responsibility to SCA was pursuant to the memorandum of understanding signed by and between the UAE Central Bank and SCA, which specifically determines responsibility of each party in relation to legislation, licensing, supervision and inspection of activities concerned with the financial services sector. Since 2008, SCA has granted many companies the Financial Consultation and Financial Analysis licenses and until now, SCA continues to receive applications to license such activity. This article summarizes the basic requirements and procedures to obtaining SCA Financial Consultation Financial Analysis License UAE.
DEFINITIONS, CAPITAL AND LEGAL FORM
As defined in the Regulation, Financial Consultation means the “opinions and recommendations based on economic and financial research, studies and analyses concerning the feasibility studies and determining the anticipated current or future values of the securities, commodities, commodity contracts and companies to be provided to clients or published to the public in any of the various means of publication and communication.”
Financial Analysis means “the scientific systematic processing of data in connection with the position and performance of the companies in the past and at present, and future forecasts of the results of their business, the securities, commodities, commodity contracts, price trends and the trading volumes for the purpose of obtaining information used to take decision at the time of providing a financial consultation.”
In order to obtain a license to practice the activity of Financial Consultation and Financial Analysis, the following conditions must be met:
- The applicant is a company and should have at least fifty one per cent (51%) of its share capital held by natural or juristic persons who are UAE nationals or Gulf Corporation Council (the “GCC“) nationals.
- The purposes of the company must include practicing the business of Financial Consultation and Analysis;
- The memorandum of association of the company should be written in Arabic and authenticated by the relevant official authorities; and
- The paid up share capital of the company to undertake Financial Consultation and Financial Analysis should not be less than one million Dirhams (AED 1,000,000).
It should be noted that SCA may add any other requirements or conditions and may exempt any company of such requirements or conditions in accordance with the functioning requirements of the markets or for the sake of public interest.
Additionally, foreign companies licensed by similar regulatory authorities in their own countries may practice the business of Financial Consultation and Financial Analysis, provided that such companies have at least five years of experience and that they satisfy the conditions pointed out above, excluding the first, third and the fourth conditions.
STAFF QUALIFICATIONS AND REQUIREMENTS
A company applying for a license must provide the administrative and technical staff to practice its business. Such staff must include a general manager (the “General Manager”), a chief executive officer (the “Chief Executive Officer”) or a financial analyst (the “Financial Analyst”).
The General Manager or Chief Executive Officer and approved Financial Analysts, researchers and technicians appointed by the licensed companies must be:
- Natural person(s);
- Fully competent;
- Be of good conduct and behavior and never been sentenced by a freedom restraining penalty in any crime against honor or honesty, unless rehabilitated;
- Has never been declared bankrupt by a final court ruling, unless rehabilitated; and
- The person must be dedicated to work on full time basis. This condition shall apply to the General Manager or the Chief Executive Officer if the company is only licensed to practice the business of Financial Consultation and Financial Analysis.
The academic qualifications and practical experience of the General Manager, the Chief Executive Officer and the Financial Analyst must be as follows:
- The General Manager or the Chief Executive Officer must hold a university degree and must have at least five years of experience in the fields of economy or finance.
- The Financial Analyst must hold a university degree or a recognized professional certificate and must have at least three years of experience in the fields of financial analysis. Furthermore, a Financial Analyst is required to sit and pass the prescribed tests as per the controls set by SCA. The company will not attain the respective license if the Financial Analyst does not appear for these tests and pass them.
SCA may exempt the General Manager or the Chief Executive Officer from the conditions related to the academic qualifications or the years of experience. Furthermore, SCA may exempt any person from sitting for any or all tests required to approve the Financial Analyst if such person holds exceptional qualifications or experience.
It should be noted that companies operating in the field of securities may obtain a license for Financial Consultation and Financial Analysis in addition to their other activities. In such case, the company shall comply with all terms, conditions and processes as set forth in the Regulation.
INTERNAL CONTROL SYSTEM
The company needs to have an internal control and regular audit system to ensure the proper application of the law, the regulations and resolutions issued thereunder and the internal bylaws applicable by the markets. SCA must be informed of the names of those in charge of the internal control in the company and of reporting any violation of the SCA law, regulations or resolutions.
APPLICATION AND REQUIRED DOCUMENTS
The application form (signed and stamped) must be successfully submitted. Furthermore, the required documents are:
- Receipt of payment of application fees (AED 1,000);
- A trade license and a Ministry of Economy letter that certifies the company’s registration with the ministry;
- A certificate of membership with the Chamber of Commerce & Industry;
- The memorandum of association of the applicant must be in Arabic/English indicating the objects of the applicant which shall include the activity of Financial Consultation and Financial Analysis;
- A no objection letter from the Central Bank of UAE is required if the applicant is a local bank;
- Operations manual that includes the administration and controls of operations, organization and responsibilities, operational control and supervision, operating procedures, safety and quality management methods, archiving systems etc.;
- A tenancy contract or the title deed of property (offices);
- Service agreement between the company and its customer(s) which conforms to applicable regulations and laws of SCA for the Financial Consultation and Financial Analysis license. The agreement must clearly state the obligations and rights of each party (client’s and advisor’s);
- Bank letter certifying the deposit of one million Dirhams (AED 1,000,000) is towards the capital of the company (please note that the sum of AED 1 million is required only for the activity of Financial Consultation and Financial Analysis license. Any other activity included in the license should have its capital requirement met separately) or three years’ financials if the company is already existent;
- A statement clarifying if the applicant and any of its subsidiaries, sister companies, and/or affiliates is presently under or has been subject to any judicial rulings or disciplinary actions or punitive actions by any regulatory bodies, markets, and/or any authority;
- A statement clarifying:
- If the market research conducted by the Financial Analyst is for the general public or for clients who have mandated the company;
- If the Financial Analyst will be the company’s spokesperson or will be elected to speak on behalf of the company;
- The target customers of the company and the channels used by the Financial Analyst to conduct his/her research;
- Mention of the method of archiving documents and the name of the person responsible for it;
- If the company is engaged in different financial activities, how these activities are segregated to avoid conflict of interest;
- An organizational chart or a statement clarifying the names, positions, and job descriptions of the General Manager, the Financial Analyst(s), and the internal Auditor/Controller;
- A statement naming the General Manager or Chief Executive Officer, Financial Analyst, officials in charge of internal audit and control and officials providing Financial Consultation and Financial Analysis services along with a statement of job description for each;
- Resumes and certificates of work experience for all employees who will work for the applicant in providing the Financial Consultation and Financial Analysis services, and the person in charge of the internal audit and control (and the relevant declaration form);
- The academic degrees attested by the relevant UAE authorities of the General Manager or Chief Executive Officer and Financial Analysts;
- A passport copy and visa copy of the General Manager or Chief Executive Officer and Financial Analyst;
- A statement indicating the following whether the Financial Analyst conducts a research that is to be widely published or not;
- A Criminal Case Search Certificate issued by the relevant authority.
SERVICE STEPS AND PROCEDURES
The form must be submitted and the fees paid. The application fees are one thousand Dirhams (AED 1,000). The fees on the approval of a Financial Analyst are one thousand Dirhams (AED 1,000) and the license fees are five thousand (AED 5,000).
The license term should be one year ending on 31st December of each year. The term of the first license shall be as from the date of issue to 31st December of the same year. The payable fee for this license shall be prorated for the licensed period of the year with a part of a month calculated as one whole month.
Once the application has been submitted, SCA should issue its decision to approve or reject the licensing application within thirty days from the date of submission.
lecocqassociate arabia dmcc specializes in the incorporation and structuring of financial and non-financial institutions with cost efficient solutions. It regularly advises and assists clients in attaining various SCA licenses.
This newsletter is for information purposes only. It does not constitute professional advice or an opinion. Please contact Mr. Dominique Lecocq on moc.e1508628028taico1508628028ssaqc1508628028ocel@1508628028lrd1508628028 for any questions.