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A Guide to theFinancial ServicesRegulations

Contents

Chapter 1 2Introduction to the Financial Services RegulationsLegislative Background

Chapter 2 3Overview of FSRRegulated ActivitiesAuthorisation of FirmsApproval of IndividualsProhibition of Market AbuseRegulation of Financial CommunicationsRegistration of Collective Investment Funds

Chapter 3 4Supervision and Investigations,Enforcement and DisciplineInternational Relations and CooperationPowers Deriving from other Regulations

Chapter 4 Regulatory Objectives andPrinciples of Good RegulationRegulatory ObjectivesPrinciples of Good RegulationAccountabilityConflictsConfidentialityTransparency

Chapter 5 6Regulated ActivitiesActivitiesSpecified ProductsRegulated Activities in Respect of Retail CustomersExclusions

Chapter 6 7Authorisation and ApprovalAuthorisation of Firms

Chapter 7 8Approval of Controllers andNotification RequirementsRequirement for ApprovalMeaning of ControllerOwn Initiative Powers

Chapter 8 9Investment Funds

Chapter 9Rules, Guidance and WaiversRulesGuidance

Chapter 10 10Supervision and InvestigationsReport by a Nominated PersonAppointment of InvestigatorsPrivileged Materials

Chapter 11 11Disciplinary and Enforcement PowersContraventionSecondary ContraventionSanctionsEnforcement Procedure

Chapter 12 13Financial Communications

Chapter 13Market AbuseGeneral ProhibitionRules Relating to Market Abuse

Chapter 14 14The Control of Business Transfers

Chapter 15Auditors and Actuaries

Chapter 16 15Protection of customersThe Regulatory EnvironmentComplaints and CompensationRights of ActionUnenforceability

Chapter 17 16Accountability of the Regulatory AuthorityReports and AccountsInternal ProceduresInquiriesComplaints Against the Regulatory AuthorityPublic RecordsConfidential InformationAppeals

Contact Information 18

A Guide to the Financial Services Regulations | 1

A Guide to theFinancial ServicesRegulations

Legislative BackgroundThe QFC Law provides a framework for regulating, authorisingand supervising banking, financial and insurancerelatedbusinesses carried on in or from the QFC by the RegulatoryAuthority.

The QFC Financial Services Regulations (“FSR”) are the primaryRegulations which define the management, objectives, duties,functions, powers and constitution of the Regulatory Authority.

The FSR are issued with the consent of the Council of Ministersand may only be varied or revoked with the consent of theCouncil of Ministers.

The following is an outline of the content of the FSR. For fulldetails, please refer to the text of the FSR.

2 | A Guide to the Financial Services Regulations

Chapter 1Introduction tothe Financial ServicesRegulations

The FSR elaborate on the basic requirements contained in theQFC Law as to management and constitution of the RegulatoryAuthority and the Appeals Body, which is established to hearappeals against the decisions of the Regulatory Authority.TheFSR also contain a description of the QFC Tribunal, whichfunctions as the QFC Court, and has powers to adjudicatecommercial disputes and issue orders, directions anddeterminations within the QFC.

Regulated ActivitiesAs envisaged by the QFC Law, the FSR set out the activitieswhich constitute Regulated Activities, the Specified Products towhich they relate, and the exceptions that will apply.

The Regulatory Authority has power to issue Rules determiningthe details of when an activity will be deemed to be carried on byway of business (activities will only be Regulated Activities if theyare carried on by way of business). This will include defining thecircumstances in which a person will be considered to beundertaking activities as a customer to the market, andaccordingly not undertaking them by way of business for thepurposes of the FSR. The precise scope of the exemptionapplying to project finance special purpose vehicles (“SPVs”) inrelation to the characteristics of an SPV and any financing orrelated activities undertaken by those entities may also bedetermined by the Regulatory Authority. The extent to whichregistered Collective Investment Funds will be considered to becarrying on the Regulated Activities of dealing in investments andmanaging investments will also be set out in Rules issued by theRegulatory Authority.

The Regulatory Authority also has the power to issue Ruleswhich clarify and delimit certain categories of Specified Productto which Regulated Activities relate. The Regulatory Authoritymay issue Rules which specify the circumstances whereparticular arrangements which would otherwise fall within thedefinition of Collective Investment Fund, but which in theRegulatory Authority’s view should not fall to be regarded as suchwill not constitute a Collective Investment Fund for the purposesof the FSR. The Regulatory Authority may also issue Rules whichset out the circumstances in which Futures, Options andContracts for Differences are to be regarded as made forcommercial rather than investment purposes and should not,therefore fall within the scope of the regulatory regime. TheRegulatory Authority is also given the power to make Rulesprescribing the circumstances in which a contract which fallswithin one of the categories of Insurance Contract listed in theFSR is to be regarded a qualifying Contract of Insurance subjectto regulation under the FSR. In all other cases, the list ofRegulated Activities may only generally be altered throughamendment to the FSR, which would require the consent of theCouncil of Ministers.

Authorisation of FirmsThe FSR describe procedures for the granting, variation andwithdrawal of Authorisations.

Approval of IndividualsUnder the FSR, Individuals performing certain functions (socalled Controlled Functions), on behalf of Authorised Firms arerequired to be “approved” by the Regulatory Authority asApproved Individuals.

Prohibition of Market AbuseProvision is also made under the FSR for a regime to preventMarket Abuse.

Regulation of Financial CommunicationsThe FSR contain a regime for the regulation of FinancialCommunications made by entities established within the QFC.The Regulatory Authority also has powers to place restrictions onFinancial Communications coming into the QFC in due course,should this be considered appropriate.

Registration of Collective Investment FundsThe FSR create a regime relating to the registration of CollectiveInvestment Funds.


Chapter 2Overview of FSR


The FSR set out the Regulatory Authority’s powers in respect ofsupervision, investigations, enforcement and discipline.

International Relations and CooperationThe Regulatory Authority is under an obligation to foster relationswith Overseas Regulators and International RegulatoryAssociations outside the QFC.

Powers Deriving from other RegulationsIn addition to its role in relation to banking, financial andinsurance related business, the Regulatory Authority is given power:

• to monitor, supervise, investigate and enforce mattersrelating to the prevention and detection of moneylaundering under the Anti-Money Laundering Regulations.The Regulatory Authority may also issue Rules andGuidance relating to the application of the Anti-MoneyLaundering Regulations; and

• to initiate insolvency proceedings in certain circumstances.

Regulatory ObjectivesThe FSR elaborate on the QFC Law by setting out a number ofRegulatory Objectives as well as Principles of Good Regulation.The FSR describe the Regulatory Authority’s eight objectives as:

(i) the promotion and maintenance of efficiency, transparencyand the integrity of the QFC;

(ii) the promotion and maintenance of confidence in the QFCof users and prospective users of the QFC;

(iii) the maintenance of the financial stability of the QFC,including the reduction of systemic risk relating to the QFC;

(iv) the prevention, detection and restraint of conduct whichcauses or may cause damage to the reputation of theQFC, through appropriate means including the impositionof fines and other sanctions;

(v) the provision of appropriate protection to those licensed tocarry on business at the QFC and their clients or customers;

In considering what constitutes appropriate protection, theRegulatory Authority shall take into account:

• the financial integrity of Authorised Firms throughappropriate financial resources requirementscomplemented by a robust system of internal controls;

• the differing degrees of protection which may beappropriate for clients or customers as a result of theirexperience, expertise, business and means and thediffering degree of information which it may be appropriateto give such clients or customers;

• the differing degree of risk involved in different kinds ofinvestment or transaction;

• the general principle that clients or customers should takeresponsibility for their own decisions;

(vi) the promotion of understanding of the objectives of theQFC amongst users and prospective users of the QFC andother interested Persons;

(vii) ensuring the Regulatory Authority is run with a view to:

• it operating at all times in accordance with bestinternational standards for financial and businesscentres of a similar kind;

• establishing and maintaining the QFC as a leadingfinancial and business centre in the Middle East; and

(viii)minimising the extent to which the business carried on bya Person carrying on Regulated Activities can be used forthe purposes of or in connection with Financial Crime.

Chapter 3Supervision andInvestigations, Enforcementand Discipline

Chapter 4Regulatory Objectivesand Principles of GoodRegulation

Principles of Good Regulation The Regulatory Authority must perform its functions under theQFC Law and the FSR with reference to a set of Principles ofGood Regulation.

These principles are set out in the FSR and are designed to guidethe Regulatory Authority in its approach to regulation.The Regulatory Authority must take account of the followingprinciples:

(i) the need to use its resources in the most efficient andeconomic way;

(ii) the desirability of facilitating innovation and fostering theinternational competitiveness of the QFC;

(iii) the desirability of fostering competition between those whoare subject to regulation by the Regulatory Authority;

(iv) the principle that the Regulatory Authority should exerciseits powers and functions in a fair and transparent manner;

(v) the need to comply with such generally accepted principlesof good governance as it is reasonable to regard asapplicable to it;

(vi) the need to balance the burdens and restrictions on firmswith the benefits of regulation; and

(vii) the need to act in accordance with all laws and Regulationsto which is it subject.

These principles act as a check on the operations of theRegulatory Authority and provide a benchmark against which itcan be assessed.

AccountabilityThe Regulatory Authority is accountable to the public, to those itregulates and to the Council of Ministers. It is required toestablish a complaints procedure for the timely resolution ofcomplaints against it and must file with the Council of Minister areport on its activities and an audited financial statement on atleast an annual basis.

ConflictsThe directors, officers, employees and agents of the RegulatoryAuthority must act to manage conflicts of interest and areprohibited from having any role in any decision on matters inwhich they are subject to a material conflict of interest.

ConfidentialityThe Regulatory Authority and any other Person who comes intopossession of confidential information in the exercise of theirregulatory functions are prohibited from disclosing suchinformation except in specified prescribed circumstances.

TransparencyThe Regulatory Authority is required to operate transparentlyand to make public, among other things, Regulations, Rules,waivers, guidance, identity of Authorised Firms and ApprovedIndividuals, public censures and the results of disciplinaryactions and the decisions of the Appeals Body.


ActivitiesIn broad terms, Regulated Activities are defined to include thefollowing (subject to certain exclusions set out in the FSR):

(i) Deposit Taking

(ii) Effecting a Contract of Insurance

(iii) Carrying out a Contract of Insurance

(iv) Dealing in Investments

(v) Arranging Deals in Investments

(vi) Providing Credit Facilities

(vii) Arranging Credit Facilities

(viii)Providing Custody Services

(ix) Arranging the Provision of Custody Services

(x) Managing Investments

(xi) Advising on Investments

(xii) Operating a Collective Investment Fund

Specified ProductsThe categories of Specified Products to which RegulatedActivities are variously expressed to relate are:

(i) Shares

(ii) Debt Instruments

(iii) Credit Facilities

(iv) Warrants

(v) Securities Receipts

(vi) Unit in a Collective Investment

(vii) Funds

(vii) Options

(viii)Futures

(ix) Contracts for Differences

(x) Contracts of Insurance

(xi) Deposits

(xii) Rights in Investments

These Specified Products are defined further in the FSR.

Regulated Activities in Respect of Retail CustomersThe Regulatory Authority may authorise Persons to carry onRegulated Activities with or for retail customers in the State afterit has put in place measures to ensure appropriate customerprotections commensurate with the needs of such customers.

For these purposes retail customers are individuals having suchcharacteristics as may be specified in Rules issued by theRegulatory Authority or other types or category of Personsspecified in those Rules.

ExclusionsThere are a number of exclusions set out in the FSR. Theseinclude, broadly speaking, activities within the followingcategories:

(i) Group exemption

(ii) Trustee exemption

(iii) Professional business exemption

(iv) Collective investment fund exemption

(v) Sale of body corporate exemption

(vi) Employee share scheme exemption

(vii) Special purpose vehicle exemption

The group exemption and trustees exemption are not applicableto Effecting a Contract of Insurance or Carrying out a Contract ofInsurance.


Chapter 5Regulated Activities

Authorisation of FirmsProcess and requirements

The FSR set out various requirements relating to theAuthorisation process and the circumstances in whichAuthorisations may be granted (or rejected), varied or withdrawn.The Application process is explained further in the Guide to theApplication Process.

The Regulatory Authority is permitted to make rules setting outthe criteria which an Application must satisfy, to include:

• the fitness and propriety of an Applicant Firm havingregard to all the circumstances, the nature of anyRegulated Activity to be carried on and the need to ensurethat his affairs are conducted soundly and prudently;

• the legal form of Applicant Firms;

• the resources of the Applicant Firm whether financial orotherwise;

• the Applicant Firm’s systems and controls;

• the location of the Applicant Firm’s office;

• in the case of an application for a withdrawal, the interestof the clients or customers of the Authorised Firm and theneed for effective supervision of the Financial System; and

• the Regulatory Authority’s ability to effectively supervise thefirm in question.

Imposition of Conditions, etcThe Regulatory Authority, in granting an Application forAuthorisation, variation or withdrawal may impose conditions,restrictions or requirements as it considers appropriate.

Own initiative actionsThe Regulatory Authority is also permitted to take own initiativeaction in certain circumstances where it considers it appropriateto do so. The steps which the Regulatory Authority may takecare to:

• impose or vary conditions, restrictions and requirements;

• require a person subject to a condition, restriction orrequirement to take or refrain from taking such action asthe Regulatory Authority considers appropriate; or

• withdraw the Authorisation of an Authorised Firm or varyits Authorisation.

The Regulatory Authority is generally required to afford therelevant Authorised Firm an appropriate opportunity to makerepresentations, but need not do so where the RegulatoryAuthority concludes that any delay likely to arise will be prejudicialto the interests of clients or customers of the Authorised Firm orthe Financial System (in which case the Regulatory Authority isrequired to afford the Authorised Firm an opportunity to makerepresentations promptly after the relevant powers have beenexercised). Similarly, the Regulatory Authority is not required togive an opportunity to make representations where the actionstaken follow a determination of the Regulatory Authority pursuantto the Disciplinary and Enforcement Powers or a decision by theAppeals Body or Tribunal.

Approved IndividualsIndividuals undertaking so called “Controlled Functions” onbehalf of Authorised Firms are required to obtain approval asApproved Individuals.

The Regulatory Authority is also permitted to make Rules settingout the criteria which an applicant for approval must satisfy,including requirements as to suitability, qualifications andcompetence.

The Regulatory Authority may issue principles or otherrequirements to which Approved Individuals are required toadhere. In addition to its general enforcement and disciplinarypowers, the Regulatory Authority may take action against anyperson who is (or has previously been) an Approved Individual incertain circumstances. These circumstances are where heperforms any function in contravention of a prohibition order orbreaches any of the principles issued by the Regulatory Authority,or has been knowingly involved in a contravention of arequirement imposed on an Authorised Firm by the RegulatoryAuthority.

As with Authorised Firms, the Regulatory Authority may take owninitiative actions against Approved Individuals in certaincircumstances.


Chapter 6Authorisation and Approval

Requirement for ApprovalThe FSR contain provisions requiring an Authorised Firm to notifythe Regulatory Authority when a person becomes, or ceases tobe, a Controller of an Authorised Firm or where increases ordecreases in the level of control, or change in the type of control, occur.

There is also a general restriction on any person assumingcontrol, (or an increased level of control) unless that person hasbeen approved by the Regulatory Authority.

The Regulatory Authority may issue Rules specifying the levelsand type of control, and of change in control, which will give riseto a notification or approval requirement.

The primary obligation to notify is that of the Authorised Firm butwhere the Authorised Firm is not aware of the acquisition orchange of control or is not able to obtain sufficient information tosubmit the control or notice, the obligation is deemed to be thatof the proposed Controller. Authorised Firms are also required tosubmit to the Regulatory Authority annual returns relating to theirControllers.

Meaning of ControllerA Controller is broadly speaking, someone who:

(i) holds 10% or more of the shares in any Authorised Firm (ora parent of the Authorised Firm), or is entitled to exercise orcontrol the exercise of 10% or more of the voting power inan Authorised Firm (or a parent); or

(ii) is able to exercise significant influence over themanagement of the Authorised Firm (or a parent of theAuthorised Firm) by virtue of his shareholding or votingpower, or by virtue of contractual or other arrangements.

Own Initiative PowersThe Regulatory Authority is given certain own initiative powers tocancel, impose conditions applying to an approval, varyconditions or withdraw approval altogether. The RegulatoryAuthority may exercise the powers where it has reason to believethat a Controller is not fit and proper, or where so called “closelinks” the Controller has with other persons are such as toprevent effective supervision of an Authorised Firm. Thesepowers may also be exercised by the Regulatory Authority whereit has reason to believe its Regulatory Objectives will no longer besatisfied.

The Regulatory Authority is also given certain powers towithdraw an Authorisation or to apply to the Tribunal for an orderrestricting the transfer of voting rights in respect of shares, or theissue or transfer of further shares or payments made in respectof the shares. The Regulatory Authority may also apply to theTribunal for an order requiring the sale of relevant shares.


Chapter 7Approval of Controllers andNotification Requirements

The Regulatory Authority may make Rules relating to theregistration of Collective Investment Funds. The Rules mayprovide that all or certain categories of Collective InvestmentFund may not be established or promoted in or from the QFCunless they have been registered. The Rules may make provisionas to the constitution, management and operation of CollectiveInvestment Funds, their investment and borrowing powers andvarious related matters.

The Regulatory Authority has the power to give various directionswhere one or more of the registration requirements of a CollectiveInvestment Fund is no longer satisfied or is likely to be breachedor where it is desirable to protect investors.

RulesThe Regulatory Authority is granted wide powers to issue ruleswhich it considers necessary or appropriate to facilitate thepursuit, achievement and furtherance of the RegulatoryObjectives or to aid it to implement, or carry out or enforce itsduties, functions and powers.

The Regulatory Authority in addition issues standards, principlesor codes of practice which will generally have the effect of Rules.

The Regulatory Authority will normally be required to publish theproposed Rules on its website, together with an invitation tomake comments and the day by which comments must bereceived. This will not apply where the Regulatory Authoritydetermines that the delay in bringing the Rules into force wouldbe contrary to the interests of the QFC.

Rules are binding on those to whom they are expressed to apply.In certain circumstances, therefore, this may extend beyondAuthorised Firms and Approved Individuals.

The Regulatory Authority may also issue consultativedocuments, open letters, policy statements, information notices,discussion documents and undertake such other forms ofconsultation and discussion as it thinks appropriate.

The Regulatory Authority may waive Rules if it is satisfied thateither the burden experienced by the person applying for thewaiver and complying with the relevant Rule significantlyoutweighs the benefits that the Rules are intended to achieve, orcompliance with a Rule would not achieve or further the purposefor which the relevant Rule was made. In addition, the RegulatoryAuthority must be satisfied that a waiver would not result in anundue risk to persons whose interests the Rules are intended toprotect.

The types of Rules which it is envisaged the Regulatory Authoritywill issue include Rules relating to the conduct of business byAuthorised Firms, their systems and controls and otherprudential requirements, and requirements in respect of ClientMoney and the safeguarding of customer assets.

GuidanceThe Regulatory Authority may issue Guidance, either on anindividual basis or generally. Guidance issued generally willnormally follow a similar consultation process to that applying tothe issuance of Rules.


Chapter 8Investment Funds

Chapter 9Rules, Guidance and Waivers

The Regulatory Authority is given a variety of powers to obtaininformation as part of its normal supervisory activities as well ascertain additional powers. These powers include:

Report by a Nominated PersonThe Regulatory Authority may require the production of a reportby a person nominated or approved by the Regulatory Authorityin respect of a particular entity.

Appointment of InvestigatorsThe Regulatory Authority may appoint investigators (who may beinternal or external). The Regulatory Authority may also exerciseits power to appoint investigators where requested byshareholders who hold 10% or more of the nominal value of theissue of share capital of a QFC Company, or in certain otherenumerated circumstances warranting the investigation of theaffairs of a QFC Company or LLP or branch of an overseas entityregistered in the QFC.

Privileged MaterialsThe obligation to produce, or disclose, or permit the inspectionof material, either as part of an investigation or otherwise, doesnot extend, broadly speaking, to material which is subject to legal privilege.


Chapter 10Supervision and Investigations

ContraventionThe Regulatory Authority is entitled to exercise disciplinarymeasures where there is a contravention of a so-called “relevantrequirement”.

A person contravenes a relevant requirement if he:

(i) fails to comply with any prohibition or requirement imposedby the Regulatory Authority or any undertaking given to theRegulatory Authority;

(ii) does any act or thing that is prohibited under, or breachesany requirement of, or omits to do any act or thing requiredunder, the QFC Law, the FSR or the Rules or other relevantRegulations (for example the Companies Regulations, theLLP Regulations or the AML Regulations);

(iii) commits an act of fraud or abuses any fiduciary duty whichhe owes to his clients or customers;

(iv) commits one of the other contraventions described assuch in the FSR (for example the prohibition of MarketAbuse or requirements in respect of FinancialCommunications);

(v) knowingly or recklessly provides the Regulatory Authoritywith any information which is false, misleading or deceptiveor conceals relevant information in certain circumstances,or conducts Regulated Activities in or from the QFC inbreach of Article 11.2 of the QFC Law; or

(vi) falsifies, conceals, destroys or otherwise disposes of arelevant document where he knows or suspects theRegulatory Authority is taking action pursuant to stipulatedpowers, unless he can show he had no intention ofconcealing relevant facts.

Secondary ContraventionThe FSR provide for a number of secondary contraventions, forexample, where a person is “knowingly concerned” in acontravention or aids, abets, counsels or procures thecontravention.

Sanctions The Regulatory Authority has various powers at its disposalwhere a contravention has taken place, notably:

Public CensureThe Regulatory Authority may “name and shame” persons whohave contravened relevant requirements.

Financial PenaltiesThe Regulatory Authority may impose financial penalties.

Appointment of ManagersThe Regulatory Authority may appoint individuals to act asmanagers of a business.

UndertakingsThe Regulatory Authority may require written undertakings fromIndividuals or Authorised Firms. In the case of breach of theundertaking, the Regulatory Authority may apply to the Tribunalfor an order directing compliance or any other order consideredappropriate.

Prohibitions and RestrictionsThe Regulatory Authority may by written notice prohibit anAuthorised Firm or Approved Individual from acting in certainways or require them to carry on business or conductthemselves in a specified manner or prohibit a person fromperforming a specified function.

InjunctionsThe Regulatory Authority may apply to the Tribunal for injunctiverelief either to restrain a particular contravention or to requirecertain steps to be taken to remedy a contravention or restrain a person from disposing or otherwise dealing with any of his assets.

Restitution OrdersThe Regulatory Authority may also apply to the Tribunal for arestitution order where the Regulatory Authority is satisfied that aperson has contravened a relevant requirement (or beenknowingly concerned in the contravention) and profits haveaccrued to him, or one or more persons have suffered loss orotherwise been adversely affected as a result of thecontravention.


Chapter 11Disciplinary andEnforcement Powers

Enforcement ProcedureNotices and RepresentationsThe FSR contain certain procedural requirements in respect ofthe disciplinary powers of the Regulatory Authority. In particular,the Regulatory Authority is generally required to serve a notice onpersons when it is proposing to exercise its disciplinary powers,giving the person in question an opportunity to make writtenrepresentations. This requirement will not apply where theRegulatory Authority seeks an injunction or restitution order from the Tribunal, or where the Regulatory Authority concludesthat any delay likely to arise might be prejudicial to the interests of clients or customers of the relevant person or theFinancial System.

Decision NoticesOnce the Regulatory Authority has made a decision it is requiredto serve a Decision Notice on the persons to whom the decisionrelates. In certain circumstances this obligation also applies inrespect of stipulated third parties. The Decision Notice must givean indication of any rights to appeal within a reasonable timespecified in the notice and the relevant procedure for appeal.

Policy on Financial PenaltiesThe Regulatory Authority is required to prepare and issue astatement of its policy in respect of the imposition and amount offinancial penalties.

The Regulatory Authority’s policy must have regard to theseriousness of the contravention, the extent to which thecontravention is deliberate or reckless, whether the person onwhom the penalty is to be imposed is an individual, and the effecton third parties, clients or customers and/or investors and thebest interests of the Financial System.


Chapter 11Disciplinary andEnforcement Powerscontd.

The Regulatory Authority is authorised to issue Rules relating tothe circumstances in which Financial Communications may bemade or approved by Authorised Firms and the form and contentof such Financial Communications. A Communication is, broadlyspeaking, any form of communication the purpose or effect ofwhich is to promote or advertise Specified Products or anyRegulated Activity or invite or induce any person to enter into anagreement in relation to a Specified Product or to engage in aRegulated Activity.

There is a general restriction on persons in the QFC other thanan Authorised Firm making any Financial Communication unlessthat person is an Authorised Firm or the content has beenapproved by an Authorised Firm. There are certain exceptions tothis, namely in respect of financial communications made toother QFC Licensed Firms, or Financial Communications madeto recipients falling within categories set out in Rules made by theRegulatory Authority.

The Regulatory Authority may, in addition, set out Rulesrestricting persons outside the QFC from making FinancialCommunications into the QFC, but in the meantime, there is norestriction in relation to such Financial Communications.

General ProhibitionThe FSR set out certain contraventions relating to Market Abuse,namely, that a person may not behave in relation to anInvestment or anything which is the subject matter of (or whoseprice or value is expressed by reference to the price or value of)an Investment where such behaviour consists of that person:

(i) acquiring or disposing of, or attempting to acquire ordispose of, for his own account or for the account of a thirdparty, either directly or indirectly, an Investment, on thebasis of inside information relating to the Investment;

(ii) disclosing inside information to another person otherwisethan in the proper course of the exercise of hisemployment, profession or duties;

(iii) recommending or inducing any person, on the basis ofinside information, to acquire or dispose of an Investmentto which that information relates;

(iv) effecting, or participating in effecting, transactions ororders to trade (otherwise than for legitimate reasons inconformity with accepted market practice on the relevantmarket) which:

• give, or are likely to give a false or misleadingimpression as to the supply of, or demand for, or asto the price or value of, one or more Investments; or

• secure the price of one or more Investments at anabnormal or artificial level;

(v) effecting, or participating in effecting, transactions ororders to trade which employ fictitious devices or any otherform of deception or contrivance; or

(vi) disseminating, or causing the dissemination of, informationby any means which gives, or is likely to give, a false ormisleading impression as to an Investment by a personwho knew or could reasonably be expected to have knownthat the information was false or misleading.

Rules Relating to Market AbuseThe Regulatory Authority is entitled to issue Rules in respect ofthe scope and effect of the Market Abuse restriction.


Chapter 12Financial Communications

Chapter 13Market Abuse

The FSR set out various required procedures for InsuranceBusiness Transfers and Banking Business Transfers. The FSRalso envisage that parties to other types of Relevant BusinessTransfers may elect to adopt the procedures set out in the FSR.

The Control of Business Transfers provisions require an order tobe obtained from the Tribunal sanctioning a relevant scheme andalso establishes other requirements as to the production ofreports and publicity.

The Regulatory Authority is authorised to make rules requiringAuthorised Firms (or particular classes of Authorised Firms) toappoint an Auditor or Actuary if it is not already subject to arequirement to do so.

The Rules may set out various requirements as to theappointment, qualification, duties, functions and powers of theAuditors or Actuaries, together with requirements relating to theapproval by the Regulatory Authority of the Auditors or Actuaries.

Relevant Auditors or Actuaries are required to disclose to theRegulatory Authority matters concerning an Authorised Firmwhich suggest a breach of the QFC Law, the FSR, Rules, orother relevant Regulations and also permit the Auditors orActuaries to inform the Regulatory Authority of other mattersconcerning an Authorised Firm and express opinions in respectof those matters.


Chapter 14The Control ofBusiness Transfers

Chapter 15Auditors and Actuaries

The Regulatory EnvironmentThe regime set out by the FSR will allow the Regulatory Authorityto issue Rules appropriate to achieve or further the RegulatoryObjectives. As described above, these will include Rules relatingto the conduct of business, the safeguarding of client money andassets and the prudential status of the Authorised Firms.

Complaints and CompensationIn addition to the protection implicit in the regime created by theFSR, the Regulatory Authority is authorised to make Rulesrelating to the manner in which Authorised Firms deal withcomplaints received from their clients or customers andestablishing an independent body to hear complaints and requirecompensation to be paid where appropriate.

The FSR also entitles the Regulatory Authority to issue rulesestablishing a compensation funds for clients or customerswhere their Authorised Firm is in default.

Rights of ActionThe Regulatory Authority is authorised to make Rules givingcertain persons (either generally or particular categories) whohave suffered loss as a result of the contravention of a relevantrequirement the right to apply to the Tribunal for a restitutionorder against such person.

UnenforceabilityThe FSR provides that agreements made by a person in thecourse of carrying on a Regulated Activity who has not, but whoshould have, obtained an Authorisation will generally beunenforceable against the other party to the agreement. Theother party to the agreement is entitled to apply to the Tribunal torecover money paid over, or property transferred, and to seekcompensation for loss suffered.


Chapter 16Protection of Customers

The FSR establishes a framework to ensure the accountability ofthe Regulatory Authority. This includes the following measures:

Reports and AccountsThe Regulatory Authority is required to provide an annual reportto the Council of Ministers (which is to be made public). The Regulatory Authority is also required to prepare annualaudited accounts.

Internal ProceduresThe FSR sets out a number of significant actions which must bedecided on by the board of the Regulatory Authority as a whole,rather than individual offices or divisions within the RegulatoryAuthority, namely:

(i) approving the annual accounts of the Regulatory Authority;

(ii) approving the annual report of the Regulatory Authority andotherwise approving reports to the Council of Ministers onthe activities of the Regulatory Authority as required by theQFC Law and the FSR;

(iii) approving the policy of the Regulatory Authority withrespect to fees and penalties;

(iv) approving the annual budget of the Regulatory Authority;

(v) approving regulations to be proposed to the Minister forapproval by the Council of Ministers;

(vi) issuing Rules on behalf of the Regulatory Authority; and

(vii) issuing Decision Notices. As an exception to this, DecisionNotices may be issued by a committee of the RegulatoryAuthority Board or the Chief Executive Officer (or to theextent permitted by internal procedures of the RegulatoryAuthority, other executive officers) to the extent they relateto routine matters or minor contraventions in accordancewith policies issued and approved by the RegulatoryAuthority Board.

The approval of Guidance of general application may also bedelegated to a committee of the Regulatory Authority Board.

InquiriesThe Council of Ministers may arrange for an independent inquiryto be undertaken where it believes there may have been aserious failure in the operation of the Financial System posing aserious risk to the QFC or the Regulatory Objectives and it is inthe public interest to hold such an enquiry.

Complaints Against the Regulatory Authority The Regulatory Authority is required to make arrangements forthe prompt, efficient, impartial and independent investigation ofcomplaints made against it arising out of the exercise, or failureto exercise, any of its functions (other than the formulation ofregulatory policy, Rules and Guidance and proposingRegulations to the Council of Ministers).

Public RecordsThe Regulatory Authority is obliged to make various informationavailable to the public, including Regulations enacted under theQFC Law, as well as Rules, general Guidance, consultative andother related documents issued under the FSR as well as detailsof Authorised Firms and Approved Individuals. In addition, detailsof disciplinary actions and related matters (subject to completionof any applicable appeal or expiry or any right to appeal) willgenerally be published.

Confidential InformationThe FSR also contain provisions imposing obligations on theRegulatory Authority and other entities performing functionsunder the FSR (for example, persons undertaking investigationson behalf of the Regulatory Authority) to keep confidential certaininformation provided to them. The FSR do, however, set out anumber of circumstances where relevant information can bedisclosed. For example, the Regulatory Authority can discloseinformation in good faith as part of the performance of itsfunctions, duties and powers under the QFC Law or the FSR.


Chapter 17Accountability of theRegulatory Authority

AppealsThe FSR provides that the following decisions of the RegulatoryAuthority are subject to appeal at the Appeals Body:

(i) decisions relating to the variation or withdrawal andrejection of an application for Authorisation) and owninitiative action by the Regulatory Authority in respect ofAuthorisation;

(ii) decisions relating to the approval of Controllers, owninitiative actions with respect to a Controller, andwithdrawal of Authorisation in consequence of improperlyacquired shares;

(iii) decisions with respect to the granting or refusal of a waiveror modification of Rules;

(iv) decisions relating to the grant of approval or variation ofapproval of Individuals, misconduct by ApprovedIndividuals or own initiative action by the RegulatoryAuthority in respect of Approved Individuals;

(v) the exercise by the Regulatory Authority of any of itsstipulated disciplinary powers;

(vi) any decision taken by the Regulatory Authority permitting it to remove, disqualify or refuse to approve an Auditor or Actuary;

(vii) decisions affecting Third Parties in certain circumstances;or

(viii)determinations made in respect of Collective InvestmentFunds.

Powers such as commissioning reports, appointing investigatorsetc may not be appealed. The granting of injunctions andrestitution orders are decisions of the Tribunal, rather than theRegulatory Authority and similarly may not be appealed to theAppeals Body.


Contact Information

The Regulatory Authority’s Regulatory Processes Rulebookcontains rules and guidance which provide further detail inrespect of the important regulatory approaches explained in this guide.

For further information please visit the Regulatory Authoritywebsite at www.qfcra.com or contact the Regulatory Authoritydirectly at:

The QFC Regulatory AuthorityPO Box 22989DohaQatar

Telephone: +974 495 6888Facsimile: +974 495 6868


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