Category 4 Difc Investment Advisor & Arranger License - 10 Leaves

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Category 4 DIFC Investment Advisor & Arranger License:
DIFC is one of the world’s top ten onshore financial centers and offers a secure and efficient platform for businesses and financial institutions to reach into and out of the emerging markets of the region. The quality and independence of DIFC’s regulator, the prevailing common law framework, excellent infrastructure and tax efficiencies make it the perfect base to take advantage of the rapidly growing demand for financial and business services in the MENASA region.

DIFC fills the time-zone gap for a global financial centre between the leading financial centres of London and New York in the West and Hong Kong and Tokyo in the East.
Why setup a financial services firm in the DIFC?
The DIFC is a leading financial hub in the region. Besides offering a wide range of financial service activities, the centre also provides an integrated environment and world-class standard of living. It is well regarded in the international community as well.
There exist opportunities for startups as well. The recent focus on fintech led to the DIFC Innovation ...
... Hub initiative, that serves as an accelerator for fintech firms to test their products and pitch it to prospective investors.

DIFC Investment Advisor & Arranger License:
Firms interested in carrying out investment advisory activities from the DIFC are required to submit applications to the Dubai Financial Services Authority, or DFSA.
The DFSA, for the purposes of authorisation and supervision, categorizes investment advisory, credit advisory and insurance advisory activities under Category 4. Other activities that come under a Category 4 license include operating an Alternate Trading System (for trading of unlisted securities including security tokens) and crowdfunding.
While the Category 4 license allows firms to deal with Professional Clients only, it is possible to seek a Retail Endorsement during, or after the licensing process. The Endorsement attracts a one-time fee of US$ 20,000 at the time of application.
Activities – Arranging Deals in Investments, Arranging Credit and Advising on Credit, Advising on Financial Products, Arranging Custody, Insurance Intermediation, Insurance Management, Operating an ATS, Providing Fund Administration, Providing Trust Services, Operating a Crowdfunding Platform, Arranging or Advising on Money Services
Advisory activities are non-discretionary in nature, and can include:
Arranging Deals in Investments
Arranging Deals in Investments means making arrangements with a view to another Person buying, selling, subscribing for or underwriting an Investment (whether that other Person is acting as principal or agent).
Advising on Financial Products
Advising on Financial Products means giving advice to a Person in his capacity as an investor or potential investor, or in his capacity as agent for an investor or a potential investor, on the merits of his buying, selling, holding, subscribing for or underwriting a particular financial product (whether as principal or agent).
Arranging Credit and Advising on Credit
Arranging Credit and Advising on Credit means:
(a) making arrangements for another Person, whether as principal or agent, to borrow money by way of a Credit Facility; or
(b) giving advice to a Person in his capacity as a borrower or potential borrower or as agent for a borrower or potential borrower on the merits of his entering into a particular Credit Facility.
Arranging Custody
Means arranging Custody for one or more Firms or individuals. Activities include:
negotiating and settling terms of the contract between the custody provider and the Client who is obtaining that service;
assisting the Client to complete application forms and other processes;
collecting and processing the Client's payments; and
transmitting information (including instructions from the Client and confirmations by the custody provider) between the Customer and the custody provider.
The DFSA expects that the firm be adequately staffed depending on the scale, scope and nature of the product portfolio that is proposed to be offered from the DIFC. At a minimum, the DFSA would like to see the following appointments:
Board of Directors – a well-organized Board with robust governance policies. The Chair would have to be a non-executive Director.
Senior Executive Officer (SEO) – Senior banking professional with over 10 years of experience, ordinarily resident in the UAE.
The Senior Executive officer (SEO) is responsible for the day-to-day management, supervision and control of the Firm’s Business activities. An SEO is expected to perform with the highest standards of skills and due diligence and take reasonable care to ensure that the Firm's business is organized, managed and controlled effectively. The SEO is also responsible to establish and maintain arrangements to provide relevant, accurate, comprehensive, timely and reliable information to Firm’s Board and senior management which is necessary to organize, monitor and control its activities, to comply with legislation applicable in the DIFC and to manage risks.
Finance Officer (FO) – Senior and suitably-qualified finance professional. In case of a group, the FO can be from the parent company and does not have to be resident in the UAE. This role can also be outsourced. You would also have to provision for a suitably qualified Accountant/Bookkeeper.
The FO contributes in making the best use of the overall corporate strategy of the company complemented by strategic planning to determine the overall aim of the Firm’s business.
This involves the financial status assessment, risk assessment and mitigation, understanding the Firm’s weaknesses and strengths and the use of analytical models to gain insights to the current financial position and opportunities for future growth.
Risk Officer – This position is usually outsourced, and not mandatory.
Compliance Officer (CO) - Senior compliance professional with over 10 years of experience, ordinarily resident in the UAE.
Money-Laundering Reporting Officer – Senior AML professional with over 10 years of experience, ordinarily resident in the UAE. This function can be combined with Compliance and one individual can carry out both responsibilities.
The Compliance and AML officer will have the following primary responsibilities:
Initiate, develop, maintain, and revise policies and procedures of the compliance framework and its related activities to prevent illegal, unethical, or improper conduct;
Oversee the day-to-day implementation and operation of the compliance framework;
Identify and assess the compliance risk associated with the Firm’s current and proposed future business activities, including new products, new business relationships and any extension of operations or network on an international level;
Establish written guidelines to staff and service providers on the appropriate implementation of the laws, regulation, rules and standards through policies and procedures;
Identify and keep an inventory available to all staff of essential laws and regulation pertinent to the Firm; provide advice with regards to the legislation;
Assess the appropriateness of internal policies, procedures and guidelines by performing regular and comprehensive compliance risk assessment, monitoring and testing; report the result on a regular basis and promptly where deemed necessary to SEO and Board;
Establish and/or supervise appropriate compliance checks and controls;
Complete, check, verify clients’ due diligence and complete sanction screening at client on- boarding;
Provide guidance to the business on permissible activities, new products and programs;
Address any compliance audit remediation activities;
Liaise with the DFSA on compliance matters;
Centralise all information on compliance-related issues (breach of regulation, conflict of interest etc.);
Respond to alleged violations of rules, regulations, and policies, procedures by evaluating or recommending the initiation of investigative procedures.
Develop and oversee a system for uniform handling of such violations; exercise any specific legal responsibilities such as reporting suspicions transactions related to money laundering and the fight against terrorism financing;
Maintain an effective compliance communication program for the organization, including promoting understanding of new and existing compliance issues and related policies and procedures;
acting as a point of contact to receive Internal Suspicious Activity Reports (“Internal SAR”) from employees; taking appropriate action following the receipt of an Internal SAR;
responding promptly to any request for information made by competent UAE authorities or the DFSA;
receiving and acting upon any relevant findings, recommendations, guidance, directives, resolutions, sanctions, notices or other conclusions; and
establishing and maintaining an appropriate AML training program and adequate awareness arrangements.
The CO and MLRO roles can also be outsourced to us.
Internal Auditor - Senior and suitably qualified internal audit professional. Usually outsourced to a professional firm.
DIFC Capital requirements
Base Capital – US$ 30,000
Base Capital for Operating a Crowdfunding Platform, Alternate Trading System or Money Transmission Services– US$ 140,000
The base capital requirement for a Category 4 Investment Advisory License is $ 30,000. Actual capital required will depend on the nature, quantum of business and forecasted annual expenditure, as per the financial model of the proposed firm.
Actually, there are three components of capital - base capital, risk-based capital and expense-based capital. The higher of the three is set to be the capital requirement. These figures are calculated using the financial models that we make for the Regulatory Business Plan during the application process, and so are mostly unique to the company that applies for the license.
The Expense-based Capital minimum for a Category 4 firm (except in the case where client monies are held) is 6/52 of the projected annual expenses of the firm, unless in the case of Lower Prudential Risk Firms.
Calculation of capital is a detailed process and involves many factors. We recommend that you contact us for more details on the application process and capital calculations.

What are Lower Prudential Risk Firms?
A Firm is a Lower Prudential Risk Firm if it meets all of the following conditions:
(a) it is in Category 4;
(b) its Licence authorises it to carry on only one or more of the following Financial Services :
(i) Arranging Deals in Investments;
(ii) Advising on Financial Products;
(iii) Arranging Custody;
(iv) Insurance Intermediation;
(v) Insurance Management;
(vi) Arranging Credit and Advising on Credit; or
(vii) Arranging or Advising on Money Services; and
(c) it does not hold Insurance Monies.
Lower Prudential Risk Firms are a subcategory of Category 4 firms. Such firms receive concessions from certain detailed prudential requirements, such as not being required to maintain capital to meet the Expenditure Based Capital Minimum requirement as described above.
However, Lower Prudential Risk Firms are still required to meet other PIB requirements and other general prudential requirements such as maintaining adequate Capital Resources, and ensuring that it maintains capital and liquid assets which are adequate in relation to the nature, size and complexity of its business to ensure that there is no significant risk that liabilities cannot be met as they fall due. These liabilities may be contingent and prospective liabilities, such as those arising from changes in business activities, or claims made against the Firm.

Can DIFC firms service clients outside the centre, and in the greater UAE?
Yes, they can. Sheikh Mohammed bin Rashid Al Maktoum issued Law No. (5) of 2021 relating to the DIFC, which brought further clarity to the rules governing the promotion and supply of services and products for firms registered in the centre.
The revised law confirms that DIFC-registered entities can supply services and products outside the DIFC, as long as they are primarily provided out of the firm’s premises in the DIFC area. Marketing and promotional activities are also allowed outside the centre.
There may be additional rules to follow, for instance, when actively marketing funds from the DIFC. A passporting regime exists in this case, where the fund manager can register for a passport for the fund to be marketed in the UAE and the ADGM. Do get in touch for more information on this.
Advising, arranging or managing Virtual Assets:
The DFSA made the relevant amendments to its legislation recently, thus creating the framework for the regulation of Security Tokens in the centre.
Any licensed firm that wishes to advise, arrange or manage crypto-assets, will have to apply for additional endorsements to their licenses. Get in touch with us to know more.
The application process
The DIFC application process commences with formal introductions to the DIFC and the DFSA.
Following the introductory call, a detailed Regulatory Business Plan (RBP) is prepared, along with financial projections, for a quick review by the regulator.
The comments of the regulator are incorporated into the RBP, and a comprehensive application is compiled, comprising policies, processes and other related documentation. The KYC and associated forms of all key individuals are also prepared for submissions.
The formal application is then sent across to the DFSA, who reviews the pack over a period of 7-10 business days, and then accepts it. The detailed review process then commences, and this can take anywhere between 60 and 90 days to complete.
The regulator maintains communication with the applicant at all times during the review, reverting with an initial review 2 weeks into the application, and then follow-up reviews thereafter. The DFSA also meets with the SEO, FO and CO/MLRO designates, and conducts a detailed interview with them.
An in-principle approval is issued in case the application is successful. The applicant then proceeds to satisfy the in-principle conditions, and this involves the setting up of a legal structure, opening a bank account, and depositing the share capital in the account. Other tasks include finalization of auditors and obtaining professional indemnity insurance for the firm.
Once done, a final submission is made to the DFSA, following which the regulator issues the Financial Service Permissions and the process is then complete. The firm is now open for business.
Costs
Setting up a DIFC Regulated Firm involves the following interactions:
Dubai Financial Services Authority (DFSA)
The DFSA is responsible for reviewing and approving all applications for financial services. Costs depend on the activities applied for, which puts the applicant in one of five categories.
Generally, there are two components of DFSA fees. One – an application processing fee, and the other, an annual licensing fee.
1. Application fee: US$ 15,000 for a Category 4 license application.
2. License fee: US$ 15,000 for Category 4 license.
3. Retail Endorsement: One-time fee of US$ 15,000
Registrar of Companies (DIFC ROC)
The ROC helps to set up the legal structure of the DIFC Regulated Firm. Shareholders can be individual, or corporate. There are many options available, such as ‘Private Company Limited by Shares’ and ‘Limited Liability Partnerships’. In case of Private Company Limited by Shares, the costs for setting up include:

Application for reserving a name (2 working days): US$ 800
Application for Incorporation of a Private Company Limited by Shares (5 working days): US$ 8,000
Commercial License on Incorporation (5 working days): US$ 12,000 (annual fee)
Data Protection
The data protection notification is part of the process of registering a new entity in the DIFC. The costs involved are as follows:
1. Registration - US$ 1,250.
2. Annual renewal – US$ 500.
Office spaces
Every entity registered in the DIFC is required to lease a physical office. You can choose from the Gate and surrounding buildings, or other buildings within the DIFC, such as Emirates Financial Towers, Central Park, Park Avenue, Burj Daman and Currency House.
Prices vary, depending on the space availed and the building. Here is an indication of the prevailing rates:
1. DIFC Business Centre – from a two-desk office at US$ 35,000.
2. DIFC Fitted Offices – from US$ 55 per square foot.
3. Other buildings – from US$ 45,000 per annum.
Visas
1. Establishment Card Application – US$ 630.
2. PSA Deposit – US$ 682.
3. Visas (per visa) – from US$ 1,500 (for a two-year visa).
4. PSA Deposit (per visa) – US$ 682.
Specific Advantages of setting up in the DIFC
Here are some specific advantages of establishing in the Dubai International Financial Centre.
LEGAL AND REGULATORY FRAMEWORK
Legal framework supports cross-border activities
100% foreign ownership permitted
No restriction on foreign talent or employees
No restrictions on capital repatriation
TAX BENEFITS
Zero tax for 50 years on profits, capital or assets from 2004
Zero tax on employee income
COUNTERPARTY CONFIDENCE
Highly regarded, independent regulator
Independent, English-speaking, common law judicial system
Distinct from the UAE legal system
Risk-based regulatory approach
DIVERSE ECOSYSTEM
Central to regional deal making
High concentration of international firms, investment funds, wealth management firms, banks, and financial institutions
World-class regional and international law and auditing firms, and other professional services
The largest fund domicile in the region
GEOGRAPHIC EPICENTRE
Management offices, holding companies and family offices are located closer to the assets they own or manage
The Middle East, Africa and South Asia (MEASA) is increasingly the centre of gravity for the global economy
Dubai plays a central role in the growing South-South trade, principally between Asia and Africa
Well-positioned to harness the potential of emerging markets
Our Services:
We provide turnkey services for applications in the DIFC. From initial consulting to assistance in authorisations, to assistance in preparation of the legal documentation, 10 Leaves helps you navigate the DFSA Rulebook and submit an application that is comprehensive, complete and compliant.
Our services include assistance in:
1. Reviewing the business model and advice on the applicable regulatory framework;
2. Preparation of the Regulatory Business Plan and comprehensive financial projections;
3. Preparation of all policies, processes and manuals required;
4. Provision of Outsourced Compliance Officer and Outsourced Finance Officer services;
5. Provision of VAT and Corporate Tax consultation services;
6. Finalising the legal structure, including holding company setup and customisation of Memorandums; and
7. Finalisation of leased space, bank account opening and obtaining Financial Services Permissions.
A lot of our Category 4 clients are startups, where experienced investment bankers set up their own shop. In these cases, we also assist such teams with corporate and commercial documentation through our legal consultany - 10 Leaves Legability.

We assist in the drafting of:
Founder agreements.
Shareholder agreements.
Investor agreements.
Share vesting/ESOP plans.
Client/Supplier/Distributor agreements.
Employment agreements.

We also provide services in Luxembourg, Saudi Arabia and Mauritius.
Get in touch today! For More Deatails About Category 4 DIFC Investment Advisor and Arranger License.