Dubai Innovation Testing Licence
Dubai issues loan-based crowdfunding consultation paper

Dubai Innovation Testing Licence

By Jonathan Lawrence

The Dubai Financial Services Authority (DFSA) published a new FinTech consultation paper on 6 March 2017 entitled “Testing FinTech Innovations in the Dubai International Financial Centre (DIFC)”. The paper is the third in a series, setting out the DFSA’s approach to FinTech regulation.

The DFSA had previously determined that the current regime for regulating firms in the DIFC was flexible enough to accommodate many aspects of FinTech without introducing new rules. The latest consultation sets out the DFSA’s approach to FinTech firms that want to test innovative products and services in the DIFC. Firms meeting the qualifying criteria will receive a Financial Services Licence, referred to as an Innovation Testing Licence, which reflects the nature of the activities to be conducted during the testing phase. The DFSA will put in place limits on the FinTech testing activities to ensure appropriate controls for the safety of any customers involved. Given the limits on activities permitted during testing, FinTech firms will not have to comply with DFSA Rules where they are inappropriate at a testing stage. The testing phase is a step towards the FinTech firm obtaining a full Financial Services Licence.

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Dubai issues loan-based crowdfunding consultation paper

By Jonathan Lawrence

The Dubai Financial Services Authority (DFSA) issued a consultation paper “Crowdfunding: SME Financing Though Lending” on 31 January 2017. The paper proposes a regulatory framework for anyone looking to operate a loan-based crowdfunding platform in the Dubai International Financial Centre (DIFC). It is the first in a series of papers which will set out the DFSA’s approach to the regulation of FinTech more generally.

The key proposals include:

  • A tailored regime of rules specifically designed for loan-based crowdfunding platform operators.
  • Minimum standards for systems and controls.
  • Operational transparency and adequate disclosure to all participants – borrowers and lenders – on the platform.
  • Suitable checks on platform participants.
  • Appropriate safeguarding and segregation of client money.
  • The development of business cessation plans.
  • Enabling the transfer of rights or obligations between lenders.

The rules are benchmarked against the regimes in the United Kingdom, New Zealand, France, Netherlands and Spain, being those jurisdictions that create an individual regime for these types of platforms.

The DFSA is seeking comments from anyone who is interested in operating, investing in, or providing services to crowdfunding platforms in the DIFC. This can be done via email consultation@dfsa.ae with “CP109″ in the subject line.  Comments should be submitted by 2 March 2017.

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