Principle I Internationally Recognised Regulatory Framework
To establish a best-in-class regulation framework, ADGM will draw on best standards and practices from international financial services centres around the world. This will enable financial institutions and business entities to operate with confidence that the ADGM’s regulatory standards and regime are comparable with their home jurisdictions.
Where appropriate, ADGM will apply established and widely accepted regulatory concepts to support institutions in minimising and managing any potential additional compliance costs from new regulations. It will also enable ADGM to update its regulations on a timely basis.
ADGM will incorporate best practices and know-how of other international finance centres in its offering of corporate structures and other investment vehicles. This will provide institutions with ease and flexibility in deciding the appropriate business model to establish their presence and business at ADGM.
Conforming to international standards in AML, sanctions, and CFT
The ADGM Financial Services Regulatory Authority (‘the Regulatory Authority’) will work closely with national and international regulators and industry associations (i) to contribute to and coordinate on standards, (ii) share relevant information to assist in investigations and (iii) address jointly any emerging threats to the integrity of the marketplace. The Regulatory Authority will rigorously apply and uphold international sanctions against countries, people and organisations.
An effective Financial Regulator is independent in its operations and decisions. It is given appropriate authority to achieve that independence and being accountable in the application of its powers. ADGM’s organisation and governance structures will match global jurisdictions in this respect, and to meet relevant international guidelines such as the IOSCO Objectives and Principles of Securities Regulation.
ADGM will be overseen by its Board of Directors who has full authority to operate the market, issue regulations and oversee the regulators budget and performance.
Within the ADGM group structure, the Regulator, Registrar and Court functions will operate entirely independently, with a Regulatory Committee appointed by the Board to ensure supervisory independence i.e. the objective application of rules by the regulatory function.
Platform for international activities
ADGM’s location is ideally suited to serve the significant and growing demand for financial services in Abu Dhabi, the Gulf and more widely in Africa and Asia. Authorised institutions, located in ADGM, will have the flexibility to incorporate their business using a range of internationally available structures and effectively offer their clients a full suite of international services and products subject to the UAE Law for financial free zones.
In the course of business, companies will have in their possession sensitive and material information pertaining to their clients. ADGM is of the view that these information should be regarded with the highest level of confidentiality.
As part of its regulatory responsibilities and supervision of the market, the Regulatory Authority will require regulated companies and institutions to submit pertinent aspects of these information. It will apply its strict confidentiality policy to protect the integrity of the information under its care. Nevertheless, there may be exceptional circumstances when the disclosure of the information is required by other regulators, public authorities or the Courts.
Principle II Dynamic and Market-Oriented Regulations
Principles based and outcome focused
ADGM’s rules and regulations will be principle-based and supplemented by specific and detailed rules, where appropriate, to guide market conduct and behaviour of industry participants. These principles will be developed to support ADGM’s objective of a sound and progressive financial system. ADGM will also issue industry guidance on application of its principles.
To achieve its objective, ADGM will administer its rules in a fair and consistent manner to maintain the integrity of the marketplace.
The Regulatory Authority team, comprising experienced professionals and analysts, will deploy a wide range of appropriately calibrated regulatory solutions and internationally practised surveillance and supervisory tools to maintain a robust, open and efficient marketplace.
Proportional and Progressive
ADGM’s legislative framework will be based on English Common Law, enabling the courts to draw on a well-established set of precedents and responding effectively to changing global market conditions. This will also empower ADGM to offer its member institutions the same level of sophistication, certainty and flexibility in its legal and regulatory regime as practised in other international financial jurisdictions.
ADGM’s approach to new regulations and rules will be proportionate, well-calibrated, clear and market-oriented. The Regulatory Authority team will review and develop its rules in keeping with the financial and market activities within its jurisdiction. ADGM will encourage and support institutions and firms to offer innovative products and services that meet the dynamic needs of the marketplace.
Responsive and proactive to industry changes and needs
In fostering market stability and efficiency, ADGM will advocate innovation in services and products to bring about company success and at the same time, cater to the needs of the consumers in the marketplace.
Through active dialogues with industry participants, ADGM aims to stay ahead of emerging issues in the marketplace. As a regulator, ADGM will also provide timely and clear rules, guidelines or clarifications to foster a fair and efficient market. ADGM will continuously enhance its regulatory tools in line with international standards.
Regular dialogue with industry
ADGM recognises the importance of regular dialogues with industry participants on regulatory matters and engaging institutions with expertise in and experience of operating in other global jurisdictions. As a practice, ADGM will consult the market openly on significant and new regulations or changes to existing regulations. This will allow industry participants and institutions to play a role in enhancing the regulatory framework, as well as, to assist them in better understanding the new rules.
ADGM will also conduct impact analyses, as part of its market diligence, to assess the effects of the regulatory changes on institutions, consumers and the wider marketplace. At the same time, minimise the risk of adverse outcomes.
Principle III Risk-focused and Proportionate Approach
Risk appropriate standards and practice
ADGM will adopt a prudential regulation approach to ensure financial stability, and provide an open and efficient business friendly environment. Companies will be subject to prudential standards and risk assessments, that are based on a defined framework, to identify their level of risk contribution and impact on the marketplace. Institutions will be risk-profiled based on their role in the financial system and, to adhere to requirements proportionate to their role.
Institutions and businesses, operating within the ADGM markets, will be expected to have a proper and thorough risk oversight of their business activities. ADGM will deploy supervisory efforts and allocate necessary resources to maintain the well-being and functioning of the marketplace.
ADGM will take a consolidated approach to the supervision of financial institutions that have multiple business lines or entities within their structures. Various types and degrees of risks can be manifested concurrently during stressful events and crisis. To achieve a more comprehensive and holistic view of risks and their potential impact, ADGM seeks to supervise entities at the parent company level and work closely with other jurisdictions on issues relating to cross-border operations.
The Regulator Authority will undertake financial sector surveillance as part of its supervisory function. This will include trend analysis to identify risks factors such as unsustainable trends over time, unstable patterns of financial exposure or structural weaknesses.
Focus on reducing impact of failure rather than failure altogether
ADGM is responsible for maintaining financial stability in the marketplace. Institutions and firms operating within ADGM’s marketplace will be required to have default rules and procedures that enable them to (i) meet their obligations in the event of a participant default, or stressed situations, and (ii) deal with replenishment of resources following a default. Should a default occur, the Regulatory Authority will work with the relevant UAE authorities to wind down the company in an orderly manner, while maintaining market stability and minimising any potential negative impact on consumers.
In the allocation of internal resources, ADGM will put in place adequate resources to supervise and monitor institutions and firms on their risks contribution.
Safeguarding the best interests of consumers
ADGM will look to its institutions and firms to provide fair and transparent services to their clients. This will enable consumers to better understand the range of service offerings, fee structures and product attributes before making informed decisions.
When there is a breach of its rules and regulations, the Regulatory Authority will take immediate steps to mitigate any immediate risks of market contagion or unfavourable impact on consumers. Details investigations will be conducted and disciplinary actions will be taken where warranted.
Proactive, proportional, predictable & judgment driven interventions
Supervisory intervention is a necessary part of the Regulatory Authority’s toolkit to make certain institutions address emerging external threats or internal weaknesses. In applying any supervisory intervention, ADGM will seek to:
- Help institutions respond early to emerging threats
- Communicate its actions early; work with institutions on agreed measures and actions to take
- Be risk focussed and practical to ensure interventions are constructive rather than punitive
ADGM will make certain that its enforcement actions are effective deterrent against misconduct and imposed fairly and consistently across the market. Where a potential criminal breach is identified, ADGM will refer the case to the relevant UAE authorities for further investigation and actions
Principle IV Cooperation and Shared Responsibility
Partnership with global regulatory community
As global financial markets become more integrated, ADGM is of the view that regulatory cooperation will play an essential part in fostering a world class regulatory environment. In keeping with international regulatory developments, ADGM will also participate in regional and global regulatory groups and contribute in shaping standards governing the industry globally.
Shared responsibility for oversight with regulated entity leadership
ADGM has regulatory and supervision oversight of the financial services provided within its jurisdiction. The ADGM Board and Senior Management will be responsible for overseeing ADGM‘s business model, its business affairs and risk management framework. The ADGM Board will work closely with the ADGM Senior Management to establish a risk management structure to provide oversight and management of risks and ensure that responsibilities and accountabilities are clearly defined.
Collaboration with market participants
In addition to its supervisory responsibility and market consultation communications, ADGM will engage market participants on a regular but informal basis. ADGM believes that one-on-one sessions with its senior regulatory team will encourage and provide a forum for institutions to share their feedback and ideas to strengthen the market. Regular communication and engagement will also, further enhance ADGM’s ongoing efforts to grow the financial centre.
The Regulatory Authority team will suggest and/or initiate working groups of market participants and professionals to manage and respond to any emerging issues that may significantly affect any aspect or development of the industry.
Recognition of local characteristics and law
Further to keeping with international standards, ADGM’s legislative framework and regulations will reflect the local characteristics of the UAE and the wider Middle East region. Specifically, ADGM will also provide the platform for comprehensive offering of Islamic finance services to meet the growing demand and needs of this industry.
ADGM institutions will have the ability and flexibility to serve UAE onshore customers through a variety of products and services, subject to restrictions contained in Federal law. ADGM will also cooperate with the onshore market regulators support and enable institutions to conduct their businesses seamlessly across jurisdictional borders.
Principle V Delivering High Standards of Quality and Service
Dedicated regulatory team with strong industry knowledge
In building a world class financial centre, ADGM has a highly experienced, qualified and ethical Management team who has extensive industry experience from international financial institutions and regulatory bodies.
The Regulatory Authority is committed to nurturing its regulatory workforce and will dedicate adequate resource to enhance the level of competency, professionalism and ethical standards among its staff.
Upholding highest standards of integrity
ADGM’s overall core values are “respect, trust, performance, and responsibility”. The Regulatory Authority will emphasise and be accountable to standards of integrity, professionalism, collaboration and accountability in all its activities.
- Integrity: To have uncompromising uprightness in all work aspects as the guardians of the markets.
- Professionalism: To be professional in all interactions with institutions, authorities, and colleagues at ADGM whom we work with.
- Collaboration: To maintain a collaborative approach with financial institutions, domestic and international authorities and other related stakeholders in order to deliver a safe and successful financial system. To foster a collaborative and cohesive work ethic among colleagues at ADGM.
- Accountability: To be accountable and responsible for delivering the stated objectives and goals at work.