Consultation Paper No. 2 - Proposals for Whistleblowing Framework for the Abu Dhabi Global Market

CONSULTATION PAPER NO. 2 OF 2024 PROPOSALS FOR A WHISTLEBLOWING FRAMEWORK FOR THE ABU DHABI GLOBAL MARKET 7 March 2024 IntroductionR A SUSTAINABLE FINANCE REGULATORY FRAMEWORK FOR ADGM 10 November 2022

2 Consultation Paper No. 2 of 2024 Table of Contents Introduction 3 Why we are issuing this paper 3 Who should read this paper 3 How to provide comments 3 What happens next 4 Background 5 Core Features of the Framework 5 A. Protected Disclosures 6 B. Anonymity 8 C. Confidentiality and information sharing between specified authorities 9 D. Protections 9 E. Arrangements, policies and procedures 10 F. Record-keeping 11 Ancillary amendments for financial services firms and DNFBPs 12 Transitional Arrangements 12 Conclusion 13 Annexes, appendices and attachments 13

3 Consultation Paper No. 2 of 2024 Why we are issuing this paper

1. The Registration Authority (“RA”) and the Financial Services Regulatory Authority (“FSRA”) of the Abu Dhabi Global Market (“ADGM”) have jointly issued this consultation paper to seek views on their proposal to introduce a regulatory framework to protect good faith whistleblowers making specified disclosures to stipulated recipients (a “Protected Disclosure”).
2. In this paper, “the ADGM” and “we” are generally used to refer to the ADGM as a whole, although where appropriate for the context, they signify the RA or the FSRA as separate authorities.
3. The framework will primarily consist of discrete commercial regulations approved by the Board and administered by the RA (“Proposed Regulations”). Amendments are proposed to the RA’s Employment Regulations 2019 (“ER 2019”) and the FSRA’s General Rulebook (“GEN”) and Market Infrastructure Rulebook (“MIR”), as well as the FSRA’s Guidance and Policy Manual (“GPM”).
4. Capitalised terms in this consultation paper have the meaning given in the Interpretation Regulations 2015, unless otherwise defined. References to “Global Market Establishments” should be given the meaning set out in the ADGM Founding Law. 1 Who should read this paper
5. This consultation paper should be of interest to all Global Market Establishments, their directors, officers, employees and advisors.
6. We also welcome feedback from other stakeholders, whether based in the ADGM or beyond. How to provide comments
7. All comments should be made in writing and sent to the physical or email address below. If emailing your comments, please use the consultation paper number in the subject line. If relevant, please identify the organisation you represent when providing your comments. 1 Global Market Establishments: Company, any branch, representative office, institution entity, or project registered or licensed to operate or conduct any activity within the Global Market by any of the Global Market Authorities according to the provisions of this law or the Global Market Regulations or the executive resolutions including the licensed financial Global Market Establishments. Introduction

4 Consultation Paper No. 2 of 2024 8. We reserve the right to publish any comments you provide, including on our website, unless you expressly request otherwise when submitting those comments. Comments supported by reasoning and evidence will be given more weight. What happens next 9. The deadline for providing comments on the framework is 30 April 2024. After receiving your comments, we will consider whether any modifications are required to the proposals. We shall then proceed to enact the proposals in their final form. 10. You should not act on these proposals until the final regulations, rules and guidance are issued. We will issue a notice on our website when that happens. Comments to be addressed to: Consultation Paper No. 2 of 2024 Abu Dhabi Global Market ADGM Square Al Maryah Island PO Box 111999 Abu Dhabi, UAE Email: consultation@adgm.com

5 Consultation Paper No. 2 of 2024

1. The ADGM believes fairness, transparency and integrity are fundamental to a thriving and sustainable international financial centre. It is essential to ensure that Global Market Establishments conduct their activities to the highest standards of business practice. This protects the ADGM business community and maintains confidence in the ADGM.
2. In line with global movements enhancing transparency, accountability, and integrity, the ADGM believes a culture supporting speaking up with confidence and without fear of retaliation is part of any progressive business environment.
3. With this in mind, in December 2022, the ADGM issued Guiding Principles on Whistleblowing (“Whistleblowing Principles”)2 .
4. In order to promote fairness, transparency and integrity in its markets, the ADGM now proposes enacting the Proposed Regulations to protect a person from suffering detriment as a consequence of making a disclosure concerning certain types of actual or suspected wrongdoing. The ADGM is now seeking input from the public about the Proposed Regulations.
5. The ADGM’s planned approach is that the Proposed Regulations will apply to all Global Market Establishments. Accordingly, the ADGM proposes to introduce the Proposed Regulations on a standalone basis rather than incorporating them into existing regulations such as the Companies Regulations 2020 (“CR 2020”) or the Financial Services and Markets Regulations 2015 (“FSMR”). However, some ancillary amendments are also proposed to existing ADGM regulations, rules and guidance, as further detailed in this consultation paper, as part of the framework.
6. The features of the framework are now considered in the following areas. A. Protected Disclosures B. Anonymity C. Confidentiality and information sharing between specified authorities D. Protections E. Arrangements, policies and procedures F. Record-keeping 2 https://www.adgm.com/documents/announcements/2022/adgm-principles-on-whistleblowing-final-20221206.pdf Background Core Features of the Framework

6 Consultation Paper No. 2 of 2024 A. Protected Disclosures 7. The Proposed Regulations are set out in Annex A. The protections specified in section 5 of the Proposed Regulations will be available to any person, whether or not connected with the ADGM, who discloses information which meets specified requirements, such that it constitutes a “Protected Disclosure”. Requirement 1: Knowledge or reasonable suspicion of certain types of misconduct 8. The information must relate to knowledge or reasonable suspicion that a Global Market Establishment, or an officer, employee or agent of a Global Market Establishment: a. has or may have contravened, or is likely to contravene, any provision of any ADGM regulations or rules, or legislation administered by any ADGM authority; or b. has or may have engaged, or is likely to engage, in money laundering, fraud or any other financial crime. 9. The concept of “reasonable suspicion” is commonly used in legislation and has an established meaning under case law, albeit what a "reasonable suspicion" is will depend on the particular factual circumstances of a matter. While “suspicion” is a relatively low threshold, the notion of reasonableness imports an objective test to the suspicion. 10. The protections in the Proposed Regulations will only apply to disclosures of information regarding contraventions of legislation within the scope of the ADGM’s administrative perimeter and with respect to which an ADGM authority can take action. Information disclosed about contraventions of other laws will not be a Protected Disclosure. This necessarily careful scoping of Protected Disclosures under the framework is complimentary to the guidance in our Whistleblowing Principles that an organisation’s own internal whistleblowing program should protect a broad range of good faith disclosures. 11. Disclosures of information concerning actual or suspected money laundering, fraud or any other financial crime will be protected under the framework given that the FSRA is designated the supervisory authority for the ADGM for Federal AML Legislation, as defined in FSMR. In addition, as an international financial centre, it is prudent for the ADGM to promote the reporting of financial crime. 12. It is important to note that the term “financial crime” has not been defined in the Proposed Regulations. This ensures alignment with future developments in the UAE’s legislative regime and avoids inappropriately narrowing the scope of the protection in an ever-evolving risk area. Question 1: Do you agree with the information proposed to be included within the scope of a Protected Disclosure? If not, should it be narrower or broader, and why?

7 Consultation Paper No. 2 of 2024 Question 2: Do you agree with there not being a definition of “financial crime” in the Proposed Regulations? If not, why not, and how would you define it? Requirement 2: The disclosure must be made in good faith 13. The protections in the Proposed Regulations will only apply to information relating to actual or suspected misconduct that is disclosed in good faith. Again, this concept has an established meaning under common law precedent. The idea requires, for example, that something is done honestly rather than for a dishonest or malicious purpose. Question 3: Do you agree with a good faith requirement for Protected Disclosures? Requirement 3: The disclosure must be made to a specified person or authority 14. In order to be a Protected Disclosure, the information must be reported to certain specified persons. “Internal reporting channels” are specified persons within the Global Market Establishment and/or other persons designated as such by that Global Market Establishment are contemplated. In addition, “external reporting channels” to specified ADGM or UAE authorities are included. These reporting channels are parallel channels to ensure whistleblowers can swiftly and effectively raise issues to an appropriate forum. The framework does not require a person to disclose information internally before disclosing that information externally to a specified ADGM or UAE authority. Internal reporting channels 15. In addition to identifying specific persons that would be permitted to receive Protected Disclosures, such as directors, management, persons performing a Controlled Function and external auditors, the Proposed Regulations provide for a Protected Disclosure to be made to “any person … designated by the Global Market Establishment” to receive Protected Disclosures. 16. Persons designated by a Global Market Establishment to receive Protected Disclosures might include any or all of the following. a. A specified person or persons in a particular function within the Global Market Establishment, such as a designated person within its compliance, legal or internal audit function. b. A person located outside the ADGM, such as a human resources or compliance officer working in a group entity that is located in another jurisdiction. (See also discussion at paragraphs 21 and 22.) c. A third party, such as a third-party provider of a whistleblowing platform or service that the Global Market Establishment has engaged to receive Protected Disclosures. 17. A Global Market Establishment should take due care when designating certain persons as appropriate to receive Protected Disclosures. It should also be mindful

8 Consultation Paper No. 2 of 2024 of the need to maintain the confidentiality of Protected Disclosures and the identities of the persons who make them. The designated persons should be selected and approved in accordance with the appropriate governance requirements of the Global Market Establishment. Where a designated person is located outside the ADGM, the laws in that jurisdiction should be assessed to ensure they do not hinder the application of the Proposed Regulations. (See also the discussion of policies and procedures in paragraphs 31 to 35 of this paper.) External reporting channels 18. The Proposed Regulations also protect disclosures made directly to the RA, the FSRA, the ADGM Office of Data Protection, law enforcement agencies in the UAE and any other person or regulatory body specified by the Board of the ADGM, collectively termed “specified authorities”. 19. Our intention is to ensure that a disclosure will be protected if made to any of the specified authorities. While, operationally, it is preferred that a disclosure is made to the authority with administrative responsibility for the relevant misconduct, a good faith whistleblower will not lose protection simply by disclosing to a different specified authority. 20. Mechanisms for the onward transmission of the Protected Disclosure to the appropriate specified authority, if not already in place, will be considered by those entities as part of operationalising the framework. We discuss information sharing between specified authorities in further detail in paragraphs 24 to 26 of this paper. Disclosures outside the ADGM 21. Practically, there are limits to the protections set out in the Proposed Regulations for a whistleblower who makes a Protected Disclosure outside the jurisdiction of the ADGM. Conflict of laws and/or jurisdictional issues may prevent the ADGM Courts from affording a whistleblower the relevant protection. This may be the case, for example, where employment laws in another jurisdiction, rather than the ER 2019, govern the relationship between the whistleblower and their employer. 22. These conflict of laws issues arise in cross-border whistleblowing arrangements in other jurisdictions. It is important that whistleblowers should be mindful of these issues when making a Protected Disclosure. Question 4: Do you agree that internal and external reporting channels for making a Protected Disclosure should operate in parallel? Question 5: Do you agree that a Protected Disclosure could be made to any of the authorities specified? If not, why not, and how would you avoid causing confusion for whistleblowers as to the most appropriate authority to make a report to? B. Anonymity 23. The Proposed Regulations allow Protected Disclosures to be made anonymously. Anonymous reports have certain drawbacks. For example, obtaining further relevant information where the whistleblower is anonymous can be more difficult, and it can facilitate some nuisance reporting. These shortcomings are outweighed by the need to encourage reporting from whistleblowers regardless of whether they feel able to

9 Consultation Paper No. 2 of 2024 disclose their identity. This approach is also consistent with whistleblower regimes in place in several other jurisdictions. Question 6: Do you agree that Protected Disclosures might be made anonymously? C. Confidentiality and information sharing between specified authorities 24. There are various requirements under laws applicable in the ADGM, including the ADGM Founding Law, FSMR and the Data Protection Regulations 2021, that require ADGM authorities such as the RA and the FSRA to keep certain types of information confidential. 25. There are exceptions to these confidentiality requirements, such as those contained in section 967 of CR 2020 and section 199 of FSMR. These exceptions will permit the sharing of Protected Disclosures where required between the RA, the FSRA and other specified authorities. 26. The Proposed Regulations also require all Global Market Establishments to have policies and procedures in place to protect a whistleblower's identity. We discuss the policies and procedures requirements in the Proposed Regulations in further detail in paragraphs 31 to 35. Question 7: Do you agree with the approach to confidentiality of Protected Disclosures? D. Protections 27. Regardless of whether or not they feel able to disclose their identity, whistleblowers may be reluctant to speak up due to the risk of negative personal consequences. For example, the possibility of losing their job. On that basis, the Proposed Regulations provide for broad protection for whistleblowers from enforcement of any civil or contractual rights and detrimental action on the part of their employer. 28. In addition, we are proposing to make changes to ER 2019 as set out in Annex B to complement the Proposed Regulations by expanding the protections offered to an employee against any form of retaliation by an employer as a result of the employee speaking up. 29. The protections offered by the Proposed Regulations and the proposed amendments to ER 2019 are for the benefit of, and need to be enforced by, the individual whistleblower. They cannot be enforced by the RA or the FSRA. 30. The criminal laws of the UAE apply in the ADGM. Some provisions of these laws might be interpreted to cover disclosures made by whistleblowers in certain circumstances. To the extent that this is a risk, and to ensure the framework operates in relative harmony with applicable criminal laws, a Protected Disclosure can only be made to specified persons (see paragraphs 14 to 20), and the external reporting channels are subject to appropriate confidentiality requirements (see paragraphs 24 to 26). Global Market Establishments may further mitigate any residual risk by implementing appropriate policies and procedures such that they encourage, but do not mandate, internal rather than external reporting.

10 Consultation Paper No. 2 of 2024 Question 8: Is the scope of the protections available to whistleblowers under the Proposed Regulations appropriate? E. Arrangements, policies and procedures 31. The Proposed Regulations would require all Global Market Establishments to have appropriate and effective arrangements in place to facilitate Protected Disclosures, escalate them where necessary, and protect the identity of whistleblowers. We recognise the importance of giving appropriate flexibility to smaller Global Market Establishments to put in place arrangements that are suitable yet do not impose a disproportionate administrative burden. Accordingly, the arrangements should be proportionate to the size and complexity of the Global Market Establishment’s business and operations. 32. As a minimum, such entities should arrange to communicate the protections afforded under the Proposed Regulations and the available internal and external reporting channels to specified authorities. They should also have processes to protect the identity of a person who makes a Protected Disclosure and to assess and escalate Protected Disclosures where necessary. 33. All Global Market Establishments that are an Authorised Person, a Recognised Body or Designated Non-Financial Business or Profession (“DNFBP”), as those terms are defined in FSMR, are required to document the necessary arrangements in written policies and procedures. The same requirement applies to any other Global Market Establishment that does not qualify as “small” under sections 369 to 371 of CR 2020 (“Small Companies”). Taking a risk-based and proportionate approach, we would expect written whistleblower policies and procedures to address the following as a minimum. a. Periodic communication of the Global Market Establishment’s whistleblowing policy to appropriate personnel, including the available channels. b. Identification of appropriate internal reporting channels for Protected Disclosures. c. Processes to protect the identity of a whistleblower, including protecting the content of a disclosure, and allowing for anonymous reporting. d. Procedures to assess a Protected Disclosure. e. Procedures to escalate a Protected Disclosure, where necessary, within the Global Market Establishment and to the relevant ADGM or UAE authorities, if appropriate. f. Reasonable measures to protect a whistleblower from detrimental consequences. g. Methods to provide feedback to a whistleblower, where appropriate.

11 Consultation Paper No. 2 of 2024 h. The approach the Global Market Establishment will take to ensure the fair treatment of all persons accused of wrongdoing by a whistleblower, including how to address any conflict of interests that may arise. 34. Policies and procedures should be developed and approved following the Global Market Establishment’s applicable governance arrangements. 35. The appropriateness, proportionality and effectiveness of whistleblowing arrangements and, if applicable, written policies and procedures should be periodically reviewed. Usual good practice would suggest that this should occur at least annually and possibly more frequently if the circumstances require it, and records of reviews should be kept. 36. We are also considering the prospect of instituting a fine for Global Market Establishments that contravene the arrangements or policies and procedures requirements of the Proposed Regulations. Question 9: Is the requirement for Small Companies sufficiently robust, or should the requirement for written policies and procedures be applied to them as well? Should the size threshold be applied to Authorised Persons, Recognised Bodies and/or DNFBPs? F. Record-keeping 37. The Proposed Regulations include a requirement for Global Market Establishments to maintain records related to a Protected Disclosure for at least six years from the date that the determination of all matters relevant to the Protected Disclosure has been completed and closed. 38. In the Proposed Regulations, the reference to that minimum period is intended to take into account that a longer period may be specified in other ADGM regulations. The reference to the determination of all matters relevant to the Protected Disclosure is to ensure that the duration of the record-keeping requirement runs from an appropriate starting point. For example, where there is an internal investigation or regulatory enforcement investigation or action arising in respect of the subject matter of the Protected Disclosure, this could run for several years. In that case, the Global Market Establishment should retain the relevant records for the period of that investigation or enforcement action, and a reasonable period after that. Question 10: Do you agree with the record-keeping requirement?

12 Consultation Paper No. 2 of 2024 39. Under the Proposed Regulations, Authorised Persons, Recognised Bodies and DNFBPs must have written whistleblower policies and procedures in place. This is a risk-based and proportionate approach to ensure that all such entities have appropriate whistleblowing arrangements in place. 40. Accordingly, amendments are proposed to GEN (see Appendix 1) and MIR (see Appendix 2) to replicate the policies and procedures requirements in the Proposed Regulations in order to support compliance and facilitate appropriate supervision of these requirements by the FSRA. 41. We are aware that in some cases only the individuals who are actively involved in a contravention or unlawful activity have sufficient knowledge to provide a helpful whistleblower report. In order to assist the RA and the FSRA in achieving their objectives in developing the framework, we wish to encourage individuals involved in contraventions of applicable laws to come forward as whistleblowers. On this basis, amendments are proposed to the FSRA’s Guidance & Policies Manual (see Attachment 1) to consider whistleblowing as a mitigating factor in the FSRA’s approach to penalty calculation, as it relates to individuals. The RA is considering amending its enforcement policies in a similar manner. Question 11: Do you have any comments on the ancillary amendments? 42. In considering whether any transitional period should apply to the Proposed Regulations, we have taken into account the publication of our Guiding Principles on Whistleblowing in 2022, the duration of the consultation period and the duration of the approvals process likely to apply to the proposals set out in this paper. Given these factors, we consider all market participants in the ADGM to be on notice of our general intentions about implementing a framework for whistleblowing for the ADGM and to have been aware of our intentions in this respect for some time. 43. Accordingly, it is proposed that Global Market Establishments will have a period of six months from the date of publication of the Proposed Regulations to comply with the requirements as appropriate. All other requirements of the Proposed Regulations will apply from the date of publication. Question 12: Do you agree with the transitional period for the Proposed Regulations to come into force? Ancillary amendments for financial services firms and DNFBPs Transitional Arrangements

13 Consultation Paper No. 2 of 2024 44. The ADGM believes that a culture that supports speaking up about instances of actual or suspected misconduct, both within an organisation and more widely where appropriate, forms part of a progressive business environment. With fairness, integrity and transparency being fundamental to a thriving and sustainable international financial centre, we believe these proposals will facilitate the ADGM’s alignment with global movements in favour of accountability and transparency. Question 13: Do you have any broader feedback on our framework that is not covered by the questions set out above? • Annex A: Proposed Whistleblowing Regulations 2024 • Annex B: Proposed amendments to Employment Regulations 2019 • Appendix 1: Proposed amendments to the General Rulebook • Appendix 2: Proposed amendments to the Market Infrastructure Rulebook • Attachment 1: Proposed amendments to the Guidance & Policies Manual Conclusion Annexes, appendices and attachments