Consultation Paper No. 2 of 2022 - Proposals for Revised Fees for Late Regulatory Filings

CONSULTATION PAPER
NO. 2 OF 2022
PROPOSALS FOR REVISED
FEES FOR LATE REGULATORY
FILINGS
23 March 2022

Consultation Paper No. 2 of 2022
TABLE OF CONTENTS
Introduction.............................................................................................................................3
Why are we issuing this paper?......................................................................................... 3
Who should read this paper?............................................................................................. 3
How to provide comments? ............................................................................................... 3
What happens next?.......................................................................................................... 3
Background.............................................................................................................................5
Proposed fee for late regulatory filings.................................................................................6
Options for Fees for Late Regulatory Filings...................................................................... 6
Incomplete or inaccurate regulatory filings......................................................................... 7
Appendices .............................................................................................................................8

Consultation Paper No. 2 of 2022
Why are we issuing this paper?

1. The Financial Services Regulatory Authority (“FSRA“) of Abu Dhabi Global Market
   (“ADGM“) has issued this consultation paper to seek views on proposed amendments to the FEES Rules for Authorised Persons, Recognised Bodies, and Designated Non-Financial Businesses or Professions.
2. The amendments to the FEES Rules proposed within this paper have been drafted
   to reflect the importance of regulatory filings being submitted within the timeframes prescribed by the FSRA Rulebooks. Such reporting is necessary for effective supervision, with late submission of regulatory filings being a contravention of
   section 218 of the Financial Services and Markets Regulations 2015 (“FSMR”).
3. Unless otherwise defined, capitalised terms used in this paper have the meanings
   attributed to them in FSMR or the Glossary (“GLO”).
   Who should read this paper?
4. This Consultation Paper should be of particular interest to all entities operating in
   the financial sector in ADGM; and entities in the non-financial sector that are required by the FSRA Rulebooks to submit regulatory filings. How to provide comments?
5. All comments should be made in writing and sent to the address or the email
   address specified below. If sending your comments by email, please use the Consultation Paper number in the subject line. If relevant, please identify the organisation you represent when providing your comments. The FSRA reserves the right to publish, including on its website, any comments you provide, unless you expressly request otherwise at the time of submitting those comments. Comments supported by reasoning and evidence will be given more weight by the FSRA. What happens next?
6. The deadline for providing comments on the proposed framework is 18 April 2022.
   After receiving comments, we shall consider whether any modifications are required to the proposals and the Board of ADGM and the FSRA will then proceed to enact the proposals in their final form as rules and associated guidance. You should not act on these proposals until final rules and guidance are issued by the FSRA, at which time we shall issue a notice on our website. Introduction

Consultation Paper No. 2 of 2022
Comments to be addressed to:
Consultation Paper No. 2 of 2022
Abu Dhabi Global Market
ADGM Square
Al Maryah Island
PO Box 111999
Abu Dhabi, UAE
Email: consultation@adgm.com

Consultation Paper No. 2 of 2022

1. The FSRA is proposing to revise the fees associated with the late submission of
   regulatory filings by Authorised Persons, Recognised Bodies, and Designated Non￾Financial Businesses or Professions (collectively “Regulated Firms”), as appropriate. The purpose of this revision is to encourage timely submission of those periodic reports, returns and other filings (collectively “regulatory filings”) that are required to be submitted within the timeframes prescribed in various FSRA Rulebooks.
2. The FSRA’s risk-based approach to supervision depends upon the timely
   submission of complete and accurate regulatory filings. Information contained in regulatory filings is a major source for FSRA supervisors to identify risk factors that require supervisory follow-up and also contributes to the FSRA achieving its strategic objectives.
3. The table below outlines the proposed new definition of “Regulatory Filings” in the
   GLO Rulebook and the required submissions that would be accordingly in-scope. Regulatory Filings - Rule Regulatory Requirement AML 4.6.1 AML Return CIB 2.3.5(3), (4) and (5) Global, Cell and Fund Returns CIB 2.3.7 Annual and quarterly Regulatory Returns CIB 2.3.8 Financial Group Capital Adequacy Report CIB 7.2.3 Written report relating to General Insurance Business, prepared by an Actuary CIB 7.3.2, 3 and 5 Actuarial report for Long-Term Insurance Business COBS 14.2.3(d), 14.2.13 Client Money Auditor’s Report COBS 15.10 Safe Custody Auditor’s Report GEN 6.6.1, 6.6.2 Reports produced by Auditor GEN 8.8.12 Annual report on Controllers IFR 3.6.2(b) Shari’a Supervisory Board annual report PIN 6.6.1 Annual Regulatory Return PIN 6.6.7 Quarterly Regulatory Return PIN 6.7.2(1) Financial Group Capital Adequacy Report Background

Consultation Paper No. 2 of 2022
Regulatory Filings - Rule Regulatory Requirement PIN 7.2.3 Written report relating to General Insurance Business, prepared by an Actuary PIN 7.3.5 Actuarial report for Long-Term Insurance Business PRU 2.3.7 Monthly, quarterly and annual returns PRU 3.2.2(c) Capital adequacy summary report PRU 3.21.1 Leverage ratio report PRU 10.3.2(3) Internal Risk Assessment Process (IRAP) PRU 10.4.2(3) Internal Capital Adequacy Assessment Process (ICAAP)
4. It should be noted that the proposed revisions to the fee schedule will not apply to
those regulatory filings that are triggered by ad hoc events, such as notification of a delegation of authority by the Governing Body or the appointment of a Key Individual. Options for Fees for Late Regulatory Filings
5. Any fees imposed under the proposed schedule should be proportionate to the
nature of a contravention, while being significant enough to improve compliance with reporting obligations across the population of Regulated Firms. A number of options for fee structures exist that might achieve this balance, including the following. Option 1 - flat fee structure Overdue period Fee Past filing deadline Flat fee of $500 Option 2 - tiered fee structure Overdue period Fee Up to one month late Flat fee of $350 More than one month Flat fee of $500 Proposed fee for late regulatory filings

Consultation Paper No. 2 of 2022
Option 3 - accrued fee structure
Overdue period Fee
Each Business Day or part thereof past the filing deadline $100 per Business Day or part thereof
6. We are proposing the adoption of option 3, i.e. a fee of $100 per Business Day or
part thereof that regulatory filings are overdue beyond their filing deadline. We have
considered the other options and believe that the proposed fee structure would be directly proportionate to the period that a regulatory filing is overdue and straightforward to understand and administer.
7. We have undertaken benchmarking of the approaches adopted in this area by
regulators in other, comparable jurisdictions and this proposal is consistent with their approaches.
8. We recognise, however, that there may be exceptional circumstances that result in
the late submission of a regulatory filing. The proposal therefore provides the opportunity for a Regulated Firm to appeal to the FSRA where it believes that such exceptional circumstances have caused a late submission. Any such appeal would be considered by the FSRA and might result in the fee remaining as specified, being reduced, waived or refunded. Question 1 Do you have any comments on the proposal to adopt a fee of $100 per Business Day or
part thereof that regulatory filings are overdue beyond their filing deadline?
Incomplete or inaccurate regulatory filings
9. The fee structure proposed above would address late regulatory filings, but not
those that are materially incomplete, inaccurate or both. We have considered whether the introduction of additional fees to address these issues is merited, as occurs in some comparable jurisdictions. The FSRA has decided that its current supervisory powers are sufficient at this time to deal with any such contraventions:
however, the introduction of fees relating to this scenario will be subject to periodic review.

Consultation Paper No. 2 of 2022
 Appendix 1: Proposed amendments to FEES
 Appendix 2: Proposed amendments to PRU
 Appendix 3: Proposed amendments to PIN
 Appendix 4: Proposed amendments to GLO
Appendices

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Appendix 1
Fees Rules (FEES)
*In this attachment underlining indicates new text and striking through indicates deleted text

Appendix 1
4. OTHER FEES
…
4.3 Registering a Domestic Fund pursuant to the Fund Passporting Rules
4.3.1 A Fund Manager registering a Domestic Passported Fund with the Regulator, must
pay to the Regulator a notification fee of $9,500 in respect of each Domestic Passported Fund, in accordance with Fund Passporting Rule 7.1.1.
4.3.2 A Fund Manager of a Domestic Passported Fund must pay to the Regulator an annual
passporting fee of $2,000 in respect of each Domestic Passported Fund, in accordance with Fund Passporting Rule 7.1.2.
4.4 Fees for late submission of Regulatory Filings
4.4.1 An Authorised Person, a Designated Non-Financial Business or Profession or a
Recognised Body that submits a Regulatory Filing after the due date must pay to the Regulator a fee of $100 for each Business Day or part thereof that the Regulatory Filing is overdue.
4.4.2 When a Regulatory Filing is received by the Regulator after its due date, the Regulator
will issue to the Authorised Person, Designated Non-Financial Business or Profession or Recognised Body a final notice specifying the total fee due that must be paid within fifteen Business Days of the date of that notice.
4.4.3 Where an Authorised Person, Designated Non-Financial Business or Profession or a
Recognised Body wishes to appeal to the Regulator against a fee imposed under Rule 4.4.1, it must do so within ten Business Days of the date of the final notice and in the form prescribed by the Regulator.
4.4.4 Nothing in this Section limits the right of the Regulator to take any other action.
Guidance

1. The Regulator will only consider an appeal under Rule 4.4.3 where there are
   exceptional circumstances wholly outside the control of an Authorised Person, Designated Non-Financial Business or Profession or a Recognised Body that result in the submission of a Regulatory Filing after the date on which it becomes due. Any such appeal will be considered by the FSRA and may result in the fee being upheld, reduced, waived or refunded.
2. The Regulator will also monitor the completeness and the accuracy of each
   Regulatory Filing and other regulatory returns that are required by the Rulebooks, whether returned prior to the due date or afterwards, and where there is an incomplete or inaccurate submission the Regulator may take supervisory action.
3. Where a Regulatory Filing is submitted after the date on which it becomes due,
   the Authorised Person, Designated Non-Financial Business or Profession or a Recognised Body is in breach of a Rule. The Regulator is entitled to take further

Appendix 1
action including, but not limited to, taking steps to withdraw authorisation to conduct Regulated Activities, in addition to the imposition and its acceptance of a fee due under Section 4.4. In considering the steps to take the Regulator will also consider the duration of the delay in submitting the Regulatory Filing and whether there is an existing pattern of late, incomplete or inaccurate submissions.

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Appendix 2
Prudential – Investment, Insurance Intermediation and Banking Rules (PRU) *In this attachment underlining indicates new text and striking through indicates deleted text

Appendix 2
2 GENERAL REQUIREMENTS
…
2.3.8 (1) When a return which is required under these Rules is not submitted on or before
after the due date or within the prescribed period, such non-submission incurs an administrative fee of $1,000 in accordance with FEES Rule 4.4. (2) Nothing in this Rule limits the right of the Regulator to take any other action. Guidance If a return is not submitted by the date on which it becomes due, the Person is in breach of a Rule and the Regulator is entitled to take action including, but not limited to, taking steps to withdraw authorisation to conduct Regulated Activities. …

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Appendix 3
Prudential –Insurance Business (PIN)
*In this attachment underlining indicates new text and striking through indicates deleted text

Appendix 3
6.6 Submission of Returns to the Regulator
…
6.6.13 (1) When a Return of the kind specified under Rule 6.6.2(a) or Rule 6.6.8(a) is not
submitted on or before after the due date or within the prescribed period, such non-submission incurs an administrative fee of $1,000 in accordance with FEES Rule 4.4. (2) Nothing in this Rule limits the right of the Regulator to take any other action. Guidance If a Return is not submitted by the date on which it becomes due, the Person is in breach of a Rule and the Regulator is entitled to take action including, but not limited to, taking steps to withdraw authorisation to conduct Regulated Activities. …

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Appendix 4
GLOSSARY (GLO)
*In this attachment underlining indicates new text and striking through indicates deleted text.

Appendix 4
1.2 Defined Terms
1.2.1 In the Rulebooks:
(1) a word or phrase which is defined in GLO is a defined term and has the meaning given in GLO; and (2) a word or phrase which relates to a defined term must be interpreted accordingly. …. Defined Terms Definitions Regulatory Filings Means the return or report to be submitted to the Regulator, in relation to:
(a) AML, in accordance with Rule 4.6.1;
(b) CIB, in accordance with Rules 2.3.5(3), (4) and (5), 2.3.7, 2.3.8, 7.2.3, 7.3.2, 7.3.3, and 7.3.5; (c) COBS, in accordance with Rules 14.2.3(d), 14.2.13, and 15.10; (d) GEN, in accordance with Rules 6.6.1, 6.6.2, and 8.8.12; (e) IFR, in accordance with Rule 3.6.2(b); (f) PIN, in accordance with Rules 6.6.1, 6.6.7, 6.7.2(1), 7.2.3 and 7.3.5; (g) PRU, in accordance with Rules 2.3.7, 3.2.2(c), 3.21.1, 10.3.2(3) and 10.4.2(3).