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  • Part IV - Licensed Distribution Services Rules

    • A. Compliance with Licensed Distribution Services Rules

      1.VASPs that have a Licence from VARA to carry out Broker-Dealer Services must comply with this Part IV of the Broker-Dealer Services Rulebook, at all times, when providing Licensed Distribution Services.
      2.All Rules in this Part IV of the Broker-Dealer Services Rulebook apply in addition to all other requirements in the Regulations and Rulebooks, as may be in force from time to time. In the event of a conflict, the Rules in this Part IV of the Broker-Dealer Services Rulebook shall have precedence in respect of Licensed Distribution Services only.
      3.
      VARA shall, in its sole and absolute discretion, have the power to instruct a VASP to take any of the following actions, from time to time, and the VASP shall comply with such instructions—
       
      a.suspend Licensed Distribution Services for specified Virtual Assets, Issuers or clients; or
      b.cease Licensed Distribution Services for specified Virtual Assets, Issuers or clients.
       

    • B. Licensed Distribution Services Obligations and Responsibility

      1.Responsibility. VASPs providing Licensed Distribution Services must ensure beyond all reasonable doubt, the quality of all Issuers and Virtual Assets for which it provides Licensed Distribution Services.
      2.
      Quality, as referred to in Rule IV.B.1, shall include, but not be limited to all factors relevant to assurance of the following—
       
      a.consumer protection and preventing harms arising from misinformation and/or abusive practices, ensuring consumers are appropriately informed and have provided consent prior to engaging with risk;
      b.full FATF and financial sanctions compliance, and zero tolerance of money laundering, financing of terrorism or destructive proliferation activities;
      c.zero tolerance of any fraud, theft or other illicit or criminal activity;
      d.fair, orderly and transparent markets, including full compliance with VARA's Market Offences as defined in the Regulations;
      e.technical and/or cyber security exposures associated with the Virtual Asset and/or with the act of issuance or throughout the process of issuing or transferring the Virtual Asset;
      f.compliance with all applicable laws and regulations; and
      g.compliance with the VA Issuance Rulebook.
       
      3.
      Due diligence and assessment of Virtual Assets. VASPs providing Licensed Distribution Services shall carry out comprehensive due diligence on each Virtual Asset for which it provides Licensed Distribution Services, in order to ensure the quality of such Virtual Asset, in compliance with Rule IV.B.1. Such due diligence shall include, but not be limited to, the following—
       
      a.that the Virtual Asset complies with the VASP's VA Standards;
      b.that the Whitepaper complies with Part III.B of the VA Issuance Rulebook;
      c.that the Risk Disclosure Statement complies with Part III.C of the VA Issuance Rulebook;
      d.compliance with Part IV of the Market Conduct Rulebook in regard to investor classifications; and
      e.all smart contracts used for the purposes of the Virtual Asset have undergone comprehensive audits of their effectiveness, enforceability and robustness and that all findings from such audits have been satisfactorily remediated.
       
      4.
      Due diligence and assessment of Issuer. VASPs providing Licensed Distribution Services shall carry out comprehensive due diligence on all Issuers to whom they provide Licensed Distribution Services to ensure the quality of the Issuer, in compliance with Rule IV.B.1. Such due diligence shall include, but not be limited to, the following—
       
      a.that the Issuer complies with Part II of the VA Issuance Rulebook; and
      b.the VASP meets its requirements under Part III.E – Client due diligence of the Compliance and Risk Management Rulebook.
       
      5.
      Disclaimer. VASPs must ensure that all documentation, including all Whitepapers, relating to Virtual Assets for which it provides Licensed Distribution Services contains the following disclaimer:
       
      a.‘VARA has not made any representation and does not provide any warranties regarding any Issuer or Virtual Asset including, but not limited to, their fitness for purpose, suitability or regulatory status in any jurisdiction other than the Emirate of Dubai, UAE.'
       

    • C. Relationship with the Issuer

      1.Written agreements. VASPs must have written Client Agreements with all Issuers to whom they provide Licensed Distribution Services in compliance with Part II of the Market Conduct Rulebook.
      2.
      Conflicts of interest. In addition to all existing requirements in Part II.C of the Company Rulebook, VASPs providing Licensed Distribution Services must have, and implement written controls to prevent, monitor, manage and disclose any conflicts of interest when providing Licensed Distribution Services. Such controls must address, but not be limited to—
       
      a.the pricing of the initial placement or distribution of all Virtual Assets; and
      b.conditions on which the VASP may receive an allocation of, or purchase, the Virtual Assets including for the purposes of dealing as principal, making a market, or by way of renumeration for the VASPs services.
       

    • D. Submissions to VARA

      1.
      VASPs providing Licensed Distribution Services must submit the following documents (in the form prescribed by VARA on its website from time to time) in respect of all Virtual Assets for which it provides Licensed Distribution Services—
       
      a.the Whitepaper;
      b.the Risk Disclosure Statement;
      c.a declaration, signed by the VASP, of its compliance with Rule IV.B.1 of this Broker-Dealer Services Rulebook; and
      d.reports on the due diligence carried out under Rules IV.B.3 and IV.B.4 of this Broker-Dealer Services Rulebook.
       
      2.Starting from the first Working Day after the submissions required under Rule IV.D of this Broker-Dealer Services Rulebook are made, a submission period of fifteen (15) Working Days shall commence (“Submission Period").
      3.No Virtual Asset may be distributed or placed prior to completion of the Submission Period.
      4.If a VASP has not received any comment or objection from VARA during the Submission Period , the VASP may distribute or place the Virtual Assets for which such submissions were made.
      5.In addition, and without prejudice, to all of VARA's existing powers of suspension and/or other enforcement actions contained in the Regulations or Rulebooks, VARA may comment on or object to the distribution or placement of any Virtual Asset during the Submission Period.
      6.Upon receipt of such comment or objection, the VASP providing Licensed Distribution Services must not distribute or place the Virtual Assets for which such submissions were made until all such comments have been addressed and/or objections remedied, to VARA's satisfaction.
      7.For the avoidance of doubt, in no event shall VARA be deemed to have approved any Virtual Asset or Licensed Distribution Services by virtue of a VASP's compliance with Rules IV.D.1 and IV.D.2 of this Broker-Dealer Services Rulebook, including, but not limited to, in the event of the expiry of the Submission Period without comment or objection from VARA.
       

    • E. Ongoing Obligations, Monitoring and Notification

      1.Monitoring. VASPs providing Licensed Distribution Services must ensure that all due diligence carried out under Rules IV.B.3 and IV.B.4 remains up-to-date and accurate at all times during which the VASP is providing Licensed Distribution Services to the Issuer and/or in respect of the relevant Virtual Asset.
      2.VASPs must immediately suspend and/or cease any Licensed Distribution Services in relation to any Virtual Asset if the VASP knows, or has reason to suspect, the Virtual Asset no longer complies with Rule IV.B of this Broker-Dealer Services Rulebook.
      3.
      In the event of any material change to an Issuer or a Virtual Asset, including but not limited to any factors listed in Rule IV.B.2, for which a VASP provides Licensed Distribution Services, the VASP must—
       
      a.immediately carry out the due diligence required under Rules IV.B.3 and IV.B.4 of this Broker-Dealer Services Rulebook including in respect of all changes since due diligence was last completed;
      b.suspend all Licensed Distribution Services immediately upon becoming aware of the Issuer or Virtual Asset not satisfying Rule IV.B; and
      c.comply with Rule IV.D including in respect of all changes since the last submission to VARA was made in accordance with Rule IV.D of this Broker-Dealer Services Rulebook.