• GEN 6. GEN 6. ACCOUNTING AND AUDITING

    • GEN 6.1 GEN 6.1 Application

      • GEN 6.1.1

        This Chapter applies to every Authorised Person and Recognised Body other than a Representative Office.

      • GEN 6.1.2 GEN 6.1.2

        An Authorised Person or Recognised Body which is a Representative Office is hereby exempt from the requirements in section 189 of the FSMR relating to the appointment of an Auditor.

        • Guidance

          The Regulator has exercised its power under section 189 of the FSMR to exempt an Authorised Person or Recognised Body which is a Representative Office from the requirements in that section. As a result, in accordance with the terms of section 189 the FSMR, the Representative Office also does not need to comply with other requirements in Part 15 of the FSMR.

    • GEN 6.2 GEN 6.2 Financial statements and financial reporting standards

      • GEN 6.2.1 GEN 6.2.1

        Each Authorised Person and Recognised Body must prepare financial statements for each financial year of the Authorised Person or Recognised Body.

        • Guidance

          1. IFR sets out specific disclosures an Authorised Person and Recognised Body must include in its financial statements when carrying on Islamic Financial Business.
          2. The financial statements prepared by an Authorised Person or Recognised Body which is a Branch may be the financial statements prepared for the Authorised Person or Recognised Body's head office.

      • GEN 6.2.2

        Each Authorised Person and Recognised Body must, except as provided under Rule 6.2.3, prepare and maintain all financial statements in accordance with the International Financial Reporting Standards ("IFRS").

      • GEN 6.2.3

        (1) An Authorised Person specified in (2) may prepare and maintain its financial statements in accordance with IFRS for Small and Medium-Sized Entities (SMEs) where that standard applies to it.
        (2) Authorised Persons specified for the purposes of (1) are:
        (a) an Authorised Person in Category 3B, Category 3C or Category 4, which does not hold or control Client Assets or Insurance Monies; and
        (b) an Authorised Person in Category 4 which is not authorised under its Financial Services Permission to carry on the Regulated Activity of Operating a Multilateral Trading Facility or Organised Trading Facility.
        (3) The Regulator may by written notice direct that a particular Authorised Person or a specified class of Authorised Person specified in (2) must prepare and maintain financial statements in accordance with IFRS rather than IFRS for Small and Medium Sized Entities.
        (4) The Regulator may by written notice vary or revoke a direction under (3).
        (5) The procedures in Part 21 of the FSMR apply to a decision of the Regulator to give a direction under (3) to a particular Authorised Person.
        (6) If the Regulator decides to give a direction under (3) to a particular Authorised Person, the Authorised Person may refer the matter to the Regulatory Committee for review.

      • GEN 6.2.4

        Each Authorised Person and Recognised Body must:

        (a) if it is a Body Corporate, have its financial statements approved by the Directors and signed on their behalf by at least one of the Directors; or
        (b) if it is a Partnership, have its financial statements approved by the Partners and signed on their behalf by at least one of the Partners.

    • GEN 6.3 GEN 6.3 Accounting records and Regulatory Returns

      • GEN 6.3.1

        Each Authorised Person and Recognised Body must keep Accounting Records which are sufficient to show and explain Transactions and are such as to:

        (a) be capable of disclosing the financial position of the Authorised Person or Recognised Body on an ongoing basis; and
        (b) record the financial position of the Authorised Person or Recognised Body as at its financial year end.

      • GEN 6.3.2

        Accounting Records must be maintained by an Authorised Person and Recognised Body such as to enable its Governing Body to ensure that any financial statements prepared by the Authorised Person or Recognised Body comply with the Regulations and Rules.

      • GEN 6.3.3

        Each Authorised Person or Recognised Body's Accounting Records must be:

        (a) retained by the Authorised Person or Recognised Body for at least six years from the date to which they relate;
        (b) at all reasonable times, open to inspection by the Regulator or the Auditor of the Authorised Person or Recognised Body; and
        (c) if requested by the Regulator capable of reproduction, within a reasonable period not exceeding three Business Days, in hard copy and in English.

      • GEN 6.3.4

        All Regulatory Returns prepared by the Authorised Person must be prepared and submitted in accordance with the requirements set out in PRU or PIN as applicable.

        Amended on (3 February, 2020).

      • Financial years

        • GEN 6.3.5

          (1) The first financial year of an Authorised Person which is a Domestic Firm starts on the day on which it is incorporated and lasts for such period not exceeding 18 months as may be determined by its Directors or Partners.
          (2) An Authorised Person which is a Domestic Firm must as soon as practicable after it has made a determination under (1) notify the Regulator of the end date determined for its first financial year.
          (3) The second and any subsequent financial year of an Authorised Person which is a Domestic Firm shall, except as provided in Rule 6.3.6, start at the end of the previous financial year and shall last for 12 months or such other period which is within seven days either shorter or longer than 12 months as may be determined by its Directors or Partners.

        • GEN 6.3.6

          (1) An Authorised Person which is a Domestic Firm may only change its financial year end from a period provided for under Rule 6.3.5(3) with the Regulator's prior consent.
          (2) The application for consent must be in writing and include the reasons for the change.
          (3) The Regulator may require the Authorised Person to obtain written confirmation from its Auditor that the change of financial year end would not result in any significant distortion of the financial position of the Authorised Person.

        • GEN 6.3.7

          If an Authorised Person is not a Domestic Firm and intends to change its financial year, it must provide the Regulator with reasonable advance notice prior to the change taking effect.

    • GEN 6.4 GEN 6.4 Appointment and termination of Auditors

      • GEN 6.4.1

        Each Authorised Person and Recognised Body must:

        (a) notify the Regulator of the appointment of an Auditor in such form as the Regulator shall prescribe; and
        (b) prior to the appointment of the Auditor, take reasonable steps to ensure that the Auditor has the required skills, resources and experience to audit the business of the Authorised Person or Recognised Body for which the auditor has been appointed.

      • GEN 6.4.2

        Each Authorised Person and Recognised Body must notify the Regulator immediately if the appointment of the Auditor is or is about to be terminated, or on the resignation of its Auditor, in such form as the Regulator shall prescribe.

      • GEN 6.4.3

        Each Authorised Person and Recognised Body must appoint an Auditor to fill any vacancy in the office of Auditor and ensure that the replacement Auditor can take up office at the time the vacancy arises or as soon as reasonably practicable.

      • GEN 6.4.4

        Each Authorised Person and Recognised Body must comply with any request by the Regulator to replace an Auditor previously appointed by that Authorised Person or Recognised Body.

      • GEN 6.4.5 GEN 6.4.5

        (1) Each Authorised Person and Recognised Body must take reasonable steps to ensure that the Auditor and the relevant audit staff of the Auditor are independent of and not subject to any conflict of interest with respect to the Authorised Person or Recognised Body.
        (2) Each Authorised Person and Recognised Body must notify the Regulator if it becomes aware, or has reason to believe, that the Auditor or the relevant audit staff of the Auditor are no longer independent of the Authorised Person or Recognised Body, or have a conflict of interest which may affect their judgement in respect of the Authorised Person or Recognised Body.

        • Guidance

          1. Each Authorised Person and Recognised Body should consider whether there is any financial or personal relationship between it or any of its relevant Employees and the Auditor or any of the relevant Employees of the Auditor that may affect the judgement of the Auditor when conducting an audit of the Authorised Person or Recognised Body or complying with all its legal obligations, including the FSMR, AML and other relevant Rulebooks.
          2. Each Authorised Person and Recognised Body should consider rotating the appointed relevant staff of the Auditor on a regular basis to ensure that the relevant staff of the Auditor remain independent.
          Amended on (3 February, 2020).

      • GEN 6.4.6

        If requested by the Regulator, an Authorised Person or Recognised Body which carries on Regulated Activities through a Branch must provide the Regulator with information on its appointed or proposed Auditor with regard to the Auditor's skills, experience and independence.

    • GEN 6.5 GEN 6.5 Co-operation with Auditors

      • GEN 6.5.1

        Each Authorised Person and Recognised Body must take reasonable steps to ensure that it and its Employees:

        (a) provide any information to its Auditor that its Auditor reasonably requires, or is entitled to receive as Auditor;
        (b) give the Auditor right of access at all reasonable times to relevant records and information within its possession;
        (c) allow the Auditor to make copies of any records or information referred to in (b);
        (d) do not interfere with the Auditor's ability to discharge its duties;
        (e) report to the Auditor any matter which may significantly affect the financial position of the Authorised Person or Recognised Body; and
        (f) provide such other assistance as the Auditor may reasonably request it to provide.

    • GEN 6.6 GEN 6.6 Audit reports

      • GEN 6.6.1 GEN 6.6.1

        Each Authorised Person and Recognised Body must, in writing, arrange for and ensure the submission of the following by its Auditor:

        (a) a Financial Statement Auditor's Report on the Authorised Person or Recognised Body's financial statements in accordance with the International Standards on Auditing following the performance of an audit;
        (b) a Regulatory Returns Auditor's Report in accordance with the Rules 6.6.4 and 6.6.5 as relevant;
        (c) if the Authorised Person is permitted to control or hold Client Money, a Client Money Auditor's Report in accordance with Rule 6.6.6;
        (d) if the Authorised Person is permitted to hold or control Client Investments or Provide Custody in or from the ADGM, a Safe Custody Auditor's Report in respect of such business as applicable, in accordance with the Rule 6.6.7;
        (e) if FUNDS is applicable, a Fund Auditor's Report in accordance with Rule 6.6.8; and
        (f) if the Authorised Person is a Public Listed Company, a Public Listed Company Auditor's Report in accordance with Rule 6.6.9.

        • Guidance

          For the purposes of Rule 6.6.1(a) the financial statements of an Authorised Person or Recognised Body which is a Branch may be the financial statements prepared for the Authorised Person or Recognised Body's head office.

      • GEN 6.6.2

        Each Authorised Person and Recognised Body must submit any reports produced by its Auditor in accordance with this Chapter to the Regulator annually within four months of the Authorised Person or Recognised Body's financial year end.

        Amended on (3 February, 2020).

      • GEN 6.6.3 GEN 6.6.3

        (1) Each Authorised Person and Recognised Body must, subject to (2), upon request by any Person, provide a copy of its most recent audited financial statements, together with the Financial Statement Auditor's Report to the Person. If the copy is made available in printed form, the Authorised Person or Recognised Body may make a charge to cover reasonable costs incurred in providing the copy.
        (2) The requirement in (1) does not apply to an Authorised Person which:
        (a) is in Category 3B, Category 3C or Category 4; and
        (b) does not hold or control Client Assets or Insurance Monies.

        • Guidance

          An Authorised Person and Recognised Body should be aware that there may be other legislation applicable to it that may require the Authorised Person or Recognised Body to provide access to all or part of its financial statements.

      • Regulatory Returns Auditor's Report

        • GEN 6.6.4

          An Authorised Person or Recognised Body must, in procuring the production of a Regulatory Returns Auditor's Report for a Domestic Firm, ensure that the Auditor states whether:

          (1) it has received all the necessary information and explanations for the purposes of preparing the report to the Regulator;
          (2) the Authorised Person or Recognised Body's Regulatory Returns, specified in PRU, PIN or MIR to the Regulator have been properly reconciled with the appropriate audited financial statements;
          (3) the Authorised Person or Recognised Body's Regulatory Returns, specified in PRU PIN or MIR to the Regulator on a quarterly basis have been properly reconciled with the appropriate annual returns;
          (4) the Authorised Person or Recognised Body's financial resources as at its financial year end have been properly calculated in accordance with the applicable Rules in PRU, PIN or MIR (as the case may be) and are sufficient to meet the relevant requirements;
          (5) (in the case of an Authorised Person other than an Insurer) the Capital Resources have been calculated in accordance with the applicable Rules in PRU;
          (6) (in the case of an Authorised Person other than an Insurer) the Capital Resources maintained exceed the Capital Requirement in accordance with the applicable Rules in PRU;
          (7) (in the case of an Authorised Person) the Regulatory Returns specified in PRU or PIN have been properly prepared by the Authorised Person in accordance with the applicable rules in PRU or PIN;
          (8) (in the case of an Authorised Person) the Authorised Person has kept proper Accounting Records in accordance with the applicable Rules in PRU or PIN;
          (9) (in the case of an Authorised Person which is subject to Expenditure Based Capital Minimum) the Expenditure Base Capital Minimum has been calculated in accordance with the applicable Rules in PRU; and
          (10) (in the case of an Authorised Person in Category 3B, 3C or 4, and which is subject to Expenditure Based Capital Minimum) the Capital Requirement maintained exceeds its Expenditure Based Capital Minimum and has been maintained in the form of liquid assets in accordance with the applicable Rules in PRU.
          Amended on (3 February, 2020).

        • GEN 6.6.5

          An Authorised Person or Recognised Body must ensure that, in procuring the production of a Regulatory Returns Auditor's Report for a Branch, an Auditor states whether:

          (1) the Authorised Person or Recognised Body's Regulatory Returns have been properly reconciled with the Branch's financial statements; and
          (2) in the case of an Authorised Person only:
          (a) the Regulatory Returns specified in PRU or PIN have been properly prepared by the Authorised Person in accordance with the applicable rules in PRU or PIN; and
          (b) the Authorised Person has kept proper Accounting Records in accordance with the applicable Rules in PRU or PIN.
          Amended on (3 February, 2020).

      • Client Money Auditor's Report

        • GEN 6.6.6 GEN 6.6.6

          An Authorised Person must, in procuring the production of a Client Money Auditor's Report, ensure that an Auditor states, as at the date of which the Authorised Person's audited statement of financial position was prepared:

          (1) the amount of Client Money an Authorised Person was holding and controlling in accordance with COBS Chapter 14; and
          (2) whether:
          (a) the Authorised Person has maintained throughout the year systems and controls to enable it to comply with the relevant provisions of COBS Chapter 14;
          (b) the Authorised Person's controls are such as to ensure that Client Money is identifiable and secure at all times;
          (c) any of the requirements in COBS Chapter 14 have not been met;
          (d) if applicable, Client Money belonging to Segregated Clients has been segregated in accordance with COBS Chapter 14;
          (e) if applicable, the Authorised Person as holding and controlling the appropriate amount of Client Money in accordance with COBS Chapter 14 as at the date on which the Authorised Person's audited statement of financial position was prepared;
          (f) the Auditor has received all necessary information and explanations for the purposes of preparing the report to the Regulator; and
          (g) if applicable, there have been any material discrepancies in the reconciliation of Client Money.

          • Guidance

            Where an Authorised Person does not hold or control any Client Money as at the date on which the Authorised Person's audited statement of financial position was prepared, the Regulator expects that a nil balance be stated to comply with Rule 6.6.6.

      • Safe Custody Auditor's Report

        • GEN 6.6.7 GEN 6.6.7

          An Authorised Person must, in procuring the production of a Safe Custody Auditor's Report by its Auditor, ensure that the Auditor states, as at the date on which the Authorised Person's audited statement of financial position was prepared:

          (1) the extent to which the Authorised Person was holding and controlling Client Investments, Arranging Custody or Providing Custody; and
          (2) whether:
          (a) the Authorised Person has, throughout the year, maintained systems and controls to enable it to comply with the Safe Custody Rules in COBS Chapter 15;
          (b) the Safe Custody Investments are registered, recorded or held in accordance with the Safe Custody Rules;
          (c) there have been any material discrepancies in the reconciliation of Safe Custody Investments;
          (d) the Auditor has received all necessary information and explanations for the purposes of preparing this report to the Regulator; and
          (e) any of the requirements of the Safe Custody Provisions have not been met.

          • Guidance

            Where an Authorised Person does not hold or control any Client Investments or Provide Custody as at the date on which the Authorised Person's audited statement of financial position was prepared, the Regulator expects that such fact be stated to comply with Rule 6.6.7.

      • Fund Auditor's Report

        • GEN 6.6.8

          A Fund Manager must, in procuring the production of a Fund Auditor's Report, ensure that an Auditor states:

          (1) whether the financial statements have been properly prepared in accordance with the financial reporting standards adopted by the Fund in accordance with FUNDS;
          (2) whether the financial statements give a true and fair view of the financial position of the Fund, including the net income and the net gains or losses of the Fund Property, or, as the case may be, the Fund Property attributable to the Sub-Fund for the annual accounting period in question and the financial position of the Fund or Sub-Fund as at the end of the annual accounting period;
          (3) whether proper accounting records for the Fund, or as the case may be, Sub-Fund, have not been kept, or that the financial statements are not in agreement with the accounting records and returns, or that the financial statements do not comply with the applicable financial reporting standards;
          (4) whether it has been given all the information and explanations which, to the best of its knowledge and belief, are necessary for the purposes of its audit;
          (5) whether the information given in the report of the Directors or in the report of the Fund Manager for that period is consistent with the financial statements; and
          (6) any other matter or opinion required by FUNDS.

      • Public Listed Company Auditor's Report

        • GEN 6.6.9

          An Authorised Person or Recognised Body, in procuring the production of a Public Listed Company Auditor's Report, must ensure that an Auditor states whether the financial statements have been properly prepared in accordance with MKT.