DFSA: ‘no need’ to ban commission
The regulator of the Dubai International Financial Centre has said that it does not think that it is necessary to ban commission, despite moves in other countries to do so.
The backing of the DIFC regulator the Dubai Financial Services Authority (DFSA), via comments from its chief executive Ian Johnston, will be seen a welcome endorsement of the region’s financial advisers, particularly as it follows Dubai-based United Arab Emirates Insurance Authority’s announcement of plans to ban indemnity commissions in November last year.
As reported, the region’s life companies, which are understood to include such well-known names in the international arena as Zurich, Generali, Metlife and Friends Provident International (FPI), were rallying together to respond to the IA proposals.
Despite moves to ban commission elsewhere, Ian Johnston, chief executive of the DFSA, has told International Investment that the organisation has no intentions to follow suit and to ban commission within the DIFC, pictured above.
“While we always note developments in other markets, we have not seen the need to ban commission in the DIFC,” said Johnston. “The DFSA continues to meet the International Organisation of Securities Commission’s standards for disclosure of conflicts of interest and remuneration.
“A fundamental premise of our regulation is that we meet the requirements of international standard-setting bodies. This is true for banking insurance and securities and funds. We also meet the Financial Action Task Force requirements’ for anti-money laundry on which we place high importance.”
Johnston, pictured left, was appointed as chief executive of the DFSA in June 2012 after originally joining the DFSA in November 2006, as a managing director, to head the policy and legal services division.
The UAE Insurance Authority is set to release its final plans for the implementation of the proposed indemnity commission ban on offshore bond sales early this year, potentially by the end of January.
The UAE is seeking to align itself with other jurisdictions, including Hong Kong and the UK, which have changed their regulations in recent years to phase in.
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Indemnity commissions are paid by life companies to the financial adviser or insurance broker who recommends the policy to a client, and are based on the full value of the product, which, in the case of life insurance-based products and offshore bonds, typically run for 20 years or more.
The UAE Insurance Authority is proposing to require the total commission charged to be spread out over the life of the policy, with commissions to be paid based on the premium collected, and paid out in equal monthly instalments.