Schedule 1: The Regulatory Authority

The following paragraphs set out and where appropriate elaborate on or extend the provisions in the QFC Law relating to the management, constitution, operation, powers and rights of the Regulatory Authority.

1. Background

1.1 The Regulatory Authority has been established by the QFC Law for the purposes of regulating, licensing and supervising banking, financial and insurance-related businesses carried on in or from the QFC. The precise activities to be regulated are set out in Schedule 3.
1.2 According to the QFC Law, these Regulations and any other Regulations defining the management, objectives, duties, functions, powers and constitution of the Regulatory Authority may only be enacted, varied or revoked with the consent of the Council of Ministers.
1.3 The Regulatory Authority has the power under the QFC Law to prepare and submit to the Minister such Regulations (or amendments, modifications to or repeal of existing Regulations) as it shall deem appropriate to achieve its objectives or to aid it to implement, carry out and enforce its powers and functions from time to time, including provisions for the determination and payment of compensation and fines in the event of breach of, or as otherwise provided in, any such Regulations.
1.4 The Minister is required by the QFC Law, when seeking consent to the enactment of such Regulations from the Council of Ministers, to provide to the Council of Ministers a copy of the draft Regulations submitted by the Regulatory Authority together with the Minister's comments in relation to the same. In giving its consent, the Council of Ministers may require such changes, modifications or additions as it thinks fit. The consent of the Regulatory Authority is not required for such changes, modifications or additions to be made.
1.5 The Regulatory Authority has capacity to enter into contracts, to sue and be sued (subject to the immunity referred to in paragraph 11 below) and to own and lease assets of all types for the purpose of achieving its objectives.
1.6 The head office of the Regulatory Authority is required to be situated in the QFC.

2. Budget

2.1 According to the QFC Law, the Regulatory Authority has an independent budget and the laws of the State regarding the general budget of the State and its ministries do not apply to the Regulatory Authority's budget.
2.2 The Regulatory Authority is required to prepare a budget for its activities in respect of each financial year (as described in paragraph 7 below) and submit the budget to the Minister. The Minister is required by the QFC Law to transmit the budget to the Council of Ministers (with such comments, if any, as he sees appropriate) for approval.

3. Funding

Subject to the Regulatory Authority having complied with its obligations under paragraph 2.2 above, the State is required to provide adequate funding directly to the Regulatory Authority, independent from the budget of the QFC Authority and independent from its control. The Council of Ministers may direct the QFC Authority to provide funding out of its budget to the Regulatory Authority and also to provide support services, provided that it is satisfied that such arrangements will not compromise the independence of those bodies.

4. Powers to raise revenues

4.1 The powers of the Regulatory Authority to raise revenues in addition to funding granted by the State and to borrow money shall be as set out in paragraph 4.2.
4.2 In addition to funding granted to the Regulatory Authority by the State or by the QFC Authority where directed pursuant to paragraph 3, the Regulatory Authority shall be permitted to raise revenue to fund and finance its activities pursuant to or contemplated by the QFC Law or this Regulation in such ways as it deems appropriate including:
(A) by such fees and charges in respect of the performance and exercise of its duties, functions and powers (including fees for Applications for licensing, authorisation or approval according to these Regulations) as the Regulatory Authority may from time to time prescribe in Rules;
(B) through financial penalties and fines paid in accordance with these Regulations (whether pursuant to an order of the Tribunal or Appeals Body or otherwise to the extent consistent with policies to be approved by the Regulatory Authority Board from time to time with respect to the use of fines), or
(C) such other sources of revenues as may be provided for in the QFC Law, these Regulations or any Related Regulations.

5. Powers to borrow money

5.1 Subject to the approval of the Council of Ministers for borrowings in excess of the equivalent of 15 million US dollars (or such other limit as the Council of Ministers may from time to time determine) the Regulatory Authority may borrow money (including money in a currency other than the currency of the State) for the purpose of achieving the Regulatory Objectives. Any monies borrowed by the Regulatory Authority under this Schedule and any interest accruing thereon may be secured by the revenue, funds or property of the Regulatory Authority.
5.2 Without prejudice to paragraph 6, the funds of the Regulatory Authority not immediately required for the purposes of expenditure may be invested by the Regulatory Authority in such investments as shall be authorised by the Regulatory Authority Board.

6. Treatment of Surpluses

6.1 Any surpluses of income over expenditure (whether budgeted for or not) realised by the Regulatory Authority may be retained by it, or returned to the State, as the Regulatory Authority shall decide. Any such surpluses may also be applied to the repayment of any indebtedness incurred by the Regulatory Authority or to the creation of a general reserve and such other reserves as the Regulatory Authority Board may reasonably think fit.
6.2 The Regulatory Authority may invest its financial resources which are not immediately required in accordance with an investment policy approved in advance by the Regulatory Authority Board.

7. Accounting Requirements - Financial Year

The financial year of the Regulatory Authority shall commence on the first day of January and end on the last day of December each year, save that the first financial year shall commence on the date on which the QFC Law came into force and shall end on the last day of December of the following year.

8. Accounts

The Regulatory Authority is required by the QFC Law to keep accounting records which are sufficient to show and explain its transactions and are such as to disclose with reasonable accuracy at any time its income and expenditure and assets and liabilities and financial position. As soon as reasonably practicable after the end of each financial year, the Regulatory Authority is required to prepare accounts in accordance with internationally accepted accounting principles.

9. Audit Requirement

9.1 The Regulatory Authority is required to have its annual accounts audited by independent auditors, being a firm of chartered accountants with an office in the State. The auditors shall report as to whether the relevant accounts show a true and fair view of the financial affairs of the Regulatory Authority during the financial year in question and its assets and liabilities at the end of the year in question. The auditors shall report on such other matters as they may consider appropriate.
9.2 The Regulatory Authority shall as soon as reasonably practicable after the end of each financial year send to the Council of Ministers a copy of its audited accounts and a report of its activities and such further reports as the Council of Ministers may require.
9.3 The auditors shall have right of access at all reasonable times to all information held or controlled by the Regulatory Authority or any of its directors, officers, employees, agents or contractors reasonably required by the auditors for the purposes of preparing the report.
9.4 The Regulatory Authority and its directors, officers, employees, agents and contractors shall co-operate with the auditors in the performance of their duties under this Schedule and shall provide the auditors with such information and explanation as the auditors shall reasonably consider necessary.

10. State Audit Bureau

The Regulatory Authority shall be exempt from the control of the State audit bureau.

11. Liability of the Regulatory Authority

11.1 According to the QFC Law, the Regulatory Authority shall be responsible for any obligations or liabilities arising out of the conduct of its activities (subject to the immunity set out in the following paragraph) and the State shall have no liability for its acts or omissions.
11.2 The QFC Law also provides that, subject to the following paragraph, neither the Regulatory Authority, nor any members of the Regulatory Authority Board nor the holders of offices in the Regulatory Authority shall incur any civil liability in relation to any acts or omissions done or omitted to be done in good faith in carrying out or purporting to carry out their respective powers, duties or functions under or pursuant to the QFC Law, these Regulations or any Related Regulations.
11.3 Neither the Regulatory Authority nor any members of the Regulatory Authority Board, members or officers, are relieved from civil liability in connection with any commercial contract entered into by them.

12. Constitution of the Board

12.1 The Regulatory Authority is required by the QFC Law to have a board with a maximum of six board members, including a Chairman and a Chief Executive Officer, appointed by a decision of the Council of Ministers. The role of Chairman and Chief Executive Officer may be held by one individual for such period as the Council of Ministers may determine. The Regulatory Authority Board members are required to be Persons whom the Council of Ministers believes to have appropriate expertise in the regulation of banking, financial or insurance businesses.
12.2 No member of the Regulatory Authority Board may be a member of the Board or of the Appeals Body or be employed by the QFC Authority or the Appeals Body. Any member of the Regulatory Authority Board who becomes such a member or so employed shall automatically thereupon cease to be a member of the Regulatory Authority Board.
12.3 Except as otherwise provided below or in the QFC Law, the appointment of each member of the Regulatory Authority Board shall be for a period of three years which may be renewed. The level of remuneration of the Regulatory Authority Board members is to be determined by the Council of Ministers, except that the Regulatory Authority Board may determine the terms and conditions upon which any member of the Regulatory Authority Board is employed by the Regulatory Authority to carry out duties and functions in addition to his duties and functions as a member of the Regulatory Authority Board.

13. Meetings

13.1 The Chairman of the Regulatory Authority Board is required to fix the date, time and place of the first meeting of the Regulatory Authority Board no later than two months after the Regulatory Authority Board has been constituted.
13.2 The Regulatory Authority Board will hold as many meetings as may be necessary for the performance of its functions subject to meeting at least four times a year. Each Regulatory Authority Board member is required to be given at least two months advance written notice of the time, date and place of such meeting provided that (1) telephone meetings may be convened on not less than forty eight hours advance written notice and (2) meetings may be held at shorter notice with the unanimous consent of all of the Regulatory Authority Board members.
13.3 The quorum for a meeting of the Regulatory Authority Board is four Regulatory Authority Board members.
13.4 Decisions of the Regulatory Authority Board at meetings are to be taken by majority vote, with each Regulatory Authority Board Member having one vote. A Regulatory Authority Board member may not vote at a meeting concerning a matter in which he has, directly or indirectly, an interest or duty which conflicts or may conflict with the interest of the Regulatory Authority. In the event of an equality of votes on any matter, the Chairman of the Regulatory Authority Board has a second or casting vote.
13.5 A resolution in writing signed by all the Regulatory Authority Board members entitled to receive notice of a meeting of the Regulatory Authority Board or of a committee of the Regulatory Authority Board will be as valid and effective as if it had been passed at a meeting of the Regulatory Authority Board or of that committee.
13.6 A meeting of the Regulatory Authority Board may be held by telephone, provided that the requirements as to notice and quorum described above are complied with.

14. Proxies

14.1 Any Regulatory Authority Board member may appoint any other Regulatory Authority Board member to represent him at any meeting of the Regulatory Authority Board and to vote for him thereat.

15. Regulation and Removal of Directors

15.1 Any member of the Regulatory Authority Board may at any time resign his office by giving not less than thirty days written notice to the Council of Ministers.
15.2 The Council of Ministers may remove any member of the Regulatory Authority Board on notice or with immediate effect if:
(1) he has become incapable through ill-health of effectively performing the duties of his office;
(2) he is declared bankrupt; or
(3) he is convicted of a criminal offence or the Council of Ministers is satisfied that he has been guilty of serious misconduct which, in either case, in the opinion of the Council of Ministers, is of a nature which warrants his removal from office.

16. Chief Executive Officer

16.1 The Chief Executive Officer of the Regulatory Authority is to be appointed by the Regulatory Authority Board from amongst the members of the Regulatory Authority Board and will be responsible to the Regulatory Authority Board for the day to day administration and operation of the Regulatory Authority to the extent authorised and empowered by the Regulatory Authority Board from time to time. Pending, and subject to, such determination by the Regulatory Authority Board, the Chief Executive Officer may undertake all functions relating to the day-to-day administration and operation of the Regulatory Authority subject, for the avoidance of doubt, to those matters specifically reserved to the Regulatory Board or a committee of the Regulatory Board under paragraph 19.
16.2 The Chief Executive Officer is required to make such reports to the Regulatory Authority Board regarding his activities and the operation of the Regulatory Authority as the Regulatory Authority Board may require and without prejudice to the foregoing is required in any event to provide a written report to the Regulatory Authority Board on such matters on a quarterly basis.
16.3 In the event that the Chairman and/or Chief Executive Officer is appointed by the Council of Ministers prior to the appointment of the remainder of the Regulatory Authority Board, then the Chairman and/or Chief Executive Officer is required to consult with the Minister prior to entering into major commitments on behalf of the Regulatory Authority until such time as the Regulatory Authority Board is quorate.

17. Duties and Powers of the Regulatory Authority Board

17.1 The Functions of the Regulatory Authority include the Functions given to it under the QFC Law and these Regulations.
17.2 Except as otherwise provided by the QFC Law or these Regulations, the Regulatory Authority is to be managed by the Regulatory Authority Board. The powers, duties and functions of the Regulatory Authority Board shall include:
(1) laying down general policies and plans for the Regulatory Authority;
(2) proposing and submitting Regulations as described in paragraph 1.3 of this Schedule;
(3) ensuring the Regulatory Authority is run in accordance with the Regulatory Objectives and the Principles of Good Regulation;
(4) providing all infrastructure, personnel, services and support as may be needed for the purposes of this paragraph 17.2;
(5) arranging for the proper administration and operation of the Regulatory Authority and the delegation of powers to the Chairman and Chief Executive Officer in this regard as it thinks appropriate;
(6) preparing in each year the budget of the Regulatory Authority and submitting the same to the Minister as described in paragraph 2 of this Schedule;
(7) determining policies for the investment of surplus funds in accordance with paragraph 5.2 subject to paragraph 6 of this Schedule (Treatment of Surpluses) and ensuring the funds received by it are spent in such manner as to deliver its objectives;
(8) reporting to the Council of Ministers on the activities of the Regulatory Authority as required by the QFC Law and these Regulations; and
(9) exercising all the other powers and perform all the other duties and pursuing and endeavouring to achieve all the other Regulatory Objectives as provided by or contemplated by the QFC Law and these Regulations.
17.3 The validity of any act of the Regulatory Authority will not be affected by a vacancy in the office of Chairman or Chief Executive Officer of the Regulatory Authority Board or by a defect in the appointment of such a Person.

18. Delegation

18.1 The Regulatory Authority Board may delegate any of its powers to any committee of the Regulatory Authority Board consisting of two or more Regulatory Authority Board members, and may establish the regulations to govern proceedings and meetings of such committee.
18.2 A committee may create working advisory groups (or similar) and co-opt such ex-officio members on to such groups as it thinks appropriate.

19. Restrictions on Delegation

19.1 The following may not be delegated by the Regulatory Authority Board:
(1) approving the annual accounts of the Regulatory Authority;
(2) approving the annual report of the Regulatory Authority and otherwise approving reports to the Council of Ministers on the activities of the Regulatory Authority as required by the QFC Law and these Regulations;
(3) approving the policy of the Regulatory Authority with respect to fees and penalties;
(4) approving the annual budget of the Regulatory Authority;
(5) approving regulations to be proposed to the Minister for approval by the Council of Ministers as described in paragraph 1.3 of this Schedule;
(6) issuing Rules on behalf of the Regulatory Authority; and
(7) issuing Decision Notices pursuant to Part 10 except as provided in paragraph 19.3.
19.2 The following matters may be delegated to a committee of the Regulatory Authority Board and must be approved by such committee (unless approved by the Regulatory Authority Board):
(1) approving Guidance of general application; and
(2) issuing Decision Notices to the extent permitted by paragraph 19.3.
19.3 Decision Notices may be issued by:
(1) a committee of the Regulatory Authority Board, or
(2) Chief Executive Officer (or, to the extent permitted by internal procedures of the Regulatory Authority, other executive officers of the Regulatory Authority)
to the extent they relate to routine matters or minor contraventions within the meaning of and treated in accordance with policies issued and approved by the Regulatory Authority Board from time to time.
19.4 The Regulatory Authority may delegate to a non executive committee of the Regulatory Authority Board:
(1) reviewing the performance of the Chief Executive Officer;
(2) keeping under review compliance by the Regulatory Authority Board with the Regulatory Objectives and the Principles of Good Regulation; and
(3) keeping under review the sufficiency and effectiveness of the Regulatory Authority's internal financial controls.

20. Status

20.1 All members of the Regulatory Authority Board and all employees of, and Persons acting under the direction of the Regulatory Authority shall be deemed to be public officers/servants for the purposes of Criminal Law No. 11 of 2004 of the State.

21. Records

21.1 The Regulatory Authority must maintain appropriate arrangements for:
(1) recording decisions made in the exercise of its functions; and
(2) the safekeeping of those records which it would be appropriate to record in accordance with the Regulatory Objectives.
21.2 Records created pursuant to paragraph 21.1 must be maintained for at least six years

22. Reports

22.1 The Regulatory Authority is required to comply with the following reporting requirements:
(1) to provide a copy of its audited accounts and report of its auditors to the Council of Ministers as described in paragraph 9 of this Schedule.
(2) to provide an annual report to the Council of Ministers within four months of the end of each financial year reviewing the activities of the Regulatory Authority throughout that year and the extent to which, in its opinion, the Regulatory Objectives have been met and the Principles of Good Regulation complied with and to make such report available for public inspection in such manner as the Regulatory Authority considers appropriate; and
(3) to provide such other reports to the Council of Ministers on the activities of the Regulatory Authority at such frequency and in such manner as the Council of Ministers may determine (all such reports to be copied to the Minister for review and comment).

23. Reviews

23.1 The Council of Ministers may appoint a suitably qualified Independent Person to conduct a review of the economy, efficiency and effectiveness with which the Regulatory Authority has used its resources in discharging its functions (either as a whole or in respect of specified functions.
23.2 The review must be in writing and set out such recommendations (if any) considered appropriate by the Person undertaking the review.
23.3 The Council of Ministers shall be entitled to publish such review, or a summary of it, in such manner as it thinks appropriate in the public interest.
23.4 The costs and expenses of the review and report shall be borne by the State.
23.5 The Independent Person shall have access at all reasonable times to documents or information held by or on behalf of the Regulatory Authority on prior notice and shall be entitled to require from the directors, officers or employees of the Regulatory Authority, or other Persons holding or accountable for such documents or information, such information and explanations as the Independent Person shall reasonably require.
23.6 The Persons referred to in paragraph 23.5 shall co-operate with the requirements of the Independent Person in the exercise of powers and duties under this paragraph.

24. Inquiries

24.1 The Council of Ministers may arrange for an independent inquiry to be undertaken where it believes that there may have been a serious failure in the operation of the Financial System (or parts of it) posing a significant risk to the QFC or the Regulatory Objectives and it is in the public interest to hold such an inquiry.
24.2 The inquiry undertaken under paragraph 24.1 can relate to such matters as may be specified by the Council of Ministers and shall be undertaken in such way and subject to such interim reporting requirements, as the Council of Ministers shall determine.
24.3 The Person undertaking the inquiry must make a written report to the Council of Ministers in writing setting out such recommendations as he considers appropriate.
24.4 The Person undertaking the inquiry shall be entitled to require from any Person who, in his opinion, is able to provide any information, or explanations, or produce any document which is relevant to the inquiry, to provide any such information or explanation or produce any such document.
24.5 The Persons referred to in paragraph 24.4 shall co-operate with the requirements of the Person undertaking the inquiry in the exercise of powers and duties under this paragraph 24.
24.6 On conclusion of the inquiry, the Person undertaking the inquiry shall make a written report to the Council of Ministers with such recommendations (if any) which he considers appropriate.
24.7 The Council of Ministers shall be entitled to publish such report or a summary of it, in such manner as it thinks appropriate in the public interest.

25. Complaints against the Regulatory Authority

25.1 The Regulatory Authority must make arrangements for the prompt, efficient, impartial and independent investigation of complaints made against it arising out of the exercise, or failure to exercise, any of its functions (other than the formulation of regulatory policy, Rules and Guidance and proposing Regulations as described in paragraph 1.3 of this Schedule).
25.2 For the purposes of paragraph 25.1, the Regulatory Authority shall appoint an Independent Person on such terms as the Regulatory Authority considers appropriate to investigate and deal with any complaints made against the Regulatory Authority which are not promptly and satisfactorily dealt with by the Regulatory Authority.
25.3 The Regulatory Authority shall not be obliged to investigate or arrange for the investigation of:
(1) any complaint which it reasonably considers would be more appropriately dealt with in another way (for example by the Appeals Body or the Tribunal);
(2) any complaint about the Regulatory Authority's relationship with its employees;
(3) any complaint connected with contractual or commercial disputes involving the Regulatory Authority and not connected with its regulatory function;
(4) any complaint relating to the role of the Regulatory Authority in recommending or commenting on proposed regulations or regulatory policy, the making of Rules and the issuing of Guidance and waivers; and
(5) complaints which the Regulatory Authority reasonably considers to be frivolous or to amount to no more than a dissatisfaction with its general policies or with the exercise of, or failure to exercise, a discretion where no unreasonable, unprofessional or other misconduct is alleged.
25.4 Subject to paragraph 25.5, the Independent Person shall be entitled to publish such details of its findings in respect of complaints made against the Regulatory Authority as it thinks appropriate.
25.5 The details published by the Independent Person pursuant to paragraph 25.4 shall not disclose the name of any Person (other than the Regulatory Authority) or contain particulars which are likely to identify any such Person unless in the opinion of the Independent Person:
(A) the omission of such particulars would be likely to materially impair the effectiveness of the details published, or
(B) it is necessary in the overriding interest of the public to do so, taking into account the interests of any other Person referred to in this paragraph.
Amended by QFC Reg 2010-2 (as from 9th December 2010)