The Dubai Financial Services Authority last changed its formal punitive decision-making procedures in 2015. It has now decided that it is taking far too long to make decisions and is determined to speed things up, often in line with British practice.

The regulator is proposing to publish more details about every decision it makes that someone refers to the Financial Markets Tribunal. This, it hopes, will enable it to convey information to the public at the earliest appropriate time about matters involving behaviour that it considers unacceptable.

Consultative paper 126 contains proposals for three changes regarding the settlement of enforcement matters - some to internal processes, some to the period in which a matter can be settled, and an important change to the allowable settlement discount, which in Dubai is a maximum 20%.

Processes regarding settlement - the end of the 20% rule

In every case, assuming that the proposals become policy, the regulator who sets the parameters for negotiation between the DFSA and the person to be punished will be the same person who approves the bargain. This is consistent with the British approach. The settlement rules are to be found in the DFSA's Regulatory Policy and Process (RPP) 'sourcebook' which is a part of its consolidated rulebook.

RPP 5-15-7 obliges the DFSA to set reasonable timetables for settlements, but this can be a very time-consuming process. It therefore wants to introduce a single fixed period, usually of 28 days, within which it must reach a settlement with the soon-to-be-punished party and levy a discounted fine on him/it, taking longer only in exceptional circumstances.

If the parties reach a settlement within the allotted time (28 days or otherwise), the DFSA wants to award (and, in a revealing passage that casts the consultative nature of the document into doubt, it says that it "will" award) a fixed discount of 30% - the British figure for such things. As with the current policy, if the penalty includes an amount representing the disgorgement of a benefit gained as a result of rule-breaking, the discount "will not apply" to that disgorged amount. The DFSA adds: "We  are proposing a 30% discount, rather than the current 20%, to create a greater incentive for settlement." Only once since 2015 has the DFSA awarded a 10% fine - because the settlement took slightly too long for the full discount to apply.

Calling in the consultants

Current policies that oblige the DFSA to use its own staff to make decisions about settlements are to be swept away. This is because the process as it stands can lead to delays in the making of decisions because these people find it hard to balance their decision-making duties with their 'day jobs.' The DFSA does have a Chief Decision Maker, who prioritises this work and makes decisions himself whenever possible, but it wants to allow him to appoint external people/firms to make decisions as well. Firms such as KPMG and EY are likely to be rubbing their hands at the prospect of such work. The DFSA expects to call in these external 'deciders' when cases are complex or involve more than one party (a stipulation that opens the door to almost any kind of case) that DFSA people lack the time to tackle. This change of tack requires no changes to the Regulatory Law (DIFC Law No 1 of 2004).

Representations

People whom the DFSA wishes to punish often ask for more time in which to "make representations," i.e. to present the regulators with evidence and/or plead for clemency. The DFSA is not happy about the fact that nearly ten months sometimes elapse between the time it sends someone a Preliminary Notice (known in the UK as a warning notice) and the date of the "oral representations meeting," so it wants to allow firms to make their supplications only in writing. It refers to the firms that it punishes as "subjects." It says that it rarely receives new information or submissions during face-to-face representations in any case. There is to be a let-out in that people are to be allowed to apply for face-to-face meetings if they can prove that written representations are not good enough.

Regulators the world over have differing policies on the subject. The Australian Securities and Investments Commission organises hearings, allowing anyone who does not want to attend to submit representations in writing instead. The Ontario Securities Commission runs something akin to court proceedings, with the service and submission of documents (North Americans calls submissions to courts 'filings'), motions, interim proceedings to manage proceedings, rules to govern the admissibility of evidence and the cross-examination of witnesses. Hong Kong's Securities  and Futures Commission normally disciplines firms and people on the basis of written submissions, but they can ask to be allowed to submit things in person if they can explain why to the regulator's satisfaction and if the regulator thinks that it is fair. The British Financial Conduct Authority's Regulatory Decisions Committee accepts both written and oral representations. Representations to the Enforcement Decision-Making Committee at the Bank of England's Prudential Regulation Authority are usually in writing, but people can ask that committee if they can make them in person. Every warning notice specifies a time-frame within which they can ask.

This British PRA model is the one that the DFSA seems to favour the most. To adopt it, however, it will have to ask the Government of Dubai to change the Regulatory Law.

Disgorgement

Only in a few cases is 'disgorgement' (paying back the proceeds of misconduct) an issue. In one case, the regulator slapped an annual interest rate of 5.89% on the total sum, basing it on prevailing market rates at the time and the attitude of the courts of the Dubai International Financial Centre (which the DFSA regulates) to awards of pre- and post-judgment interest. The British FCA sometimes charged a rate of 8% on disgorgement; the DIFC courts have tended to pick 9% for post-judgment interest in recent times.

In future, the DFSA wants to fix disgorgement interest on a case-by-case basis by reference to the prevailing market lending rates over the time since the contravention in question occurred. The minimum rate should be 1% over the 3-month Emirates Interbank Offered Rate reference rate, up to a maximum of 12%.

Publication of notices

Dubai's regulators publish neither decision notices nor the details of decisions that people have referred to the tribunal, but they want to change this policy. This is because they want to be seen to be active and 'on the case,' and might also bespeak a desire to subject certain people to 'trial by media.'

In each case, the regulator now aims to tell someone against whom it has made a decision that it will publish information about that decision after the period in which he can appeal to the tribunal against it, or (if he does appeal) as soon as is practicable after the moment when he appeals. Appeals to the tribunal in the UK are always called referrals, and so it is in Dubai.

The regulator proposes to ask the Government to amend the Reguatory Law to include a provision similar to that found in the British Financial Services and Markets Act 2000 which expressly requires the regulator to publish details about a decision notice at an earlier point.

In the UK, moreover, the FCA pubishes information about certain types of warning notice (which the DFSA calls preliminary notices) when it issues them, the reason presumably being to "put the wind up" recalcitrants in the industry. Its website publicises a few brief details of each case and only names companies, not people. The DFSA does not propose to do this, although it might change its mind in future iterations of the rules.

Slow decision-making is no doubt bad for business in the UAE, just as it is in the UK, for another reason. Garon Anthony, a partner at the City law firm of Squire Patton Boggs, told this publication: "I've seen firms go under because the FCA decision-making process is too slow. The FCA says that new investigations take only 6-9 months, but that's not our experience."