Customer classification
In the United Arab Emirates (UAE), the categorization of clients and companies, especially in the context of financial services and regulations, is crucial to ensuring that the correct level of regulatory oversight and investor protection is applied. These categories are typically defined under the regulatory frameworks established by the Dubai Financial Services Authority (DFSA). Below is a detailed explanation of the different types of client registration types:
Retail Client
A Retail Client is a client who does not meet the criteria to be classified asa Professional Client ('deemed', 'service-based' or 'assessed') or Market Counterparty. Retail clients are typically individuals or entities with less experience, knowledge, or resources to manage financial risks compared to professional clients. Learn more about Retail Client classification.
ProtectionRetail clients are afforded the highest level of regulatory protection. This includes transparency of fees, suitability assessments, and detailed risk warnings.
RegulationsFirms dealing with retail clients must adhere to strict regulations and provide clear, transparent information. This ensures that retail clients fully understand the products they are investing in and the associated risks.
ExamplesIndividuals investing in personal capacity, small businesses, or entities that do not meet the thresholds to qualify as professional clients or market counterparty.
Regulatory ImplicationsRetail clients benefit from extensive protections under DFSA regulations,including the requirement for financial advisors to ensure that the products are suitable for the client's financial situation and objectives.
Market Counterparty
A Market Counterparty is a category usually reserved for entities that are highly sophisticated in their operations, such as large institutions, financial service providers, or large-scale corporate entities. These counterparties engage in transactions with minimal regulatory protection, as they are considered capable of assessing the risks involved. Learn more about Market Counterparty classification.
Protection Market counterparties have minimal regulatory protection, as they are assumed to have sufficient expertise to understand and manage financial risks independently. The client should give a prior written notification of the classification as a Market Counterparty.
Regulations They are not subject to the same level of regulatory scrutiny as retail clients, but some protective measures are still in place to ensure their interests are safeguarded.
Examples Large corporations, government bodies, pension funds, publicly traded entities, or other entities that manage significant assets and have in-house expertise.
Regulatory Implications Deemed professional clients receive fewer regulatory protections, based on the assumption that they have the resources and expertise to manage their financial affairs effectively. While an authorised firm is not required to undertake a detailed assessment of a deemed Professional Client’s expertise or net assets, however, an authorised firm still needs to have a reasonable basis for classifying a Person as falling within the list of deemed Professional Clients.
Professional Client - Deemed
A Professional Client (Deemed) is an entity or individual who is automatically classified as a professional client due to their nature, scale, or experience without needing further assessment by the financial firm. Learn more about Professional Client - Deemed classification.
Protection Protection levels are tailored to the specific service or product provided, with firms ensuring suitability for the client’s knowledge and experience.
Regulations Classification is specific to the financial services or products engaged in, with varying levels of protection based on the client’s experience with each service.
Examples An individual might be classified as a professional client when receiving certain complex investment services but might be considered a retail client for other services.
Regulatory Implications This classification ensures that clients are treated according to their experience with specific services, ensuring a balance between protection and operational freedom. While an Authorised Firm is not required to undertake a detailed assessment of a 'service-based' Professional Client's expertise or net assets, a firm still needs to have a reasonable basis for classifying a Person as falling within the list of 'service-based' Professional Client.
Professional Client - Service-Based
A Service-Based Professional Client is an entity classified as a professional client based on receiving financial services like credit and such services are used for business activities, including related entities. Learn more about Professional Client - Service-Based classification.
ProtectionProtection levels are tailored to the specific service or product provided,with firms ensuring suitability for the client’s knowledge and experience.
RegulationsClassification is specific to the financial services or products engaged in,with varying levels of protection based on the client’s experience with each service.
ExamplesAn individual might be classified as a professional client when receiving certain complex investment services but might be considered a retail client for other services.
Regulatory ImplicationsThis classification ensures that clients are treated according to their experience with specific services, ensuring a balance between protection and operational freedom. While an Authorised Firm is not required to undertake a detailed assessment of a 'service-based' Professional Client's expertise or net assets, a firm still needs to have a reasonable basis for classifying a Person as falling within the list of 'service-based' Professional Client.
DISCLAIMERPlease note that Multipass Platforms Limited (DIFC Branch) does not offer services that qualify as credit or loan provision, investment crowdfunding,financial product advice, or credit advice. We do not arrange deals in investment or credit, as these activities are outside the scope of our services. Specifically, we do not operate under a Category 2 or Category 4license as defined by the Dubai Financial Services Authority (DFSA) regulatory framework.
Multipass Platforms Limited (DIFC Branch) holds a Category 3D license and is authorized to provide advice and arrange services exclusively related to money services. All clients and prospective clients should be aware that our offerings are strictly limited to these activities, and we do not engage in any other regulated financial services.
Professional Client - Assessed
An Assessed Professional Client is an individual or entity classified as a professional client based on specific criteria set by the regulatory framework such as sufficient amount of net assets, professional experience, knowledge,and understanding of the financial markets. Learn more about Professional Client - Assessed classification.
ProtectionAssessed professional clients receive protection based on an evaluation of their knowledge, experience, and understanding of financial markets.
RegulationsFirms conduct a thorough assessment to ensure the client qualifies as a professional, documenting the process and obtaining client agreement to the classification.
ExamplesHigh-net-worth individuals, professional with relevant financial experience,or entities with investment management experience.
Regulatory ImplicationsAssessed professional clients are given more freedom but less protection compared to retail clients. The assessment process ensures that only those with sufficient expertise are classified as professionals, reducing the likelihood of mismanagement or misunderstanding of financial products.