Employment in Financial Services

The UAE has four different regulators responsible for the authorisation and supervision of banks, insurers, and other financial institutions.

There are two regulators "on-shore" in the UAE, namely, (i) the UAE Central Bank, which is the state institution responsible for banking and insurance regulation, as well as monetary policy, and has authority over all licensed financial institutions in the UAE, including those in the financial free zones; and (ii) the Emirates Securities and Commodities Authorities (ESCA)  that regulates markets, listed companies, and securities brokers.

There are two financial free zones in the UAE, the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM), who were established as special economic zones with independent jurisdictions through amendment to the UAE Constitution.  Within the free zones, the Dubai Financial Services Authority (DFSA) is the regulator of the DIFC and the Financial Services Regulatory Authority (FSRA) is the regulator of the ADGM.

As the DIFC and ADGM free zones have been established as special economic zones in which financial services are conducted, most of the applicable legislation in the UAE which governs financial services is found in the two free zones.  Therefore, unless expressly referenced, the responses for the UAE in this guide consider the position in the DIFC and ADGM only.

The Dubai Financial Services Authority is the financial regulatory body of financial services conducted in or from the DIFC.  The key legislation is the Regulatory Law of 2004, as amended, which is administered by the DFSA and is described as the cornerstone legislation of the regulatory regime.

The ADGM Financial Services Regulatory Authority is the financial regulatory body of financial services conducted in or from the ADGM.  The key legislation is the Financial Services and Markets Regulations (FSMR), which sets out the legislative and regulatory framework for financial services in the ADGM.  The FSMR was modelled on the UK’s Financial Services and Markets Act 2000 and other related legislation.

Finally, all employees in the private sector (excluding the two financial free zones) are subject to Federal Decree-law No. 33 of 2021, as amended (the Labour Law).  In the DIFC, employees are subject to DIFC Law No. 2 of 2019, as amended (the DIFC Employment Law) and in the ADGM, employees are subject to the ADGM Employment Regulations 2019 (the ADGM Employment Regulations).  In addition to the employment legislation described above, a number of other laws will be applicable to employees in the UAE, including Federal Decree-law No. 30 of 2021 containing the Penal Code.

In the UK, there are two main regulators responsible for the supervision of financial institutions. These are:

• The Prudential Regulation Authority (the PRA) – The PRA supervises over 1,500 financial institutions, including banks, building societies, credit unions, insurance companies and major investment firms. It creates policies for these institutions to follow and watches over aspects of their business.
• The Financial Conduct Authority (the FCA) – The FCA regulates the conduct of approximately 50,000 firms, prudentially supervises 48,000 firms, and sets specific standards for around 18,000 firms.

Some financial institutions are regulated by both the PRA and FCA (dual-regulated). Those financial institutions must comply with rules set down by the PRA in its rulebook (the PRA Rulebook) and by the FCA in its handbook (the FCA Handbook). Other firms are regulated solely by the FCA (solo-regulated) and must comply with the FCA handbook alone. Different rules can apply depending on the nature and size of the firm. The PRA and FCA work closely on certain issues and firms, but the FCA focuses specifically on ensuring fair outcomes for consumers.

The Senior Managers and Certification Regime (SM&CR) sets out how the UK regulators oversee people in businesses supervised and regulated by them, and how those people must act. As the FCA has summarised, “The SM&CR aims to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence” (https://www.fca.org.uk/firms/senior-managers-certification-regime).

SM&CR consists of three elements:

• The Senior Managers Regime (SMR) – This applies to the most senior people in a firm (senior managers) who perform one or more senior management functions (SMFs). These functions are specified in the PRA Rulebook and the FCA Handbook. Senior managers must be pre-approved by the PRA or FCA before starting their roles. Each senior manager must also have a “Statement of Responsibilities” (that sets out what they are responsible and accountable for), which may include (depending on the firm) certain responsibilities prescribed by the regulator known as “Prescribed Responsibilities”. Every year, senior managers must be certified as fit and proper to carry out their role by their firm.
• The Certification Regime (CR) – This applies to employees who, because of their role, could pose a risk of significant harm to the firm or its customers, such as employees who offer investment advice (certified staff). For solo-regulated firms, these roles are generally called certification functions. Firms must certify that these employees are fit and proper for their roles both at the outset of their employment and continuously.
• The Conduct Rules – The Conduct Rules set minimum standards of individual behaviour in financial services in the UK. They apply to almost all employees of a firm. They also include particular rules applicable only to senior managers.

Certain parts of SM&CR apply to particular firms only. This is outside the scope of this note, which sets out the general position under SM&CR.

Employees must be provided with an employment contract across the different jurisdictions in the UAE.  This applies to all employees, regardless of whether they work in the financial services industry.

In the DIFC, the DIFC Employment Law requires employers to provide their employees with a written contract that must specify the following:

• the parties’ names;
• the start date;
• the salary and any allowances to be provided to the employee;
• the applicable pay period;
• hours and days of work;
• vacation leave and pay;
• notice to be given by either party to terminate employment; 
• the employee’s job title;
• confirmation as to whether the contract is for an indefinite period or for a fixed term;
• the place of work;
• applicable disciplinary rules and grievances procedures;
• the probation period;
• a reference to any applicable policies and procedures (including any codes of conduct) and where these can be accessed; and
• any other matter that may be prescribed in any regulations issued under the DIFC Employment Law.

In the ADGM, the ADGM Employment Regulations requires employers to provide their employees with a written contract that must specify the following:

• the parties’ names;
• the start date;
• remuneration;
• the applicable pay period;
• hours and days of work; and
• any terms and conditions relating to:
  • vacation leave and pay, national holiday entitlement and pay;
  • sick leave and sick pay;
  • the notice period that either party is required to give to the other in order to terminate employment;
  • the employee’s job title;
  • whether the employment is for an indefinite or fixed term;
  • the place of work;
  • any disciplinary rules or grievance procedures applicable to the employee; and

any other matter that may be prescribed by the employer.

As a matter of general UK employment law, employers must give employees written particulars of certain terms and conditions of employment. This is known as a “section 1 statement” after section 1 of the Employment Rights Act 1996, which sets out the mandatory information that employers must give to employees no later than the first day of their employment. This includes fundamental information such as the names of the employer and employee; the date of commencement of employment; the rates and timing of pay; and working hours. Other prescribed particulars (such as information regarding pensions, collective agreements and training) can be provided to employees in instalments within two months of commencement of employment. Typically, a written employment contract will contain the relevant information to satisfy these requirements.

Financial services employers should ensure that, in addition, their employment contracts reinforce the requirements of SM&CR. This will help the employer manage the employment relationship in a manner compliant with SM&CR and demonstrate to the relevant regulators the employer’s commitment to compliance with SM&CR. The employment contract will usually include, therefore, additional provisions regarding the completion of SM&CR-compliant background checks; confirmation of the employee’s regulated function (eg, their SMF or certification function); required regulatory standards of conduct; cooperation with fitness and propriety assessments; and tailored termination events.

In addition, all senior managers must have a statement of responsibility setting out their role and responsibilities. Certain firms must also allocate certain regulator-prescribed responsibilities (prescribed responsibilities) among senior managers. It is common to set out a senior manager’s regulatory responsibilities in their employment contract.

Dual-regulated firms must also ensure that individuals approved to carry out a PRA-designated SMF are subject to any specific contractual requirements required by the PRA. For example, depending on the type of firm, a firm may be required to ensure that the relevant individual is contractually required to comply with certain standards of conduct, such as to act with integrity and with due care and skill (among other requirements).