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D Category 2 VA Issuance – Licensed Distributors (Example)

LDS FZE is a VASP that is Licensed by VARA to carry out Broker-Dealer Services. LDS FZE has been approached by ORC FZE to provide placement and distribution services to ensure the launch of its ORC Virtual Asset is carried out in a compliant manner, in accordance with the VARA VA Issuance Rulebook.
 
Key considerations: As explained in Illustrative Example C above, issuing ORC falls within Category 2. As a result, ORC FZE must ensure that all placing and distribution of ORC is carried out through or by a Licensed Distributor. As LDS FZE is a VASP that is Licensed by VARA to carry out Broker-Dealer Services, LDS FZE qualifies as a Licensed Distributor and can provide such placing and distribution services.
 
In order to meet the requirements in Part IV (Licensed Distribution Services Rules) of the Broker-Dealer Services Rulebook, LDS FZE must ensure, beyond all reasonable doubt, the quality of both ORC FZE as an Issuer and ORC as the Virtual Asset, before carrying out any placement or distribution of ORC.
 
‘Quality’ is explained fully in Rule IV.B.2 of the Broker-Dealer Services Rulebook and includes all factors relevant to the assurance of, but not limited to, the following:
 
 
 
a.consumer protection; 
b.full FATF and financial sanctions compliance and zero tolerance of money laundering; 
c.zero tolerance of any fraud, theft or other illicit or criminal activity; 
d.fair, orderly and transparent markets;
e.technical and/or cyber security exposures associated with the Virtual Asset and/or with the act of issuance or throughout the process of issuing or transferring the Virtual Asset;
f.compliance with all applicable laws and regulations; and
g.compliance with the VA Issuance Rulebook.
 
LDS FZE must complete due diligence assessments of both ORC FZE and the ORC Virtual Asset in accordance with Rules IV.B.3 and IV.B.4 of the Broker-Dealer Services Rulebook. LDS FZE must submit reports from both of those due diligence assessments to VARA, along with the Whitepaper and the Risk Disclosure Statement relating to ORC. LDS FZE must also submit a signed declaration stating it has complied with Rule IV.B.1 of the Broker-Dealer Services Rulebook, above.
 
LDS FZE must wait for a period of fifteen (15) Working Days, starting on the first Working Day after the submissions to VARA are made, before it can place or distribute ORC. This is called the “Submission Period". If LDS FZE does not receive any comment or objection from VARA during this period, it is free to distribute or place ORC after the Submission Period has ended. If VARA does make any comments or objections, LDS FZE must address or remedy them to VARA's satisfaction before it can place or distribute ORC.
 
For the avoidance of doubt, in no event does VARA approve any Virtual Asset, Issuer or Licensed Distribution Services by virtue of a VASP's compliance with this process including, where a Submission Period passes without comment or objection from VARA. LDS FZE must ensure the following disclaimer is included in all documentation relating to ORC including, but not limited to, the Whitepaper:
 
“VARA has not made any representation and does not provide any warranties regarding any Issuer or Virtual Asset including, but not limited to, their fitness for purpose, suitability or regulatory status in any jurisdiction other than the Emirate of Dubai, UAE."