The Dubai
Financial Services Authority (DFSA) proposed a broad rewrite of its investment
fund rules today (Tuesday), opening a consultation that would change how
private funds are classified and ease licensing for managers.
The
regulator, which supervises firms in the Dubai International Financial Centre
(DIFC), called it the most significant review of its funds framework since
2010.
The
consultation, labeled CP 173, arrives as the DIFC’s wealth and asset management sector has expanded quickly, with the center
reporting a 321-firm industry overseeing roughly $176 billion at the end of
2025.
The DFSA
framed the package as an effort to match its rules to the risk of a given fund
and cut what it called unnecessary regulatory complexity.
Fund Classifications Get a
Risk-Based Rewrite
Under CP
173, the DFSA wants to drop rigid classifications for specialist private funds
in favor of a risk-based approach it said would better fit hybrid and
multi-strategy investing.
The paper
also proposes to simplify authorization for investment managers, confirming
that dealing as agent and arranging deals fall under a single managing-assets
license.
Other
measures would update master-feeder public fund structures by removing
eligibility criteria the DFSA described as outdated. The regulator also wants
to scrap the external fund manager regime, a change it tied to what it said was
a growing pipeline of firms seeking full DFSA
authorisation.
A separate
proposal would widen the room for employees to invest in funds run by their
employers, both directly and through dedicated vehicles. The DFSA said the
change is meant to support recruitment and retention, and to align staff
interests with those of outside investors.
“This
reflects our commitment to investor protection, market confidence, and
proportionate regulation,” said Charlotte Robins, the DFSA’s managing
director of policy and legal.
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The
regulator said the broader aim is to deepen the DIFC’s asset management base
and keep it competitive for global managers, a claim it did not tie to
independent data.
Tokenized Funds and Retail
Access Put on the Table
Alongside
the formal proposals, the DFSA is seeking early feedback on two areas it may
turn into policy later. One is the tokenization of fund units and fund assets,
including tokenized money market funds.
The other
is a possible long-term investment fund regime that would let retail investors
reach illiquid, real-economy assets currently open only to professional
investors.
The
tokenization question builds on earlier digital-asset work. The regulator
introduced investment token rules in 2021 and has since recognized a
short list of crypto tokens for use in the DIFC.
It stressed
that both new topics sit at the feedback stage, with no commitment to draft
rules.
Gulf Rivals Race to
Rewrite Fund Rulebooks
The DFSA is
not moving in isolation. In November 2025, the Financial Services Regulatory
Authority of the Abu Dhabi Global Market, the DIFC’s main regional rival,
published Consultation Paper No. 12 of 2025, proposing streamlined regimes for
smaller managers running $200 million or less and for managers serving only
institutional clients.
That
consultation, which closed on January 30, 2026, also moved to exempt employee
investment vehicles from fund licensing, echoing the DFSA’s employee-investment
proposal. Abu Dhabi said funds-sector assets under management rose 48% year
over year in the third quarter of 2025.
The
retail-access idea has precedents further afield. The European Union’s revamped
long-term investment fund rules, known as ELTIF 2.0, took effect in January
2024 and opened illiquid assets to retail buyers, while Britain’s Long Term
Asset Fund regime moved the same way around the same time.
Both have
drawn scrutiny over how easily ordinary investors can exit funds holding
private assets, a concern the DFSA would have to weigh if it goes beyond
feedback.
On
tokenization, asset managers have already pushed ahead. BlackRock launched its
BUIDL tokenized fund in March 2024, and rivals have since rolled out tokenized
money market products. Dubai, for its part, has expanded the digital assets it recognizes in the DIFC, adding Ripple’s
XRP and its RLUSD stablecoin.
Rules Face a Long Path to
Sign-Off
The
consultation runs until September 7, 2026, with responses submitted through the
DFSA’s online form.
After that,
the regulator said it will review submissions and finalize changes to the
Collective Investment Law and Rules, the Investment Trust Law, the Regulatory
Law and the relevant rulebook modules.
Any
legislative changes then go to the President of the DIFC and on to the Ruler of
Dubai for assent, which leaves the timeline open.
The DFSA
cautioned that firms should not act on the proposals until the final changes
are confirmed and published, and said timing will depend on how much the new
rules ask authorized firms to change.
This article was written by Damian Chmiel at www.financemagnates.com.
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