The Dubai Financial Services Authority proposes updates to the framework for collective investment funds

DUBAI, 7 JULY / WAM / The Dubai Financial Services Authority, the independent regulator of banking, financial services and markets in the Dubai International Financial Centre, today issued Consultation Paper No. 173, which includes proposals to make fundamental updates to the framework for collective investment funds.

The framework dates back to 2006, and the current proposals represent its most significant revision since 2010.

Since the implementation of the framework, the asset and fund management sector in the Dubai International Financial Center has witnessed remarkable growth and rapid development in parallel with developments in international standards and best regulatory practices.

Consultation Paper No. 173 is based on the results of a comprehensive review that relied on supervisory expertise and consultation with market stakeholders.

The paper presents comprehensive proposals aimed at ensuring that regulatory requirements and guarantees are commensurate with the risks associated with each fund and its investors, while maintaining a proportionate and risk-based regulatory approach to protect investors. It aims to align the regulatory framework with international standards and best regulatory practices, which contributes to increasing the clarity of requirements and reducing unnecessary regulatory burdens.

Charlotte Robins, Director General of the Policy and Legal Affairs Department at the Dubai Financial Services Authority, said that Consultation Paper No. 173 supports achieving the strategic goal of the Dubai Financial Services Authority in expanding the wealth and asset management system at the centre, by proposing improvements that ensure the application of regulatory requirements and guarantees commensurate with the risks associated with investment funds. This approach reflects the commitment to protecting investors, enhancing market confidence, and applying a proportionate regulatory framework.

She added that by aligning the regulatory framework with international standards and best regulatory practices, enhancing clarity, and reducing unnecessary regulatory complexities, we seek to support sustainable growth, encourage responsible innovation, and ensure the DIFC remains competitive as the preferred destination for global asset managers wishing to build and expand their businesses in the region.

Consultation Paper No. 173 addresses a set of main topics presented for official consultation, which contribute to enhancing the clarity of regulatory requirements for companies. This includes moving from rigid classifications of specialized private funds to a more flexible approach based on risk assessment and taking into account hybrid and multi-strategy investment models, simplifying licensing requirements for investment managers, and considering the activities of dealing as an agent and arranging deals as an integral part of the process of managing fund investments, and falling within the asset management license, in addition to modernizing the structures of public funds from the categories of main funds and funds. Feeder, by eliminating outdated eligibility criteria and expanding the definition of a master fund in line with market practices.

The proposals also include abolishing the system of external fund managers, which reflects the strong and increasing demand from companies seeking to obtain a full license from the Dubai Financial Services Authority, and providing the opportunity for employees to invest in private funds managed by the employer, whether directly or through dedicated mechanisms, in a way that enhances the attraction and retention of talent, and aligns the interests of employees with the goals of investors, and introducing specific technical amendments to the Collective Investment Law with the aim of enhancing clarity and consistency in its provisions.

The consultation paper calls for preliminary comments on two topics that may be the subject of future regulatory proposals: tokenization of fund units and assets, including tokenized money market funds, and studying the possibility of introducing a system for long-term investment funds that would allow individual investors to invest in illiquid asset classes linked to the real economy, in which investment is currently limited to professional investors.

For its part, the Dubai Financial Services Authority invites all parties concerned with the funds and asset management system in the Dubai International Financial Center to submit their comments through the electronic response form by September 7, 2026.

The targeted entities are fund managers and management officials, asset managers and custody service providers, companies that intend to apply for a license from the Dubai Financial Services Authority within any of the categories referred to above, and legal advisors, accountants, auditors, and compliance advisors working in the funds sector.

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