DFSA proposes biggest overhaul of DIFC investment fund rules in 16 years
Proposal seeks simpler rules, stronger investor safeguards, prepares for tokenised funds
Dubai: The Dubai Financial Services Authority (DFSA) has proposed its most significant overhaul of the Dubai International Financial Centre's (DIFC) investment fund regulations since 2010, aiming to simplify rules for fund managers, strengthen investor protection and prepare the regulatory framework for new investment trends.
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The regulator on Monday published Consultation Paper No. 173, outlining a broad package of reforms to the DIFC's Collective Investment Fund framework, which has been in place since 2006.
The proposals come as Dubai continues to expand its position as a regional wealth and asset management hub, with the DFSA saying the industry has evolved significantly over the past two decades.
What is changing?
The proposed reforms would make the rules more flexible by tailoring regulatory requirements to the level of risk involved, rather than applying the same approach across different types of investment funds.
Among the key proposals are:
Replacing rigid classifications for specialist private funds with a more flexible framework that better accommodates modern investment strategies.
Simplifying licensing requirements for investment managers by clarifying that activities such as arranging investments and dealing on behalf of clients are already covered under an asset management licence.
Modernising rules governing "master-feeder" fund structures to better reflect current market practice.
Removing the external fund manager regime as more firms seek direct authorisation from the DFSA.
Allowing employees greater scope to invest in private funds managed by their own employers, either directly or through dedicated investment vehicles.
Making technical amendments to improve clarity and consistency in the Collective Investment Law.
The regulator said the changes are intended to improve regulatory clarity, reduce unnecessary compliance requirements and better align the framework with international standards while maintaining appropriate investor safeguards.
Tokenised funds
The consultation also seeks early feedback on two areas that could shape future regulation.
One is the tokenisation of investment funds and fund assets, where ownership units are represented digitally using blockchain technology. The other is the possible creation of a new long-term investment fund regime that could eventually give retail investors access to certain long-term assets, such as infrastructure or private market investments, which are currently limited to professional investors.
No regulatory changes have been proposed in these areas yet, with the DFSA seeking industry views before developing future policy.
Charlotte Robins, Managing Director of Policy and Legal at the DFSA, said the proposals are designed to support the continued growth of DIFC's wealth and asset management sector by ensuring regulation remains proportionate, internationally aligned and focused on investor protection.
The consultation is open until 7 September 2026, with the DFSA inviting feedback from fund managers, asset managers, fund administrators, legal advisers, auditors, compliance professionals and other participants in the DIFC investment funds industry.
