Proposal aims to simplify rules, strengthen investor protections and prepare for tokenised funds.
Dubai: The Dubai Financial Services Authority (DFSA) has proposed its most extensive overhaul of the Dubai International Financial Centre’s (DIFC) investment fund regime since 2010, seeking to simplify regulations for fund managers, strengthen investor protections and modernise the framework to accommodate emerging investment trends, including tokenised funds.
The regulator on Monday published Consultation Paper No. 173, setting out a wide-ranging package of reforms to the DIFC’s Collective Investment Fund framework, which has been in place since 2006.
The proposals come as Dubai strengthens its position as a regional wealth and asset management hub, with the DFSA noting that the industry has evolved significantly over the past two decades, warranting a modernised regulatory framework.
What is changing?
The proposed reforms would introduce a more flexible, risk-based approach to regulating investment funds, tailoring requirements to the level of risk rather than applying a one-size-fits-all framework across different fund structures.
Key proposals include:
The proposed reforms include:
- Replacing rigid classifications for specialist private funds with a more flexible framework that better reflects 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 align them with current market practices.
- Removing the external fund manager regime as more firms seek direct authorisation from the DFSA.
- Giving employees greater flexibility to invest in private funds managed by their employers, either directly or through dedicated investment vehicles.
- Introducing technical amendments to improve the clarity and consistency of the Collective Investment Law.
The DFSA said the reforms are designed to enhance regulatory clarity, reduce unnecessary compliance burdens and better align the DIFC’s investment fund framework with international standards, while maintaining robust investor protections.
Tokenised funds
The consultation also seeks early industry feedback on two areas that could shape the next phase of the DIFC’s investment fund framework.
The first is the tokenisation of investment funds and fund assets, where ownership units are digitally represented using blockchain technology. The second is the potential introduction of a long-term investment fund regime that could, in time, allow retail investors to access selected long-term assets—such as infrastructure projects and private market investments—that are currently available only to professional investors.
The DFSA has not proposed any regulatory changes in these areas at this stage and is instead seeking industry feedback to help shape future policy.
Charlotte Robins said the proposals are intended to support the continued growth of the DIFC’s wealth and asset management sector by ensuring the regulatory framework remains proportionate, aligned with international standards and focused on investor protection.
The consultation will remain open until 7 September 2026, with the DFSA inviting submissions from fund managers, asset managers, fund administrators, legal advisers, auditors, compliance professionals and other participants in the DIFC investment funds industry.
