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Regulators in Dubai have proposed an overhaul to its 20-year-old collective funds regime. The upgrade is designed to maintain a “proportionate and risk-based approach to investor protection” and put the system on a par with international standards.

The Dubai Financial Services Authority (DFSA) – markets regulator of Dubai International Financial Centre (DIFC) – issued an announcement about the proposals this week. 

It published Consultation Paper No 173 (CP 173), proposing significant updates to its Collective Investment Fund framework. The DFSA’s framework was established in 2006; the proposals are the regulator’s “most significant” review since 2010.

Explaining the reason for the upgrade, DFSA said since the regime took effect two decades’ ago, “the funds and asset management industry in DIFC has grown and evolved substantially, alongside developments in international standards and regulatory best practice.”

The consultation is targeted at fund managers and fund administrators; asset managers and custody providers; firms intending to apply for DFSA authorisation in any of the above categories; and legal, accounting, audit, and compliance advisors serving the funds industry.

The proposed changes include:

-- Moving away from rigid specialist private fund classifications to a more flexible, risk-based approach that accommodates hybrid and multi-strategy investing;

-- Simplifying authorisation requirements for investment managers, clarifying that dealing as agent and arranging activities are integral to investment management of funds and covered by a managing assets licence;

-- Updating master-feeder public fund structures to remove outdated eligibility criteria and broadening the definition of master fund to reflect market practice;

-- Removing the external fund manager regime, reflecting the DFSA’s strong and growing pipeline of firms seeking full DFSA authorisation;

-- Broadening the scope for employee investment in private funds managed by their employer, both directly and through dedicated vehicles, supporting recruitment, retention, and aligning employee interests with investor goals; and

-- Making targeted technical amendments to the Collective Investment Law to improve clarity and consistency.

“The Dubai Financial Services Authority’s (DFSA) Consultation Paper No 173 supports its strategic objective to broaden and deepen DIFC’s wealth and asset management ecosystem by proposing enhancements so that requirements and appropriate safeguards are directed at, and applied to, the relevant fund-related risks,” Charlotte Robins, managing director, policy and legal, of the DFSA, said. 

“By aligning with international standards and regulatory best practice, improving clarity, and removing unnecessary regulatory complexity, we aim to support sustainable growth, responsible innovation, and the continued competitiveness of DIFC as the destination of choice for global asset managers looking to build and grow in this region,” Robins said. 

The consultation paper also invites early-stage feedback on the tokenization of fund units and fund assets, including tokenized money market funds, and the potential introduction of a long-term investment fund regime to allow retail investors to access illiquid, real-economy asset classes, currently available only to professional investors.

Respondents to the proposals are encouraged to reply online by 7 September.