DFSA Consultation Paper 173 Proposes Major Overhaul of Collective Investment Funds Framework
DFSA Consultation Paper 173 proposes a major overhaul of DIFC’s collective investment funds framework, aligning rules with international standards and inviting feedback by September 7, 2026.
DFSA issues Consultation Paper 173 and opens formal consultation
On July 7, 2026 the Dubai Financial Services Authority (DFSA) issued Consultation Paper 173, which sets out comprehensive proposals to update the collective investment funds framework in the Dubai International Financial Centre (DIFC). The consultation paper signals the most significant review of the framework since 2010 and seeks industry and public comments on measures designed to modernise fund regulation. The DFSA says the objective is to align requirements with evolving international standards while maintaining a risk-based, proportionate regulatory stance.
History of the DIFC funds framework and reasons for change
The collective investment funds regime in the DIFC dates back to 2006 and has supported notable growth in the centre’s asset and fund management community. Since its inception, the regulatory and market environment has evolved substantially, prompting the DFSA to reassess structures, classifications and safeguards. The consultation paper frames the update as necessary to reflect hybrid investment models, multi-strategy funds and international best practice while reducing unnecessary compliance burdens where appropriate.
Core proposals to introduce a risk-based, proportional approach
Consultation Paper 173 proposes shifting from rigid classifications of private specialised funds toward a more flexible, risk-based approach that better accommodates hybrid and multi-strategy vehicles. The DFSA proposes clearer, proportionate requirements and safeguards that correspond to the specific risk profile of each fund and its investor base. The authority also seeks to simplify licensing requirements for investment managers and clarify that dealing as agent and arranging transactions are intrinsic parts of asset management activities covered under the asset management licence.
Changes to fund structures and manager licensing
The paper recommends updating public fund structures by removing outdated eligibility criteria and broadening the definition of a master fund to reflect common market practice for main and feeder fund arrangements. It also proposes phasing out the external fund manager regime in recognition of the growing preference among firms for full DFSA licensing. In tandem, the DFSA is considering measures to permit staff investment in employer-managed private funds through direct or structured arrangements, with the intention of improving talent attraction and alignment of interests.
Technical amendments, tokenisation and long-term funds considered
Alongside substantive rule changes, Consultation Paper 173 outlines targeted technical amendments to the Collective Investment Law to enhance clarity and consistency across provisions. The DFSA also invites initial views on two potential future initiatives: the tokenisation of fund units and assets, including tokenised money market funds, and the creation of a long-term funds regime to enable retail participation in illiquid, real-economy asset classes. These topics are presented for early feedback to gauge industry readiness and to identify policy considerations that would require subsequent consultation.
Consultation timetable and stakeholders invited to respond
The DFSA has called on fund managers, asset managers, custodians, prospective licence applicants, legal and accounting advisers, auditors and compliance advisers operating in the DIFC to submit responses through the online questionnaire by September 7, 2026. The paper sets out the primary themes for consultation and welcomes evidence-based feedback on the proportionality of proposed measures and the likely operational impacts on market participants. The authority indicates that responses will inform the next stage of rule-making and any transitional arrangements that may be introduced.
The DFSA’s proposals are framed to support sustainable growth, foster responsible innovation and preserve investor protection while bolstering the DIFC’s appeal as a regional hub for global asset managers.
