Dubai Regulator Plans Major Rewrite of Fund Rules

The Dubai Financial Services Authority has opened a consultation on a broad overhaul of its investment fund framework, marking the regulators most significant review of fund rules since 2010.

The proposal comes as the asset management sector in the Dubai International Financial Centre continues to expand. By the end of 2025, the centres wealth and asset management industry included 321 firms overseeing around $176 billion in assets.

The consultation, issued as CP 173, aims to simplify parts of the current framework and align regulatory requirements more closely with the risk profile of different fund structures.

Private Fund Categories Set for Revision

One of the main changes under consideration is a shift away from fixed classifications for specialist private funds.

The regulator is proposing a more risk-based model, which it says would better reflect the way private funds are now structured, particularly where strategies combine multiple asset classes or investment approaches.

The proposal also looks at simplifying authorization for investment managers. Under the planned approach, activities such as dealing as agent and arranging transactions would fall under a single managing-assets license, reducing overlap in licensing requirements.

The review also covers master-feeder public fund structures. Certain eligibility criteria currently applied to these structures may be removed if they are considered no longer necessary under the updated framework.

External Fund Manager Regime May Be Removed

Another notable proposal is the removal of the external fund manager regime.

The regulator said the change reflects a growing number of firms seeking full authorization within the Dubai International Financial Centre, rather than operating through lighter external arrangements.

If adopted, the move could push more managers toward a direct regulatory relationship with the DFSA and a clearer local operating structure.

Wider Access for Employee Investment

The consultation also proposes expanding the ability of employees to invest in funds managed by their employers.

This could apply both through direct investment and through dedicated employee investment vehicles. The regulator framed the measure as a way to support staff retention and align employee interests more closely with those of other investors.

For fund managers, the change may provide more flexibility in compensation and participation structures, especially in private fund and alternative investment strategies.

Tokenized Funds and Retail Access Under Early Review

Beyond the formal rule changes, the DFSA is also seeking preliminary feedback on two areas that may shape future policy.

The first is tokenization, including tokenized fund units and tokenized fund assets. This may include products such as tokenized money market funds.

The second is a possible long-term investment fund regime that could allow retail investors to access illiquid assets linked to the real economy, which are generally available only to professional investors.

At this stage, the regulator has not committed to drafting rules in either area. The feedback process is intended to assess market views before any formal policy direction is set.

Regional Fund Rules Are Becoming More Competitive

The proposed changes come as financial centres in the Gulf continue to update their fund regimes to attract asset managers and private capital.

For Dubai, the review signals a move toward a more flexible regulatory model, particularly for private funds, employee investment structures, and managers seeking full local authorization.

At the same time, any expansion into retail access or tokenized fund products would require careful rules around disclosure, liquidity, valuation, and investor protection.

Consultation Timeline

The consultation remains open until September 7, 2026. Responses must be submitted through the regulators online consultation process.

After the consultation period, the DFSA will review feedback before finalizing any changes to the relevant laws and rulebook modules. Legislative amendments would then require approval through the Dubai International Financial Centre process before taking effect.

The regulator has cautioned firms not to rely on the proposals until final rules are confirmed and published.

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