DFSA proposes changes to DIFC funds framework: what fund managers need to know

Regulatory change can create uncertainty for fund managers, particularly where it affects how funds are classified, managed and supervised. The Dubai Financial Services Authority has issued Consultation Paper 173, proposing changes to the Dubai International Financial Centre’s collective investment funds framework.

The proposals would move the regime towards a more flexible, disclosure-led model, with potential implications for fund structuring, authorisation, operating models and governance documentation.

The consultation is relevant for existing DIFC fund managers, fund administrators, asset managers and custody providers, as well as managers considering the DIFC for future fund launches.
 

What could change?

The DFSA’s proposals cover several areas of the current funds framework, including:

• Closing the external fund manager route for non-DFSA licensed managers

• Moving away from fixed specialist class categorisations for Qualified Investor Funds and exempt funds

• Expanding the definition of ‘fund manager’

• Updating the credit fund regime

• Introducing a route for employee co-investment

• Seeking early feedback on tokenisation and long-term investment funds

A more flexible approach to fund classification

Specialist fund labels currently help determine the requirements that apply to certain Qualified Investor Funds and exempt funds. The DFSA considers this less suited to hybrid or multi-strategy funds, where investment activity may not fit neatly into one category.

The proposed framework would remove certain specialist class requirements, including for money market, private equity and credit funds. This could give managers more flexibility, while placing greater emphasis on clear disclosure, robust governance and accurate documentation.
 

Closure of the external fund manager route

The DFSA proposes to withdraw the external fund manager route, which currently allows fund managers established outside the DIFC, subject to certain conditions, to manage DIFC-domiciled funds without being DFSA-licensed.

If implemented, affected managers may need to establish a DIFC presence, transfer management to a locally licensed manager or restructure existing arrangements. The DFSA has indicated that it will engage with current external fund managers, but early assessment will be important.
 

Changes to the credit fund regime

The DFSA also proposes to update how credit funds are identified and regulated. The current 90% property threshold for providing credit would be removed, meaning funds with a smaller but meaningful credit allocation could fall within the revised regime.

The consultation also proposes reducing the base capital requirement for credit fund managers from USD 140,000 to USD 40,000 and removing initial and subsequent application fees. This could make the regime more accessible while bringing more credit strategies within regulatory oversight.
 

A broader definition of fund manager

The DFSA proposes to broaden the definition of “fund manager” under the Collective Investment Law. Under the proposed approach, a person could fall within scope even if they are not directly legally accountable to unitholders.

Existing fund managers would continue to have a statutory duty to act in unitholders’ best interests. However, more parties involved in fund management could come within the DFSA’s regulatory perimeter, so managers should consider whether delegated or related-party arrangements may be affected.
 

Employee co-investment

The consultation proposes a new route allowing certain employees to invest in private funds managed by their employer, without the usual minimum subscription thresholds or professional client net worth test, where specific criteria are met.

The relief would be limited to eligible employees directly involved in investment decisions or advice. Investment could also be made through a dedicated vehicle, provided it is limited to the same eligible staff and does not itself constitute a fund.
 

Tokenisation and long-term investment funds

The DFSA is also seeking initial feedback on tokenisation and long-term investment funds, signalling potential future reforms as the DIFC funds framework evolves to support innovation, long-term capital and changing investor demand.
 

What should managers do now?

The consultation period runs until 7 September 2026. Fund managers and prospective applicants should assess how the proposals could affect current and planned activity.

Managers may wish to review fund strategies, borrowing arrangements, delegated management structures, authorisations, risk management documentation and investor disclosures. Early review can help identify whether restructuring, local licensing or additional governance steps may be needed.

How Ocorian can help support fund managers

As regulation evolves, fund managers need clarity on what is changing, why it matters and how to respond. Ocorian supports clients across the fund lifecycle, helping them manage operational, governance and regulatory complexity so they can stay focused on investors, strategy and growth.

Our teams can help managers assess the potential impact of the proposals, review existing structures and prepare for the practical steps that may follow once the DFSA confirms its final position.