DFSA’s CP 173: the biggest shake-up to DIFC’s funds framework in 15 years

Ocorian insight – for fund managers, asset managers, wealth managers and investment advisers operating in or looking to enter the DIFC.

Yesterday, the DFSA published Consultation Paper No. 173 (CP 173), proposing significant changes to the DIFC funds regime since its last major overhaul in 2010.

The consultation comes at a time when the DIFC’s wealth and asset management sector has expanded considerably, with over 300 firms managing approximately $176 billion.   
 

What is changing:

• Private fund classification is being loosened: The DFSA is moving away from rigid specialist fund categories toward a more flexible, risk-based approach designed to accommodate hybrid and multi-strategy strategies that don’t fit neatly within existing classifications.
• Investment manager authorisation is being simplified: Activities such as dealing as agent and arranging activities would be treated as integral to fund management, folded into a single managing assets licence rather than requiring separate permissions.
• Update to master-feeder structures: Outdated eligibility criteria are being removed, and the definition of “master fund” is being broadened to reflect current market practices and fund structing approached.
• Removal of the external fund manager regime: Reflecting the evolution of the DIFC funds market, the proposal recognises the growing preference among managers for full DIFC authorisation rather than operating through the external fund manager route.
• Employee co-investment gets easier. The proposals broaden the scope for employees to invest in private funds managed by their own employer – a clear nod to recruitment, retention, and interest alignment.
   

Why this matters beyond the DIFC

This is not happening in isolation. The ADGM ran its own consultation on streamlined regimes late last year, and the direction of travel across both centres is the same: proportionate, risk-based regulation that keeps pace with how managers actually run money today, rather than how they ran it in 2010.
 

What firms should do now

Although the proposals remain subject to consultation and firms should not act on them until the final rules are made, they should begin assessing the potential impact on their existing structures, licensing arrangements and governance frameworks.

Areas to consider include:

• Reviewing current fund classifications and whether the proposed move away from fixed specialist fund categories could create greater flexibility.
• Evaluating the impact of the proposed authorisation simplifications on existing licence structures.
• Assessing any implications for master-feeder arrangements, particularly where DIFC feeder or master fund structures are being considered.
• Considering the potential impact of the proposed removal of the external fund manager regime, including whether existing or planned structures may need a DFSA-licensed fund manager.
• Reviewing employee co-investment arrangements and whether the proposed changes could create new structuring opportunities.
   

The consultation timeline

The consultation is open until 7 September 2026.

For fund managers, administrators, custodians, and advisers with a stake in DIFC’s funds ecosystem, this is an important opportunity to contribute to the development of the rules that will govern the market for years to come.

How Ocorian can help

At Ocorian, we are already working through the details with clients to understand what CP 173 means for existing structures, authorisation strategies, and employee investment arrangements.

If you would like to talk through how these proposals might affect your fund or your licence, please contact our team.

About the authors

Veena Karuthasen is the consulting lead for UAE regulatory & compliance services at Ocorian. She advises asset managers, financial institutions and founders on regulatory strategy, licensing, governance and compliance across the DIFC, ADGM and wider UAE, translating complex requirements into practical, commercially aligned solutions.

Charlie Rix is the head of fund services for Dubai at Ocorian. He is a chartered accountant with more than 18 years’ experience supporting private equity, venture capital, real estate and private market funds. He specialises in fund administration, regulatory frameworks and compliance across the UAE.