On 7 July 2026, the Dubai Financial Services Authority ("DFSA") issued Consultation Paper No. 173 ("CP 173"), the first comprehensive review of the Dubai International Financial Centre's ("DIFC") Collective Investment Fund framework since 2010, which seeks public comments on proposals to amend the framework (the “Proposed Amendments”). The Proposed Amendments affect the Collective Investment Law, the Investment Trust Law, the Regulatory Law, and seven (7) Rulebook modules, moving the framework towards a more flexible, risk-based approach while streamlining requirements for Fund Managers.
Part I of CP 173 sets out the Proposed Amendments to the existing Collective Investment Fund framework, including the proposed transitional arrangements. Part II invites early feedback on tokenised Fund structures and a possible long-term investment fund regime for retail investors, which may inform future policy development.
Key proposals at a glance: The table below summarises certain key Proposed Amendments addressed in Part I of CP 173 and is not exhaustive. Capitalised terms not otherwise defined in this newsletter have the meanings given to them in the applicable DIFC legislation or the DFSA Rulebook.
Topic |
Current Position |
Proposed Amendment |
Fund Specialist Classes |
A Fund constituted as an Exempt Fund or Qualified Investor Fund (“QIF”) is currently subject to fixed, prescribed requirements tied to its classification (e.g. as a Money Market, Private Equity, or Credit Fund). |
These specialist classes and their respective requirements would be removed in favour of a disclosure-based approach, with a focus on the activities undertaken, their associated risks and the safeguards needed to manage those risks. The Proposed Amendments therefore seek to apply the existing specialist class risk-management requirements, along with some new risk management systems, on a horizontal basis to all Fund Managers – including those of Public Funds. |
Borrowing Requirements |
Credit Funds are currently subject to the fixed 10% net asset value borrowing cap imposed under the Collective Investment Rules. QIFs and Exempt Funds that are not constituted as a specialist class such as a Credit Fund are not currently subject to any specific borrowing limits under the Collective Investment Rules. |
The fixed 10% cap for Credit Funds would be replaced with a requirement for the Fund Manager to calculate its own borrowing limitation "in a reasonable and prudent manner" and disclose the expected maximum level of borrowing, together with an explanation of the basis for that figure. This same calculation-and-disclosure duty would extend to QIFs and Exempt Funds generally, rather than being limited to Credit Funds. |
Credit Fund Costs |
Credit Fund Managers currently have a base capital requirement of USD 140,000, and pay a separate USD 10,000 application fee and USD 10,000 annual fee. |
The base capital requirement for Fund Managers that have an investment strategy that involves Providing Credit would be reduced to USD 40,000, with the separate USD 10,000 application fee and USD 10,000 annual fee both removed. |
Authorisation For Investment Managers |
Dealing In Investments As An Agent & Arranging Deals In Investments |
An Authorised Firm to which a Fund Manager delegates discretionary investment management of Fund Property must be authorised to carry out the activity of Managing Assets. It may also require separate authorisations to Dealing in Investments as an Agent and Arranging Deals in Investments when carrying out the delegated mandate.
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An authorisation for Managing Assets would also cover Dealing in Investments as an Agent and Arranging Deals in Investments where undertaken as part of the delegated management of Fund Property, removing the need for separate authorisations. |
Dealing In Investments As Principal |
An investment manager may subscribe for initial Units in a Private Equity Fund without needing to be authorised to Deal in Investments as Principal, provided the Units are held for more than 12 months. |
The same treatment will apply where an investment manager subscribes for initial Units in a Venture Capital Fund. |
External Fund Manager Regime |
Fund Managers based outside the DIFC (“EFMs”) can currently manage Domestic Funds under the EFM regime, without needing to establish a place of business in the DIFC. |
The EFM regime would be removed, requiring EFMs to obtain full DFSA authorisation to continue managing Domestic Funds. Existing EFMs would be consulted separately on transitional arrangements, while DIFC-based Fund Managers would continue to be permitted to manage External Funds. |
Employee Investment In Funds |
The current regime does not provide a means for employees to invest in the private Funds their employer manages, other than by independently meeting the standard QIF or Exempt Fund investor criteria. |
CP 173 proposes that employees directly involved in a Fund's investment management could invest directly, or indirectly through a dedicated vehicle, in Funds their employer manages, without triggering minimum subscription or net asset thresholds, subject to experience criteria and enhanced conflict of interest disclosures. |
Fund Manager Definition |
The current definition of a Fund Manager is based on legal accountability to the Unitholders, a test that has created difficulty for global structures, where a Fund Manager’s obligations may run to the Fund vehicle or its Governing Body rather than directly to investors. |
A Fund Manager would be defined as a person who manages a Collective Investment Fund, regardless of whether it is directly legally accountable to Unitholders. The obligation to act in the best interests of Unitholders would continue to apply. |
Venture Capital Fund Manager Relief |
The DFSA’s existing Venture Capital Fund Manager relief, including reduced fees and exemptions from capital, audit, and reporting requirements, currently applies only to Fund Managers investing at least 90% of committed capital in unlisted companies established no more than ten (10) years ago. |
CP 173 proposes extending this relief to Fund Managers of Funds dedicated to investing in other Venture Capital Funds. |
Next steps:
Comments on CP 173 are due by 7 September 2026. Once the Proposed Amendments are finalised and come into force, the DFSA proposes a three (3)-month transition period, on the basis that most of the proposals involve removing existing restrictions or are clarificatory in nature.
Our Experience
lecocqassociate provides a full range of financial regulatory, corporate and commercial advice in relation to the structuring and operation of funds and fund managers in the DIFC. This article is for information purposes only. It does not constitute professional advice or an opinion.
If you would like to know more about CP 173, please feel free to contact our firm.
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