The Dubai Financial Services Authority (DFSA) is proposing regulatory changes that would lower capital requirements and ease hiring restrictions for asset managers in the Dubai International Financial Center, Bloomberg reports, citing a DFSA spokesperson. The proposals, currently under consultation with firms, aim to align Dubai’s regulatory framework more closely with UK and EU standards and could be finalized as early as next year.

Background: The DFSA first proposed these reforms in October 2024 through a consultation paper (pdf), with feedback accepted until 10 January 2025.

The most significant changes affect Category 3 firms — entities licensed to manage assets — which would see minimum base capital requirements drop from USD 230k to USD 140k, building on a 2023 adjustment that had temporarily lowered the threshold from USD 500k. Smaller, locally domiciled firms would also benefit, with capital requirements reduced from USD 70k to USD 40k.

…. Plus, activity-based reductions? The regulator is also considering introducing an activity-based capital model, which would scale requirements based on a firm’s assets under management, client fund holdings, and trading volume — a shift away from fixed thresholds.

DFSA also plans to drop its requirement to pre-approve certain senior hires, including compliance and finance officers and other senior managers. Under the new rules, firms would take full responsibility for vetting and appointing key personnel.

Liquidity rules are under review as well. Firms that do not hold client assets may be exempt from maintaining wind-down capital. For firms that do, the required buffer could be lowered to 25% of fixed annual overheads, from the current 35%.

REMEMBER- This regulatory shift builds on previous DFSA initiatives to lower entry barriers. Last June, the regulator amended its crypto token regime, loosening restrictions on unrecognized tokens, cutting investment fees, and tightening anti-money laundering requirements. DFSA is also working to boost financial stability amid financial risks, issuing new risk management amendments in December that tightened rules under its Prudential — Investment, Ins. Intermediation, and Banking Module.

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