The Dubai Financial Services Authority (DFSA) has finalized amendments to its prudential regime for Category 3 firms — including asset managers, fund managers, and advisory firms operating in the Dubai International Financial Center (DIFC). The changes, published in the final feedback statement (pdf) and Appendix 3 PIB amendments (pdf), aim to align Dubai’s regulatory regime more closely with UK and EU standards.

REFRESHER- The DFSA first proposed the reforms in October 2024, closing its consultation in January 2025. Further clarification came in March, with the proposals including:

  • Introducing an activity-based capital requirement (ABCR) to replace fixed thresholds;
  • Exempting firms without client assets from the expenditure-based capital minimum (EBCM);
  • Removing pre-approval requirements for senior hires such as compliance and finance officers, with vetting responsibilities shifting to firms.

The DFSA adopted the bulk of its proposals, with only minor revisions based on market feedback. The details:

  • Base capital thresholds will now reflect the highest-risk licensed activity a firm is authorized for. For instance, a firm licensed for both fund and investment management must meet the higher USD 140k threshold — a substantial reduction from the previous flat USD 230k requirement, and down from USD 500k prior to 2023.
  • Wind-down capital requirements remain for firms that do hold client assets, but the DFSA has broadened the definition of eligible liquid assets to include high-quality sovereign bonds denominated in GBP and EUR, as well as USD and AED, with a cap of two-thirds of the liquidity buffer.

What didn’t make it into the final rulebook: The DFSA had also floated lowering the wind-down capital buffer from 35% to 25% of fixed annual overheads, but this adjustment was not included in the final amendments. We also could not find mentions of the removal of pre-approval requirements for senior hires like compliance and finance officers.

The reforms take effect on 1 July 2025, with a phased transition period running until 1 July 2026. Clarifications will be issued around how capital and liquidity buffers should be managed during the transition period.

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