DFSA Consultation Paper No. 165
Background
Since the global financial crisis, regulatory authorities have placed increased emphasis on senior management responsibilities and accountability. In line with this trend, the Dubai Financial Services Authority (DFSA) published on 6 March 2025 proposals aimed at reinforcing the responsibility of Authorised Firms in ensuring their staff meet fitness and properness standards. Such changes are aimed at bringing DFSA regulations in line with those of comparable jurisdictions. The regulator also indicated that these proposals are designed to allocate DFSA resources more efficiently.
Proposed changes
Designated Functions and Designated Individuals
New Classification: Under the DFSA’s proposals, the Compliance Officer, Finance Officer and Senior Manager functions will no longer be “Licensed Functions”. They will instead fall under a new classification: “Designated Functions” and individuals performing such functions will be “Designated Individuals”.
Appointment and removal of Designated Individuals:
The appointment of Compliance Officers, Finance Officers and Senior Managers will cease to be subject to the DFSA’s prior approval. However, the Consultation Paper contemplates requiring Authorised Firms to notify the DFSA within 7 calendar days of the appointment of new Designated Individuals and to attest that they have assessed their fitness and properness against relevant criteria (as considered further below).
It is also proposed that Authorised Firms submit a notification to the DFSA within 7 calendar days of an individual ceasing to perform a Designated Function specifying the rationale for such change.
Fitness and Properness: As the DFSA will no longer approve Designated Individuals, Authorised Firms will be solely responsible for assessing the fitness and properness of Designated Individuals using the same criteria as those currently applicable to staff performing Licensed Functions. Firms will be required to keep records of their assessments which should be made available to the DFSA upon request.
Ongoing Requirements: The draft rules require Authorised Firms to ensure that the Designated Individuals remain fit and proper to perform their functions and to submit an attestation to this effect to the DFSA on an annual basis.
Notes:
the approval process for Senior Executive Officers and Money Laundering Reporting Officer will remain unchanged;
the restrictions on combining certain roles (e.g. Compliance Officer and Senior Executive Officer) will continue to apply; and
the DFSA’s public register will include details of Designated Individuals such that the information available thereon will remain the same.
Finance Officer
Eligibility criteria: In addition to the Finance Officer function becoming a “Designated Function” (as explained above), the DFSA is proposing to remove the requirement that the Finance Officer of an Authorised Firm be a Director, Partner or Senior Manager. However, the draft rules will mandate firms to ensure that their Finance Officer has sufficient seniority and independence to discharge his/her responsibilities.
Lower Prudential Risk Firms: The Consultation Paper also invites industry participants to give their views on whether “Lower Prudential Risk Firms”[1] should be exempted from the requirement to appoint a Finance Officer.
Senior Manager and Compliance Officer – Clarifications
Senior Manager: The DFSA proposes to clarify that: (i) the Senior Manager function should be carried out by an individual who is (alone or jointly with others) responsible for the management, supervision or control of one or more parts of an Authorised Firm’s Financial Services; and (ii) is only relevant to individuals not already performing one of the specified Licensed or Designated Functions.
Compliance Officer:
The DFSA will amend the definition of this function to emphasize that Compliance Officers are not only responsible for the firm’s compliance with applicable laws and regulations but also for “the implementation and management of the control framework” in place to comply with such laws and regulations.
The Consultation Paper also contemplates removing the requirement that Compliance Officers be Directors or Partners.
Further, the proposals require firms to ensure that their Compliance Officer has sufficient seniority and independence to perform his/her function.
Core Principles
The DFSA is of the view that, notwithstanding the reclassification of Compliance Officers, Finance Officers and Senior Managers as “Designated Functions”, individuals discharging these functions should remain subject to the DFSA’s Principles for Authorised Individuals. Therefore, the DFSA is proposing to extend the application of such Principles to “Designated Individuals”.
Further, the Consultation Paper contemplates applying Principle 1 (Integrity), Principle 2 (Due skill, care and diligence), Principle 3 (Market conduct) and Principle 4 (Relations with the DFSA) to all “Relevant Individuals” – i.e. employees of an Authorised Firm involved in activities carried on in connection with a Financial Services business or managing an Authorised Firm – except those carrying out ancillary roles. The DFSA appears to take a very narrow view of the roles which it will regard as ancillary in light of the examples provided in the Consultation Paper, namely: audiovisual technicians, cleaners, human resources administrators, personal assistants and secretaries. This suggests that the DFSA will regard back-office staff as being Relevant Individuals and, therefore, subject to Principles 1 to 4.
Next steps
Deadline for providing comments: The Consultation is open for comments until 5 May 2025.
Implementation:
The DFSA intends to publish relevant amendments to the DFSA Rulebook in July 2025.
The new rules will come into force on 1 September 2025. While the timeframe for complying with the revised rules is quite short, the DFSA believes it to be sufficient as firms will only need to make limited adjustments as a result.
The DFSA indicated in its Consultation Paper that it was undertaking a broader review of its corporate governance framework. We should therefore expect further consultations coming out of the DFSA in this area.
What does this mean for Authorised Firms?
If the DFSA goes ahead with these proposals, Authorised Firms should take a number of steps to comply with the revised requirements, including:
Fitness and properness assessments: Authorised Firms should ensure that their existing and incoming Designated Individuals meet the requisite fitness and properness criteria (as well as seniority and independence requirements for Finance Officers and Compliance Officers) and that they maintain adequate records of their assessments. Note that such assessment should be undertaken on a regular basis to ensure that Authorised Firms can provide the requisite annual attestation to the DFSA.
Policies and procedures: Authorised Firms should review their policies and procedures to ensure that they are in line with the DFSA’s updated requirements, including to reflect the updated terminology, the amendments to the definition of “Senior Manager” and “Compliance Officer”, changes in filing requirements applicable to Designated Individuals, and to apply the Core Principles to a broader category of personnel.
Regulatory filings:
No regulatory filing will be required with respect to existing Compliance Officers, Finance Officers and Senior Managers. They will automatically be reclassified as Designated Individuals by the DFSA (unless the regulator is notified of changes).
Authorised Firms will, however, be required notify the DFSA in the event of changes in individuals performing Designated Functions.
Lower Risk Prudential Firms: Lower Risk Prudential Firms may consider terminating the appointment of their Finance Officer.
For further information and tailored guidance, please contact Eugénie Levy.
This material is provided for general information only. It should not be relied upon for the provision of or as a substitute for legal or other professional advice.
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[1] An Authorised Firm is a Lower Prudential Risk Firm if it meets all of the following conditions:
(a) it is in Category 4;
(b) its Licence authorises it to carry on only one or more of the following Financial Services: (i) Arranging Deals in Investments; (ii) Advising on Financial Products; (iii) Arranging Custody; (iv) Insurance Intermediation; (v) Insurance Management; (vi) Arranging Credit and Advising on Credit; or (vii) Arranging or Advising on Money Services; and (c) it does not hold Insurance Monies.
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