DIFC Fund Rules Evolve: The Shift to Activity-Based Oversight is Here

The Dubai Financial Services Authority has proposed the most significant overhaul of DIFC fund rules in over fifteen years. Consultation Paper 173 signals a fundamental shift: away from prescriptive, label-based regulation and toward activity-based oversight.

Professional investor funds will see reduced specialist classifications. The external fund manager regime — which allowed non-DIFC managers to manage DIFC funds without a local presence — is being abolished entirely.

New horizontal requirements will apply to all fund managers regardless of strategy: valuation independence from investment management, leverage disclosure, and prime brokerage safeguards. For private equity and venture capital managers, the valuation independence requirement is the most operationally significant — it means deal teams can no longer drive both investment decisions and asset valuations.

The direction of travel is clear. Fund structures will be regulated by what they do, not what they are called. The consultation closes 7 September 2026. Fund managers operating in or through the DIFC should assess how the proposals reshape their operating model before that deadline.