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CP165: DFSA clarifies its approach to Licensed Functions and Authorised Individuals
Middle East | Publication | January 2026
Background
The Dubai Financial Services Authority (DFSA) recently published a Feedback Statement (Feedback Statement) on Consultation Paper No. 165 (CP165), which had proposed significant changes to its Authorised Individual regime. CP165 had proposed, amongst other things, removing the requirement for DFSA authorisation for the appointment of Compliance Officers, Finance Officers and Senior Managers and to reclassify those roles as Designated Functions and Designated Individuals. The principal rationale for this proposal was to place greater responsibility on Authorised Firms to assess, appoint and monitor individuals in these roles. See our earlier article for further information on the changes initially proposed by CP165.
The Feedback Statement confirms that amendments will be made to the DFSA Rulebook (the New Rules) which will apply to all Authorised Firms from July 1, 2026, but that many of the key changes proposed will not be implemented. The following is a summary of the key aspects of the Feedback Statement and what it means for the Authorised Firms.
Retention of Licensed Functions
The DFSA noted in the Feedback Statement that while many respondents to CP165 supported the proposals regarding Designated Individuals and Designated Functions as proportionate and pragmatic, the majority raised concerns about removing DFSA authorisation from such critical roles. These concerns included the loss of regulatory oversight as a deterrent for bad actors, a potential weakening of the roles’ authority within Authorised Firms, and risks around clarity of responsibilities.
In light of these objections the DFSA has decided not to proceed with removing its authorisation requirements for these roles. As a result, Compliance Officers, Finance Officers, and Senior Managers will continue to require DFSA authorisation, and no new Designated Function or Designated Individual regime will be introduced for now. No changes will be made to the existing application process, which the DFSA considers sufficiently detailed.
Fitness and propriety: Ongoing obligations
Although the DFSA has decided to retain the authorisation requirement for the roles set out above, the DFSA used the Feedback Statement as an opportunity to reaffirm the fact that Authorised Firms remain fully accountable for the appointment and ongoing fitness and propriety of their Employees, including those performing key functions, regardless of regulatory approval. The Feedback Statement made clear that the DFSA believes that existing guidance in its Rulebook regarding the approach Authorised Firms should take to assessing an individual’s fitness and propriety is sufficient, and it does not propose to introduce more prescriptive requirements.
However, the DFSA has clarified expectations where individuals perform Licensed Functions for multiple Authorised Firms. In this regard, Authorised Firms must assess, both at authorisation and on an ongoing basis, whether such individuals have the capacity, capability, and independence to perform their roles effectively, taking into account the firm’s business, the individual’s duties, and any conflicts of interest. The DFSA has confirmed that there will be no single prescribed level of due diligence, as this should be proportionate to each firm’s size, business model, and the nature of the role. Nonetheless, to support Authorised Firms when considering Individuals performing Licensed Functions for more than one firm, the DFSA plans to collate more detailed guidance in the Policy Statement to be published alongside the New Rules.
Conduct principles
In CP165, the DFSA consulted on applying the Principles for Authorised Individuals to Designated Individuals and extending the application of Principles 1 – 4 to “Relevant Employees”, those being all Employees in an Authorised Firm involved in relevant activities carried on in connection with a Financial Services business or managing an Authorised Firm. Staff that only perform ancillary roles in Authorised Firms were excluded from the proposal.
This proposal will go ahead, with the Principles for Authorised Individuals will be renamed Conduct Principles and extended to Relevant Employees under GEN Chapter 4. Importantly, the obligation to proactively disclose matters to the DFSA has been limited to Authorised Individuals only, through amendments to Principle 4 and the introduction of Principle 7. Staff that only perform ancillary roles in Authorised Firms will be excluded from the new Conduct Principles.
Summary
The DFSA has considered the strength of feedback from stakeholders on CP165 and decided to preserve its existing Licensed Functions framework. This is a welcome example of a regulator listening to stakeholders and to adapting its proposals accordingly.
However, Authorised Firms should be prepared for additional scrutiny of their fitness and propriety process in 2026 and would be wise to use the transition period to review governance arrangements, fitness and propriety processes, record-keeping and Conduct Principles training for all Relevant Employees ahead of the July 1, 2026 implementation date.
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