DFSA Overhauls Client Assets Regime Ahead of 2026 Implementation

The Dubai Financial Services Authority (DFSA) has unveiled a comprehensive update to its Client Assets regime, signalling a significant evolution in how authorised firms must manage, report on, and protect client money, investments, and crypto tokens within the Dubai International Financial Centre (DIFC). The new rules will come into effect on 1 January 2026, following consultation through CP160 and the associated Feedback Statement.

Published last week, the DFSA’s updated regime and accompanying Frequently Asked Questions (FAQ) highlight a series of structural and supervisory shifts aimed at improving investor protection, clarifying responsibilities for auditors and firms, and preparing the industry for crisis scenarios.

Key Reforms

At the heart of the overhaul are four core updates:

• Clarified obligations for firms that control but do not hold client assets, reducing ambiguity in the regulatory perimeter.

• Exclusion of Fund Property (including investments and crypto tokens) from the Client Assets regime, where those assets form part of a fund’s portfolio.

• Introduction of a Client Asset Crisis Preparedness Pack, mandating firms to maintain essential information to facilitate asset return in the event of insolvency or disruption.

• New auditing responsibilities, requiring more specific reporting across client money, investments, and crypto token custody.

The revised framework comes amid a growing regional push to elevate financial infrastructure standards and align with global best practice. While most firms are expected to operate on a calendar-year basis, the DFSA has acknowledged transitional complexity for firms with non-calendar financial years, with dual reporting potentially required during the crossover period.

FAQs: What the Industry Needs to Know

The DFSA’s 24-question FAQ document, published alongside the online summary, offers detailed guidance for firms and auditors preparing for implementation. Key areas covered include:

• Timeline & Transitional Guidance: Confirmation that the current rules remain in effect until 31 December 2025, with dual compliance issues addressed for non-calendar-year firms.

• Audit and Reporting Requirements: Firms must submit Client Assets Auditor’s Reports — including separate reports for client money, safe custody of investments, and crypto tokens — within four months of their financial year-end. A further summary of non-compliance findings must follow within 30 days.

• Third-Party Agent (TPA) Assessments: Emphasis is placed on due diligence, creditworthiness evaluation, and diversification considerations when entrusting TPAs with client assets.

• Client Disclosure Rules: Firms must disclose insolvency regimes and depositor preference frameworks applicable in TPA jurisdictions.

• Reconciliation & Recordkeeping: Monthly reconciliations are the baseline, with more frequent checks expected depending on transaction volume and risk. Firms must also maintain robust TPA assessment records.

• Client Asset Crisis Preparedness Pack: A central innovation of the new regime, the Pack must be maintained by firms that hold or provide custody of client assets, but not by those that merely control them. It must be kept up to date within five business days of any material change and may be integrated into existing business continuity plans.

• Fund Management Exemptions: The rules explicitly exempt firms engaged solely in delegated fund management from holding a Client Assets endorsement, provided they do not also offer wealth management services.

Sector Response and Outlook

While the DFSA has committed to running outreach sessions ahead of implementation, firms are being urged to conduct gap analyses and update internal systems and controls without delay. Registered Auditors are similarly expected to revise their audit methodologies in line with the new scope and structure.

With its phased rollout and technical clarifications, the new Client Assets regime is positioned to provide greater certainty and security across the DIFC ecosystem, particularly as the market expands its exposure to crypto assets, cross-border custody, and outsourced operations.

The full FAQ and further details can be accessed via the DFSA’s website.

Need help preparing for the DFSA’s revised Client Assets regime?

At Clarity, we work with authorised firms and auditors to ensure full readiness ahead of the 1 January 2026 deadline. Whether you need help conducting a gap analysis, updating audit processes, reviewing your client disclosures, we’re here to support you.

Get in touch today to discuss how we can help you meet the new requirements with confidence.