Proposed DFSA Amendments under Consultation Paper No.165: Shifting Key Roles from Licensed to Designated Functions

The Dubai Financial Services Authority (DFSA) has proposed significant revisions to the appointment, supervision, and regulation of key roles within Authorised Firms. Under the new framework, Compliance Officers, Finance Officers, and Senior Managers will no longer be “Licensed Functions” requiring DFSA approval.

Instead, they will become “Designated Functions,” with firms assuming responsibility for their appointment and oversight. Senior Executive Officers (SEO) and Money Laundering Reporting Officers (MLRO) remain Licensed Functions requiring DFSA approval.

These changes increase firms’ accountability for staff fitness and propriety. The DFSA is seeking industry feedback, with the consultation period closing on 5 May 2025. Firms should assess how the amendments could impact compliance, governance, and senior management oversight.

DFSA Consultation Paper No.165: Key Changes

1. Reclassification of Licensed Functions

Currently, eight Licensed Functions require DFSA approval: SEO, Licensed Director, Licensed Partner, Finance Officer, Compliance Officer, Senior Manager, MLRO, and Responsible Officer.

The proposals shift Compliance Officer, Finance Officer, and Senior Manager functions to Designated Functions, placing the full responsibility for fitness and propriety assessments on firms.

The DFSA is also considering whether a Finance Officer should remain a mandatory function for certain low risk firms.

2. SEO and MLRO Retain DFSA Approval

The SEO and MLRO will remain Licensed Functions due to their critical roles in governance and anti-money laundering. The DFSA will continue vetting these positions to ensure fitness, propriety, and competence.

3. New Notification and Accountability Framework

While DFSA approval will no longer be required for Designated Functions, firms will be required to:

• Notify the DFSA within seven days of appointing or removing a Designated Individual.
• Attest that fitness and propriety has been assessed in accordance with the relevant criteria.
• Perform periodic reviews and submit annual attestations confirming ongoing fitness and propriety.

4. Expanded Definition of “Relevant Individuals”

The proposals introduce three personnel categories:

1. Authorised Individuals – Roles requiring DFSA approval (SEO, MLRO, etc.).
2. Designated Individuals – Firm-appointed roles (Compliance Officer, Finance Officer, Senior Manager).
3. Relevant Employees – Staff involved in financial services activities but not classified under the first two categories.

Principles 1-4 of the of the Principles for Authorised Individuals (to be renamed as ‘Conduct Principles’ with some minor amendments) are proposed to be applied to all Relevant Individuals, except those carrying out ancillary roles.

5. Role Combination Restrictions

While the DFSA will not directly approve Designated Functions, the proposed rules still limit role combinations. For instance, the SEO cannot simultaneously hold the Compliance Officer or Finance Officer role. Firms must ensure role separations to maintain governance integrity and avoid conflicts of interest.

Next Steps for Firms

The DFSA has invited public comments until 5 May 2025. Firms should assess the impact of these proposals on their organisational structure, reporting lines, and compliance frameworks. Following the consultation, the DFSA will finalise the rules and set an implementation period for compliance adjustments.

Subject to any changes that arise following the consultation process, the DFSA will proceed to make changes to the DFSA Rulebook and would intend to publish these in July 2025. The amended rules will then come into force on 1 September 2025. As of this date, existing Compliance Officer, Finance Officer and Senior Manager functions will automatically transition to Designated Functions and Designated Individuals, unless the DFSA is notified of any changes.

How Clarity Can Help

Clarity offers expert guidance on DFSA regulatory changes, assisting firms in navigating governance realignments and strengthening compliance frameworks. Firms facing role reassignment or requiring enhanced fitness and propriety processes can benefit from tailored support.

For expert assistance in adapting to these changes, contact Clarity today.