DFSA Communication on Licensed Functions and Fitness & Propriety Obligations

The Riffle

The Dubai Financial Services Authority (DFSA) has released a formal reminder to all Authorised Firms in the DIFC, reinforcing the critical importance of maintaining fit and proper standards for personnel performing Licensed Functions. The message comes while the DFSA continues to review feedback from Consultation Paper No. 165 (CP165), which proposed changes to the framework governing Authorised Individuals and Licensed Functions.

The DFSA’s key directive is clear — firms must not act on the CP165 proposals until formal amendments are incorporated into the DFSA Rulebook. Any future updates will be communicated officially through the regulator’s website.

Core Regulatory Obligations

The DFSA underscores that ensuring employees meet the fit, proper, competent, and capable standards is not an administrative formality but a core regulatory duty. These obligations are central to maintaining trust, market integrity, and client protection within the DIFC.

Under GEN Rule 5.3.19, all Authorised Firms must:

• Vet and monitor all employees for fitness and propriety.

• Maintain clear, demonstrable records of compliance.

• Regularly review and update governance frameworks.

Firms lacking adequate controls or governance processes must immediately remediate these deficiencies to avoid breaching DFSA rules.

Key Considerations: Outsourcing and Multiple Roles

The DFSA highlights two specific areas requiring heightened oversight:

1️⃣ Outsourced Licensed Functions

Even when functions are outsourced, firms retain full responsibility for ensuring that the individuals performing these roles are qualified, experienced, and have the capacity to fulfil their duties. Firms must assess how many other entities an outsourced individual serves to confirm adequate time and attention can be devoted to their role.

2️⃣ Multiple Licensed Functions

As per GEN Rule 7.5.1A, a single individual may perform multiple Licensed Functions only if the firm is reasonably satisfied that the person can do so effectively without compromising any of the functions.

Immediate Actions Required

All Authorised Firms are expected to:

• Conduct an internal review of their governance and record-keeping frameworks.

• Ensure robust vetting and monitoring processes are in place.

• Maintain detailed documentation to demonstrate ongoing compliance.

For clarifications, firms have been advised to contact the DFSA through the Supervised Firm Contact Form available on the DFSA ePortal.

The communication was issued by Justin Baldacchino, Managing Director of Supervision, and shared directly with Senior Executive Officers and Compliance Officers across the DIFC.

Read the full briefing document presented by 10 Leaves here -