DFSA CP160 Feedback: Client Assets Regime Updates

The Riffle

The DFSA’s Feedback Statement on CP160 introduces updates to the Client Assets Regime, effective January 1, 2026. Key changes include excluding Fund Property from Client Assets, requiring firms holding Client Assets to maintain a Crisis Preparedness Pack, and mandating monthly reconciliation for both Client Investments and Client Money. Auditors are no longer required to assess remedial actions, but firms must report all findings. Third Party Agent (TPA) assessments must be documented, and firms must provide clear insolvency disclosures. These updates enhance transparency and compliance, ensuring firms are ready for the new regulations.

Key Updates from DFSA CP160 Feedback

1. Fund Property Exclusion

• Update: Assets classified as "Fund Property" are not considered "Client Assets."

• Impact: Investment managers handling funds exclusively no longer require a Client Asset endorsement.

• Foreign Funds Clarification: DFSA confirms that Fund Property of Foreign Funds is also excluded from Client Assets protection.

2. Client Assets Crisis Preparedness Pack

• New Requirement: Firms holding Client Assets must maintain a crisis preparedness pack.

• Update Frequency: The pack must be updated within 5 business days of any change.

• Integration Allowed: If an existing business continuity plan includes all required details, no separate pack is needed.

3. Client Assets Auditor’s Report

• Proposal Dropped: Auditors will not assess whether firms took appropriate action on discrepancies.

• New Rule: Authorised Firms must report all audit findings (not just material ones) and outline remedial actions.

• Reporting Deadline: Firms must submit reports within 30 days of the Auditor’s Report submission.

4. Third Party Agent (TPA) Suitability

• New Documentation Requirement: Firms must document their assessment of TPAs.

• Principle-Based Diversification: No fixed diversification percentage required for Client Money holdings.

5. Client Disclosures

• Updated Rule: Firms must disclose relevant insolvency protections in the TPA’s jurisdiction.

• Example: If depositor guarantee schemes exist, firms must inform clients.

6. Client Asset Reconciliations

• New Requirement: Both Client Investments & Client Money must be reconciled monthly.

7. Client Investments Reporting

• Proposal Dropped: No mandatory monthly reporting for Professional Clients.

• Reason: Many clients prefer real-time online access over periodic reports.

8. Transition Period

• Final Deadline: January 1, 2026 – allowing firms time to comply.

Next Steps:

• Review and integrate the updated rules into compliance frameworks.

• Ensure documentation, reconciliation, and reporting align with new requirements.

• Prepare for the new regulatory expectations before the January 2026 deadline.

  The DFSA’s updates improve transparency, client asset protection, and risk management, ensuring firms are well-prepared for the regulatory changes.

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