Establishing a DFSA Category 3A and Category 4 licence in Dubai in 2024
Over the past few decades, the United Arab Emirates (UAE) has rapidly developed into a global business hub, with Dubai emerging as a prime destination for top-tier investment firms, asset managers, fintech companies, and venture capital funds. A pivotal element in this financial success has been the Dubai Financial Services Authority (DFSA), an independent regulatory authority that oversees all financial and ancillary services within Dubai. The DFSA works in tandem with the Dubai International Financial Centre (DIFC) to ensure the seamless operation of this prominent financial district.
In this article, the SALVUS Investment Firms Licensing team delves into the requirements for obtaining a Category 3A or Category 4 license under the DFSA framework, comparing the two categories. We also share our approach to assisting you in securing the appropriate license to suit your specific business needs.
Additionally, the Licensing team at SALVUS highlights the DFSA’s vision and regulatory strategy and offers advice from the DFSA on becoming a licensed Investment Firm, Investment Fund, Money Services Firm, or other types of financial service providers.
This commentary is designed to guide you through the process of establishing a DFSA Category 3A or Category 4 license in Dubai in 2024, ensuring that you are well-informed and prepared for the regulatory landscape ahead.
1. DFSA Category 3A license requirements and authorisation
2. DFSA Category 4 license requirements and authorisation
3. How Category 4A and Category 4 licenses compare
4. The DFSA’s vision and regulatory approach
5. Advice from the DFSA for becoming a licensed entity
6. How can SALVUS help?
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1. The DFSA Category 3A license
The DFSA Category 3A license allows an investment firm to conduct the following financial services:
- Dealing in Investment as Principal (on a Matched Principal basis only), or
- Dealing in Investments as Agent.
To qualify, the firm must be incorporated in DIFC and may operate as a subsidiary of a regulated entity from approved jurisdictions. With a Retail Clients license endorsement from the DFSA, Category 3A licensed entities can onboard retail clients. Additionally, they can hold and/or control client funds or assets through a Client Assets license endorsement issued by the DFSA.
The minimum capital requirement for entities with a DFSA Category 3A license is 500,000 USD. Based on our experience, the licensing process typically takes between 8-12 months to complete.
2. The DFSA Category 4 license
The DFSA Category 4 license, permits an investment firm to perform the following investment related services:
- Arranging Deals in Investments,
- Advising on Financial Products,
- Operating an Alternative Trading System,
- Providing Fund Administration,
- Operating a Crowdfunding Platform.
Through DFSA Category 4 license, firms can be authorized to offer other financial services not included in the above list.
Similar to Category 3A, the firm must be incorporated within the DIFC and can be a subsidiary of a regulated entity from approved jurisdictions. While Category 4 licensed entities can onboard retail clients through a Retail Clients regulatory license endorsement from the DFSA, they are not permitted to hold or control client funds or assets.
The minimum capital requirement for entities holding a DFSA Category 4 license is 30,000 USD. Based on our experience, the licensing process for a DFSA Category 4 license can be completed within 6-8 months.
Contact us at info@salvusfunds.com to discuss your DFSA Category 3A or Category 4 licensing requirements; our SALVUS Licensing team looks forward to being of value.
3. How the Category 3A and Category 4 licenses compare
| Features | Category 3A | Category 4 |
|---|---|---|
| Key differences | Allowed to act as a traditional broker | Allows the license holder to be a facilitator of transactions but has no authority to bind parties to the transaction |
| Minimum Regulatory Capital Required | 500,000 USD | From 30,000 USD, depending on the combination of services to be offered. |
| Licensing timeframe | approx. 12 months | approx. 6 months |
| Permitted to hold and/or control client funds or assets | Yes, through a one-off 5,000 USD Client Assets regulatory license endorsement fee to the DFSA | No |
4. The Dubai Financial Services Authority vision and regulatory approach
The DFSA intends to set clear goals and principles, providing direction and purpose for its regulatory activities. Its vision is “to be an internationally respected regulator, leading the development of financial services through strong and fair regulation”. The DFSA follows a risk-based regulatory approach. The independent regulator directs and prioritises their resources to prevent unacceptable and unnecessary risks. Thus, the DFSA is committed to ensuring a high level of competence across all functions related to their administrative and consultative procedures, while also commanding respect amongst the market participants in the region and across the globe.
5. Advice from the regulatory for becoming a licensed entity
Preparing the necessary documentation and paperwork for submitting an application has to be taken seriously. Whether you are a start-up investment firm or an established payment institution wanting to branch out into Dubai’s International Financial Centre and grow your business, it is important to prepare in advance.
Submitting the DFSA’s most up-to-date application forms will help avoid outdated requirements and having to re-do the procedure. Additionally, ensure the business activities to be provided are indeed recognised by the DFSA and correspond to specific financial and ancillary services. If you are unsure whether or not your business activities fall under DFSA’s regulation, be sure to review this with the DFSA, DIFC or an expert consultancy firm such as SALVUS.
6. How can SALVUS assist you?
At SALVUS, we adopt a project management approach to efficiently manage these engagements. We guide our clients through the entire process, collaborating to gather and analyse internal data and producing all necessary documentation for a complete and successful licensing application.
Drawing on our extensive experience with DFSA Category 3A and Category 4 licensing applications, we proactively anticipate and address potential regulatory queries. This ensures our clients are well-prepared for regulatory scrutiny, streamlining their path to securing a DFSA Category 3A or Category 4 license.
SALVUS will work closely with you to identify the best solution for your business needs in the region. We are dedicated to ensuring that your application to the DIFC and DFSA is thorough and well-prepared, meeting all regulatory requirements effectively.
Contact us at info@salvusfunds.com to discuss your DFSA Category 3A or Category 4 licensing requirements; our SALVUS Licensing team looks forward to being of value.
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The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.