Obtaining a DFSA Category 3A and Category 4 license

The UAE has been at the forefront of growth in the Middle East, with spectacular achievements in all aspects of their economy. As a natural consequence, entrepreneurs and existing groups are looking for ways to credibly enter the regulated market of financial services in the wealthy region. For this, there are two key abbreviations someone needs to know: the DFSA and the DIFC.

The Dubai Financial Services Authority (DFSA) is the independent regulatory authority for all activities related to financial and ancillary services in Dubai. The Dubai International Financial Centre (DIFC) is a financial-free zone attracting some of the world’s finest investment firms, investment funds, fintechs, and venture capital investment funds. The DFSA works symbiotically with the DIFC in facilitating the largest financial hub for not only the Middle East, but increasingly for Africa and South Asia too.

In the following commentary, the Licensing team at SALVUS outlines the requirements for obtaining a Category 3A or Category 4 license in alignment with the DFSA and DIFC, and how the two categories compare. We also mention our approach to helping you obtain your desired license suitable to your particular business needs.

Moreover, our Licensing team provides information about the advantages associated with operating a business in the DIFC, the DFSA’s vision and regulatory approach, and finally some advice from the DFSA themselves in becoming a licensed investment firm, investment fund, Electronic Money Institution (EMI) or any other type of financial services provider.

  1. DFSA Category 3A license requirements and authorisation
  2. DFSA Category 4 license requirements and authorisation
  3. How Category 3A and Category 4 licenses compare
  4. Obtaining a DFSA Category 3A or DFSA Category 4 license with SALVUS
  5. Advantages of operating a business in the DIFC
  6. The DFSA’s vision and regulatory approach
  7. Advice from the DFSA for becoming a licensed entity

1. The DFSA Category 3A license

The Category 3A license under the regulation of the Dubai Financial Services Authority (DFSA), authorises an investment firm to carry out the financial services of

  • Dealing in Investment as Principal,
    1. Restricted to do so only on a Matched Principal basis only,
  • Arranging Deals in Investments.

The entity to be licensed will be incorporated in Dubai’s International Financial Centre (DIFC) and can be a subsidiary of a regulated entity in other approved jurisdictions. The entity can onboard retail clients through a Retail Clients regulatory license endorsement and compliance with the DFSA’s requirements when engaging retail clients, and can hold and/or control client funds or assets through a Client Assets regulatory license endorsement.

The Minimum Capital Requirement for DFSA Category 3A Licensed entities is at 500,000 USD and in our experience, the DFSA licensing procedure can be concluded in 12 to 14 months.

2. The DFSA Category 4 license

The Category 4 license by the Dubai Financial Services Authority (DFSA), authorises an investment firm to carry out the financial service of

  • Arranging Deals in Investments.

The entity to be licensed will also be incorporated in Dubai’s International Financial Centre (DIFC) and can be a subsidiary of a regulated entity in approved jurisdictions. A Category 4 licensed entity can onboard retail clients through a Retail Clients regulatory license endorsement fee and compliance with the DFSA’s requirements when engaging retail clients however, it cannot hold and/or control client funds or assets.

The Minimum Capital Requirement for DFSA Category 4 Licensed entities is 10,000 USD and in our experience, the DFSA licensing procedure can be concluded in 8 to 10 months.

3. How the Category 3A and Category 4 licenses compare

FeaturesCategory 3ACategory 4
Fees• ~23,000 USD in total for DIFC set-up & 15,000 USD recurring annually
• 20,000 USD as a one-off fee to DFSA for onboarding retail clients
• 25,000 USD or 50,000 USD as a one-off application fee to DFSA depending on the structure of the applying entity
• 25,000 USD plus 1,000 USD for each 1,000,000 of expenditure and 1,000 USD for each additional financial service specified on the license in annual renewal fees payable to the DFSA
• ~23,000 USD in total for DIFC set-up & 15,000 USD recurring annually
• 20,000 USD as a one-off fee to DFSA for onboarding retail clients
• 15,000 USD or 30,000 USD as a one-off application fee to DFSA depending on the structure of the applying entity
• 15,000 USD plus 1,000 USD for each 1,000,000 of expenditure and 1,000 USD for each additional financial service specified on the license in annual renewal fees payable to the DFSA
Minimum Regulatory Capital Required500,000 USD10,000 USD
Licensing timeframeapprox. 12 monthsapprox. 6 months
Permitted to hold and/or control client funds or assetsYes, through a one-off 5,000 USD Client Assets regulatory license endorsement fee to the DFSANo

4. Obtaining a DFSA Category 3A and Category 4 license with SALVUS

We approach our licensing engagements in a project management manner. For our clients, this means we work as an extension of their team, leading the effort to gather internal data while producing all required documents and forms.

We optimise the DFSA Category 3A and 4 licensed entity’s expenditure through our know-how on the most efficient number of employees, outsourcing arrangements and external third parties to be engaged for what.

5. The advantages of operating a business in the Dubai International Financial Centre

Setting up and operating a business in the Dubai International Financial Centre has numerous advantages. It is no secret that the DIFC built their legislation upon modelling frameworks used in the global financial hubs of New York and London. The rationale behind the implementation of similar models within Dubai, is that these models have proven extremely successful in all kinds of business cycles. Furthermore, the DIFC wanted to ensure businesses commencing operations within their jurisdiction have a robust financial legal framework to grow their firms.

Additionally, the enticing tax regime instilled in the UAE jurisdiction is worth mentioning. The DIFC guarantees zero taxes on profits and corporate income for 40 years. Great relationships with their vast and high-profile networks, comprised of central banks and regulators, have allowed the DIFC to implement several double taxation avoidance treaties.

Service providers such as SALVUS are, as a consequence, attracting high-end clientele in the region’s comprehensive financial ecosystem. The DIFC hosts an abundance of international wealth management firms and financial institutions and due to its geographic location, UAE enables firms to conduct business during worldwide operating hours.

6. The Dubai Financial Services Authority vision and regulatory approach

The DFSA’s 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 at preventing 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.

7. Advice from the regulator 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 have 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.

Our Licensing team is ready to listen to the specific needs and challenges of your business. We can then work together to overcome them. Our team carries vast experience in all matters associated with licensing across the UAE and other key areas of the region.

Please feel free to contact us via email at [email protected] or call us at +357 7000 7898 if you would like to find out more about how to obtain a DFSA Category 3A or Category 4 license or would like any additional information. Our 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.

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