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Dubai financial zone adjusting regulation to boost wealth managers

[DUBAI] Dubai is adjusting regulation of investment firms that handle the money of wealthy people in its financial free zone, a move that could help the zone win more wealth-management business from the Middle East and Asia.

Like other financial hubs, the Dubai International Financial Centre (DIFC) distinguishes between less-sophisticated retail clients and richer, more experienced professional clients, which are assumed to need less regulatory protection.

New rules announced by the Dubai Financial Services Authority (DFSA) on Wednesday give investment firms more flexibility to classify their clients as professional, for example by easing a requirement for the firms to assess clients'net assets.

In addition, they will be allowed to classify some clients as professional because of the nature of the services being provided to them, without an asset test.

Reducing regulation may cut costs for wealth managers and help them win more business, particularly from the "family offices" which handle the money of the Gulf's wealthy business dynasties and are increasingly establishing presences in Dubai.

While the DIFC is booming as a banking centre, it has been slower to grow in wealth management. Instead, much of the business for Gulf clients is done out of European cities.

In another step that could help to change this, the DFSA last August created a new class of DIFC-domiciled funds, aimed at the richest and most risk-tolerant investors, which face less stringent regulation than existing funds.

The DFSA said on Wednesday that its new rules on professional clients would take effect on April 1, except for a provision increasing the minimum assets of one type of professional client to US$1 million from US$500,000. That will come into effect on April 1, 2016, to give firms time to adjust.