Singapore VCC insights

DFSA CP 173: What the DIFC Funds Overhaul Means for a Manager Weighing a Singapore VCC

By VCC Editorial Team · Published 10 November 2026

Short answer: DFSA CP 173 remains a proposal; we found no final rules as at 10 November 2026. It would loosen DIFC specialist fund labels, fold dealing and arranging into the managing assets licence and abolish the External Fund Manager route. Managers planning to run a DIFC fund from Singapore without a DFSA licence should wait.

This article is general information only and is not legal, tax or investment advice. For matters needing legal advice, we work with a panel of experienced Singapore law firms.

DFSA CP 173 matters to a manager choosing between Dubai and Singapore because it changes the comparison in two places. It lowers friction inside the Dubai International Financial Centre (DIFC) for licensed managers. It also closes the route that let a foreign manager run a DIFC fund without a DFSA licence. This article reads each proposal against the position of a Singapore Variable Capital Company (VCC) manager. It is a consultation explainer: everything attributed to CP 173 is a proposal, not law. We checked all sources on 10 November 2026. Our comparison of a DIFC Qualified Investor Fund and a Singapore VCC and our review of the DIFC Variable Capital Company Regulations 2026 compare vehicles under today’s rules. This article looks at what may change.

What is DFSA CP 173, and is it final?

CP 173, titled “Proposals to enhance DFSA’s Collective Investment Funds Framework”, is a consultation. It is not a rulebook change. The DFSA released it on 7 July 2026 and set 7 September 2026 as the deadline for comments.

The DFSA says the paper aligns requirements “more closely to the risk profile of a fund and its investors” while reducing “unnecessary regulatory burden”. As at 10 November 2026 we found no DFSA notice of amendments, policy statement or final rules implementing CP 173. The DFSA notices from July and October 2026 that we found relate to other consultations. Until the DFSA Board makes the amending instruments, the current Collective Investment Law and Collective Investment Rules (CIR) apply in full.

This article relies on the DFSA’s official summary of CP 173, which lists each proposal. We could not retrieve the full draft rule text this run, so we do not cover drafting detail such as transitional periods. Read the draft appendices before relying on any specific mechanism.

What does CP 173 propose, and what is the Singapore counterpart?

Most proposals reduce friction for DFSA-licensed managers; removing the External Fund Manager regime takes an option away. The table maps each against Singapore.

CP 173 proposal (not yet in force)	Current DIFC position	Singapore VCC position (in force)
Replace rigid specialist private fund classes with a risk-based approach that accommodates hybrid and multi-strategy funds	Specialist rules for property, private equity, credit, money market and other funds; credit funds must be closed-ended with a life of up to 10 years	A VCC is one or more collective investment schemes (section 15(1) of the VCC Act), with no DFSA-style specialist strategy classes; one umbrella VCC can hold sub-funds with different strategies, governed by the offer route and the manager’s licence
Treat dealing as agent and arranging as integral to fund management, covered by a managing assets licence	The DFSA presents this as a clarification of the managing assets licence scope	Fund management under a capital markets services (CMS) licence; anyone doing fund management activity for the VCC, including marketing, must be an appointed representative
Remove the External Fund Manager regime	A body corporate from an acceptable jurisdiction may manage a DIFC fund without a DFSA licence if it appoints a DFSA-licensed fund administrator or trustee	No foreign-manager route: the VCC must appoint a permissible fund manager regulated by MAS
Update master-feeder public fund rules and widen the definition of master fund	Eligibility criteria for public master-feeder structures that the DFSA now calls outdated	Retail offers need MAS authorisation or recognition and a registered prospectus
Broaden employee investment in private funds managed by the employer	Professional-investor and minimum-subscription limits apply	Depends on the offer exemption used, for example the private placement or accredited investor exemptions
Targeted technical amendments to the Collective Investment Law	DIFC Law No. 2 of 2010 as amended	Not applicable

How would the move away from specialist fund categories compare with a Singapore umbrella VCC?

This is where CP 173 could narrow Singapore’s flexibility advantage most. Today a DIFC Exempt Fund that fits a specialist label carries that label’s rules. A credit fund must be closed-ended. It must be an Investment Company or an Investment Partnership, set up for a finite period of no more than 10 years, and be either an Exempt Fund or a QIF. A property fund must be closed-ended. A private equity fund that is an Exempt Fund appoints an investment committee instead of an eligible custodian. The DFSA’s guidance notes that specialist fund requirements do not apply to QIFs, so the current constraints fall mainly on Exempt and Public Funds.

In Singapore, the Variable Capital Companies Act 2018 requires a VCC to be one or more collective investment schemes but has no equivalent of the DFSA’s specialist fund classes. A hybrid strategy, such as private credit alongside listed equities, can sit in separate sub-funds under one board, constrained by the offer route, the manager’s licence and the custody rule.

The DFSA’s summary says the new approach will “accommodate hybrid and multi-strategy investing” but does not say which specialist rules survive. Until the CIR is final, a manager cannot know whether a DIFC credit fund will still be capped at 10 years.

What does removing the External Fund Manager regime mean for a Singapore-based manager?

This is the proposal with the most direct cross-border effect. A Singapore manager that hoped to run a DIFC fund from Singapore, without a DFSA licence, would lose that option if the proposal is adopted.

Under the current regime, a fund manager from an acceptable jurisdiction can establish and manage a DIFC domestic fund without a DFSA licence. It must be a body corporate, submit to DIFC laws and courts, and appoint a DFSA-licensed fund administrator or trustee to act as its local agent and handle investor-relations functions. The route is not available for credit funds. The DFSA explains the proposed removal by pointing to its “strong and growing pipeline of firms seeking full DFSA authorisation”.

The change would bring the DIFC closer to Singapore’s model. A Singapore VCC has never accepted a foreign manager. MAS Circular IID 04/2025 (26 June 2025) states that a VCC “must have a manager that is regulated by MAS”, citing section 46 of the Variable Capital Companies Act 2018. The Accounting and Corporate Regulatory Authority (ACRA) lists the permissible managers as holders of a CMS licence for fund management, or financial institutions exempt under section 99(1)(a) to (d) of the Securities and Futures Act 2001, such as banks.

Once both hubs require a locally regulated manager, the real question is where the investment team sits. A manager wanting funds in both centres would need two regulated entities, or a feeder or parallel structure.

How does DIFC manager authorisation compare with MAS licensing after CP 173?

CP 173 would make the DFSA licence scope simpler. It would not lower the bar to entry. MAS’s requirements are already set out and in force.

The DFSA proposes to clarify that dealing as agent and arranging, done as part of managing funds, are covered by a managing assets licence. That spares managers a second permission for activities they carry out anyway. The DFSA’s current published fees are US$5,000 on application and US$5,000 a year for a manager of QIFs only. They are US$10,000 each for a manager of Exempt and Public Funds. Each QIF or Exempt Fund pays an annual fee of US$4,000. CP 173’s summary does not mention fee changes.

In Singapore, IID 04/2025 states that every individual who conducts fund management activity for the VCC must be appointed as a representative of the manager. That includes portfolio inputs and marketing. It also expects managers to carry out “substantive fund management activity” and not act as a conduit for assets the investors already owned. For the licence application itself, see our guide to building the fund management licence file for MAS.

How do custody, audit and offer rules differ between the two hubs?

These areas are largely outside CP 173. They are also where the Singapore rules are most settled, so a manager can compare them now.

1. Custody. Under regulation 13B(1)(c) of the Securities and Futures (Licensing and Conduct of Business) Regulations, as cited in IID 04/2025, a VCC manager must keep the VCC’s assets segregated with an independent custodian. The exception is private equity or venture capital investments offered only to accredited or institutional investors. In the DIFC, an Exempt private equity fund may appoint an investment committee in place of an eligible custodian. CP 173’s summary does not say whether that changes.
2. Audit. ACRA requires every VCC to appoint at least one auditor within three months of incorporation, and states that the usual Companies Act audit exemptions do not apply to VCCs.
3. Directors. A VCC needs at least one director who is a director or qualified representative of its manager (section 48(1)(b) of the Variable Capital Companies Act 2018). A VCC with authorised schemes needs at least three directors, one of them independent.
4. Offers in Singapore. A VCC sub-fund offered only to “relevant persons” under section 305 of the Securities and Futures Act 2001 is a restricted scheme. It must be notified to MAS through CISNet and entered on MAS’s list before any offer, with an information memorandum and an annual declaration every 12 months. Other exemptions cover small offers of up to S$5 million in 12 months and private placements to no more than 50 persons in 12 months.
5. Offers in the DIFC. Under the current regime an Exempt Fund or QIF is offered only to professional clients by private placement, at minimum subscriptions of US$50,000 and US$500,000 respectively.

A DIFC fund marketed into Singapore can use the restricted scheme route. To be entered on the list, its manager must be “licensed or regulated to manage the scheme property in the jurisdiction of its principal place of business and is fit and proper”. A DFSA-licensed manager can meet that condition.

Does tax change the answer for a manager weighing DFSA CP 173?

CP 173 does not deal with tax. In Singapore, tax often decides where the manager sits.

MAS Circular FDD 05/2026 (31 July 2026) states that the section 13D, 13O, 13OA and 13U schemes under the Income Tax Act 1947 “provide tax exemption to fund vehicles managed by Singapore-based fund managers”. The same circular removes the annual minimum assets under management condition in Designated Investments for non-single family office funds under sections 13O, 13OA and 13U. A Singapore VCC managed from Dubai would be outside these schemes.

For the remaining entry conditions, see our note on the 13O entry test after the 2026 circular. The UAE corporate tax position of a DIFC fund or manager is a separate question. Take UAE advice on it, as nothing in CP 173 changes it.

Which managers should wait for the DFSA’s final rules before choosing?

Wait if your DIFC plan depends on a proposal that could change; decide now if it rests on settled Singapore rules.

Managers who should wait:

• Singapore or other foreign managers whose DIFC plan relies on the External Fund Manager route. Under CP 173 that route would end, and the transitional treatment for existing arrangements is not stated in the DFSA’s summary.
• Managers of hybrid or multi-strategy Exempt Funds, or of credit and property strategies, whose structure depends on which specialist rules remain.
• Managers pricing a DFSA licence with separate dealing or arranging permissions, because the proposed licence scope may make one of them unnecessary.
• Sponsors planning public master-feeder structures, or employee co-investment vehicles, in the DIFC.

Managers who need not wait:

• Managers whose team, investors and banking are centred in Asia. The Singapore requirements for manager, custody, audit and offers are in force and do not depend on CP 173.
• Managers whose economics depend on a Singapore fund tax incentive, which needs a Singapore-based manager wherever the investors are.
• QIF managers already licensed by the DFSA with a single-strategy fund, who are largely unaffected because specialist fund requirements do not apply to QIFs today.

The long-term investment fund and tokenisation ideas are at the early-feedback stage and are not a reason to delay. For the wider Gulf picture, see our comparison of the ADGM funds framework and Singapore.

Frequently asked questions

Has the DFSA issued final rules under CP 173?

Not as far as we could find on 10 November 2026. The comment period closed on 7 September 2026. The DFSA notices of amendments published since then relate to other consultation papers. Check the DFSA’s legislation and news pages before acting.

Can a Singapore fund manager manage a DIFC fund today without a DFSA licence?

Under the current regime, yes, as an External Fund Manager. It must be a body corporate from an acceptable jurisdiction, submit to DIFC laws and courts, and appoint a DFSA-licensed fund administrator or trustee. The route is not available for credit funds. CP 173 proposes to remove it.

Can a DFSA-licensed manager manage a Singapore VCC?

Not on a DFSA licence alone. A VCC must appoint a permissible fund manager regulated by MAS: a CMS licence holder for fund management or a financial institution exempt under section 99(1)(a) to (d) of the Securities and Futures Act 2001.

Does a Singapore VCC need a custodian?

Yes, as a rule. The manager must keep the VCC’s assets segregated with an independent custodian. The exception is private equity or venture capital investments offered only to accredited or institutional investors.

Sources

• DFSA: The DFSA proposes significant updates to its Collective Investment Fund framework (7 July 2026)
• DFSA: Collective Investment Funds, key features of the DFSA funds regime
• MAS Circular IID 04/2025: Governance and Management of Variable Capital Companies (26 June 2025)
• MAS: Offers of Collective Investment Schemes
• ACRA: Step 2, choosing directors and key officers for a VCC

Raffles Corporate Services helps fund managers weighing Dubai against Singapore with VCC incorporation, umbrella and sub-fund set-up, family office set-up and ongoing compliance, working alongside MAS-licensed managers and experienced Singapore law firms. Email hello@rafflescorporateservices.com or Call/SMS/WhatsApp +65 8501 7133, or visit Raffles Corporate Services.

Last reviewed: 10 November 2026. The Editorial Team, Variable Capital Companies Act.