UAE capital markets reform to bolster investor protection

The changes follow the government issuing Federal Decree-Law No (32) of 2025 and Federal Decree-Law No (33) of 2025, which together establish a new regulatory framework for the capital markets sector and replace the Securities and Commodities Authority (SCA) with the Capital Market Authority (CMA) as the new regulatory authority with supervisory powers over the sector.

The decree laws, which entered into force on 1 January 2026, define the CMA’s role in prudential oversight and the management of exceptional circumstances. Any prior references in UAE legislation to the SCA will now refer to the CMA.

Marie Chowdhry, a financial regulation expert at Pinsent Masons, said the reforms represented more than a “rebrand” and would significantly “modernise and strengthen oversight” of the country’s capital markets regime and bring it in line with international standards. “Investor protections have been strengthened, including through the CMA’s power to establish an investor protection fund to safeguard investor assets against risks determined by the CMA,” she said.

A separate settlement guarantee fund will also be an available as a form of recourse by the central clearing house to guarantee settlement of market transactions.

The new framework grants the CMA the power to enter into conciliation before the initiation of criminal proceedings, to regulate early intervention, settlement, and resolution mechanisms, as required. In particular, the CMA will have jurisdiction to designate systemically important persons and intervene early if there is a deemed risk of collapse.

The new laws also bolster the regulator’s supervisory and enforcement toolkit, including the ability to impose administrative fines of up to AED 200 million or up to the value of ten times the profit gained or loss avoided.

The changes are also expected to establish a clearer and firmer regulatory perimeter that captures financial activities carried out both in the UAE – excluding the financial free zones; the Abu Dhabi Global Market (ADGM) and Dubai’s International Financial Centre (DIFC) – and conducted from outside the UAE where domestic clients are targeted.

The capital markets regime now expressly prohibits trading of virtual assets for investment purposes unless the virtual asset is approved and registered with the CMA. However, Chowdhry said it remains unclear how exactly this framework will interact in practice with existing regimes operating under the Dubai Virtual Assets Regulatory Authority (VARA).

The legislation took effect on 1 January 2026, but market participants are granted a transitional period of up to 12 months to align themselves with the new framework. This is helpful, Chowdhry commented, “given the general market uncertainty around some of the former SCA licensing categories – particularly with respect to established traders and brokers operating in the UAE and nearby jurisdictions such as in the Seychelles and Mauritius.”

The reforms follow a series of other major regulatory developments in the UAE financial services landscape, including the new Central Bank of the UAE’s (CBUAE) banking law and enhanced AML legislation. It is expected that further regulations and guidance from the CMA will be implemented as the regime takes effect.