ADGM's new funds rules are final: who gets a lighter route and who does not

In February a manager called us about a first fund. Roughly USD 60 million of commitments, closed-ended, private credit, a handful of family offices and two institutions. He had read about ADGM's proposed Sub Threshold Fund Manager category and wanted to know whether to wait for it or file in the DIFC now. We told him what we tell everyone in that position: do not build a plan that only works under a consultation paper.

That advice has an expiry date, and it reached it on 16 September 2026. The FSRA published its finalised enhancements to the ADGM funds framework, following industry feedback on Consultation Paper No. 12 of 2025. The rules are made, five rulebooks are amended, and there is a guidance note explaining how the new categories work. If you were waiting, you can stop.

What landed

The FSRA made and published rules on 16 September 2026 amending the Conduct of Business, Funds, General, Glossary and Prudential rulebooks. On the same day it issued a Supplementary Guidance on the Regulatory Framework for Specialised Fund Manager Categories, listed on the FSRA's guidance and policy statements page. The guidance is issued under section 15(2) of the Financial Services and Markets Regulations 2015 and sets out the eligibility and authorisation criteria for two new frameworks, their key features, and additional points that apply specifically to venture capital managers.

There are four moving parts. Two new fund manager frameworks, Sub Threshold and Institutional. A new Institutional Fund Asset Manager route for certain asset managers providing investment management services to funds sold exclusively to institutional investors. Changes that make it easier for employees to invest in private funds managed by their employer. And revisions to the framework for Foreign Fund Managers.

The guidance document covers the first of those in detail. It does not set out the Institutional Fund Asset Manager criteria, which sit in the rulebook amendments rather than in this guidance, and it does not deal with the Foreign Fund Manager revisions. If either of those is your position, read the amended Funds and General rulebooks directly rather than relying on a summary of the guidance, including this one.

Sub Threshold Fund Manager: four tests, not one

The headline is a number, and the number is real: committed capital for all funds managed, or proposed to be managed, must not exceed USD 200 million. But the FSRA requires three further conditions at the same time, and in our experience it is these that disqualify people rather than the ceiling.

No fund may be invested in by a Retail Client, so every fund must be an Exempt Fund, a Qualified Investor Fund or an equivalent foreign fund not open to retail. Every fund must be closed-ended. And the firm must not operate, or seek to operate, as a host fund manager. A manager planning an open-ended vehicle, or planning to platform other people's strategies, is outside this framework whatever its size.

The permission itself carries a restriction recording the firm's Sub Threshold status, and the FSRA expects that status and those restrictions to be disclosed in the fund prospectus, on the basis that an investor would consider it relevant.

There is a forward-looking obligation worth putting in your calendar now. If a Sub Threshold Fund Manager intends to accept commitments that would take it over USD 200 million, it must apply to vary its permission in advance of accepting them. That is not a notification after a successful close. It is a decision to be made while the closing documents are still in draft.

Institutional Fund Manager: a different test entirely

The Institutional framework is not a smaller version of the Sub Threshold one. There is no cap on assets. The test is who the investors are.

An Institutional Fund Manager may manage only Qualified Investor Funds, or equivalent foreign funds, where both carry a minimum subscription threshold of USD 5 million, and those funds must have no natural persons as unitholders. The FSRA's own example of the target investor is a sovereign wealth fund or a similar institution. If a fund would admit an individual, however wealthy, the manager falls outside the category.

That last point is where the employee change matters. The rules on Employee Investment Vehicles allow certain employees to invest in a fund managed by an Institutional Fund Manager without affecting the manager's status. If your carry or co-invest arrangements route employees into the fund itself, read those rules carefully before you assume the structure survives.

What each route changes in practice

Both new frameworks remove the internal audit function and the mandatory Finance Officer appointment. Neither removes the underlying responsibility. Where a firm does not appoint a Finance Officer, the FSRA expects it to demonstrate that it has the expertise on hand, in-house or outsourced, to prepare and oversee its financial accounts, and the Senior Executive Officer and the directors or partners remain responsible for compliance, including prudential capital compliance. In our experience that is the point advisers gloss over when selling a light-touch category. The function is gone. The accountability is not.

The capital positions differ. A Sub Threshold Fund Manager must hold capital resources meeting a base capital requirement of USD 50,000 on an ongoing basis, with no expenditure based capital minimum applied, but remains subject to the other prudential requirements for its category, including liquid assets above its minimum capital requirement, operational risk requirements and professional indemnity insurance. An Institutional Fund Manager must meet the higher of that USD 50,000 base and an expenditure based minimum of six fifty seconds of annual audited expenditure, and is not required to hold professional indemnity insurance.

Venture capital managers: inside the framework, with their own points

Venture Capital Fund Managers are a sub-category of Sub Threshold Fund Manager, so the same four eligibility tests apply. A VCFM applies using the Sub Threshold authorisation form and indicates its intention to operate as a VCFM, and the permission carries a restriction recording that status.

Two things are specific to VCFMs. First, the asset restriction: while Sub Threshold managers are generally not limited in what their funds may invest in, a VCFM may manage only VC funds, broadly funds limited to instruments issued by companies at an early stage of development, with the permissible investments listed in the Funds rulebook. Second, the approved persons position. A VCFM must appoint a Senior Executive Officer and, in addition, a Licensed Director if it is a body corporate or a Licensed Partner if it is a partnership. The SEO should have at least ten years of relevant and demonstrable experience and the Licensed Director or Partner at least five, in either operating a venture capital or private equity fund, or in-depth industry experience in the sectors the VCFM intends to invest in. The FSRA is explicit that this route is available to VCFMs only and not to other Sub Threshold managers.

A VCFM may also apply for permission to advise on investments or credit, or to arrange deals in investments, where those activities are restricted to co-investments in assets its VC fund will invest in. That can be added at authorisation or by variation later. If your model involves putting LPs alongside the fund in a portfolio company, this is the part to get right at the outset.

If you are already authorised

Existing Authorised Persons are not moved across automatically. Fund managers wanting Sub Threshold or Institutional status apply to vary their Financial Services Permission using the declaration form the FSRA has published, and asset managers wanting Institutional Fund Asset Manager status use a separate form. Where the variation is granted, a restriction goes on the permission recording the new status.

The honest question to ask before filing is whether you want the restriction. A Sub Threshold permission is a commitment to stay under USD 200 million, closed-ended and free of retail money until you vary it again. A manager who expects to raise past that in eighteen months may prefer to be authorised once, properly, rather than twice.

The 31 March 2027 date

The FSRA has set a transition period running to 31 March 2027 for the new rules as they apply to Venture Capital Fund Managers and Foreign Fund Managers, and has said it will contact those firms about transition arrangements.

Two practical points. Being contacted by your regulator is not a project plan, and the firms that handle this well will have read the amended Funds rulebook against their own permission, business plan and prospectus long before the letter arrives. And for foreign fund managers in particular, the announcement confirms that the framework has been revised but the detail is in the rules rather than in the guidance note, so this is a read-the-instrument exercise, not a read-the-summary one.

What has not changed

Authorisation is still required. These are streamlined frameworks, not exemptions: a Sub Threshold or Institutional Fund Manager still applies for a Financial Services Permission to carry on the regulated activity of managing a collective investment fund, and still satisfies the FSRA on its business plan, its systems and its people.

Approved individuals still apply. Removing the mandatory Finance Officer does not remove the Senior Executive Officer, the Compliance Officer or the MLRO, and for a VCFM it adds a Licensed Director or Partner with a stated experience floor.

Substance still applies. Nothing in the 16 September rules changes the expectation that a manager authorised in ADGM is actually run from ADGM. The vehicle, the service providers and the office are the same conversation as in August.

And the jurisdiction question has not been settled by this. Our DIFC and ADGM fund setup comparison works through the differences that usually decide it, and our guides to setting up a fund in ADGM and the DIFC's 2026 fund regulations cover each side. If you are at the earlier stage of deciding whether a fund is the right vehicle at all, our note for emerging fund managers is the better starting point.

What has changed is that a manager with a small closed-ended fund, or an institutions-only fund, now has an ADGM route with fewer mandatory functions than the standard one. That is worth a fresh look if you priced ADGM out earlier in the year.

Atlas Corporate Services handles the ADGM entity formation, corporate administration and governance that sits underneath an authorised manager, and our fund setup service covers the vehicle and the service provider appointments. Accounting and corporate tax are delivered with GTAG, our sister company in the GTAG/Assetica group. A broader view of the centre is in our ADGM guide, and advisers introducing clients can start from our page for advisers.

We are not a law firm and this is not regulatory advice on your application. Before you file anything, read the amended Funds, General and Prudential rulebooks in the versions dated 16 September 2026, and the Supplementary Guidance on Specialised Fund Manager Categories, against your own facts.