ADGM FSRA Unveils Game-Changing Capital Regulations for Category 4 Financial Firms
In a bid to enhance the regulatory landscape for lower-risk financial firms, the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) has initiated a public consultation to revise its prudential framework. This revision, outlined in Consultation Paper No. 2 of 2025, aims to ensure that the regulatory requirements remain suitable and effective for firms categorized under Categories 3B, 3C, and 4 of the FSRA’s Prudential – Investment, Insurance Intermediation, and Banking Rulebook (PRU).
Overview of the Proposed Changes
The FSRA is proposing several significant amendments aimed at recalibrating the prudential framework, particularly focusing on capital requirements and reporting obligations for specific categories of firms.
Capital Requirements for Category 4 Firms
- Recalibration of Capital Requirements: The proposed changes include adjustments to capital requirements for Category 4 firms, which primarily offer advisory services or arrange investment deals without holding client assets.
- Proportionality: The adjustments are designed to ensure that the capital requirements are proportionate to the risks these firms pose to the financial system.
Reporting Obligations for Categories 3B and 3C
In addition to capital adjustments, the FSRA consultation also addresses reporting obligations:
- Streamlined Reporting: Category 3B and 3C firms may benefit from modified reporting duties to enhance regulatory efficiency.
- Alignment with International Standards: The changes aim to align reporting obligations with global best practices.
Refinement of Professional Indemnity Insurance Obligations
The FSRA also seeks to refine the professional indemnity insurance requirements within the PRU framework:
- Consumer Protection: Proposed changes will affect how firms demonstrate their financial capacity to cover potential claims, ensuring enhanced consumer protection.
- Operational Resilience: The adjustments aim to bolster the operational resilience of financial firms.
Feedback and Stakeholder Engagement
Stakeholders, including affected firms, industry bodies, and other interested parties, are invited to provide feedback on the proposed amendments by May 21, 2025. The FSRA encourages active participation to ensure a robust and effective regulatory environment.
Commitment to Innovation and Growth
This consultation reflects the FSRA’s ongoing dedication to adapting its regulatory framework in line with global best practices. It also supports innovation and sustainable growth within the FinTech and financial services sectors.
For more information on the consultation and to access the complete document, visit the ADGM official website.
Stay informed about further updates by following our news section for the latest developments in financial regulation.
