DFSA

DFSA Conduct of Business (COB) Rules Explained

2026-04-16 · 6 min read · By Aureus Worldwide

The DFSA Conduct of Business rules, the COB module, govern how an Authorised Firm treats its clients once it is licensed in the Dubai International Financial Centre (DIFC). Where authorisation asks whether a firm should be allowed to operate, the DFSA Conduct of Business rules ask how it must behave day to day: how it classifies clients, communicates, assesses suitability, manages conflicts and protects client money. This guide explains the main COB obligations and how they fit together.

Where COB sits in the Rulebook

COB is one of the DFSA's core conduct modules, sitting alongside the high-level Principles for Authorised Firms in the General (GEN) module. Those Principles set the tone, integrity; due skill, care and diligence; management, systems and controls; market conduct; paying due regard to clients' interests and treating them fairly; managing conflicts; suitability; safeguarding clients' assets and money; and dealing with the DFSA in an open and cooperative way. COB turns those principles into specific, testable rules. A firm that understands the principles behind COB tends to apply the detailed rules more sensibly, especially in situations the Rulebook does not spell out.

The reach of COB depends on your permitted activities and endorsements, explained in our regulated financial services activities guide, an advisory firm and a custodian face very different slices of the module.

Client classification: the foundation of COB

Almost every COB obligation scales with who the client is. The DFSA recognises three classes:

• Retail Client, the highest level of protection; serving Retail Clients requires a specific endorsement and triggers the fullest set of conduct rules.
• Professional Client, a client treated as having the knowledge and resources to need less protection. Professional Clients are either deemed (for example, governments, regulated financial firms, collective investment funds and large undertakings meeting size thresholds) or assessed against net-asset and experience-based tests.
• Market Counterparty, typically other regulated firms dealing at arm's length, receiving the least protection.

Getting classification right is critical, because it determines how far obligations such as suitability, disclosure and communications rules apply. Many DIFC firms deliberately restrict themselves to Professional Clients to keep their conduct obligations proportionate, a decision that should be reflected consistently in their onboarding, marketing and client agreements.

Communications and financial promotions

The DFSA requires that all communications with clients, and all marketing material, are clear, fair and not misleading. Promotions must be identifiable as such, must present benefits and risks in a balanced way, and must be suitable for the audience they reach. Firms that market to Retail Clients face tighter controls than those addressing only Professional Clients. A defensible sign-off process, where marketing is reviewed against COB before it goes out, is far cheaper than remediating a misleading-promotion finding later.

Suitability and the client's best interests

Where a firm advises a client or manages assets on a discretionary basis, it must take reasonable steps to ensure that its recommendation or decision is suitable for that client. Suitability draws on the client's financial situation, objectives, risk appetite and, where relevant, knowledge and experience. The obligation is lighter for some Professional Clients and heavier for Retail Clients, but the underlying duty to act in the client's best interests runs throughout. Firms should be able to evidence why a given recommendation was suitable, not merely assert that it was.

Conflicts of interest and inducements

COB requires firms to identify, prevent and manage conflicts of interest, between the firm and its clients, and between one client and another. Effective practice combines a conflicts policy, a conflicts register, information barriers where needed, and disclosure where a conflict cannot be fully managed. Closely related are the rules on inducements: a firm should not accept or pay fees, commissions or non-monetary benefits that would conflict with its duty to clients, and must be transparent about the fees and charges a client bears. Clear, upfront fee disclosure is both a COB requirement and a trust-builder.

Client agreements and disclosure

Before providing services, a firm generally must put in place a client agreement setting out the nature of the service, the fees, the risks and the respective responsibilities of the parties. Ongoing disclosure obligations follow, periodic statements, reporting on managed portfolios, and prompt information about material developments. Good documentation here does double duty: it satisfies COB and reduces disputes.

Protecting client money and client assets

If a firm holds a Client Money or Client Assets endorsement, some of the most demanding COB-related obligations apply. In outline, the firm must:

• Segregate client money and assets from its own.
• Hold client money with approved third parties under proper arrangements.
• Reconcile client money and asset records regularly and promptly resolve differences.
• Keep accurate records so client entitlements are clear at any moment.
• Have arrangements so that client money and assets are protected if the firm fails.

These duties are why holding client assets raises a firm's prudential category and its supervisory scrutiny. Many firms structure their model to avoid holding client money altogether, using third-party custodians instead.

Complaints, records and the compliance link

COB requires firms to handle complaints fairly, promptly and through a documented process, and to keep records of client dealings for the periods the Rulebook specifies. These conduct obligations do not sit in isolation, they depend on the firm's wider systems and controls and on a compliance function that monitors adherence and reports to senior management. Conduct failures are very often systems-and-controls failures in disguise.

Periodic reporting and keeping clients informed

Conduct does not stop at onboarding. Where a firm manages a client's assets or holds their money, COB requires periodic statements, reporting on holdings, valuations, transactions and performance at appropriate intervals, so the client always has an accurate picture. Firms must also keep clients informed of material developments that affect their investments or the service provided. For discretionary managers this reporting is a core deliverable, not an afterthought, and it depends directly on accurate books and reconciliations: a client statement is only ever as reliable as the records behind it. Building disciplined, audit-ready accounting into the operation is therefore part of meeting COB, not separate from it.

A practical COB checklist

• Confirm and document each client's classification before you deal.
• Review all marketing against the clear, fair and not misleading standard.
• Evidence suitability wherever you advise or manage assets.
• Maintain a conflicts policy and register, and disclose what you cannot manage.
• Put client agreements in place and disclose all fees upfront.
• If you hold client money or assets, segregate, reconcile and record rigorously.
• Log and resolve complaints through a defined process.

How Aureus Worldwide can help

Aureus Worldwide is a Dubai-based accounting, tax and CFO-outsourcing firm. We are not DFSA-authorised and we do not provide regulated financial services or act as your compliance function of record, your COB compliance sits with your DFSA-approved Compliance Officer and your regulatory advisers. What we support is the financial infrastructure that COB relies on: accurate client-money and client-asset reconciliations, audit-ready accounting, and outsourced CFO reporting that gives senior management the management information to oversee conduct. For your compliance framework and officers, we can point you to our compliance officer support and work alongside your DIFC and ADGM advisers. To strengthen the reporting behind your conduct obligations, contact our team.

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