Broker To Broker Agreement Template for the United Arab Emirates
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What is a Broker To Broker Agreement?
The Broker to Broker Agreement is essential for establishing formal relationships between licensed brokerage firms operating in the UAE financial markets. This document is typically used when two brokers wish to collaborate on trading activities, share clients, or provide complementary services while maintaining compliance with UAE federal laws and SCA regulations. The agreement encompasses crucial elements such as commission sharing structures, regulatory compliance requirements, risk management protocols, and operational procedures. It is particularly important in the UAE context where specific regulatory requirements govern brokerage activities, including licensing obligations, anti-money laundering compliance, and market conduct rules. The document serves as a foundational framework for ensuring clear understanding of roles, responsibilities, and risk allocation between cooperating brokers.
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About the Broker To Broker Agreement
A Broker To Broker Agreement is a specialized commercial contract that governs collaborative relationships between licensed brokerage firms operating in the United Arab Emirates. This document ensures that your business partnerships comply with UAE federal laws while protecting your commercial interests and regulatory standing.
When do you need this document?
You need this agreement when establishing any formal business relationship with another licensed broker in the UAE. This includes situations where you plan to share trading facilities, refer clients between firms, or collaborate on investment opportunities. The document is essential when two securities brokers want to cross-trade on behalf of each other's clients, or when an insurance broker partners with a real estate broker to offer comprehensive services. You also need this agreement if you're entering into commission-sharing arrangements or establishing reciprocal referral systems with other brokers. Islamic finance brokers particularly require this document when partnering with conventional brokers to ensure Sharia compliance alongside regulatory compliance.
Key legal considerations
Your agreement must clearly define each party's regulatory obligations and ensure compliance with anti-money laundering requirements under UAE Federal Law No. 20 of 2018. You need to establish robust due diligence procedures for client verification and transaction monitoring. The commission structure must be transparent and comply with SCA regulations, particularly regarding fee disclosure and conflict of interest management. Risk allocation clauses are crucial to protect your firm from potential liability arising from your partner's actions or regulatory violations. You must include termination procedures that protect client interests and ensure orderly wind-down of collaborative activities. Confidentiality provisions are essential to protect sensitive client information and proprietary trading strategies. The agreement should also address dispute resolution mechanisms that comply with UAE commercial law requirements.
Legal requirements in United Arab Emirates
Under UAE Federal Law No. 18 of 1993 (Commercial Transactions Law), your agreement must satisfy general commercial contract requirements including clear identification of parties, consideration, and lawful purpose. Both brokers must hold valid licenses from the Securities and Commodities Authority (SCA) as required under SCA Decision No. (1/R) of 2000, and license numbers must be specified in the agreement. The document must comply with UAE Federal Law No. 2 of 2015 (Commercial Companies Law) regarding corporate governance and business relationship standards. Anti-money laundering compliance procedures must align with UAE Federal Law No. 20 of 2018, including customer due diligence and suspicious transaction reporting protocols. You must ensure that all commission arrangements and fee structures comply with SCA market conduct rules and transparency requirements. The agreement should be executed in accordance with UAE contract law formalities and may require notarization depending on the scope of collaboration and regulatory requirements.
GOVERNING LAW
Applicable law
This Broker To Broker Agreement is drafted to comply with United Arab Emirates law. Key legislation includes:
SCA Decision No. (1/R) of 2000: Regulations concerning market activities and licensing of brokerage firms, setting out requirements for brokers operating in the UAE securities markets.
UAE Federal Law No. 2 of 2015 (Commercial Companies Law): Governs the establishment and operation of companies in the UAE, including brokerage firms, and their business relationships.
UAE Federal Law No. 20 of 2018 (Anti-Money Laundering Law): Sets out requirements for financial transactions and due diligence procedures that brokers must follow to prevent money laundering and terrorist financing.
UAE Federal Law No. 5 of 1985 (Civil Code): Contains general principles of contract law that apply to all agreements in the UAE, including formation, interpretation, and termination of contracts.
SCA Board Resolution No. (11) of 2015: Regulations concerning market-making and liquidity provision, relevant for brokers engaging in these activities.
UAE Federal Law No. 14 of 2018 (Central Bank Law): Relevant for financial transactions and monetary aspects of brokerage activities, including payment systems and financial settlements.
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