Discretionary Management Agreement Template for the United Arab Emirates

A Discretionary Management Agreement is a legal contract that grants an investment manager the authority to make investment decisions on behalf of a client without requiring prior approval for each transaction. Under UAE law, this agreement must comply with strict regulatory requirements set by the Securities and Commodities Authority (SCA) and incorporate provisions that protect both parties' interests while ensuring adherence to local market practices.

When do you need this document?

You need this agreement when seeking professional investment management services where you want to delegate day-to-day investment decisions to a qualified manager. This is particularly relevant for high-net-worth individuals, family offices, corporate treasuries, pension funds, and institutional investors who prefer active portfolio management over self-directed investing. The agreement is also essential when establishing relationships with UAE-licensed investment managers, wealth management firms, or asset management companies that offer discretionary portfolio management services. Given the UAE's position as a regional financial hub, this document is frequently used by both UAE residents and international clients seeking exposure to regional and global markets through UAE-based investment managers.

Key legal considerations

The agreement must clearly define the scope of discretionary authority, including which assets can be managed, investment restrictions, and risk parameters. Investment objectives should be explicitly stated, covering target returns, risk tolerance, liquidity requirements, and any ethical or religious investment preferences such as Sharia-compliant investing. Fee structures must be transparent, detailing management fees, performance fees, custody charges, and any other costs. The document should establish clear reporting obligations, requiring regular portfolio valuations, transaction reports, and performance updates. Termination provisions are crucial, specifying notice periods, asset transfer procedures, and settlement of outstanding fees. The agreement must also address liability limitations, indemnification clauses, and dispute resolution mechanisms, typically favoring arbitration under UAE or international arbitration rules.

Legal requirements in United Arab Emirates

Under UAE Federal Law No. 4 of 2000 and SCA Board Resolution No. 1 of 2014, investment managers must be properly licensed by the SCA and comply with specific regulatory requirements. The agreement must incorporate client classification procedures, distinguishing between retail, professional, and qualified investors, as each category has different protection levels. Anti-money laundering provisions are mandatory under UAE Federal Law No. 20 of 2018, requiring comprehensive client due diligence, beneficial ownership identification, and suspicious transaction reporting mechanisms. The document must specify compliance with SCA regulations regarding client asset protection, segregation of assets, and custodial arrangements with approved custodian banks. UAE Civil Code provisions under Federal Law No. 5 of 1985 govern the fiduciary relationship, imposing duties of care, loyalty, and good faith on investment managers. The agreement should also address regulatory reporting requirements, including submission of client information and transaction data to the SCA as required under local regulations.