Discretionary Investment Advisory Agreement Template for Saudi Arabia

A Discretionary Investment Advisory Agreement is a crucial legal document that formalizes the relationship between you as a client and a licensed investment advisor in Saudi Arabia. Under this arrangement, you grant the advisor authority to make investment decisions on your behalf within agreed parameters, while the advisor assumes fiduciary responsibility for managing your assets according to your investment objectives and risk tolerance.

When do you need this document?

You need this agreement when engaging a professional investment advisor to manage your portfolio with discretionary authority under Saudi Arabian law. This document is essential when you want to delegate day-to-day investment decisions to a qualified professional while maintaining oversight through agreed investment guidelines. It's required for institutional investors, family offices, and high-net-worth individuals seeking professional asset management services. The agreement becomes necessary when you prefer not to approve each individual transaction but want ongoing professional management of your investments within established parameters.

Key legal considerations

The agreement must clearly define the scope of the advisor's discretionary authority, including permitted asset classes, investment limits, and any restricted investments. Client classification under CMA regulations is crucial, as it determines the level of protection and disclosure requirements applicable to your relationship. The document should specify fee structures, performance benchmarks, and reporting obligations to ensure transparency. Risk management provisions must outline how the advisor will monitor and manage portfolio risks within your stated risk tolerance. Termination clauses should clearly establish the procedures for ending the relationship and transferring assets, while compliance provisions must ensure adherence to all applicable CMA regulations throughout the relationship.

Legal requirements in Saudi Arabia

Under the Capital Market Law and CMA regulations, investment advisors must hold valid authorization from the Capital Market Authority to provide discretionary investment services. The agreement must comply with Authorized Persons Regulations, which establish minimum standards for professional conduct, capital adequacy, and client protection. Anti-Money Laundering Law requirements mandate proper client identification, due diligence procedures, and ongoing monitoring of the advisory relationship. The document must incorporate Client Money Rules to ensure proper segregation and protection of client assets. Investment Funds Regulations may apply if the advisory relationship involves fund investments, requiring additional disclosure and compliance measures. The agreement must also address data protection requirements and establish clear procedures for regulatory reporting and supervision by the CMA.