Discretionary Investment Management Agreement Template for Saudi Arabia

A Discretionary Investment Management Agreement is a legally binding contract that grants a licensed investment manager the authority to make investment decisions on your behalf without requiring your prior consent for each transaction. This agreement is essential for establishing a professional relationship with investment firms in Saudi Arabia and must comply with strict regulatory requirements set by the Capital Market Authority.

When do you need this document?

You need this agreement when engaging a professional investment manager to handle your portfolio with full discretionary powers. This is particularly relevant for high-net-worth individuals who prefer professional management of their investments, institutional investors seeking specialized portfolio management services, or corporate entities requiring Shariah-compliant investment strategies. The agreement is also necessary when establishing family investment funds, managing pension fund assets, or when international investors want to enter the Saudi Arabian market through qualified local investment managers.

Key legal considerations

The agreement must clearly define the scope of discretionary authority granted to the investment manager, including specific investment parameters, risk tolerance levels, and any investment restrictions you wish to impose. Particular attention must be paid to Shariah compliance requirements, as many clients in Saudi Arabia require their investments to adhere to Islamic principles. The fee structure, including management fees, performance fees, and any additional charges, must be transparently disclosed and agreed upon. Client asset protection provisions are crucial, ensuring your assets are held separately from the investment manager's own assets. The agreement should also specify reporting requirements, including frequency and detail of performance reports, and establish clear termination procedures and notice periods.

Legal requirements in Saudi Arabia

Under Saudi Arabian law, investment managers must be licensed by the Capital Market Authority and comply with the Capital Market Law and Investment Funds Regulations. The agreement must incorporate Anti-Money Laundering Law requirements, including proper client identification and ongoing monitoring procedures. If Shariah compliance is required, the involvement of a qualified Shariah Advisor must be documented within the agreement. The investment manager must adhere to Authorized Persons Regulations regarding conduct of business, client communication, and record-keeping requirements. Additionally, the agreement must comply with any specific requirements related to foreign investment restrictions and currency regulations that may apply to your particular circumstances or investment strategy.