Discretionary Management Agreement Template for Saudi Arabia

A Discretionary Management Agreement is essential when you want to delegate investment decisions to a professional fund manager in Saudi Arabia. This legally binding contract establishes the terms under which a Capital Market Authority (CMA) authorized investment manager will handle your investment portfolio with full discretionary authority, meaning they can make investment decisions without seeking your prior approval for each transaction.

When do you need this document?

You need this agreement when engaging a professional investment manager to handle your portfolio in Saudi Arabia. High-net-worth individuals often use these agreements when they lack the time or expertise to actively manage their investments. Institutional investors, such as pension funds or insurance companies, require these agreements to formalize their relationship with external portfolio managers. Family offices frequently enter into these agreements to ensure professional management of family wealth across generations. Additionally, you need this document when establishing Shariah-compliant investment mandates that require specialized Islamic finance expertise from qualified managers.

Key legal considerations

The agreement must clearly define the scope of the manager's discretionary authority and investment restrictions to protect your interests. Fee structures, including management fees, performance fees, and expense allocations, must be transparently disclosed and comply with CMA guidelines. The document should establish robust reporting requirements, including regular portfolio valuations, transaction reports, and performance summaries. Risk management provisions are crucial, including stop-loss mechanisms, concentration limits, and volatility controls. For Shariah-compliant mandates, the agreement must specify the role of the Shariah advisor and compliance monitoring procedures. Client asset segregation requirements must be clearly outlined to ensure your assets remain separate from the manager's own funds.

Legal requirements in Saudi Arabia

Under the Capital Market Law (Royal Decree No. M/30), only CMA-licensed entities can provide discretionary investment management services, and your agreement must verify the manager's authorization status. The Investment Funds Regulations require specific disclosures about conflicts of interest, risk factors, and the manager's track record. Anti-Money Laundering Law compliance necessitates comprehensive customer due diligence procedures and ongoing monitoring provisions. If your investment mandate includes Shariah compliance, the agreement must incorporate the Shariah Governance Framework requirements, including Shariah board oversight and purification mechanisms. The Authorized Persons Regulations mandate specific operational requirements, including segregation of client assets, adequate capitalization, and professional indemnity insurance coverage that must be referenced in your agreement.