Introducing Broker Agreement Template for Saudi Arabia

An Introducing Broker Agreement is a specialized financial services contract that allows you to formalize relationships with third-party introducers who refer clients to your brokerage or financial institution. Under Saudi Arabian law, this agreement must comply with strict regulatory requirements set by the Capital Market Authority (CMA) and adhere to Islamic finance principles overseen by your Shariah Advisory Board.

When do you need this document?

You need an Introducing Broker Agreement when expanding your client base through partnerships with licensed intermediaries who can refer potential investors for securities trading, investment advisory services, or wealth management products. This is particularly common when establishing relationships with independent financial advisors, investment consultants, or regional partners who have established client networks but lack full brokerage licenses. The agreement becomes essential when you want to offer commission-based referral arrangements while maintaining regulatory compliance. You'll also need this document when entering joint ventures with international firms seeking to access Saudi Arabian capital markets through your licensed platform.

Key legal considerations

Your agreement must clearly define the scope of permitted introducing activities, ensuring the introducing broker doesn't exceed their authorized capacity or engage in activities requiring separate CMA licensing. Commission structures and payment terms must comply with securities regulations and avoid conflicts of interest that could harm client outcomes. Anti-money laundering obligations require detailed provisions for client due diligence, with clear responsibilities for KYC procedures and suspicious transaction reporting. The agreement should establish comprehensive compliance monitoring procedures, including regular audits and reporting requirements. Termination clauses must address client transition procedures and ongoing regulatory obligations. You must also include specific provisions for Shariah compliance verification, particularly when dealing with Islamic financial products, and ensure all marketing materials and client communications meet CMA advertising standards.

Legal requirements in Saudi Arabia

Under the Capital Market Law (Royal Decree No. M/30 of 2003) and Authorized Persons Regulations, both parties must maintain appropriate CMA licenses for their respective activities. The introducing broker must be properly registered and cannot engage in activities beyond their authorization scope. Your agreement must incorporate specific AML compliance requirements under Royal Decree No. M/20 of 2003, including detailed customer identification procedures and ongoing monitoring obligations. Securities Business Regulations mandate specific disclosure requirements for all client-facing activities and referral arrangements. The contract must address data protection requirements under Saudi data privacy laws and establish clear protocols for cross-border data transfers if dealing with international clients. Additionally, all Islamic finance products referenced in the agreement require approval from a qualified Shariah Advisory Board, and the agreement structure itself must comply with Islamic commercial law principles prohibiting excessive uncertainty (gharar) and interest-based arrangements (riba).